California is moving forward with its plan to produce state-sponsored insulin, but its goal of making drugs cheaper than brand-name companies may be much more difficult to achieve now that major drugmakers have decided to cut prices significantly on some products. .
So while some experts welcomed the news last weekend that the state had awarded a $50 million contract to Civica, a nonprofit, to make low-cost insulin, others wondered if the initiative it was still viable given the changing market. Civica’s planned products would still need federal approval, meaning it could be at least two years before they are available for sale.
For years, the high costs associated with insulin for people with diabetes have forced some to ration their medications, putting their health at risk.
For the approximately eight million Americans with diabetes who need insulin, including about one million Californians, the average price has more than quadrupled in 20 years. However, there have been wide swings in prices, with Eli Lilly increasing the sticker price of its most popular product, Humalog, more than ten times.
Many people with private health insurance pay nothing or no more than a $20 to $35 copay for a month’s supply of insulin. And since January, the Inflation Reduction Law has imposed a $35 price limit for the nearly four million insulin users with Medicare Part D.
But those with high-deductible health plans or those without insurance… an estimated 12 percent and 7 percentrespectively, of California insulin users often face much higher costs, costing them hundreds of dollars per month.
“This is a space where apparently everyone seems to be making a quick buck,” Governor Gavin Newsom said at a March 18 meeting. Press conference announcing the new pharmaceutical contract in Downey, California, against a backdrop of refrigerators filled with insulin. “Time for disruption.”
Mr. Newsom, who went on a four-day statewide tour to promote his policies, also announced plans for California to develop its own naloxonethat reverses opioid overdose.
The insulin contract is the result of the state Legislature’s allocation last year of $100 million for the program, called the CalRx Biosimilar Insulin Initiative. (Competing versions of so-called biologic treatments like insulin are known as biosimilars.) Under the 10-year agreement, Civica said it planned to develop and produce these products at a new plant in Petersburg, Virginia, and would begin filing applications for approval of the biosimilar products with the Food and Drug Administration next year. Half of the $100 million budget would go toward setting up a plant in California for further production.
The biosimilar versions are expected to be comparable to Eli Lilly’s Humalog, Novo Nordisk’s NovoLog and Sanofi’s Lantus. These three companies control about 90 percent of the insulin market.
Eli Lilly, Sanofi and new nordisk have announced cuts in sticker prices, mostly in the 70 percent range, and some caps on out-of-pocket costs for certain insulin products. The lower prices should start at the end of this year until next year, depending on the company.
President Biden and Democratic lawmakers took credit for the drugmakers’ moves, but the companies had less financial incentive to keep prices of their older insulin products high, and are now more reliant on newer drugs to diabetes and obesity. Drug manufacturers also faced sanctions that would have forced them to pay back Medicaid for raising their prices faster than inflation.
Civica was founded in 2018 by a collective of health systems seeking to mitigate chronic drug shortages. Ned McCoy, Civica’s chief executive, said the company announced its pricing a year ago “with the goal of forcing the market to respond.”
While many academic insulin pricing experts expressed optimism about California’s move, some were skeptical that its plans and others in early stages in Maine, Michigan and Washington could live up to their expectations.
Andrew Mulcahy, a senior policy researcher at the RAND Corporation, whose study 2020 found that the US average list price for insulin was 10 times that of other nations, was measured in their assessment.
“It’s a major change in a time when there’s a lot of flow for insulin,” he said. “There is savings potential for Californians and others. But it is not clear that this is going to fundamentally change the market. It already has in some respects. There are already these cheaper alternatives emerging on the market.”
He noted that Walmart sells a private-brand version of NovoLog, called ReliOn, for about $73 per vial. And the list price for a vial of NovoLog, a widely used product, will drop to $72, from $289, according to the Novo Nordisk plan.
CalRx will set maximum recommended retail prices of $30 for a 10-milliliter vial of insulin and $55 for a set of five 3-milliliter pre-filled pens. California residents will have priority for supply.
Whether Civica’s insulin will be much cheaper than the big brands once the new price cuts take effect is open to debate, especially since Civica’s products won’t be available anytime soon.
Before the new cuts were announced, a Editorial JAMA suggested that a successful launch could provide a potent blueprint for state-led disruption of the pharmaceutical industry.
“At best, the CalRx plan sheds some light on the path toward state interventions to lower drug prices,” Jacob S. Sherkow, professor of law and medicine at the University of Illinois Urbana-Champaign and editorial leader. author said.
“Many previous attempts in that area have failed completely, either for economic reasons or due to legal challenges,” Sherkow continued. “This is one way that states can get back in the business of providing public goods.”
The attorneys general of several states, including California, recently filed lawsuit against the big three insulin drug makers for high prices, and also against pharmaceutical benefit managers, companies that negotiate discounts off label prices on behalf of insurers, and pocket part of the difference.
California’s generic drug plan would bar pharmacy benefit managers from benefiting from rebates, undermining what critics charge is a relationship between the companies and drugmakers that is imbued with a perverse incentive to inflate label prices .
Reid Porter, a representative of PhRMA, the main trade group for pharmaceutical companies, joined a representative of Sanofi in pointing the finger at pharmaceutical benefit managers for, they said, failing to pass the savings on to the consumer.
Mr. Newsom, Mr. Porter said, “wants to score political points and villainize the industry responsible for making California a world leader in developing life-saving treatments and cures and infusing more than $200 billion into the economy.” and support nearly 700,000 jobs.”
When contacted for comment on the California program, representatives for Eli Lilly and Novo Nordisk highlighted their plans to lower some of their insulin prices.
At the press conference, Mr. Newsom said, “I think it would be spectacular if all these other companies fell even further on their pricing considerations and fell well below” the state’s price points. He expressed confidence that Civica could “proactively address” such sales on the cheap.
Still, the recent changes will mean that many Californians with diabetes will likely be able to spend less on their insulin next year.
Once the new discounts from the three drug companies go into effect, the annual out-of-pocket costs for people who are uninsured or have high-deductible plans and who use the three products that the California program seeks to replicate would range from $420 to $1,200. , according to Dr. Mariana Socal, an associate scientist at the Johns Hopkins Bloomberg School of Public Health.
The state program is expected to charge those individuals between $200 and $375 a year for their versions of these products. Annual costs for the well-insured would drop from about $350-$550 currently to $140-$250 because of the program.
Baylee Bakkila, a medical student at Yale University, led a study posted in Health Affairs in July and found that 14 percent of insulin users spent more than 40 percent of their disposable income on the drug.
Ms. Bakkila has reservations about the California program, noting that prices are set by the vial of insulin or the set of pens, not a fixed monthly fee. She pointed to the Medicare price cap; Eli Lilly’s similar $35 limit for a month’s supply of insulin, which is typically two to three vials; and Sanofi’s plan for a comparable cap.
“CalRx will bring benefits to patients who spend exorbitantly on insulin,” Ms. Bakkila said of the approximately 190,000 Californians with high-deductible plans or no insurance. “But by comparison, these programs already in place reduced spending even more.”
Niketa Calame-Harris, 42, is an actress, acting teacher and advocate for the American Diabetes Association, who was diagnosed with type 1 diabetes in college. A Los Angeles resident, she is covered through a private health plan Obamacare and pays around $5,000 a year for Humalog insulin. She said that she had to ration her dose at times.
He expected to save about $3,000 a year with the state plan. But it could save about $3,500 a year once Eli Lilly’s cut takes effect in the last three months of this year. And possibly more if you qualify for their $35 limit.
Anticipating the savings, Mrs. Harris thought of her 2-year-old daughter and said, “That money could be used to get her a better education.”
Rebecca Robbins contributed to this article.