Will lower insulin prices be a windfall for patients and plans?  

General Mills’ Box Tops for Education Program, launched in 1996, proved society’s interest in earning “free” money. Today, many businesses offer rebates – refunds from the manufacturer for a product that the customer might otherwise think is too expensive – although usually without requiring box tops. Most manufacturers of brand-name prescriptions drugs pay rebates to pharmacy benefit managers (PBMs) for preferred status on their formulary. In self-insured plans, the entire rebate is typically passed through to plan sponsors and savings can be significant. In the case of insulin products, which have historically been a highly rebated class of drugs, rebates can total upwards of 70% of the list price.  

Therapies for diabetes have long been a top category of spend for plan sponsors. Since 2012, the list price for many insulins has increased an average of 15-17% per year, and newer, more efficacious forms have become essentially unaffordable for millions of insulin-dependent people without insurance or enrolled in a high-deductible health plan. Medicare drug pricing reforms, intended to lower the cost of insulin, spurred the top three manufacturers of insulin in the U.S. – Eli Lilly, Novo Nordisk, and Sanofi, which supply nearly all the insulin needed by the over 9 million people who rely on insulin – to announce list price cuts for certain insulin products, as well as maximums on patient out-of-pocket costs, that apply to people in commercial plans. 

Eli Lilly, the largest of the three manufacturers, is cutting the list price of key insulin products – including its non-branded insulin and its most-prescribed product, Humalog® – by 70%, effective in the fourth quarter. The company is already automatically capping out-of-pocket costs at $35 at participating retail pharmacies for people with commercial insurance using any Lilly insulin. Sanofi and Novo Nordisk have followed, announcing similar price cuts and out-of-pocket spending caps.  

These changes will have an immediate impact on patients, plan sponsors, and pharmacy vendors. While there are still many unknowns, this Q&A addresses how manufacturer pricing changes could impact your coverage of insulin, your pharmacy vendor contracts, your members’ cost share – and your plan costs. 

Q. What are commercial plan sponsors required to do in response to the drug pricing reforms?

A. Commercial plan sponsors are not required to adjust their coverage or cost of insulin. The drug pricing reforms have no direct requirements on commercial, self-insured pharmacy plans. 

Q. Will commercial plan sponsors and members be impacted by the manufacturer list price reductions?

A. While insulin cost will decrease, we can expect that a corresponding decrease in rebates will be forthcoming. In general, we anticipate the total cost to be neutral (member and plan paid), but there are early signs pointing to potential overall savings due to continued market competition. For plan sponsors that use a set dollar copay or are already capping member costs for insulin through another existing benefit design, we do not anticipate the manufacturer list price reductions to have an impact on members. For sponsors offering HDHP plans with member coinsurance and/or deductibles, members might benefit from paying a lower list price for their insulin product. In these instances, net plan costs after member cost share may increase, but not by a material amount.  

Q. Will commercial plan sponsors and members be impacted by the manufacturer $35 insulin monthly member cost cap?

A. Potentially. Some of the manufacturer announcements imply they will try to automatically limit member cost share through preferred retail pharmacies for all patients, independent of their insurance. Their success and/or integration with pharmacy vendor adjudication methodology is still to be determined.  

Q. Will commercial plan sponsors see added clinical value from the manufacturer $35 insulin monthly member cost cap?

A. It is possible that lower insulin prices may increase adherence. While this may trigger a short-term cost increase to the plan, it could lead to lower overall long-term costs due to better management of diabetes. 

Q. Will patient assistance and copay card programs for insulin products go away?

A. At this time, it appears that Eli Lilly, Sanofi, and Novo Nordisk’s patient assistance and copay card programs are still active.  

Q. What should plan sponsors do at this time to prepare for these changes?

A. First, because most of these changes do not go into effect until the end of 2023, prices, rebates, and reconciliation payments for 2023 are not likely to be impacted in a material way. However, plan sponsors may want to contact their pharmacy vendor to discuss how they will navigate this market event and ensure 2023 contract terms remain and are not re-opened by them.    

PBM and carrier responses have varied between triggering their Reservation of Rights, adding a contractual rebate credit amendment, or in some cases recommending the implementation of a new formulary. In instances where a rebate credit is being discussed, plan sponsors can proactively negotiate with PBMs to ensure the impact of changes will be, at worst, cost neutral (in terms of member and net plan cost combined) and that the plan will benefit from any potential additional reduction in costs due to continued market competition. We also recommend scheduling and budgeting for a pharmacy rebate audit in 2025.  

Finally, plan sponsors should remain on the lookout for additional announcements from other drug manufacturers in other therapeutic categories as the impact of legislation stretches beyond the insulin drug class.