Major insulin maker Novo Nordisk said Tuesday it will cut list prices of some insulin products by up to 75% by the end of the year. Experts expect Sanofi, the third-largest insulin maker in the US, to follow suit.
The price cuts come after years of escalating public backlash against the company’s sharp rise in insulin prices, which many supporters describe as price gouging. List prices for insulin are set five to ten times higher in the United States than in other high-income countries, and the standardized average unit of insulin is nearly $100. , usually below $10.
In an announcement on Tuesday, Novo Nordisk said it would cut prices on several of its products, including Levemir, Novolin, Novolog and Novolog Mix 70/30. With the 75% price reduction, NovoLog’s 10 mL vial drops from $289.36 to $72.34. The NovoLog Mix 70/30 FlexPen drops from $558.83 to $139.71.
Amid public outrage over prices, lawmakers are also working on ways to bring prices down. Both companies’ voluntary price cuts are strictly in line with federal price caps that came into effect this year through the 2022 Inflation Reduction Act. This law limits out-of-pocket insulin costs for Medicare Part D recipients to $35 a month. When Eli Lilly slashed prices earlier this month, he also announced a program that would limit monthly insulin costs to $35 for those with corporate insurance, as well as those without insurance. Novo Nordisk did not provide such caps in today’s announcement, but pointed to a hodgepodge of deals and programs.
But while the price cuts may appear to be related to last year’s Inflation Cuts Act, health policy experts and lawmakers say the real driving force behind the dramatic cuts is a slightly older law. pointing out that it is possible. The 2021 American Relief Plan. This includes removing caps on the rebates drug companies must pay to Medicaid.If the cap was lifted with insulin list prices set as they are now, insulin manufacturers might have had to pay for the Medicaid program. more Each time the Medicaid program has to cover one, it’s probably less than the price of their insulin products, totaling tens of millions of dollars in payments to Medicaid. But Eli Lilly and Novo Nordisk will dodge those extra payments with lower list prices. The rebate cap will be lifted on January 1, 2024. This is also the time when corporate price cuts are in full swing.
Rebate program caps are a bit complicated, so here’s a breakdown of how they work. This all stems from the Medicaid Drug Rebate Program (MDRP) passed by Congress under the Comprehensive Budget Adjustment Act of 1990. A direct goal of the MDRP was to have Medicaid pay the lowest or highest possible prices for prescription drugs. As such, drug companies that want drugs covered by Medicaid must enter into rebate agreements. Medicaid thereby agrees to cover and purchase its own products as long as the drug company pays the rebate to keep costs as low as possible. It is based on a series of formulas that take into account price and more.
cold calculation
For branded drugs, the basic rebate that drug manufacturers pay to Medicaid is 23.1% of the manufacturer’s average price. again Of the difference between the average price and the best (lowest) price, taller thanIn the example presented by the Federal Medicaid and CHIP Payments and Access Commission (MACPAC), if a branded drug has an average manufacturing price of $100 and the best market price is $88, drug companies are at a standard rate. Pay $23.10. , for base rebates. However, if the average price is $100 and the highest price is $70, the base rebate would be $30.
However, there is another important factor in calculating rebates. Inflation. If drug companies raise prices faster than inflation, they will also have to pay back the difference between the current average price and what it would have been if the price increase simply matched inflation. This is calculated based on the “baseline” average manufacturer price. This is the drug’s average price just before the rebate program started, or if it is a new drug, the initial average manufacturer price of the drug. Using that baseline price, the Medicaid program calculates the current price based on prevailing inflation. That is, the consumer price index (CPI-U) for all urban consumers. Medicaid then subtracts the baseline trend price from the current average price, and drug companies pay the difference on top of their base rebate, but only up to a point.
Under current law, rebates were limited to the current average price. That is, the drug company does not have to pay a rebate over his 100% of the drug company’s average price. But drug prices skyrocketed far beyond inflation, leaving a lot of money on the table. For example, a 2012 federal analysis of drug rebates found that 54% of branded drug rebates were due to an inflationary component. And according to Congressional Budget Office estimates, in 2019 the rebate cap allowed drug companies to avoid paying out a whopping $3 billion in rebates.
Based on the current price of insulin, Eli Lilly and Novo Nordisk could easily pay Medicaid rebates above the drug’s average manufacturer price, thanks to steep price increases from companies that have blown past inflation rates for years. will be For example, Sean Dickson, a drug pricing expert at the nonprofit West Health Policy Center, tells Politico that each Medicaid-covered vial of Humalog would generate an estimated $150 in revenue, an annual Medicaid He said the payment would be about $140 million. From Eli Lilly.
With lower list prices, Medicaid may end up paying more for insulin products, but how much is unknown.
