Insulin list prices have escalated dramatically during the past 5-10 years. This is largely due to an oligopoly of only three manufacturers, the lack of “generic” insulin, and manufacturer overuse of patent extensions.

PBMs have created competition using drug formularies and rebates. So in spite of dramatic increases in list prices with total gross sales increasing from $22b in 2012 to $54b in 2019, PBMs have held net prices flat, with total net sales of $13b in 2012 and the same $13b in 2019.

Recent findings:

  • Basaglar (a follow-on biologic insulin to the dominant brand-name Lantus) has shown how a price competitive alternative can shift market share and reduce overall costs. Total net costs for Lantus/Basaglar decreased from $5.6b in 2014 to $2.1b in 2019.
  • The Basaglar experience suggests that seven new insulin biosimilars in the pipeline will likely create an expanded opportunity for PBMs to further reduce total insulin costs through greater formulary competition

PBMs are creating innovative programs that limit consumer OOP insulin costs to promote affordable access, as well as clinical programs that improve care and patient outcomes.

Oligopoly Pricing

Oligopolies stifle competition as prices for two manufacturers increase in lock-step:

With only three main manufacturers, competition has been limited leading to uninhibited price increases

When oligopolies limit competition in the market, all manufacturers increase list prices.

And, as new insulin products hi the market, launch prices soar higher and higher.

With PBMs, new manufacturers can enter the market at a lower list price, creating competition and driving costs down.

How PBMs Create Savings

Basaglar competition created significant reductions in net price

PBMs pit incoming insulin products against competitors:

  • Basaglar was introduced in late 2016, as a follow-on competitor to Lantus. Follow-on insulins are FDA-approved copies of a biologic product, but don’t meet the definition of a “generic.”
  • Prior to Basaglar, Lantus was continuously increasing in both list price and net price (i.e., “net-of-rebate” price).
  • PBMs used Basaglar to drive competition with Lantus.  As a result, the net price of Lantus decreased by almost 55% since Basaglar was introduced.
  • In 2019, even though Basaglar had a lower list price than Lantus, the net-of-rebate price of Basaglar and Lantus were almost equal.

Innovative PBM Programs Reduce Costs and Improve Outcomes

CONCLUSION:
Basaglar competition had a dramatic impact on Lantus pricing.

No Correlation Between Rebates and Price Increases

  • Top insulins with lower average rebates (in red) have actually had higher annual price growth during the 2016-2019 period.
  • Insulin with highest average rebate (in blue) had small average price increase.
  • A similar analysis across all top 200 drugs also shows no correlation between rebate levels and list price growth.

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PBM Research Shows:

No Correlation Between Rebates and Price Increases

For the eight top insulin products by 2019 sales, there is no correlation between the growing list prices set by drugmakers and the average rebate levels that they negotiate with PBMs