Slashing insulin prices could actually result in cost savings for Big Pharma.

Insulin Makers Slash Prices: What You Need to Know

Slashing insulin prices could actually result in cost savings for Big Pharma.

Introduction:

• Novo Nordisk and Eli Lilly announce price cuts for insulin products
• Sanofi expected to follow suit
• Price hikes on insulin have led to public backlash and accusations of price gouging

Novo Nordisk's Price Cuts:

• Novo Nordisk announces up to 75% price cuts on select insulin products
• Products include Levemir, Novolin, NovoLog, and NovoLog Mix 70/30
• Prices set to drop from hundreds to tens of dollars for Medicare beneficiaries and commercial insurance holders
• Novo Nordisk's price cuts follow in the footsteps of Eli Lilly and are expected to be similar to those of Sanofi

Reasons for Price Cuts:

• Escalating public backlash against steep price hikes on insulin
• Insulin list prices set five- to 10-times higher in the US than in other high-income countries
• Cost of producing insulin products generally falls under $10
• Federal price cap via the Inflation Reduction Act of 2022 limits out-of-pocket insulin costs to $35 per month for Medicare Part D beneficiaries
• American Rescue Plan of 2021 eliminates a cap on rebates that drug companies are required to pay Medicaid
• With lower list prices, insulin makers will dodge tens of millions of dollars in payments to Medicaid
• Rebate cap set to lift January 1, 2024, which is when the companies' price cuts will fully kick in

How the Rebate Program Cap Works:

• Medicaid Drug Rebate Program (MDRP) passed by Congress in 1990 to ensure Medicaid pays the lowest or best possible price for prescription drugs
• Drug makers who want their drugs covered by Medicaid have to enter into a rebate agreement
• Basic rebate for brand drugs is 23.1% of the average manufacturer price or the difference between the average price and the best (lowest) price, whichever is higher
• Inflation plays a key role in rebate calculation
• Rebate was capped at the current average price under current law, meaning drug makers wouldn't be required to pay a rebate that exceeded 100% of their drug's average manufacturer price
• This led to drug makers avoiding paying billions in rebates, according to a congressional budget office estimate
• With insulin prices set as they are now, insulin makers would easily end up paying Medicaid rebates that exceed the current list prices