Inside the Drug Pricing Investigation from the House Oversight and Reform Committee
Editor’s Note: People who take insulin require consistently affordable and predictable sources of insulin at all times. If you or a loved one are struggling to afford or access insulin, click here.
After almost three years of investigation and eight staff reports, the United States federal House Oversight and Reform Committee released a 289-page report in December 2021 detailing unsustainable drug prices in the U.S. and the need for structural reform.
The “Drug Pricing Investigation” majority staff report further confirmed and aggregated original suspicions from the January 2021 report from the Senate Finance Committee on Insulin Pricing, which provided significant (previously confidential) information from drug companies.
The key findings of this report are undoubtedly a lot to digest, so what does it all mean? In this article, we attempt to provide further clarity by diving into the report’s specifics. This recap aims to help you understand the impact and outlook on drug pricing in the United States in 2022 and beyond.
Key terminology within the report
Many statistics and quotes from the report are worth noting, especially for people living with diabetes. Before diving in, it’s essential to review the following terminology to best understand the findings in this report:
- Medicare – Medicare is a federal health insurance program for people 65 or older, select younger people with disabilities and people with end-stage renal disease (kidney failure requiring dialysis or a transplant, sometimes called ESRD). (Whereas, Medicaid is the United States’s public health insurance program for low-income people.)
- Build Back Better – Build Back Better encompasses two significant pieces of legislation that sit at the core of President Joe Biden’s domestic agenda. The plan includes a long list of social policies and programs impacting education, healthcare, housing, climate and more. As of January 21, 2022, the bill has passed in the House but not in the Senate. Biden indicated it might need to be reconstructed into smaller bites to maintain its foundational mission and pass.
- Rebates – A percentage of the list price of a medication, given by a drug x, in order to be listed on the health insurance plan formulary or placed in a pharmacy. Rebates function a bit like a “broker’s fee” of sorts and can account for 30-70 percent of the cost a person has to pay at the counter for insulin. The pharmacy benefits manager (PBM) takes a portion of the rebate and then gives the remainder to their client, which can be the federal government (Medicare), an employer’s health plan, or a standalone health insurer. Many clients use those rebates to lower premium costs for all of their members, rather than passing it lowering the out-of-pocket cost of the drug.
Editor’s Note: See Beyond Type 1’s full glossary for the US Healthcare System HERE.
Key findings from the report
- Patients in the United States pay more than twice as much for their prescription drugs than patients in 32 other developed nations.
- From 2016 to 2020, pharmaceutical companies raised the prices of branded prescription drugs by 36 percent—almost four times the inflation rate during that period.
- Drug companies aggressively raise list prices to meet revenue targets. The drugs in the committee’s investigation are now priced at a median of almost 500 percent higher than when they were initially brought to market.
- The three insulin companies have engaged in strategies to maintain monopoly pricing and defend against competition from biosimilars. These strategies include: manipulating the patent system and marketing exclusivity granted by the Food and Drug Administration, pursuing tactics to switch patients to new formulations of their products before losing exclusivity and engaging in Shadow pricing is the practice of one company watching a competitor’s public pricing, then changing the price of their own product to match it. This is different from “lockstep pricing” where companies illegally work together to increase their prices at the same time.shadow pricing that keeps list prices high.
Reflecting on these findings, house leadership arrived at clear conclusions and calls to action to help the American public.
“What the Committee has learned should be troubling to lawmakers, taxpayers and any American who has ever struggled to afford their prescriptions,” Carolyn B. Maloney, the chairwoman of the Committee on Oversight and Reform, wrote to fellow committee members.
“The result of the House Oversight Committee investigation is clear: American families are suffering from outrageous drug prices, while Big Pharma rakes in record profits,” said Speaker of the House, Nancy Pelosi.
Despite being known as one of the most developed countries in the world, the U.S. is still recognized as having one of the worst healthcare systems among high-income nations.
“These (drug) companies have specifically targeted the U.S. market for higher prices, even while cutting prices in other countries because weaknesses in our healthcare system have allowed them to get away with outrageous prices and anti-competitive conduct,” Chairwoman Maloney said.
As a result of their findings, the committee recommends the passage of the Build Back Better Act, Medicare (Parts B and D) negotiations for prescription drugs, improved transparency and the creating and passing of anti-competitive policies and practices.
Gaps in coverage, access and affordability
A large part of the report explored how much prescription drug access and affordability is tied to health insurance in the U.S. The findings highlighted inequalities that a majority of the population already had some awareness of.
Data from the National Center for Health Statistics shows that during the first six months of 2021, from January to June, 31.1 million United States citizens were uninsured (4.4 percent of them children, 14 percent adults). During this time, 21.6 percent of adults (ages 18-64) had public health coverage, and 66.3 percent had private coverage. Hispanic adults (31.4 percent) were more likely than non-Hispanic Black (14.7 percent), non-Hispanic White (9 percent) and non-Hispanic Asian (6.1 percent) adults to be uninsured.
Being uninsured or underinsured means a lack of affordable out-of-pocket access for many necessary prescription medications for millions of Americans. Even with insurance, medications can be unaffordable for families, especially those in low- to mid-income brackets.
According to data from the Kaiser Family Foundation, from October 2021, approximately one-quarter of Americans reported having difficulty affording their medications. The report also states that three in ten American adults reported not taking their medications as prescribed at some point in the previous year due to cost.
U.S. News polls from September 2021 showed that 18 million Americans could not afford their prescription medications—7 percent of the adult population. U.S. News reports that among respondents with three or more chronic conditions, 11 percent could not afford their medicine. People with chronic conditions who could not afford their prescriptions include people with diabetes—12 percent of whom reported not being able to afford their medicine —as well as other conditions like depression, chronic obstructive pulmonary disease (COPD) and the immune-compromised.
All of this data further confirms and escalates the need for broad coverage for the insured and uninsured in the United States. The committee encourages passing Biden’s Build Back Better plan to fill this gap, but the bill lacks coverage for the uninsured, especially when it comes to insulin pricing. In its current form, Build Back Better would reduce the cost of insulin to a $35 out-of-pocket copay for people with insurance, leaving those without health insurance (more than 31 million people) without help.
The state of Medicare Part D
Information obtained by the committee reveals that if Medicare Part D plans had secured the same discounts as other federal healthcare programs for three frequently used insulin products — Humalog, Lantus and Novolog, Medicare could have saved more than $16.7 billion from 2011 through 2017.
A separate report from the United States Senate Committee on Finance, published in January 2022, further confirms these findings. According to the report, the average price of a brand-name drug in Medicare Part D has more than doubled from 2009 to 2018, from $149 to $353.
High drug costs have historically impacted Medicare Part D recipients during the coverage gap, the period after the initial coverage phase and before the Catastrophic Coverage phase, in which patients are 100 percent responsible for out-of-pocket costs. The Affordable Care Act sought to slowly close that when it was enacted in 2010.
Humana explains that in 2021, once you spent $6,550 out of pocket with Medicare Part D, you were moved out of the Coverage Gap and into stage four—Catastrophic Coverage. Medicare Part D helps cover the cost of prescription drugs, including most shots and vaccines. It is offered through private companies as stand-alone plans for those enrolled in Original Medicare or as a set of benefits included with a Medicare Advantage Plan. Effective January 1, 2021, those covered under the Medicare Senior Savings Part D model, which is available through many Medicare Advantage (MA) plans, insulin copayments were capped at $35/month without deductible meeting.
“The average net price for brand-name prescription drugs in Medicare Part D doubled in the last decade—far faster than inflation. It’s time to give Medicare the tools to fight back against high prices,” said Senate Finance Committee Chair, Ron Wyden, D-Ore.
According to the House Oversight and Reform Committee’s analysis of data from 2009 to 2018, taxpayers could have saved billions of dollars if Medicare Part D plans had secured rebates comparable to those secured by other federal healthcare programs.
Drug pricing projections and the cost of insulin
The report from the House Oversight and Reform Committee confirms that research and manufacturing costs do not justify medication price increases. From 2016 to 2020, the 14 leading drug companies spent $577 billion on stock buybacks and dividends—$56 billion more than they spent on research and development (R&D) over the same period.
U.S. net revenue for the top three insulin manufacturers in 2019 was over $1 billion each. Meanwhile, a 2018 study from BMJ Global Health projected that insulin manufacturers could still profit from selling their products at $78-98 for insulin analogues and $48 for biosimilars of human insulin.
Diabetes remains one of the most expensive chronic illnesses in the United States with every one in four healthcare dollars in the country being spent on medications, services and treatments for both the disease and its complications. Price hikes include new and existing products. Milliman notes that discrepancies in pricing are due to the differences between the list price versus the net price after rebates.
The United States Senate Finance Committee notes that “between 2010 and 2018, Medicare Part D spent $78.4 billion on insulin prior to rebates, the majority of which was spent on Lantus ($27.4 billion), Novolog ($16.5 billion), Humalog ($12.3 billion) and Levemir ($11 billion).”
The need for structural reform is clear
Report findings indicate that if we are to do the most good for the population, we have to recognize and remedy gaps in health insurance coverage that benefit private insurance companies as opposed to the people they serve.
Healthcare should work for the American people, period. No one should have to suffer the high costs of prescription drugs.
Everyone impacted by diabetes—type 1, type 2 and beyond—has a right to the best care possible for their unique situation. This means access to the technology, medications, support and clinical care teams that help each individual manage their chronic condition. We work to increase access and remove barriers, giving our community the tools needed to succeed.
High quality, modern insulin must be available to people with diabetes regardless of employment or insurance status, across all demographics, without barriers and at an affordable and predictable price point.
Our advocacy work focuses on equity: making sure people with diabetes have access to care by tackling issues like systemic racism, financial privilege and discrimination in all its forms.
To learn more about access advocacy and how you can become an advocate, start here.