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U.S. Senate Committee on Judiciary

01/22/2021 | Press release | Distributed by Public on 01/22/2021 18:36

Q&A: Insulin Pricing Gambit

Q&A: Insulin Pricing Gambit

With U.S. Senator Chuck Grassley

Q: Why did you investigate insulin prices?

A: Sticker shock at the pharmacy counter is an issue I regularly hear about from Iowans. In particular, the soaring cost for one life-saving medicine, insulin, has gained greater urgency in the last several years. Stories of patients who skip or ration doses of insulin only because they can't afford their medication raise troubling concerns. Policymakers have a responsibility to understand what's going on in the drug pricing supply chain to protect consumers and taxpayer dollars and to ensure free markets are working as intended. For example, market distortions and murky business practices that delay generic drug entry or manipulate rebate payments harm competition and lead to artificially high prices for taxpayers and consumers to pay.

For nearly two years, I led a bipartisan investigation to scrutinize the pricing strategies that insulin manufacturers and pharmacy benefit managers (PBMs) use to set drug prices. Specifically, I wanted to find out why insulin has seen a stratospheric rise in prices, especially over the last decade, even though it's been available for more than a century to help patients manage diabetes. PBMs are the middlemen, the third-party administrators of prescription drug benefits included in the health insurance plans for more than 270 million Americans covered by employer-sponsored or union plans, self-insured health plans, Medicare Part D, as well as federal and state government employee plans. We left no stone unturned, combing through more than 100,000 pages of documents, emails, memoranda and contracts to examine the business practices and pricing strategies used by these industry giants to double and triple the price of insulin over the last 10 years. Read the full report HERE.

Q: What did the investigation find?

A: In a nutshell: big players along the drug supply chain are in cahoots to game the system to capture more revenue. Companies are putting profits, not taxpayers or their insulin-dependent patients, first. Our bipartisan investigation confirmed what I've been working to fix for several years. The nation's drug pricing system is broken. Pharmaceutical companies and PBMs are making an end run around our free market system and taking taxpayers for a ride. We found the business practices and the competitive relationships between manufacturers and middlemen have created a vicious cycle of price increases. Here's how. Pharmaceutical companies set the list price of their drugs and then use rebates to compete for position on what's known as the formulary - that's the list of drugs that are covered by health plans for their beneficiaries. Our investigation documented how they're twisting incentives and artificially inflating drug prices to land placement on what a beneficiary's health plan covers from one year to the next. Getting on the formulary is like getting prime real estate in a patient's medicine cabinet. A drug manufacturer effectively wins the lottery if its drug secures premium formulary placement - especially for a medicine like insulin that tens of millions of patients use to manage a chronic disease - and then shares in the jackpot with the middleman. Increasing the list price delivers greater rebates and fees. PBMs are paid a portion of the rebate that drug makers pay to health plans and they also charge fees based on a percentage of a drug's list price. To be clear, we found that insulin manufacturers aggressively raised the list price of their insulin products without significant advances in the drug's efficacy or other innovative improvements. Our bipartisan report used facts to expose the gambit that's operated unchecked for too long. And it will provide even more ammunition to continue and win our battle in Congress to get our bipartisan drug pricing reform legislation across the finish line. I'll continue working in the 117th Congress to advance our drug pricing legislation and build on the efforts of the Trump administration to cut drug prices for Americans. We can and must achieve these much-needed reforms without harming innovation and drug safety. The pharmaceutical industry has broken new frontiers with the historic discovery of a COVID-19 vaccine in record time. Now Congress needs to step up and fix the broken drug pricing regime. I'll work with the new Biden administration to ensure reforms do not harm innovative cures and treatments with misguided government price controls and that Big Pharma doesn't exploit the pandemic to stop drug pricing reforms from getting signed into law.

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