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As the price of insulin continues to rise in the United States, a team of economists at the University of Southern California (USC) suggests that solely focusing on drug makers will miss what it claims is an ever-increasing share of dollars going to pharmacy benefit managers (PBMs), best face wash for accutane users pharmacies, and wholesalers.

While the mean list price of 32 insulin products increased by 40% from 2014-2018, the share of a hypothetical $100 insulin expenditure accruing to manufacturers decreased by 33% and to health plans by 25%, say the study authors in their report published in JAMA Health Forum.

But the share going to PBMs increased by 155%, to pharmacies by 229%, and to wholesalers by 75%.

Even so, in 2018, insulin makers retained the largest portion, about $46.73 of that $100, compared with $10.40 for insurers, $14.36 for PBMs, $20.42 for pharmacies, and $8.09 for wholesalers.

The authors say that profits for insulin makers and insurers have declined — citing public financial filings and the widening gap between the net expenditures by drug companies and the net prices they receive.

That growing gap suggests manufacturers have been increasing discounts and rebates paid to intermediaries, write Karen Van Nuys, PhD, Rocio Ribero, PhD, Martha Ryan, BS, and Neeraj Sood, PhD, all from the Leonard D. Schaeffer Center for Health Policy and Economics at USC.

“The widening gap between net expenditures and net prices suggests that increasing profits of distribution system participants are responsible for the increase in insulin costs,” they conclude.

The authors are not entirely without conflict, however. The Schaeffer Center receives money from many private entities, including drug companies, and Sood reports receiving “personal fees” from the Pharmaceutical Research and Manufacturers of America (PhRMA) and two law firms that have represented drug makers in litigation and regulatory matters, WilmerHale LLP and Goldman Ismail Tomaselli & Brennan LLP.

Even so, their work is important, say Chester B. Good, MD, MPH, and Inmaculada Hernandez, PharmD, PhD, in an accompanying editorial.

Given the lack of data on the flow of money among all the parties in the US drug distribution system, “the authors are to be congratulated for attempting such a daunting task,” they write.

Good and Hernandez, of UPMC Health Plan, Pittsburgh, Pennsylvania and the Division of Clinical Pharmacy, University of California, San Diego, respectively, say they are particularly surprised by the “substantial increase in the net flow to pharmacies,” adding that they aren’t aware of any previous reports documenting such an increase.

A Window on Pricing Mystery

The USC researchers used at least a dozen sources to estimate the flow of dollars, including Medicare Part D claims, Medicaid, the National Average Drug Acquisition Cost database, and data from SSR Health, which compiles information, including product-level net revenues reported by publicly traded drug companies in financial statements and earnings calls.

They also had product-level unit volumes and list prices from Symphony Health, and data from the Drug Channels Institute (DCI), which Good and Hernandez say could not be independently verified. DCI provides education and data to players in the drug industry.

The authors were able to estimate how much PBMs were receiving from manufacturers and paying out in rebates to health insurers thanks to data from Nevada and Ohio. Those two states have transparency laws that require PBMs to provide certain information.

The USC study includes a mind-boggling chart that documents the flow of dollars back and forth among all parties.

At the bottom, the patient is the only party that gives, but does not receive, money.

The authors report that the list prices per 100 units of insulin increased from $19.60 in 2014 to $27.45 in 2018. But the net price — which reflects the price after all the discounts and rebates — decreased from $10.53 to $7.29 over the same period.

“Overall, the share of a hypothetical $100 insulin expenditure that accrued to manufacturers decreased such that by 2018 more than half of expenditures on insulin flowed to distribution system intermediaries,” they reiterate.

The researchers acknowledge the limitations of their study, including that they used parameter estimates for missing data.

The results “are best interpreted as suggesting trends in insulin markets generally rather than as providing a precise picture of a particular insulin market.”

Good and Hernandez say they hope that others will follow the USC researchers’ “lead in attempting to piece together more information about the flow of money through the drug distribution system, and that others will seek to confirm their findings.”

Van Nuys, Ribero, and Sood are employees of the Leonard D. Schaeffer Center for Health Policy & Economics at USC, which is supported by a variety of public and private entities, including health insurers and pharmaceutical manufacturers. Sood has reported receiving grants from the National Institutes of Health, the Agency for Health Care Research and Quality, the Jedel Foundation, the Rockefeller Foundation, Abbott Diagnostics, the Conrad N. Hilton Foundation, the Health Care Services Corporation, the Los Angeles County public health department, the Los Angeles’ Mayor’s office, and personal fees from Payssurance, Virta Health, Pharmaceutical Research and Manufacturers of America, WilmerHale LLP, and Goldman Ismail Tomaselli & Brennan LLP.

Alicia Ault is a Lutherville, Maryland-based freelance journalist whose work has appeared in publications including JAMA, Smithsonian.com, The New York Times, and The Washington Post. You can find her on Twitter: @aliciaault.

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