The rising cost of insulin: "Horror stories every day"

After years of rising prices, insulin costs in the U.S. are creating painful choices for diabetics and their families. 

The problem is drawing the attention of lawmakers, with the Senate Committee on Aging examining insulin prices a hearing on Tuesday. One father testified that his 13-year-old son's insulin jumped from $300 for a 90-day supply in 2017 to more than $900 in early 2018. 

"I immediately went into panic mode," Paul Grant, a project estimator for a building company in Maine, told the committee. "I tried to get answers from my insurance company but received little help or explanation. I don't think they even understand our health plan – I know I don't."

Grant, who said he ended up buying the same insulin from Canada, where it cost about $300, isn't alone. Insulin prices more than tripled from 2002 to 2013 and have continued to climb -- costs for the drug from two manufacturers rose almost 8 percent in 2017

Diabetes, a disease in which the body fails to properly regulate blood sugar, affects 30 million -- or almost one in 10 -- Americans. 

A deadly decision

One patient who was affected by the price spike was Alec Smith, who struggled to afford insulin after he aged out of his mother's health insurance plan. The then 26-year-old's employer didn't offer insurance, so he considered getting a health plan with a $7,600 deductible, his mother, Nicole Smith-Holt, told CBS MoneyWatch. 

Instead, "He made the decision he would go without insurance" and pay out of pocket, she said. "We estimated [the insulin] would be $1,000, but when he went to the pharmacy, they told him it would be $1,300, so he went home without insulin."

Smith-Holt said she believed her son planned to buy the insulin, manufactured by Eli Lilly, when he received his next paycheck, and hoped he could ration his remaining supply. Instead, he died on June 27, 2017, of diabetic ketoacidosis, a complication resulting from diabetes that can be treated with insulin. It was a little over a month after he had left his mother's insurance plan. 

"I thought it was a rare situation, like, 'This doesn't happen to anyone else,'" Smith-Holt said. But after her son's death, she heard from many others within the diabetes community, many of whom have had to make similar choices and risked adverse health consequences. 

"We have people who are making life and death decision daily of, 'Do I buy groceries and or do I buy my insulin?'" she said. "We hear horror stories every day."

Smith-Holt, who traveled to the Eli Lilly shareholder meeting this month, said she was disappointed she wasn't able to read a statement at the meeting. Instead, she asked its CEO a few questions, such as whether he believes insulin is a human right. She said she didn't feel satisfied by the answers.  

"Nicole traveled from Minnesota to our headquarters to tell Alec's story, and we took her visit very seriously," an Eli Lilly spokesman said in an email. "She's a woman with strong convictions who wants to make sure no one else falls through the cracks."

He added, "Nicole asked three questions, each of which was answered in the public meeting. The head of our U.S. diabetes team met privately with Nicole after the shareholders meeting, during which Nicole read her full statement and engaged in a productive and impactful dialogue about Alec."

One question posed by the Senate Committee on Aging is why insulin costs so much. After all, it's a nearly 100-year-old medication. Its inventors sold the patent for about $3 to help get the drug to as many diabetics as possible, and manufacturers were given the right to manufacture the drug without paying royalties. 

An opaque system

But no generic version of the drug exists, and three manufacturers -- Eli Lilly, Sanofi and Novo Nordisk -- control 99 percent of the market. Adding to the complication is the tangled relationship between insurance companies, pharmacy benefit managers and drugmakers. 

"There is a lack of transparency throughout the insulin supply chain. It is unclear precisely how the dollars flow and how much each intermediary profits," said William Cefalu, chief scientific, medical and mission officer at the American Diabetes Association, at the hearing. 

Part of the issue are so-called "rebates" negotiated by pharmacy benefit managers and other players in the insulin market, which is a fee calculated as a percentage of the list price. But patients don't get the discounts and rebates negotiated between pharmacy benefit managers and drugmakers, nor are the rebates typically passed on to the patients. 

Asked if Eli Lilly would considering lowering the price of insulin, the company spokesman said the issue "will require leadership and cooperation across many stakeholders, including manufacturers, payers, and policymakers."

"That's because the answer itself isn't simple. For instance, while the list price for Humalog has gone up, Lilly's average net realized price (the amount received after discounts and rebates are paid) has gone down since 2009," he said.

"I want to deconstruct that complicated web of transactions to figure out who is making so much money and why aren't discounts negotiated with manufactures reaching the patient, particularly the uninsured patients, but also the insured patient who has a high deductible," said Sen. Susan Collins, R-Maine, in the hearing. 

To be sure, insulin isn't the only drug that's witnessed skyrocketing costs and a convoluted pricing system. A drug called Acthar surged more than 100,000 percent from 2001 to today, rising from $40 a vial to more than $40,000, according to "60 Minutes."

"There's an absolute opaque system of pricing for drugs in our country," Larry Morrissey, the mayor of Rockford, Illinois, told the news program. His city was hit with increased health care costs because of the drug. "That's part of the problem."

Need for transparency 

In the meantime, efforts are underway in some parts of the country to shed light on insulin pricing. Nevada passed a law last year that will require insulin makers to disclose information on pricing, profits and discounts to pharmacy benefit managers. Two pharmaceutical groups are challenging the law, alleging it interferes with federal patent law. 

Federal lawmakers may need to step in to ensure drugmakers provide more transparency on pricing, Jeremy Greene, professor of medicine at the Johns Hopkins University School of Medicine, said in the hearing. 

"It's to everyone's advantage to point to each other while prices remain high," Greene said. "It's the uninsured patient and the taxpayer ultimately who is harmed by such a system."