The promise of Medicare for All has morphed into Drug Ripoffs for Everyone, after President Joe Biden’s reversal of Donald Trump’s executive orders that would have slashed the prices of insulin, EpiPen and most prescription drugs.
Biden wasted no time rolling back the price cuts, signing an executive order Thursday, last week – his first full day in office. All the reforms planned will now be delayed until the end of March. There is little hope the lower price regulations will be reinstated, considering the drug industry’s support of politicians from both parties, including today’s President.
Yesterday’s price for an EpiPen two-injector pack was $340 list. Lantus insulin was $475 a month. Insurance plans and pharmacy discounts can drop prices to $121 for EpiPens and $336 for Lantus. Both are produced for a only few dollars and are cash cows for the investor class.
The Biden move to stop reforms was no surprise.
Big Pharma had spent millions promoting Biden in his election bid, running disparaging ads about Trump’s lower-cost drugs’ agenda. The U.S. Chamber of Commerce, conservative groups funded by Big Pharma, plus the media dependent on drug ads, all combined to push Americans to accept the highest drug prices in the world – often five times as much as other developed nations.
Trump’s biggest target, saved by Biden, was the Pharmacy Benefit Manager (PBM) system.
The evidence that the drug industry needs reform and regulation is indisputable.
The Senate Committee on Finance issued findings from a two-year investigation January 13, just a week before Biden’s inauguration. The 90-page report and more than 1,700 pages of documents, contains internal emails, contracts, and presentations. Click below to open and/or download.
“We found that the business practices of, and the competitive relationships between manufacturers and middlemen, have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof,” Senate Committee Chairman Chuck Grassley (R-Iowa) explained.
The investigation sheds light on factors that led to the surging list price of insulin—a drug that’s been available for almost a century—which has doubled or in some cases tripled in just the past decade, and provides new insight into how the opaque business practices of pharmaceutical manufacturers and pharmacy benefit managers (PBMs) impact patients, Medicare Part D, and private health plans, Grassley said.
The report noted that the market’s “big three insulin producers are Eli Lilly and Company, Novo Nordisk A/S, and Sanofi S.A. They dominate more than 90% of the world insulin market by value.”
There is clearly something broken when a product like insulin, that’s been on the market longer than most people have been alive, skyrockets in price. Our investigation worked to get to the bottom of this.
We found that the business practices of, and the competitive relationships between manufacturers and middlemen, have created a vicious cycle of price increases that have sent costs for patients and taxpayers through the roof.
This industry is anything but a free market, when PBMs spur drug makers to hike list prices in order to secure prime formulary placement and greater rebates and fees,” the Senator explained.
Grassley is a long-time advocate for seniors. Most of his GOP colleagues are notoriously so pro-business, they find it repugnant to regulate even the worst examples of monopoly power. He said that pricing around the world should be a factor in what we pay for drugs in America.
In the course of its investigation, the committee reviewed more than 100,000 pages of internal documents, memoranda and rebate agreements produced by the three largest insulin manufacturers (Sanofi, Novo Nordisk, and Eli Lilly) and the three largest PBMs (CVS Caremark, Express Scripts, and OptumRx) in the United States.
Pharmaceutical manufacturers set the list price of their products, and then use rebates to compete for positions on formularies—lists of drugs that are covered by health plans for their beneficiaries.
PBMs receive a portion that can be as high as 60% of a drug’s list price, which encourages higher prices to yield more discount dollars.
The investigation found that insulin manufacturers aggressively raised the list price of their insulin products absent significant advances in the efficacy of the drugs. In particular, the investigation found that Novo Nordisk and Sanofi not only closely monitored the others’ price increases, they actually increased prices in lockstep—sometimes within hours or days of each other—a practice known as “shadow pricing.”
These efforts kept a high price floor for their products, and left consumers paying more for insulin at the pharmacy counter. Internal documents also showed that insulin manufacturers were sensitive not only to their own bottom lines, but the bottom lines of PBMs and of health plans that set formularies, without which a manufacturer’s product would likely lose significant market share.
Grassley explained that Novo Nordisk’s board of directors “even voted down a proposed insulin price decrease due to financial downsides, risk of backlash from PBMs and payers, and expected pressure to take similar action on other products.
In other words, the drug makers were aware that higher list prices meant higher revenue for PBMs, and that lowering list prices could be viewed negatively by PBMs and health plans, even though it meant higher out-of-pocket costs for patients.
There appeared to be little, if any, attempt by PBMs to discourage manufacturers from increasing the list price of their products. Instead, the investigation found that PBMs used their size and aggressive negotiating tactics, like the threat of excluding drugs from formularies, to extract more generous rebates, discounts and fees from insulin manufacturers.
Rebates for insulin products started ramping up in 2013, according to the Committee.
Sanofi offered rebates of 2%-4% for preferred placement on a CVS Caremark client’s formulary in 2013, but by 2018, those rebates had climbed to as high as 56%. Novo Nordisk increased its rebate for Levemir from 25% in 2014 to 47% in 2017 in a bid to gain preferred status on the Express Scripts formulary.
The Senate report was bipartisan with both Democrats and Republicans approving it.
Insulin manufacturers lit the fuse on skyrocketing prices by matching each other’s price increases step for step, rather than competing to lower them, while PBMs, acting as middlemen for insurers, fanned the flames to take a bigger cut of the secret rebates and hidden fees they negotiate,” added Sen. Ron Wyden, the Committee’s highest-ranking Democrat, from Oregon.
Other findings of the investigation included:
- Spending on insulin products has increased significantly for the Medicare program and its beneficiaries.
- Insulin R&D spending was a fraction of manufacturers’ revenue and sales and marketing expenses.
- The three largest PBMs—CVS Caremark, Express Scripts, and OptumRx—command significant market power when negotiating rebates in comparison to smaller rivals.
- PBMs’ use of exclusion lists has put more pressure on companies to increase the size of rebates, but has done little to reduce the list price of insulin.
- So-called “price protection” clauses that PBMs insert in contracts allow drug manufacturers to increase prices up to 12% per year.
When Trump issued his four executive orders he noted that “Americans often pay 80% more for prescription drugs than Germany, Canada and other nations for some of the most expensive medicines.”
The four orders I’m signing today will completely restructure the prescription drug market in terms of pricing and everything else to make these medications affordable and accessible for all Americans. Under my administration, we’re standing up to the lobbyists and special interests and fighting back against a rigged system.
The first order targeted high insulin prices, requiring federal community health centers to pass discounts they receive on Insulin and EpiPens directly to patients.
The second order allowed states, pharmacies and wholesalers to import drugs from Canada, where they cost less than in the U.S. Historically, it is illegal to import these from other countries for personal use, according to the Food and Drug Administration.
Sen. Bernie Sanders also agreed with this change, explaining that importing drugs from other countries would increase competition and substantially lower prices.
The third order was aimed at preventing “middlemen,” the pharmacy benefit managers, from pocketing “gigantic discounts,” Trump said.
Alex Azar, secretary of the Department of Health and Human Services, told reporters after the signing ceremony that drug companies currently pay about $150 billion in undisclosed kickbacks to middlemen, often in exchange for more favorable insurance coverage for their drugs.
The fourth order allowed Medicare to purchase drugs at the same price other countries pay.
The details of the four executive orders were on the White House website, but the links were removed when Biden took office last week.
How easy it is to erase the past.
Although prescription drug spending in the U.S. far exceeds that of other high-income countries, increasing to $335 billion in 2018, the reaction to Trump’s orders was immediate.
Big Pharma President Stephen J. Ubl called the changes “a radical and dangerous policy to set prices based on rates paid in countries that he has labeled as socialist, which will harm patients today and into the future.”
It jeopardizes American leadership that rewards risk-taking and innovation and threatens the hope of patients who need better treatments and cures.
After Trump issued his executive orders, the estimate was several months would be required to institute changes.
By the time the Biden Inauguration rolled around, the rules were not yet in effect, probably because bureaucrats realized the new administration would oppose them.
The role of money in the U.S. drug system may taint even our doctors. Consider this outlandish provision reported by Bloomberg News:
Today, Medicare Part B—our single-payer program for seniors’ visits to doctors’ offices—has a crazy way for paying for such drugs, called “ASP plus 6,” which stands for “average selling price plus 6 percent.” Doctors get a 6 percent commission—technically, now a 4.3 percent commission—on any drug they administer to a patient in their offices.
The Hippocratic Oath
- I swear to fulfill, to the best of my ability and judgment, this covenant:
- I will respect the hard-won scientific gains of those physicians in whose steps I walk, and gladly share such knowledge as is mine with those who are to follow.
- I will apply, for the benefit of the sick, all measures [that] are required, avoiding those twin traps of over treatment and therapeutic nihilism.
- I will remember that there is art to medicine as well as science, and that warmth, sympathy, and understanding may outweigh the surgeon’s knife or the chemist’s drug.
- I will not be ashamed to say “I know not,” nor will I fail to call in my colleagues when the skills of another are needed for a patient’s recovery.
- I will respect the privacy of my patients, for their problems are not disclosed to me that the world may know. Most especially must I tread with care in matters of life and death. If it is given me to save a life, all thanks. But it may also be within my power to take a life; this awesome responsibility must be faced with great humbleness and awareness of my own frailty. Above all, I must not play at God.
- I will remember that I do not treat a fever chart, a cancerous growth, but a sick human being, whose illness may affect the person’s family and economic stability. My responsibility includes these related problems, if I am to care adequately for the sick. (bold: editor)
- I will prevent disease whenever I can, for prevention is preferable to cure.
- I will remember that I remain a member of society, with special obligations to all my fellow human beings, those sound of mind and body as well as the infirm.
- If I do not violate this oath, may I enjoy life and art, respected while I live and remembered with affection thereafter. May I always act so as to preserve the finest traditions of my calling and may I long experience the joy of healing those who seek my help.
—Written in 1964 by Louis Lasagna, Academic Dean of the School of Medicine at Tufts University, and adopted by those in the medical industry today..