Insulin companies, PBMs pass the blame as they face bipartisan ire on pricing

David Ricks, chair and CEO of Eli Lilly and Company
Greg Nash
David Ricks, chair and CEO of Eli Lilly and Company, makes an opening statement during a Senate Health, Education, Labor, and Pensions Committee hearing to discuss lowering costs of insulin and other drugs with manufactures and pharmacy benefit managers on Wednesday, May 10, 2023.

Major stakeholders in the pharmaceutical industry on Wednesday testified in front of a key Senate panel to address questions over the affordability of insulin, with the assembled witnesses, as expected, passing the blame amongst each other.

Leaders from top insulin manufacturers Eli Lilly, Novo Nordisk and Sanofi joined with executives from top pharmacy benefit management (PBM) companies CVS Health, Express Scripts and OptumRx to face the grilling from lawmakers on the Senate Committee on Health, Education, Labor and Pensions (HELP).

In their opening statements, drug manufacturing leaders cited numerous causes of insulin’s sky-high price that exist outside their companies. 

Eli Lilly CEO David Ricks pointed out his company had not raised the list price, the initial price for a drug that manufacturers set, for its insulin products since 2017. While heralding the recent consumer price caps his company announced, Ricks alluded to the role PBMs play in drug pricing.

“Last year, about 80 percent of our list prices went to pay ever-increasing fees and rebates to companies who don’t invent, didn’t develop nor manufacture the medicine,” Ricks said. “With the remaining 20 percent, we cover the cost of making and distributing the product, which also supports about 4,000 high-paying manufacturing jobs here in America with full benefits and pensions.”

Paul Hudson, CEO of the French multinational drug company Sanofi, directly pointed a finger to “pharmacy benefit management, health insurance, specialty pharmacies and group purchasing organizations” in his opening remarks.

“This vertical integration gives these corporations near total control over the products the patients can access and the price they have to pay,” said Hudson.

Earlier this year, the drug companies who spoke in front of the committee on Wednesday all announced they would be capping the out-of-pocket monthly prices for some of their insulin products. While consumers will benefit from these policies, the list prices for these products are unchanged.

Representatives from the PBM industry subtly shot back at the drug company representatives, insisting that their companies have a key role in keeping costs down.

“The PBM industry has helped clients hold increased spending to just four and a half percent and kept member cost growth to just 1.4 percent,” said David Joyner, executive vice president and president of pharmacy services at CVS Health. Joyner pushed the blame for large drug costs on to high list prices and a lack of competition in the market.

“So drug manufacturers claim rebates are the reason for price increases,” he added. “But the facts show otherwise. Government study after government study has concluded that price increases are not the result of rebates or discounts.”

HELP committee Chair Berne Sanders (I-Vt.), always known to rail against high drug prices, was seemingly unimpressed by the initial answers provided by the witnesses.

“Let me start off by saying if somebody in the real world is watching this hearing, they’ve heard every single person from the drug companies and from the PBMs say, ‘We are working tirelessly to lower the cost of prescription drug. Just knocking our brains out.’ And yet, at the end of the day, 1.3 million Americans are rationing their insulin,” Sanders said.

In his interrogation, Sanders sought out commitments from the drug companies that they would not increase the prices of their insulin products going forward.

Ricks said Eli Lilly is “comfortable” with leaving the current prices of its insulin products where they are.

Hudson from Sanofi and Novo Nordisk CEO Lars Fruergaard Jørgensen were less direct, alluding to commitments to keeping prices low and noting that the cost of their products had declined in recent years.

During his time, Republican Sen. Mike Braun (Ind.) demanded to know why the U.S. consistently pays more for drugs than other developed countries, characterizing the current situation as out of line with free enterprise principles.

“The rest of the world can buy drugs for one-fourth the price. They have health care as being 10 to 12 percent of their GDP, with every developed country, having outcomes as good as if not better. And here we are at 18 percent of our GDP, and it’s going up as opposed to going the other way. Nothing works like that in a true market context,” Braun said.

Ricks acknowledged the U.S. pays significantly more in net prices for drugs than most of Europe, but argued this premium gives the U.S. “the earliest access to new medicines of any country in the world.”

Sen. Tina Smith (D-Minn.), noting the gathered drug and PBM executives, asked if they could all agree to lower the list price of drugs.

Adam Kautzner, president of the Express Scripts PBM, was quick to lay the blame on drug companies, claiming they were only lowering the insulin prices now due to “government intervention” in the Medicare insulin cap.

The HELP committee is scheduled to meet again on Thursday for a markup session on several bills, including the Pharmacy Benefit Manager Reform Act, which would impose restrictions on how PBMs conduct their businesses.

Sanders ended the hearing by saying that “the system is broken. It is enormously complicated.”

“This lack of transparency works for both the drug companies and I think the PBMs as well. So the end result is we have got to conclude that there is an enormous amount of greed going on,” he said.

Tags drug pricing insulin insulin costs PBM pharmacy benefit manager

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