“Insurers in Minnesota Can No Longer Profit From Selling Insulin” — Minneapolis StarTribune, October 8, 2019


Reporter Joe Carlson finally states plainly in a major city paper—the Minneapolis StarTribune—what T1DF, both in and out of federal courts, has been saying for the past three years: health insurers profit from high insulin list prices and the large rebates they negotiate from manufacturers. It is now, writes Joe Carlson, “illegal in Minnesota for insurers to take in more cash from members’ out-of-pocket payments for insulin than the net price for that medicine.” While insurers are also using high list prices to inflate premium rates and other benefit designs, point-of-sale transparency is a necessary first step towards an auditable net cost accounting standard in health insurance plans at the state and federal levels.

Insurers’ unjust enrichment—at the direct expense of the insured—also directly injures the uninsured, who pay pharmacies’ large markup on top of list prices already inflated to satisfy insurers’ rebate demands. Carlson’s article thus exposes the direct conflict between insurers and all patients who use rebated pharmaceuticals (including insulin, glucagon, asthma inhalers, and EpiPens). Federal judges currently presiding over drug pricing cases where conflicted plaintiffs’ attorneys work to extinguish patients’ claims against their payer clients—Judge Crabtree in Kansas (EpiPen) and Judge Martinotti in New Jersey (insulin)—must fulfill courts’ duty to protect the interests of absent patient class members.

T1DF has brought insurers’ leading role (and monopsony power) in a price-fixing scheme that endangers U.S. patients to the attention of the U.S. Senate H.E.L.P. Committee and Senate Finance Committee (in December 2017), to legal counsel of the Senate Special Committee on Aging (in 2018), to HHS on Medicare Part D (in 2018), to the Oregon state legislature’s Joint Interim Task Force on Fair Pricing of Prescription Drugs (in 2018) and to federal courts in New Jersey (insulin, glucagon, test strips) and more recently in Kansas (EpiPens). T1DF has fought on this issue when the Senate wanted to ignore it, and we fought for it in New Jersey when plaintiffs’ class action attorneys (and the Minnesota attorney general) wanted to extinguish it. We’ve now brought the direct conflict between insurers and patients to the attention of Judge Crabtree in the EpiPen MDL pending before U.S. Court for the District of Kansas, where he is soon expected to rule on plaintiffs’ counsel’s effort to certify a joint payer-patient class.

Insurers in Minnesota can no longer profit from selling insulin... [Senator Benson’s] amendment — known to insurers as the “state mandate” on insulin — says it’s illegal in Minnesota for insurers to take in more cash from members’ out-of-pocket payments for insulin than the net price for that medicine negotiated by the insurer.
— Joe Carlson, Star Tribune

In his October 8 piece ("Minnesota insurers try to address unhealthy cost of insulin in 2020"), Joe Carlson helps his readers understand what an overlooked Minnesota state legislative amendment really means: “Insurers in Minnesota can no longer profit from selling insulin.” The amendment, proposed by Minnesota state senator Senator Michelle Benson, requires that patient cost-sharing established by insurers in the state must “not exceed the net price of the prescription insulin drug” to the insurance company. It is now, writes Carlson, “illegal in Minnesota for insurers to take in more cash from members’ out-of-pocket payments for insulin than the net price for that medicine.”

Insurers’ practice of charging patients based on list price, while treating manufacturers’ prescription drug rebates as general revenue instead of offsets to plan costs, may already have been unlawful prior to the passing of this amendment—as T1DF has alleged since filing Boss v. CVS Health (against PBMs acting as agents of insurers) in March 2017. Senator Benson's amendment doesn't mandate net cost accounting in all plans nor does it address the issue of rebate laundering through insurers' out-of-state holding companies; it does, however, establish a clear mandate for point-of-sale rebate pass-through.

Forcing insurers—who now receive manufacturer rebates greater than 70% off list price—to base insulin cost-sharing on rebated net cost (or lower) is crucial to bringing down list prices. But Minnesota’s narrow amendment—targeting only insulin, and only patient cost-sharing—is just a small step toward the wholesale reform Americans need. We need to see all insurers, large self-insured employers, Medicare Part D plan sponsors—every third-party-payer active in the U.S.—shift to net cost accounting for the pharmacy benefit for all purposes and for all drugs and supplies. An insurer’s or other third-party payer’s net cost for a prescription drug is the only legitimate basis for calculating beneficiaries’ cost-sharing and premiums, and for all reporting.

Since Joe Carlson is now writing openly about insurers’ practice of exploiting the difference between insulin list and net price (dubbed the "gross-to-net bubble" by DrugChannels’ Adam Fein) to boost their profits, we hope this reporter will now move on to a related question:

Why does the insulin lawsuit filed by former Minnesota Attorney General Lori Swanson and continued by current Attorney General Keith Ellison only target the manufacturers who pay the giant rebates to insurers, and not the insurers who pocket them and then overcharge Minnesotans?

The insulin pricing lawsuit filed by Minnesota’s Attorney General ignores, and in fact perpetuates, the ongoing misrepresentation by Minnesota’s in-state public and private payers that the list prices set by manufacturers determine the “cost” of insulin to payers. And the Minnesota complaint ignores payers' handling of the vast rebates they receive. The lawsuit also sidesteps the conflict between public and private payers (including the State of Minnesota) and individuals who use rebated brand drugs. An AG lawsuit, if genuinely in the interest of Minnesota residents—and not merely in the interest of the state as a third-party payer—must also address the insurance companies who have enriched themselves, and continue to enrich themselves, at the expense of people who need insulin and EpiPen to stay alive.


About T1DF

Oregon-based 501(c)(3) nonprofit Type 1 Diabetes Defense Foundation is America's only legal advocacy organization dedicated to advancing equal rights and opportunities for Americans with type 1 and other forms of insulin dependent diabetes. T1DF accepts no funding from the pharmaceutical, medical device, pharmacy benefit management, or insurance industries, nor from any organization they fund, any investment fund, or any other corporate actor with a financial interest in health care. We support regulatory frameworks in which manufacturers compete directly on innovation and price to consumers and where drug channel actors can engage in open and efficient price arbitraging, without price discrimination and asymmetries of information. Annual report available here.