Focus on Access: Julia Boss, President of Type 1 Diabetes Defense Foundation
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Two of my great-grandmothers had insulin-dependent diabetes.
Gertrude had a big family, a big North Dakota farm to keep up with, and a small budget. She couldn’t afford insulin, and she died.
My great-grandmother Olive, in Pennsylvania, died of hypoglycemia one night after changing her insulin dose so she could eat ice cream. Gertrude needed affordable insulin; Olive needed better insulin and a way to measure what it was doing to her blood sugar.
In every generation since, there’s been someone in my family treating diabetes with insulin. My daughter was diagnosed with Type 1 in 2015. And by far the hardest part of that diagnosis has been coming to terms with the reality that in the fifth generation since the start of this family story, in the era of “T1D looks like me,” Type 1 diabetes in the United States still looks a lot like Gertrude and Olive.
Since 2015, my family has consistently paid either 100% or 50% of unrebated list price for insulin in individual insurance plans. We’ve faced years where no ACA plan available in our Oregon county offered Novolog except with high percentage cost-sharing (and insulin allergies mean Novolog is the brand our daughter’s life depends on). I’ve been in tears at the pharmacy counter, in tears in the parking lot after paying $280 a vial, in tears trying also to pay bills for health insurance premiums, rent, groceries and crushing student loans. With insurance and without any actual health catastrophe, my family’s healthcare spending in relation to income hit catastrophic levels every single year in 2015, 2016, 2017, and 2018.
News stories have shown Americans the insulin crisis where it’s most acute — the no money, no insulin in the fridge worst-case scenario. People with Type 1, both insured and uninsured, are dying. We’ve turned into a nation that has insulin GoFundMes for people who’ve lost jobs and the insurance that went with them, and insulin GoFundMes for seniors, even though they’re covered under Medicare Part D. Alec Smith, who died in 2017, did not have insurance. Micah Fischer, who died in 2018, did. Both were 26 years old.
We need to talk about manufacturers’ skyrocketing list prices and the impact of those prices on the uninsured. To understand what’s driven those prices up — and to reach a lasting solution to the insulin access crisis — we must also talk about the silent tragedy unfolding within health insurance plans that favor high list prices (and large rebates) and force a growing number of insured Americans to ration or use riskier older insulins. For two years, the Type 1 Diabetes Defense Foundation (T1DF) has led this second conversation in federal courts, state rulemaking advisory committee meetings, and standard-setting organizations. We’ve done so because we want treatment access stories like Gertrude’s and Olive’s to belong to the American diabetes past — not to this country’s diabetes present, and certainly not its diabetes future.
Elephants in the room
The “Big 3” insulin manufacturers (Eli Lilly, Sanofi, and Novo Nordisk) don’t control what Americans pay for insulin in the 95% of U.S. pharmacy transactions that involve a third-party payer. Manufacturers negotiate with payers, who then control what we pay. The third-party payer in your life might be Medicaid, Medicare, a commercial insurer offering an ACA plan on your state exchange, or a large employer health plan. But from the manufacturers’ perspective, that payer (not you) is the customer, the one who is “always right.” And when every year that payer prefers the brand with the higher list price and the bigger rebate — not the one with the lower price — then list prices keep going up.
Payers are the colossal elephants in the room of U.S. insulin pricing. They’ve used their weight to push for big rebates, and then to create benefit designs where Americans pay for prescriptions as a percentage of “gross pharmacy claims expense.” That’s the front-end price at the pharmacy. It doesn’t account for rebates and other offsets that travel around the back from manufacturers to insurers. In the 1990s — when the National Association of Insurance Commissioners (NAIC) decided its Statutory Accounting Principles would not follow the Generally Accepted Accounting Principles (GAAP) that treat rebates as price offsets — there were small rebates on most drugs, most health plans had small fixed copays, and a health plan’s members were all more or less equally affected by the practice. Two decades later, about 90% of prescription fills are for generics that have no back-end rebating—but for the remaining 10% of prescriptions, for brand drugs, rebates have exploded to $150 billion annually. Meanwhile, half of Americans are now on health plans with high deductibles or percentage cost-“sharing” that insurers base on gross claims expense.
People whose bodies don’t make insulin are living in the “gross to net bubble,” where average rebates on analog insulins are now reported by SSR Health and Credit Suisse at more than 70% off list price. Any plan requiring individuals to pay artificially inflated cost-sharing for rebated brands, calculated as a percentage of gross claims expense (while the payer treats rebates as general revenue) systematically causes financial harm to a subset of plan members who have medical conditions — including Type 1 diabetes — where rebated brand drugs are the only treatment option. That violates the spirit, and possibly also the letter, of the Affordable Care Act’s anti-discrimination mandate.
Let’s say you’re on a plan with 30% “cost-sharing” on all brand drugs. You fill a prescription that has gross pharmacy claims expense of $100, and the payer separately gets a $70 rebate. The payer’s net cost is $30. If you pay $30 at the pharmacy counter, that’s not “30% cost-sharing” but “paying the entire cost.” On a high-deductible plan, for a drug with a 60% rebate, you might pay “an astounding 243% of the true net cost to the payer.”
Actuarial firm Milliman confirmed in 2018 that when insurers base payment on gross, beneficiaries pay “higher than [their] listed coinsurance,” and some pharmacy visits turn into a “net gain” for the insurer or large-employer payer.
Transactions like these explain why UnitedHealthcare recently sent a letter to manufacturers demanding financial concessions to the insurer if manufacturers’ list prices go down, and why Lilly would decide to sell a half-price “authorized generic” Humalog, Insulin Lispro, while maintaining high-list/big-rebate pricing on brand Humalog for insurers and employers.
Rebate pass-through to individuals — with any percentage cost-sharing based on net cost — is a critical step toward bringing list prices for analog insulins down to current net (about $30 to $60 per vial) for all Americans, insured or uninsured. Rebate pass-through is how we get the massive weight of our insurer elephants back on the patients’ side of the drug-pricing negotiation.
There’s no good reason
There’s no good reason insurers and large employer plans don’t base patient payments on estimated net cost. (A few large employer plans, in fact, already do this.) The communication standards and the IT infrastructure for real-time claims adjudication and rebate pass-through at the pharmacy point of service have been around for over a decade. Integrated national PBMs and health insurers now control the complete drug pricing process, from rebate negotiation between insurance holding companies and manufacturers to drug dispensing. No logic — including pushing patients toward preferred brands — entitles a fiduciary to misrepresent or inflate cost to beneficiaries. Artificially inflating the cost of insulin terrifies and hurts people whose lives depend on it, and — because it predictably causes rationing and medical harm (DKA, long-term complications) — the original misrepresentation also drives other healthcare costs up. When out-of-pocket cost for prescriptions reaches $250 per month, 69% of patients abandon treatment. Type 1s, of course, can’t live if they abandon treatment — but in high-deductible plans they now face costs several times the $250 per month that, statistically, forces rationing. (Less than 2% of respondents in the waiting room survey Yale grad students ran last year had no prescription drug coverage, yet 25% reported cutting back on insulin for cost reasons.) Artificially inflated cost-sharing predictably increases injury to the few; given the fixed Medical Loss Ratio imposed by most state insurance laws and the ACA between insurers’ profits, premium rate increases and claims expenditures, these inflated costs also indirectly hurt the many. Health insurers can only increase profit by continuously increasing population health costs and setting premium rates (including deductible amounts) as high as the market can bear.
There’s no good reason why the politicians who now seethe with anger at insulin manufacturers aren’t also decrying abuse by insurers. If it is morally wrong to derive unjust enrichment from people who need insulin — and I’m sure the Beyond Type 1 community would agree that it is — then it makes no sense to reserve all your anger for the corporations that pay giant rebates and none for the corporations that pocket them. If you’re a politician who wants to address insulin pricing, there’s plenty of public information on rebating and payers’ net cost. State legislators can access even more information via their states’ public health divisions and insurance commissioners. Some reasons we don’t hear more from politicians about net pricing to payers: rebate capture is happening in some state and federal employee health plans, including the Federal Employees Health Benefits Program (FEHBP), and many states quietly treat supplemental manufacturer rebates paid in Medicaid as general revenue (used to fund other programs) even as their legislators shout that list prices are driving up Medicaid spending. A politician who tweets out graphs that show only the climbing list prices and misleadingly complains list price is the Medicaid or Medicare “cost” impact on taxpayers enables the ongoing abuse of people with diabetes. Calling rising list price (not falling net) insurers’ “cost” lays the groundwork for public and private payers to walk back the standard of care from analogs to “cheaper alternatives”—with the perverse result that more Type 1s will end up paying beyond insurers’ net cost. (Here’s what that walk-back looks like: Kaiser Permanente’s 2019 Oregon ACA formulary prefers only older Humulin; all analogs get bumped to a higher tier with minimum 50% cost-“sharing.”) Reversing progress on the national standard of care does nothing to help the Gertrudes of my daughter’s generation, and it’s impossible to see any way it would encourage development of better treatments for today’s Olives.
With my husband Charles Fournier, I co-founded the Type 1 Diabetes Defense Foundation in 2015, in response to accommodation refusals and restrictions on glucagon administration in Washington State public schools. When Washington’s Department of Health recommended against stocking ambulances with glucagon kits, explicitly on grounds of high cost, T1DF shifted its organizational focus to drug pricing.
Turning to U.S. healthcare from a career in forensic cost analysis in very large construction disputes, Charles targeted the cost accounting issues and discriminatory benefit designs at the core of the patients’ injury. In 2017, T1DF became the first diabetes nonprofit to talk publicly about plan cost misrepresentations and discriminatory benefit designs that overcharge people with chronic conditions treated with rebated brand drugs. That same year, T1DF reverse-engineered the production cost of the 35mg of insulin included in a 10ml vial (about $1.47) and zeroed in on payers’ role in driving up list prices for insulin, glucagon, and test strips as manufacturers’ net prices for insulin decreased for the second year in a row.
When class-action attorneys sued insulin manufacturers early in 2017 on a flawed “Big 3 only” fact pattern, T1DF filed Boss v. CVS Health to add PBM/payer defendants to that litigation. We recognized that manufacturers have also earned supra-competitive net prices, but that to make viable federal RICO claims plaintiffs would need to focus on the PBMs/payers who receive rebates, misrepresent plan cost, and peg patients’ payments to unrebated list prices. When multiple insulin pricing lawsuits were consolidated, we opposed the decision by lead attorneys — who have a long history of representing payers — to drop PBM/payer defendants, and then battled to unconsolidate Boss v. CVS Health (succeeding in November 2018 and withdrawing those claims to protect them). Over a fifteen-month period we committed thousands of unpaid hours to the work needed to protect these crucial patient claims. T1DF’s individual donors contributed funds to offset considerable PACER case research fees and FedEx costs for letters and court filings, and we are hugely grateful for that support. On February 15, 2018, the court dismissed plaintiffs’ federal RICO claims against manufacturers, on grounds related to those T1DF had identified.
T1DF has also educated state and federal legislators about payer rebate capture, in a December 2017 white paper and in meetings with professional staff for the U.S. Senate’s Special Committee on Aging a year later, as they began investigating what insurers are doing with rebates earned from their plan members’ insulin purchases. In 2018 T1DF described in public comments to Oregon’s Joint Interim Task Force on Fair Pricing of Prescription Drugs the financial burden and medical harm caused when insurers inflate cost-“sharing” in insurance plans overseen by Oregon’s Division of Financial Regulation. After we outlined ways that insurer Moda Health’s admissions, during Task Force meetings, to rebate capture and misrepresentation of plan cost could document violations of Oregon’s insurance code, the insurance commissioner opened an investigation (ongoing). T1DF is now involved in the National Council for Prescription Drug Program (NCPDP) task force charged with drafting recommendations to implement full rebate pass-through in Medicare Part D.
Stay curious and engage broadly
I encourage anyone who wants to advocate on insulin pricing to remain curious and engage broadly.
Get past hashtag politics – The facts on the ground are always messier than movement messaging. The small European countries that deliver low- or no-cost insulin to their people do so via healthcare delivery systems that first negotiate low net prices with manufacturers (as our payers do) and then subsidize costs to individuals. Each of our major commercial insurers has substantially more market power than most “low drug price” single-payer markets. UnitedHealth Group’s “covered lives” total is greater than the population of France or Germany. Anthem covers more lives than the population of Canada. Aetna has the market power of all four Scandinavian countries combined—Denmark, Norway, Sweden and Finland. Our payers have no less negotiating power. Their goals are simply opposite: they negotiate low net prices for themselves, and then artificially inflate costs to individuals. That means we do need to talk about the payers we have now and the multiple ways they are failing us. And we need to support a range of actions and actors — patients who tell their stories to lawmakers, activists who demonstrate in front of corporate headquarters and keep the insulin pricing crisis in the news cycle, and policy organizations that analyze technical issues and comment on the rulemaking that happens after the reporters head home.
Don’t give away your story – Patient stories are the glue that binds legislators’ votes to specific bills. Most legislation now introduced is written with (sometimes by) lobbyists. A platform that asks you to sign away the right to use your story could help a lobbyist stick votes to a bill you don’t support.
Remember the law of unintended consequences – There’s often a big gap between what a bill’s proponents claim it will accomplish and the actual impact if it passes. No reference-pricing bill yet introduced would directly “slash drug prices.” But the “Low Drug Prices Act,” for example, is written to deny patients access to medicines in Medicare, Medicaid, Affordable Care Act plans and every other federal program if price is deemed to exceed reference benchmarks. A state law that requires commercial insurers to pass through only 51% of manufacturer rebates may also rationalize the discriminatory practice of rebate capture.
The most impactful system change we could see right now, and the simplest to implement, would be for all payers — commercial insurers in the ACA and Medicare Part D, Medicaid, employer plans, union plans, any future Medicare For All — to shift to net cost accounting for all prescription drugs in all benefit designs (as the rest of the U.S. retail industry did in 1996), subject to regulatory audit, with premiums and any individual cost-sharing based on net cost.
The Beyond Type 1 community can help make that happen by rejecting the binary opposition of manufacturers vs. patients to recognize that U.S. patients are caught between two groups of powerful corporate actors. This is a both/and situation. Calling out discriminatory practices by insurers is not “defending high list prices,” any more than fighting predatory mortgage lending is arguing against affordable housing. When the list price for a vial of Humalog is $275 and climbing, and Lilly nets only 20% of that list price, and we fail to make payers’ low net cost part of our everyday conversation on insulin pricing, then we make it easier for manufacturers to pretend “half-price insulin” is a reasonable concession, and we leave people with Type 1 diabetes vulnerable to ongoing exploitation.
Focus on Access Editorial Disclosure: The position presented above is solely that of the author. Other than fact-checking and formatting, Beyond Type 1 has not edited the content of this post.