Inside the Senate Report on Rising Insulin Prices


Editor’s Note: People who take insulin require consistently affordable and predictable sources of insulin at all times. If you or a loved one are struggling to afford or access insulin, you can build custom plans based on your personal circumstances through our tool,

In January 2021, the United States Senate Finance Committee issued their findings from a two-year investigation into the price of insulin in the US. Their findings are unsurprising to anyone impacted by the cost of insulin. Too many entities—manufacturers, pharmacy benefit managers (PBMs) and insurance companies—are driving up the cost of insulin, a life-sustaining drug that insulin-dependent people cannot go without. 

The diabetes community has never gotten this level of insight before; all of the contracts and deals the Senate Finance Committee were able to investigate were confidential. Below, we break down what’s in the Senate Finance Committee’s 90-page report

To best understand the findings, here are four definitions you need to know:

Insulin manufacturers – Refers to the companies who manufacture insulin. Currently there are three primary insulin manufacturers that market insulin in the US, sometimes referred to as “the Big 3”: Eli Lilly, Novo Nordisk and Sanofi. These three companies produce almost 90 percent of insulin worldwide. Other companies include MannKind, which makes Afrezza inhalable insulin, Viatris (formerly known as Mylan), which makes Semglee, as well as multiple manufacturers who market insulin outside of the US. 

Pharmacy Benefit Managers (PBMs) – PBMs are third-party intermediaries who negotiate prices and drug placements on insurance formularies between pharmaceutical companies and insurance companies. Sometimes they are standalone companies, other times they are attached to national pharmacies or insurance companies. For their negotiating services, they take a share of the profits from prescriptions. This share is known as ‘rebates.’ They also profit from “administrative fees” for each unit of drug sold, which can be up to 5 percent of the list price.

Rebates – A percentage of the list price of a medication, given by a drug manufacturer to a PBM, in order to be listed on the health insurance plan formulary or placed in a pharmacy. Rebates function a bit like a “broker’s fee” of sorts and can account for 30-70 percent of the cost a person has to pay at the counter for insulin. The PBM takes a portion of the rebate and then gives the remainder to their client, which can be the federal government (Medicare), an employer’s health plan, or a standalone health insurer.  

Formulary – Also known as an insurance or prescription formulary, this is the list of prescription drugs covered by your health insurance or prescription drug plan, also called a drug list. Health insurance companies change their covered prescription drugs from year to year based on negotiations with PBMs and drug manufacturers. This is why you may hear that the insulin you use is no longer “covered on the formulary.” This is also why you may notice the cost of your insulin changing, sometimes from an amount like $500 a month one year, to $35 a month in another. This has nothing to do with federal drug pricing policy, and everything to do with private deals made between PBMs, insurance companies and manufacturers.

Editor’s Note: See Beyond Type 1’s full glossary for the US Healthcare System HERE

Over almost two years, the Senate Finance Committee poured over 100,000 pages of internal documents provided by insulin manufacturers, the three major PBMs, and reports from The Centers for Medicare & Medicaid Services (CMS), trying to determine the financial and contractual relationships between the companies. 

As stated in the report, “…the opaque business practices of pharmaceutical manufacturers and PBMs have huge implications for patients, payers and the Federal government, with respect to insulin and therapies for other diseases.” 

This report is drastically different from the 2018 report issued by the Congressional Diabetes Caucus, which was a very light overview of the issue, thanking manufacturers, PBMs, plans, and organizations for their participation. 

Some of the top line findings from the report include::

  • Two insulin manufacturers considered dropping list prices by up to 50 percent in 2018—neither did, because it wasn’t good for business. 
  • The rise of list prices is due to the profits they create for insulin manufacturers and PBMs, as well as PBM pressure for rebates, and threats to exclude products from insurance formularies. 
  • The insulin manufacturers admit they could drop some rebates by up to 89 percent and still be profitable. 

The report puts numbers on what all those examining healthcare policy in the US already knew—this problem is complex. It requires multiple, drastic solutions from many angles. There is no quick fix—bandaids in one place create issues in another. And it’s not limited to insulin—even if the government were to place a federal list price cap on insulin, many other diabetes medications and technologies would still be within the PBM and rebate system. Continuous glucose monitors (CGMs), for example, have started going through pharmacy benefits, making them subject to rebates. GLP-1 medications, particularly vital for people with type 2 diabetes, and various forms of glucagon, crucial for anyone on insulin, are prohibitively expensive and hard to be approved for. The entire system is broken; here’s the how of some of it.

The role of Pharmacy Benefit Managers (PBMs)

A definition you need to know for this section: insulin WAC is the wholesale acquisition cost, an estimate of the manufacturer’s list price for a drug to wholesalers or direct purchasers, that does not include discounts or rebates.

Speculated about for some time but difficult to prove because of private contracts (fully legal through the US system, which is notoriously bad at regulating drug pricing) is the sheer amount of cash being collected by PBMs. Originally created to help get needed drugs to patients more efficiently, PBMs have unfortunately become a key agitator to high out-of-pocket drug costs. 

Page 5 of the report outlines the issue—“…drug manufacturers increased insulin WAC, in part to give them room to offer larger rebates to PBM and health insurers, all in the hopes that their product would receive preferred formulary placement. This pricing strategy translated into higher sales volumes and revenue for manufacturers. In some cases, manufacturers appear to have been concerned that decreasing WAC prices would be viewed negatively by PBMs, since PBM’s capture a portion of rebate revenue and are also paid administrative fees based on a percentage of WAC.” 

The big legislative stumbling block we now face is just how reliant on PBMs the US healthcare system has become. In a more simple system, a pharmaceutical manufacturer could provide their medications to a pharmacy for direct disbursement to patients who require them. But in a system with a shaky foundation to start with and many players in the space, across private and public entities, the water gets significantly muddied. 

From the report, “PBMs play a major role in the drug supply and payment chain by negotiating drug rebates and discounts with manufacturers and managing drug benefits for health care payers, including private insurers, employers and entities that provide coverage under Medicare, Medicaid and the Children’s Health Insurance Program (CHIP).”

To keep PBMs happy, ensuring they negotiate the placement of each manufacturer’s insulin on insurance formularies, rebates for insulins have increased exponentially, particularly since 2013. In July 2013, Sanofi offered rebates between 2 percent and 4 percent for preferred placement on a formulary. The same product in 2018 provided a 56 percent rebate. That’s more than half of the out-of-pocket cost of insulin being handed to companies that don’t make the insulin. This is one example, but every single insulin manufacturer does this. As the report states, “What is clear is that the money that flows through PBMs is nothing short of enormous. As discussed throughout this report, rebates have grown at a rapid pace in the insulin market in recent years, which is not true in all therapeutic markets.” 

The bigger the PBM, the greater the power. The three largest PBMs—CVS Caremark, Express Scripts and Optum Rx—wield significant power in the market commanding large rebates, to the detriment of the smaller PBM players in the country. Lilly documents show that they offered a 22 percent rebate to a small PBM, but offered Optum Rx a 68 percent rebate for the same products in order to get placement in Medicare’s Part D prescription plan. As noted in the report, this robust ability to negotiate has led to “…some PBMs securing rebates as high as 70 percent in recent years.”

Manufacturer contracts with PBMs, previously confidential but exposed by the Senate Finance Committee report, are written in percentages. This means that it is to the PBMs’ benefit to encourage list price increases, making their portion of payout larger. The bundling of multiple products (increasing one product’s rebate amount to get other products included) is also a tactic used in PBM and manufacturer negotiations, especially in exclusivity contracts. 

“As Eli Lilly explained to its investors in 2019, failing to secure formulary placement can “lead to reduced usage of the drug for the relevant patient population due to coverage restrictions such as prior authorization in formulary exclusions, or due to reimbursement limitations which result in higher consumer out-of-pocket cost, such as non-preferred co-pay tiers, increased co-insurance levels and higher deductibles.” 

How rebates—most of the cost of your insulin—work

The math is infuriating, but here’s the heavily-simplified basics of how rebates work—if you made a product for $5 and wanted to sell it, you may set the price at $10, to create a $5 profit. With that $5 profit, you can invest back in your company to create better products, pay yourself—whatever you want to do with your $5.  

But let’s say you want your product to be in more places and available to more people. You might hire a middle person to place your product in new stores across the country, and they’ll charge a fee, which is reasonable. 

When you begin, their fee is $1. So that you can keep your $5 profit, you raise your price to $11. Still reasonable. But over time, your middle person makes themselves indispensable and knows it. You’re making way more money because of how many products you’re able to sell, so you’re not about to drop your middle person. 

And oh oops—you also signed a contract with your middle person to ensure you’ll always get your product placed in these nation-wide stores, so you’re locked in. And part of that contract was an understanding that you won’t lower your price, since that would impact your middle-person’s profit.

And oh oops—your middle person also has contracts with your competitors, and the contracts signed with those competitors makes it so that if your competitor gives the middle person a little bit more of their profits, your middle person won’t sell your product in certain stores for a year. You can fix this by raising your own price to give the middle person more profits, so you can kick your competitor out of a store the next year.

So now, your product costs $50. It’s the same product—you’ve never improved it. Your customers are receiving no more value than when the product cost just $10. Over time, you wanted to make more money from it, so your profit is now $10.

It’s still $5 to make your product. 

You get $10 profit, doubled from your original earnings.

And your middle person? They’re making $35, 70 percent of the list price, off a product they don’t make or even touch. 

But you’re definitely not going to get rid of your middle person, because they’re the reason you’re able to sell so many products and make the money that you do. 

For a regular product like a water bottle, no worries, your customer will just go somewhere else. 

But what if your product was water, and your customer needed it to survive?

List prices as a marketing tool

A part of drug pricing that can be jarring and confusing is the practice of including list prices—effectively the cost one pays without insurance—on a medication’s receipt. Typically 30-50 percent of the cost, sometimes up to 70 percent of the cost, is not for the medication itself, but to pay for the rebates given back to the PBMs and insurance companies, often the very company that is printing the receipt. It’s not necessarily that your insurance or the pharmacy “saved” you that money—it’s that by buying the medication through them, they are getting a kickback from the sheer amount of medication they were able to negotiate to go through their company. 

That list price ends up being what someone who does not have insurance coverage has to pay because that person is not participating in the very system of insurance and PBMs that drove the price up in the first place. 

Insulin manufacturers offer Patient Assistance Programs (PAPs), cash pricing through the manufacturer, and co-pay cards to bypass the PBM system and get insulin at less than the list price, usually for no more than $100 per month and often for $0-$50 per month. In order to access these programs, a patient may have to know where to look, how to assess eligibility and navigate what can sometimes be a challenging approval process. Beyond Type 1 launched for exactly this reason (through the tool you can quickly find what programs you qualify for based on your unique circumstances such as brand, income, insurance type etc).

The role of insulin manufacturers

The list price of insulin has risen steeply over time, with the greatest increase over the last 15 years. For context, one vial of insulin typically lasts an insulin-dependent person anywhere from 5 to 20 days. Most insulin-dependent people require two to three vials of insulin per month, while some require six or more. Every case of diabetes is unique.

In the late-90s, one vial of analog (modern) insulin cost about $25-40 per vial, without insurance. By 2005, this had doubled to about $80, then started sharply increasing—about $125 by 2010, $260 in 2015, and—depending on the type of insulin—up to $275 and sometimes as much as $500 or more for long-acting analog insulins. Experts have stated that, even in a capitalist but competitive market, an insulin-dependent person should be paying $130 or less per year for their insulin needs

These price hikes are not limited to insulin—all drugs, including all glucose regulating medications and most recently, diabetes devices, are subject to the rebates problem. But insulin is certainly where we see one of the clearest examples of how the US healthcare system is broken. Not only do PBMs and insurance companies benefit, but the Senate Finance Committee’s January 2020 report states that despite the insulin manufacturers saying that they are not making as much off insulin as people say, evidence shows that they are. 

From the report, “…companies set their WAC price for insulin based on competitive considerations in the insulin market, maximizing revenue and maximizing market share.” Each insulin manufacturer often states that the reason for increasing their list prices is due to the need to earn more money to invest in research and development of new insulins, but the Senate Report shows that this reasoning falls apart quickly when looking through financial documents.  

The report calls out several clear instances of the pricing increase practices:

  • Sanofi increased the list price of Lantus three times in 2013 alone—on April 26, August 2 and December 13—resulting in a total increase of approximately 39.7 percent for Lantus vials and 29.7 percent for Lantus pens. The Senate Finance Committee showed these price increases to be based on a conscious choice from Sanofi, aimed at setting up a higher list price for their newer product Toujeo, while getting their Lantus users ready to switch to the new product because they would already be used to the higher price. This was combined with increased pressure from PBMs to offer higher rebates or suffer exclusion of Lantus and/or Toujeo from insurance formularies.
  • Novo Nordisk did the same with their long-acting insulin product Tresiba. Before Tresiba, Novo Nordisk “shadow priced” Sanofi in 2014. This is different from “lockstep pricing,” where companies illegally work together to increase their prices at the same time. But Novo Nordisk’s internal documents show that Novo Nordisk would track the price of Sanofi’s Lantus long-acting insulin, then increase the own price of their competitive product Levemir, sometimes getting approval turnaround within 24 hours. This strategy changed in 2015 with Novo Nordisk’s launch of the long-acting insulin Tresiba. Instead of shadow-pricing Sanofi, Novo Nordisk raised the price of Levemir before Lantus was increased, in order to “…set a high basal insulin price floor from which to launch Tresiba’s initial list price.”
  • From 2014 to 2019, Novo Nordisk increased the list price of the NovoLog FlexPen by 70 percent.

Perhaps the biggest blow is that Novo Nordisk’s Board of Directors voted against a proposed insulin price decrease. From the report, “On May 29, 2018, Novo Nordisk USPC debated whether it should reduce the list price of its insulin drugs by 50 percent after a string of news reports detailed how patients were struggling to afford their medications. Novo Nordisk believed that a 50 percent cut would be a meaningful reduction to patients, significantly close the list-to-net [price] gap, head off negative press attention, and reduce “pressure” from Congressional hearings.”

The Novo Nordisk board voted against the price reduction and recommended that the company continue its “reactive posture.” The board recommended that Novo Nordisk “monitor the market… to determine if other major pharma companies are taking list price [increases].” Internal documents show that this decision was due to “financial downsides, risk of backlash from PBMs and payers, and expected pressure to take similar action on other products. PBM and payer [insurance company] backlash appeared to be of particular concern to Novo Nordisk. The company believes that its decision to decrease list price could upset payers, and that many in the drug supply chain (e.g., wholesale distributors, PBMs and health insurers) would be negatively impacted financially and could retaliate against Novo Nordisk.” 

The role of insurance companies

When negotiating with PBMs to create their insurance formularies, i.e. the products that they will provide insurance coverage for, insurance companies also receive portions of the drug rebates. Those rebates often go back to those enrolled under the insurance plans in the form of lower premiums. However, people who require maintenance (ongoing) medications like those for diabetes, asthma, etc. are the bulk of those paying for hefty rebates, while the rebates received by insurance companies themselves get spread amongst the entire population of those enrolled on a health insurance plan. 

Over the last several years, further complicating privatized US healthcare, PBMs have merged with health insurance (also known as “payer”) companies, further increasing their leverage, buying power and ability to control the healthcare market. Express Scripts merged with Cigna, CVS Health with Caremark and Aetna and Optum Rx became a subsidiary of UnitedHealth Group. These large mergers and acquisitions further complicate an already clunky system built more upon profit than patient care.

In the US, most of those who have health insurance are covered by for-profit insurance companies. This means that even for the companies who do have strong social missions, their business decisions are still driven by profit. This has led to the rise of high deductible healthcare plans (HDHPs) and other measures meant to decrease healthcare spending and increase profits, very often to the particular detriment of anyone living with a lifelong disease like diabetes.

From the report, “The Internal Revenue Service sought to address this issue in July 2019 when it released guidance that expanded the list of preventive services that an HDHP can cover below the deductible, to include insulin.” However, this is a voluntary offering for HDHP plans; it is up to the employer to decide if they want to offer this “first dollar coverage” (exempting insulin from the deductible, so people are not paying the list price of insulin before they hit their deductible), which creates an additional cost to the employer. 

Of course, this issue is not unique to private insurance; federal insurance like Medicare is also involved. Medicare is a federal health program provided mostly for those aged 65 and older. From the report, in 2019, Eli Lilly offered rebates as high as $75 per vial of insulin for preferred formulary placement in Medicare Part D, the section of Medicare that oversees prescription drugs. For Lilly, this meant securing the Medicare population as their customers. 

The number of patients on Medicare who are using insulin has increased 51 percent from 2010 to 2017, whereas spending on insulin—prior to rebates—increased more than 470 percent during the same time. It is a large market to corner, and insulin manufacturers, wanting preferred formulary placement, are willing to include large rebates in their insulin pricing structure as incentive. From the report, “…on July 28th, 2017, one Sanofi official wrote to colleagues after considering their offer to CVS Caremark [one of the PBMs utilized by Medicare] for placement on the [Medicare] Part D formulary: “after including of additional fees, we are still profitable up to a 89 percent rebate.””

The bottom line 

The US healthcare system is deeply broken, and insulin pricing is one of the clearest examples that an unregulated drug pricing system motivated by profit will always put cash flow over patient lives. With a new political administration in place and further transparency provided by the Senate Finance Committee’s report, now is the time to create pressure for change. 

Significant rebate reform and an overhaul or removal of the PBM system could slash the list price of insulin by up to 70 percent and would impact not just insulin, but many medications and devices that are subject to the rebate system. Robust federal healthcare reform could create a system where drug prices could be negotiated on a federal level, and current proposals like rolling back prices to more reasonable levels could be a step. A deeply broken system requires layered solutions. Without a full overhaul, we risk fixing the insulin pricing issue with a bandaid, while driving up prices and limiting access to other life sustaining medications and life changing technology.  

Substantial healthcare policy change takes the voice of many, and individual advocates make a resounding and impactful difference. If you are looking to get involved with diabetes access advocacy, start here. Reach out and get to know your state’s congressional representatives in the House and Senate. Make sure they know your personal experience and how issues of healthcare, drug pricing and access impact you.

WRITTEN BY Lala Jackson, POSTED 02/06/21, UPDATED 11/29/22

Lala is a communications strategist who has lived with type 1 diabetes since 1997. She worked across med-tech, business incubation, library tech and wellness before landing in the type 1 diabetes (T1D) non-profit space in 2016. A bit of a nomad, she grew up primarily bouncing between Hawaii and Washington state and graduated from the University of Miami. You can usually find her reading, preferably on a beach.