Industry Voices—New Medicare plan helps make insulin affordable at last

In the midst of COVID-19 outbreak, it's more important than ever for Americans to stay on top of their health. For those suffering from diabetes, this can prove particularly challenging. (Getty/Samara Heisz)

The Centers for Medicare & Medicaid Services (CMS) just took a major step toward improving affordability for seniors with diabetes.

Thanks to a newly announced plan, more than 1,750 health plans will soon cap out-of-pocket costs for insulin at just $35 a month. Every state in the nation—plus the District of Columbia and Puerto Rico—will have at least one such plan available to seniors.

This action deserves praise. Millions of patients rely on insulin to lead healthy, productive lives. By lowering out-of-pocket costs, the administration can help ensure that the most vulnerable Americans have access to the lifesaving drug. Let's hope this is just the first of many like-minded reforms on the horizon.

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In the midst of COVID-19 outbreak, it's more important than ever for Americans to stay on top of their health. For those suffering from diabetes, this can prove particularly challenging.

RELATED: Oscar Health announces $3 cap on about 100 popular drugs like insulin

At particular risk are the elderly and communities of color. While roughly 1 in 3 Medicare beneficiaries has diabetes, rates run higher among African Americans and Hispanics. Compared to non-Hispanic whites, Hispanics are 66% more likely to develop Type 2 diabetes. For African Americans, that number is approximately 77%.

More than 3 million of these diabetes patients require insulin treatments to manage blood sugar levels. Failure to manage the condition can lead to catastrophic health outcomes including heart disease, stroke, kidney damage, nerve damage leading to amputation and blindness, among others.

Unfortunately, patients battling diabetes often face difficulty accessing medication due to cost. More than 25% of patients who had been prescribed insulin said they had either not filled their prescriptions, skimped on doses or stopped use altogether because of cost, according to a report from the Journal of the American Medical Association.

Medicare Part D has evolved over time, and, unfortunately, more and more costs have been shifted to beneficiaries. In order to properly fix it, the drug pricing system will require fundamental change.

Under Medicare's prescription drug coverage—Part D—patients choose from several competing plans that offer different benefits, including coverage for various prescription medications.

Insurers hire or own entities known as pharmacy benefit managers (PBMs) to design these drug benefit plans. PBMs negotiate directly with drug manufacturers and help decide which medicines are covered.

In exchange for coverage of their drug on a plan's formulary, manufacturers typically offer significant discounts and rebates. In 2018 alone, they doled out $166 billion in rebates. These rebates reduce a drug's list price 30%, on average.

But patients often never see a dime of these savings when purchasing medication at the pharmacy. PBMs keep a portion of these discounts for themselves and pass the remaining sum along to insurers. Insurers then use these savings to lower monthly plan premiums for all beneficiaries by a few dollars.

RELATED: CMS releases Part D payment model to offer lower cost-sharing on insulin

Lower premiums are welcome, of course. But they do nothing to reduce the burden of high out-of-pocket costs—especially for patients who rely on multiple medications. Since the discounts secured by PBMs are kept secret, insurers still peg patients' copays or coinsurance fees to the list price of the drug—not the post-rebate price.

For example, say a diabetic patient requires insulin that carries a list price of $400. If a PBM negotiated a 60% discount, the insurer would pay just $160 to fill that patient's prescription. However, because insurers typically calculate copays based on the list price, if that patient owed a 20% copay, she would pay $80 as opposed to $32.

These costs add up and net insurers and PBMs billions that should instead be put toward reducing patients' direct, out-of-pocket pharmacy costs.

Under the new program, Americans in participating Part D plans will only responsible for a flat copay of $35 per month for their insulin needs. That will save each beneficiary an average of $446 a year.

For many, particularly low-income members of America's communities of color, these savings will represent a massive financial lifeline. But this is still just one step toward broader prescription drug affordability. Reducing patients' out-of-pocket spending—for insulin and other critical medicines—requires policymakers to shed sunlight on the opaque practices of PBMs and insurers.

Make no mistake—this a good first step by CMS to make insulin more affordable for vulnerable patients. But it's important that our leaders build on this momentum and embrace fundamental changes to the drug supply chain that will lower out-of-pocket costs for all Americans.

Kevin Kimble is a member of the Health Equity Collaborative, a community-based resource center designed to inform, educate and elevate the voices of America's most vulnerable and underserved communities.

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