The passage of the Affordable Insulin Now Act, or a similar bill, into law would deliver much-needed economic relief to millions of Americans. However, this will likely not solve the root issue, and instead, the burden of the cost of insulin will shift to insurers.
Because the cost sharing will be capped, health plans will have to pay for larger portions of these increasingly expensive insulin prescriptions. If insulin prices continue their upward trajectory, the total cost in the healthcare system will not reduce. In fact, more diabetics able to pay for insulin may lead to rising total costs for payers.
While it might not be dramatic, this could lead to gradual increases in premiums and deductibles for some plans while they may have higher co-pays and co-insurance on other services to offset costs.
Such an insulin cost sharing cap is necessary to prevent life-threatening situations for Americans right now, but further legislation must also target the root cause of insulin’s rising prices. Hopefully, these tactics can be used to control costs of other drugs and, more generally, other healthcare services and treatments.
One direction a Mayo Clinic proceeding
suggests to look into is the role of pharmacy benefit managers (PBMs)
. The first issue of this newsletter digs into the role of PBMs, but in short, PBMs are the middlemen that negotiate the price that insurers must pay for drugs that they cover.
Getting a drug covered by an insurer is important for drug manufacturers, because few people can afford the full manufacture price of a drug. These manufacturer prices must allow the manufacturer to offset the cost of research and development. PBMs negotiate the amount that insurers are willing to pay manufacturers for coverage of a drug. Through a complex system of rebates which incentivizes the drug manufacturer to raise the price of a drug to pay the PBM more (I know, this is dizzying), these PBMs can be partly attributed to a huge increase in insulin costs.
Further, consider that the manufacture of insulin is also largely controlled by three companies which have taken advantage of patent law to extend their monopoly rights to produce insulin. Such market dominance gives these companies flexibility to raise prices as they wish. This excessive market concentration can only be fought off with a revision of patenting laws related to drug manufacturing so that other players could have the chance to enter and compete lower prices into the market.
If anything is certain, while an immediate law to cap the out-of-pocket costs of drugs like insulin may deliver much-needed (and perhaps necessary) relief to Americans, there will still be more work to reign in rising healthcare costs after such a law is passed.