Insulin Copay Laws Are Unlikely to Impact Insurer Bottom Lines for Now

Seven states have moved this year to cap out-of-pocket expenses for diabetic patients’ insulin, a trend that should help a small group of people who generally are uninsured or have high-deductible plans and have struggled to afford their medication. But it is unlikely to expand beyond insulin or impact health plans’ bottom lines, industry observers say.

The states that have enacted insulin legislation this year — Colorado, Maine, New Mexico, New York, Utah, Washington and West Virginia — generally cap out-of-pocket costs for some or most patients at $100 per month. Those new state laws join insulin copay legislation already on the books in eight other states, including Alabama, Delaware, Kentucky, New Hampshire, Oklahoma, Oregon, Rhode Island, Texas and Virginia, according to a report from the National Conference of State Legislatures (NCSL).

Jeff Myers, senior vice president of market access and reimbursement strategies at Catalyst Healthcare Consulting, Inc., says he doesn’t expect insulin copay caps to cost health plans a significant amount of money. However, the funds have to come from somewhere, because the states by themselves can’t force the price of insulin down.

“When I think about what the states are doing, it’s fascinating, but it doesn’t actually lower the cost of drugs,” Myers tells AIS Health, a division of MMIT. “All it does is squeeze the balloon to force the manufacturers to extract more revenue, more profit from some other market, or to have the state taxpayers subsidize the purchase of insurance or other reinsurance collateral to pay for the cost of the end user paying only $100 a month.”

An analysis from the Georgetown University Health Policy Institute’s Center on Health Insurance Reforms (CHIR) found that one in four patients with diabetes reported that they had to ration their supply of insulin because of high out-of-pocket costs. It also found that the average out-of-pocket cost for insulin over a one-year period for a privately insured person is $613, but that the cost varies widely across health plan type (see infographic, p. 5).

“Capping copays for insulin can be a win-win for state lawmakers who want to do something about prescription drug costs but are loath to take on the powerful pharmaceutical industry,” the CHIR report said. “Pharmaceutical manufacturers strongly oppose efforts to curb high drug prices, but they are supporters of insulin cost-sharing caps. Conversely, insurers say their health plan formularies are just a reflection of the high and rising prices that drug manufacturers charge for their products.”

Colorado’s new law, which takes effect in January and builds on a measure approved in 2019 that capped copays on individual insulin prescriptions, is one of the most expansive in the nation. Under the new legislation, all state-regulated insurers must cap the copay for insulin at $100 per 30 days, regardless of the amount or type of insulin needed to fill the covered person’s prescriptions or the number of prescriptions.

New Laws Have Caveats

The copay caps leave out many patients: The CHIR analysis found that Colorado’s copay cap, enacted earlier this year, touched only 3% of state residents with diabetes under age 65. The Colorado law requires every diabetic, including those who are underinsured, to pay a copay of no more than $100 a month, but the law does not affect copays for self-funded plans, which cover the majority of Colorado’s commercially insured residents, according to CHIR.

“Additionally, the savings from the out-of-pocket obligation will likely just shift to burden people with higher premiums or higher cost sharing for other services,” the CHIR analysis said. “People with other chronic diseases could face growing out-of-pocket costs as a result. Arguably the most significant limitation is that copay caps are a downstream remedy to a problem with a lot of upstream causes. Reducing what people are obligated to pay out of pocket does nothing to address the underlying price of the drug.”

The Colorado law also establishes an insulin affordability program, which requires pharmacies to offer state residents one emergency 30-day supply of insulin within a 12-month period for $35. To be eligible for this emergency supply, individuals must be state residents with valid prescriptions, have less than a seven-day supply of insulin on hand, and be required to pay more than $100 out-of-pocket each month for their insulin.

Like Colorado, Illinois also has approved a law limiting all copays to $100 for 30-day supplies of insulin. That law, which took effect on Jan. 1, permits yearly price increases for inflation. The issue has garnered attention at the federal level, as well, with the Senate Finance Committee examining insulin affordability.

Gary Rosenfield, senior vice president at ConsejoSano, a health equity-focused member engagement company specializing in outreach for health plans, notes that insulin copay caps will have the biggest effect for patients with private insurance on the lower rungs of the socioeconomic ladder, particularly in non-Medicaid expansion states. Texas and Alabama, which have not expanded Medicaid, have enacted caps on insulin copayments for some groups of diabetic patients.

“From a private insurer standpoint, I think plans generally will be in favor of state efforts to control insulin prices,” Rosenfield tells AIS Health. “The high prices that cause people to ration leads to higher plan costs if members don’t take their insulin — e.g., avoidable emergency department visits and inpatient admissions, not to mention the poorer health outcomes in our communities of color.”

States Must Prove Sustainability

However, Rosenfield points out that state aid to cover a gap in private insurance will only work as long as states can afford the price tag. “If you have to revisit this every budget cycle, you have to ask, ‘Is this sustainable?’ Remember, someone has to pay for this — whether it be from an increase in taxes or cuts to vital programs like the Medicaid safety net. I think plans will be left wondering if this helps to address affordability in the long run, or if it will help them manage their populations better, helping to drive health equity,” he says.

Myers blames high prices on the dynamic between drug companies and PBMs. “At the end of the day, the drug companies set the price,” Myers says. “They’re going to argue about the distribution channel, about WAC [wholesale acquisition cost], about rebates, but they’re the ones setting the price and they’re the ones increasing the price for a 100-year-old invention. But what also is clear is the reason they’re doing it is, they’re in a very competitive marketplace where the PBMs can extract giant-level rebates because they can force customers to move to one or the other based on the discounting the insurance companies do.”

The Pharmaceutical Care Management Association (PCMA), meanwhile, argues that the blame rests on pharmaceutical manufacturers: “PBMs have been able to moderate insulin costs for most consumers with insurance,” says Greg Lopes, PCMA assistant vice president for strategic communications.

“For example, some PBMs have introduced new programs to cap, or outright eliminate, out-of-pocket costs on insulin,” and have stepped up efforts to provide clinical support and education, Lopes tells AIS Health. “However, strategies used by drug manufacturers to avoid competition through ongoing patent extensions on insulin products are a significant barrier to getting costs down even further. The key to reducing drug costs is by increasing competition among brands, biologics and generics, including for insulin products.”

More broadly, copay limits on insulin are unlikely to lead to copay limits on other drugs, Myers says: “I think insulin’s an easy thing to focus on because it’s such a clear story. It’s not a new and innovative drug by any stretch of the imagination.” More generally, he says, “limiting copays would be a giant mistake because pharma is very good at selling product. Copays either exist where there are several different options and the payer wants you to select either a generic or a product that they have received some additional rebate or price concession on, and then copays for incredibly expensive drugs, which are frankly designed to limit access to them. Trying to limit that copay changes the economic way you can actually manage the use of these products.”

by Jane Anderson

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