Benefits Strategy

What Your CEO is Reading: The Insulin Price Cap

On March 1, Eli Lilly announced they would cap patient out-of-pocket (OOP) costs for insulin at $35 per month at participating retail pharmacies. While this improves access to insulin for patients who may struggle to afford the drug, the manufacturer’s announcement presents other potentially significant implications for employers.

March 10, 2023

On March 1, Eli Lilly announced a planned price reduction for their insulin products and, effective immediately, capped the OOP costs for patients using one of their insulin brands at $35 per month at participating retail pharmacies. The move was praised by many, including President Biden, who called on drug manufacturers to lower the price of insulin in his February 7 State of the Union Address. As part of the move, Eli Lilly is cutting the list price of its non-branded insulin, Lispro, to $25 per vial, and that of its most commonly prescribed insulin, Humalog, by 70% effective Q4 2023. Additionally, in April 2023, the manufacturer is launching Rezvoglar, an injectable biosimilar to Sanofi’s insulin product Lantus. Rezvoglar is the second insulin biosimilar to gain the FDA’s interchangeability designation, allowing for pharmacy-level substitution of the medication. Eli Lilly also expanded their copay assistance program to those without insurance, allowing them to receive insulin for $35 per month.

According to the Centers for Disease Control and Prevention (CDC), 37.3 million Americans, about 1 in 10, have diabetes, and over 7 million require daily insulin. With the passage of the Inflation Reduction Act (IRA) in August 2022, over 3 million people with diabetes covered under Medicare had their OOP spending capped at $35 per month starting January 1, 2023. Some pharmacy benefit managers (PBMs) also introduced programs that enable commercial payers to institute a $35/month cap in their own benefit plans.

The $35 Medicare cap, in tandem with public pressure to improve affordability of insulin, has created momentum for change. However, another relatively recent legislative change enacted in the 2021 American Rescue Plan, that removed a cap on Medicaid rebate penalties, and its downstream implications may have also played a role in Eli Lilly’s decision. Starting January 2024, manufacturers could face higher penalties for certain drugs, including insulin. Such penalties may potentially be mitigated by reducing a drug’s list price ahead of time.

Underlying reasons aside, the announcement made by Eli Lilly could result in some murky waters ahead for employers and PBMs. The long history of steep price hikes in the competitive insulin market has made insulin one of the highest rebated products. This announcement could mean forthcoming changes are in store regarding PBM contract guarantees, rebates, formulary decisions and what OOP cost impacts members will experience.

Why Your CEO May Care

Your CEO may be interested in whether your employees will have access to the $35 insulin products and how your plan can benefit from the lower list price. While news media headlines about the price cap have generally praised Eli Lilly ‘s decision, the drastic change in pricing of insulin may lead to material contractual implications for employers and PBMs and cause employee confusion.

Eli Lilly is not the only manufacturer with insulin products on the market, and 7 out of 10 people in America who use insulin don’t use Eli Lilly products. Employees who require insulin may not realize they do not have access to Eli Lilly products due to their formulary structure. Aside from member communication challenges, benefit managers are potentially facing complex conversations with PBMs regarding formulary decisions and contractual implications, including rebate guarantees. In addition, it is still unknown whether other insulin manufacturers will follow-suit with Eli Lilly’s first steps, impacting formulary decisions for the remainder of 2023 and beyond.

What Employers Can Do

Employers can consider the following actions and strategies to prepare for any impending changes and challenges due to the lack of stability in insulin pricing:

Discuss with consultants and other partners the changing market dynamics and quantify the anticipated financial impact on the plan.
Assess pharmacy benefit plan cost-sharing, deductibles, and other financial impacts on your covered individuals (including those on HSA-qualified, high deductible plans), as not all plan members may stand to benefit from the $35 OOP max. Specifically, assess how plan design decisions, such as copay accumulators, are impacted by a unilateral OOP copay reduction by the manufacturer at the point-of-sale, which may not be fully accounted for in the current terms of the plan.
Identify whether Eli Lilly insulin products are included on the plan’s formulary. If another manufacturer’s insulin product is preferred, review utilization data and what members pay out of pocket.
Consider targeting communications to members who are using insulin products on your plan to explain the $35 OOP cap and detail if it applies to them. Ensure your advocacy teams, diabetes programs, and pharmacists supporting your members are prepared to answer questions related to the impact of this announcement.
Talk with your PBM about what changes they recommend to your plan as a result of this announcement, including whether the $35 OOP cap may apply for mail-order prescriptions.
Gauge whether the rebate impact associated with any list price changes is material enough for your rebate guarantees to potentially trigger a “marketplace event” review of your contractual guarantees by the PBM. Additionally, ensure the PBM does not drive members to higher-price products to protect current contractual guarantees.
Employers that implemented point-of-sale rebates should ensure that the PBM adjusts the projection used in passing rebates at the point of sale to reflect the impact of any manufacturer price and rebate actions.
Consult with market experts on the impact this announcement may have on prices of other products in this category, including diabetes drugs awaiting approval to treat obesity.

Drive change with our Pharmacy Benefit Committee .

Learn More