by wayne persky
Founder and President of the Microscopic Colitis Foundation
In a recent study published in PLOS Medicine , researchers from Brigham and Women's Hospital, led by William Feldman, shed light on the tactics used by insulin manufacturers to keep prices high. The analysis reveals how these companies have manipulated patent laws and FDA regulations to extend their market exclusivity, suppressing competition, and keeping insulin prices elevated despite its century-old discovery (Olsen, et al., 2023).1
U.S. insulin prices continue to increase, as drug companies "game" the system.
Insulin is an essential treatment for individuals with type 1 and certain types of type 2 diabetes. Despite its vital role and long history, insulin remains expensive in the United States. Compared with other countries around the world, insulin is 7 to 10 times more expensive in the U.6. A 2021 Congressional report highlighted how the three major insulin manufacturers have been raising prices in unison for decades. The study by Feldman and colleagues delves deeper into the mechanisms behind these sustained high prices, focusing on patents and regulatory exclusivities.
Drug companies have learned how to exploit the patent system.
Patents allow a government-granted monopoly that lasts for 20 years, and they prevent the FDA from approving generic versions of a drug until the patents expire. The study analyzed FDA and patent data for all insulin products approved in the U.S. from 1986 to 2019. During this period, 56 brand-name insulin products received FDA approval.
The researchers discovered that manufacturers often obtained additional patents on their insulin products after FDA approval. These additional patents extended the market exclusivity period by a median of six years. Interestingly, many of these patents were for insulin delivery devices rather than the insulin itself. In two-thirds of drug-device combinations, the patents on the devices were the last to expire, adding an extra median of 5.2 years of protection.
Overall, the study found that the median protection period for insulin products was 16 years. Some insulin products, such as Lantus, Novolog, and Novolog 70/30, had protection periods extending over 30 years due to strategic patenting.
The researchers discovered that manufacturers often obtained additional patents on their insulin products after FDA approval. These additional patents extended the market exclusivity period by a median of six years. Interestingly, many of these patents were for insulin delivery devices rather than the insulin itself. In two-thirds of drug-device combinations, the patents on the devices were the last to expire, adding an extra median of 5.2 years of protection.
Overall, the study found that the median protection period for insulin products was 16 years. Some insulin products, such as Lantus, Novolog, and Novolog 70/30, had protection periods extending over 30 years due to strategic patenting.
PBMs were originally hired to reduce the cost of drugs.
Originally, pharmacy benefit managers (PBMs) were hired by employers and government insurance programs like Medicare, as middlemen to negotiate drug prices and handle payments to pharmacies. But now, PBMs are often driving up the costs of drugs in their pursuit of profits.
Many patients are not even aware of the role of PBMs, as they are noticeable only when issues arise in filling prescriptions. Most Americans rely on one of the big three PBMs: CVS Health’s Caremark, Cigna’s Express Scripts, or UnitedHealth Group’s Optum Rx. These companies are tasked with negotiating prices with drug manufacturers, determining out-of-pocket costs for patients, and reimbursing pharmacies for dispensed medications.
Many patients are not even aware of the role of PBMs, as they are noticeable only when issues arise in filling prescriptions. Most Americans rely on one of the big three PBMs: CVS Health’s Caremark, Cigna’s Express Scripts, or UnitedHealth Group’s Optum Rx. These companies are tasked with negotiating prices with drug manufacturers, determining out-of-pocket costs for patients, and reimbursing pharmacies for dispensed medications.
But PBMs have become the "fox guarding the henhouse".
While PBMs are expected to save money by securing favorable terms from manufacturers and pharmacies, they often overcharge at multiple points in the process. This can involve steering patients toward more expensive drugs, or charging employers significantly more than the wholesale cost of medications. Given that these practices affect over 200 million Americans, the cumulative financial impact is substantial.
As described in a New York Times article, a glaring example of PBM overcharging involves Kent McKinley, a cancer patient in Oklahoma covered by a state employee health insurance program (Abelson, and Robbins, 2024, June 21).2 His PBM, CVS Caremark, billed the state $120,000 more per year for his cancer drug than a local pharmacy would have charged. McKinley expressed frustration, saying, "We were getting ripped off." Such instances highlight how PBMs can exploit the system, often without employers' knowledge.
As described in a New York Times article, a glaring example of PBM overcharging involves Kent McKinley, a cancer patient in Oklahoma covered by a state employee health insurance program (Abelson, and Robbins, 2024, June 21).2 His PBM, CVS Caremark, billed the state $120,000 more per year for his cancer drug than a local pharmacy would have charged. McKinley expressed frustration, saying, "We were getting ripped off." Such instances highlight how PBMs can exploit the system, often without employers' knowledge.
The PBM system stifles competition.
The Times article describes how the complexity of the PBM system and the massive scale of the largest players create significant barriers to competition. The three major PBMs process around 80% of prescriptions in the U.S. Following major mergers in 2018, these PBMs are now part of larger conglomerates that include insurers and pharmacies, allowing them to dominate the market. This integration enables them to push patients toward their pharmacies and makes it difficult for smaller competitors to gain a foothold.
Accordingly, PBMs are facing increasing scrutiny from regulators. High drug prices have prompted the Federal Trade Commission, lawmakers, and state attorneys general to investigate potential abuses of power by PBMs. Ohio's Republican Attorney General, Dave Yost, who has sued Express Scripts and Optum Rx, remarked, “They’re seeking to extract from the system without creating any corresponding value for the system. The patients are the ones that are suffering.”
Accordingly, PBMs are facing increasing scrutiny from regulators. High drug prices have prompted the Federal Trade Commission, lawmakers, and state attorneys general to investigate potential abuses of power by PBMs. Ohio's Republican Attorney General, Dave Yost, who has sued Express Scripts and Optum Rx, remarked, “They’re seeking to extract from the system without creating any corresponding value for the system. The patients are the ones that are suffering.”
PBMs often steer Americans toward expensive medications.
As described in a recent Medical Xpress article, in 2022, Tennessee spent a staggering $48 million on Humira, a single drug, amounting to $62,000 per patient for those covered by the state's employee health insurance program (Allen, 2023, September 21).3 The introduction of nine Humira biosimilars, priced as low as $995 a month, promised substantial savings. Yet, despite the potential for significant cost reductions, these savings remain unrealized due to the complex dynamics of the U.S. healthcare system, and their reliance on PBMs.
Despite the logic of promoting cheaper biosimilars, PBMs have not favored them. As a result, the anticipated savings from switching to biosimilars like Yusimry, which costs $995 compared to Humira's $6,600, have not materialized. In countries like the UK, Denmark, and Poland, over 90% of Humira patients have switched to biosimilars since their European launch in 2018. Similarly, Kaiser Permanente, covering 12 million people across eight U.S. states, expects to save $300 million this year by switching most patients to a biosimilar.
Despite the logic of promoting cheaper biosimilars, PBMs have not favored them. As a result, the anticipated savings from switching to biosimilars like Yusimry, which costs $995 compared to Humira's $6,600, have not materialized. In countries like the UK, Denmark, and Poland, over 90% of Humira patients have switched to biosimilars since their European launch in 2018. Similarly, Kaiser Permanente, covering 12 million people across eight U.S. states, expects to save $300 million this year by switching most patients to a biosimilar.
Biosimilars offer a significant opportunity for cost savings due to their lower development costs compared to biologics. While developing a new biologic treatment may take 10 to 15 years, and cost as much as $2 billion or more, creating a biosimilar often takes eight years or less, and costs roughly $200 million, or less. Although developing a biosimilar may cost only about 1/10 of the cost of developing a biologic, the development cost is still expensive enough that a significant market share is required before the pharmaceutical company can't consider the treatment a success. The financial stakes are high, but so are the potential savings. For instance, Coherus BioSciences’ Humira biosimilar, Yusimry, is priced at a fraction of Humira’s list price.
Drug manufacturers are part of the problem.
The biggest hurdle is the PBMs' reluctance to place biosimilars on formularies at prices lower than Humira. This inertia is partly due to the high rebates PBMs receive from AbbVie, Humira's manufacturer. These rebates are often based on total drug usage, incentivizing PBMs to keep Humira on formularies. Additionally, according to the Medical Xpress article, AbbVie has warned PBMs that recommending biosimilars over Humira could result in losing rebates for other expensive drugs like Skyrizi and Rinvoq.
And there are drug company payments to clinicians.
A recent study published by The BMJ, reveals a troubling correlation between industry payments to oncologists and the use of non-recommended and low-value treatments among cancer patients (British Medical Journal, 2023, October 25).4 This finding raises concerns about the quality of care and suggests a need to reassess the current practice of personal payments from the drug industry to physicians.
The study, conducted by researchers in the United States, analyzed Medicare claims data for patients diagnosed with cancer between 2014 and 2019. These patients were identified as being at risk of receiving one of four non-recommended or low-value drugs. Non-recommended drugs are those discouraged by guidelines, while low-value drugs provide no incremental benefit but are more expensive.
The study, conducted by researchers in the United States, analyzed Medicare claims data for patients diagnosed with cancer between 2014 and 2019. These patients were identified as being at risk of receiving one of four non-recommended or low-value drugs. Non-recommended drugs are those discouraged by guidelines, while low-value drugs provide no incremental benefit but are more expensive.
The drugs evaluated in the study included:
1. Denosumab — A bone-modifying drug for castration-sensitive prostate cancer.
2. Granulocyte Colony Stimulating Factors (GCSF) — Used to prevent neutropenic fever in chemotherapy patients.
3. Nab-paclitaxel — Used instead of paclitaxel for breast or lung cancer patients.
4. Branded cancer drugs — Used when generic or similar versions are available.
2. Granulocyte Colony Stimulating Factors (GCSF) — Used to prevent neutropenic fever in chemotherapy patients.
3. Nab-paclitaxel — Used instead of paclitaxel for breast or lung cancer patients.
4. Branded cancer drugs — Used when generic or similar versions are available.
Researchers cross-referenced this data with the Open Payments database, which tracks financial relationships between pharmaceutical companies and physicians. They specifically noted whether the patients' oncologists had received payments from the manufacturers of these four drugs in the year before the patients' diagnoses.
The study found that:
49.5% of patients whose oncologists had received payments were prescribed denosumab, compared to 31.4% whose oncologists had not received payments.
32.1% of patients whose oncologists received payments were prescribed GCSF, versus 26.6% for those without payments.
15.1% of patients whose oncologists received payments were prescribed nab-paclitaxel, compared to 7.3% whose oncologists had not received payments.
83.5% of patients whose oncologists received payments were prescribed branded drugs, while 88.3% of those without payments received the same.
32.1% of patients whose oncologists received payments were prescribed GCSF, versus 26.6% for those without payments.
15.1% of patients whose oncologists received payments were prescribed nab-paclitaxel, compared to 7.3% whose oncologists had not received payments.
83.5% of patients whose oncologists received payments were prescribed branded drugs, while 88.3% of those without payments received the same.
After adjusting for patient characteristics such as age, pre-existing conditions, and income, the researchers found that industry payments were associated with a 17.5% greater use of denosumab, a 5.8% greater use of GCSF, and a 7.6% greater use of nab-paclitaxel. Interestingly, there was a 4.6% lower use of branded drugs among those whose oncologists received payments.
Both patients and physicians alike often would rather not change treatments.
Switching patients from Humira to biosimilars involves administrative costs and resistance from both patients and doctors. Physicians are often hesitant to change a patient's medication if the current treatment is effective. This reluctance is reinforced by health plans’ preference for high-priced, high-rebate drugs, as well as logistical challenges and fears of adverse effects.
Despite these challenges, there are successful cases of transitioning to biosimilars. For example, Kaiser Permanente and Prescryptive, a small PBM, have both switched significant numbers of patients to biosimilars without major issues. Kaiser Permanente’s chief pharmacy officer, Mary Beth Lang, highlighted the substantial savings and positive patient outcomes from their switch to biosimilars.
Despite these challenges, there are successful cases of transitioning to biosimilars. For example, Kaiser Permanente and Prescryptive, a small PBM, have both switched significant numbers of patients to biosimilars without major issues. Kaiser Permanente’s chief pharmacy officer, Mary Beth Lang, highlighted the substantial savings and positive patient outcomes from their switch to biosimilars.
Medicare may "inspire" the switch to biosimilars.
The upcoming $2,000 out-of-pocket cap on Medicare drug spending, set to take effect in 2025 under the Inflation Reduction Act, could drive more interest in biosimilars. With insurers responsible for more of the drug costs, they may seek cheaper alternatives.
Europeans are also calling for tighter regulation of pharmaceutical companies.
Health care professionals and organizations must take a firmer stance against unethical marketing practices by the pharmaceutical industry, according to a new study published in the British Medical Journal (BMJ). The research, conducted by Dr. Piotr Ozieranski from the University of Bath and Dr. Shai Mulinari from Lund University, highlights the failures of industry self-regulation and advocates for stronger regulatory measures to protect patient health, ensure value for taxpayers, and bolster trust in health care systems (University of Bath, 2023, September 19).5
In many countries, including most of Europe, Japan, Canada, and Australia, the regulation of pharmaceutical marketing largely relies on self-regulation. Industry trade groups are responsible for setting and enforcing rules of conduct. One of the most notable examples is the Code of Practice of the Association of the British Pharmaceutical Industry (ABPI). However, the study argues that self-regulation is inherently flawed and unsustainable.
The research cites the case of Danish drug company Novo Nordisk, which faced suspension from the ABPI in March 2023 for serious breaches of the Code of Practice. Novo Nordisk had sponsored courses for health professionals on using its anti-obesity drug Saxenda without disclosing its involvement, effectively orchestrating a large-scale promotional campaign that downplayed the drug's side effects. Despite the suspension and loss of certain membership benefits, Novo Nordisk remains bound by self-regulation and can still sell its products in the UK.
A similar situation occurred in 2016 with the Japanese company Astellas, which was suspended from the ABPI for promoting its prostate cancer drug Xtandi for unapproved uses, potentially endangering patient safety. These cases underscore the inadequacies of self-regulation in holding pharmaceutical companies accountable for unethical practices.
The study suggests that health care organizations, such as the United Kingdom National Health Service (NHS), universities, and professional associations, should critically review and revise their collaborations with companies that have violated ethical standards. For instance, the Royal Colleges of Physicians and General Practitioners have ended partnerships with Novo Nordisk, returning outstanding grants and pausing associated projects. Such decisive actions set an important precedent for challenging unethical behavior within the industry.
In many countries, including most of Europe, Japan, Canada, and Australia, the regulation of pharmaceutical marketing largely relies on self-regulation. Industry trade groups are responsible for setting and enforcing rules of conduct. One of the most notable examples is the Code of Practice of the Association of the British Pharmaceutical Industry (ABPI). However, the study argues that self-regulation is inherently flawed and unsustainable.
The research cites the case of Danish drug company Novo Nordisk, which faced suspension from the ABPI in March 2023 for serious breaches of the Code of Practice. Novo Nordisk had sponsored courses for health professionals on using its anti-obesity drug Saxenda without disclosing its involvement, effectively orchestrating a large-scale promotional campaign that downplayed the drug's side effects. Despite the suspension and loss of certain membership benefits, Novo Nordisk remains bound by self-regulation and can still sell its products in the UK.
A similar situation occurred in 2016 with the Japanese company Astellas, which was suspended from the ABPI for promoting its prostate cancer drug Xtandi for unapproved uses, potentially endangering patient safety. These cases underscore the inadequacies of self-regulation in holding pharmaceutical companies accountable for unethical practices.
The study suggests that health care organizations, such as the United Kingdom National Health Service (NHS), universities, and professional associations, should critically review and revise their collaborations with companies that have violated ethical standards. For instance, the Royal Colleges of Physicians and General Practitioners have ended partnerships with Novo Nordisk, returning outstanding grants and pausing associated projects. Such decisive actions set an important precedent for challenging unethical behavior within the industry.
References
1. Olsen, A., Beall, R. F., Knox, R. P., Tu, S. S., Kesselheim, A. S., and Feldman, W. B. (2023). Patents and regulatory exclusivities on FDA-approved insulin products: A longitudinal database study, 1986–2019. PLOS Medicine, Retrieved from https://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1004309
2. Abelson, R. and Robbins, R. (2024, June 21). Bad medicine. The New York Times, Retrieved from https://messaging-custom-newsletters.nytimes.com/dynamic/render?campaign_id=9&emc=edit_nn_20240621&instance_id=126819&isViewInBrowser=true&nl=the-morning&paid_regi=1&productCode=NN®i_id=219091490&segment_id=170165&te=1&uri=nyt%3A%2F%2Fnewsletter%2Fbb2588dc-a62e-578e-a3ba-c913677f71d4&user_id=5dfc16e8efb91fe67ecbf1b4eda4a654
3. Allen, A. (2023, September 21). Save billions or stick with Humira? Drug brokers steer Americans to the costly choice. Medical Xpress, Retrieved from https://medicalxpress.com/news/2023-09-billions-humira-drug-brokers-americans.html?utm_source=nwletter&utm_medium=email&utm_campaign=daily-nwletter
4. British Medical Journal. (2023, October 25). Industry payments to physicians linked to use of some non-recommended and low-value drugs among cancer patients. Medical Xpress, Retrieved from https://medicalxpress.com/news/2023-10-industry-payments-physicians-linked-non-recommended.html?utm_source=nwletter&utm_medium=email&utm_campaign=daily-nwletter
5. University of Bath. (2023, September 19). Self-regulation of pharma industry marketing is unsustainable and failing patients, according to new analysis. Medical Xpress, Retrieved from https://medicalxpress.com/news/2023-09-self-regulation-pharma-industry-unsustainable-patients.html?utm_source=nwletter&utm_medium=email&utm_campaign=daily-nwletter
