Column: With insulin price cap, drug industry is once again shamed into doing the right thing

The United States doesn’t have a market-based economy for prescription drugs.

It has a shame-based economy.

The latest example of this “scarlet letter” approach to drug pricing came this week as insurance giant Cigna and its Express Scripts subsidiary announced that consumers with drug benefits managed by the company could see their out-of-pocket costs for insulin limited to $25 a month.

“For people with diabetes, insulin can be as essential as air,” Steve Miller, Cigna’s chief clinical officer, said in a statement. “We need to ensure these individuals feel secure in their ability to afford every fill so they don’t miss one dose, which can be dangerous for their health.”

He added: “Together, Cigna and Express Scripts are now able to give people who rely on insulin greater affordability and cost predictability so they can focus on what matters most: their well-being.”

The companies said they are “partnering with insulin manufacturers” to pull this off.

Gosh, thanks, Big Pharma!

Just wondering, though: Considering that insulin has been around for about a century, and that costs have skyrocketed for no good reason except that the worldwide market is controlled by just three pharmaceutical companies, why has it taken until now to suddenly worry about the welfare of people with diabetes?

Miller didn’t address that in his statement. But it’s not hard to guess.

The public and, more importantly, lawmakers have grown increasingly fed up with indefensibly high drug costs, and there’s a feeling among some policymakers that price controls should be on the table.

Insulin has emerged as a lifesaving drug that’s particularly vulnerable to an official crackdown because of the obesity epidemic and the fact that millions of Americans rely on the drug to manage Type 1 and Type 2 diabetes.

“The idea of a shame-based economy isn’t too far off,” said Andrew Friedson, a healthcare economist at the University of Colorado Denver. “Consumers have little power to engage in direct bargaining to get a better deal.”

That means, he told me, that the only way drug prices will be reduced is through a price war with a competitor (unlikely), or by attracting the attention of lawmakers and regulators through “public outrage and corporate shaming.”

On Tuesday, the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee heard from doctors, researchers and patients about the challenge of treating diabetes amid frequent insulin price hikes.

“Our insulin supply chain is broken, unfair and dangerous,” said Dr. Alvin Powers, a representative of the Endocrine Society and director of the Vanderbilt Diabetes Center in Nashville. “Our patients deserve better.”

A recent study in the Journal of the American Medical Assn. found that a quarter of people with diabetes are rationing their insulin because of cost. This can lead to a variety of serious complications, including blindness, amputations and death.

Full disclosure: I have Type 1 diabetes — that’s the autoimmune kind, not the obesity kind — and rely on multiple daily insulin doses.

Committee members and witnesses at Tuesday’s hearing observed that it’s clear why insulin prices keep going up. Higher prices are great for drug makers, pharmacy benefit managers, distributors and drugstores, each of which cuts itself in for a piece of the action.

The only ones who don’t benefit, they noted, are patients.

Cigna and Express Scripts said that under drug plans they manage — which include those of other insurers — the average insulin user now pays $41.50 for a month’s supply. So limiting out-of-pocket costs to $25 a month represents a significant savings.

But James Robinson, director of UC Berkeley’s Center for Health Technology, told me that what’s more likely here is that the companies are merely shifting their revenue sources.

In recent years, he said, insurers and pharmacy benefit managers have favored cost-sharing by individual patients through rising copays and coinsurance, thus keeping premiums down for the broader population.

“It’s been a revolt of the healthy against the sick,” Robinson said. “Not only is that unethical, it’s ineffective because people stop taking their medicine and get even sicker, which we all have to pay for.”

He said it’s a near-certainty that as copays and coinsurance are reduced for people with diabetes, which is basically what Cigna and Express Scripts are doing, the losses for insurers will be offset by higher premiums for everyone.

“And that’s not a bad thing,” Robinson said. “In that sense, you can call this a good move. But why limit it to insulin? Do it as well for cancer drugs, for rheumatoid arthritis drugs, for all other drugs.”

Also, this does nothing to address problems faced by the uninsured, who can be stuck paying hundreds of dollars for insulin because they’re dealing with list prices that in no way reflect actual costs.

When drug maker Eli Lilly introduced its Humalog insulin in 1996, it cost $21 a vial, which is about a month’s supply. Everyone involved made a handsome profit.

A vial of Humalog now costs almost $300, and everyone involved is making exponentially more money off the chronically ill.

Jennifer Luddy, an Express Scripts spokeswoman, told me that helping people with diabetes is important to her company and Cigna, which acquired Express Scripts last year for $54 billion. That’s why they’re limiting people’s out-of-pocket insulin expenses.

“We recognize the critical need for individuals who rely on insulin to feel secure in their ability to afford every fill so they don’t miss one dose, which can be dangerous for their health,” Luddy said, repeating almost word for word what Miller said in his statement.

“We are taking this action and working with drug makers so we can make a meaningful difference for people who use insulin,” she said.

They’re taking this action because they don’t want officials taking more stringent actions, such as requiring drug companies to disclose how much (or little) they actually spend on research and development, and how much profit they really pocket with their drugs.

It’s the shame economy in action, just as a similar shaming resulted in lower costs for lifesaving EpiPens.

“I’ll give them credit for doing the right thing,” said Robinson at UC Berkeley. “But not a lot of credit. If they were really serious, they’d do the same for all classes of drugs.”

Luddy said that “we’re certainly looking at it for other drugs.” But I’m not holding my breath.

There are only so many scarlet letters to go around.

David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to [email protected].