State Insulin Price Caps Seen as New Front in Drug Price Fight

State lawmakers can better aid communities bearing the brunt of high insulin prices by expanding policies to cover the uninsured and addressing practices of drug industry middlemen, analysts and patient groups say.

A Democratic state lawmaker in Wisconsin recently proposed a bill that would cap the price of insulin at $35 for residents with state-regulated commercial health plans. Legislatures in others states, including Massachusetts and Pennsylvania, are also considering proposals that would add them to the list of 25 states that currently limit copayments for patients covered by commercial plans.

In California, Gov. Gavin Newsom (D) recently vetoed a bill that would have set a $35 insulin copay cap, citing the state’s efforts to manufacture its own low-cost insulin. But that plan, which Newsom argued would better address high prices, is facing unanticipated delays and likely won’t meet its initial 2024 timeline.

At a time when the cost of insulin remains a major policy issue for the Biden administration and federal lawmakers, drug pricing analysts say states need a more multipronged approach that accounts for rebates and fees drugmakers pay to pharmacy benefit managers, which manage prescription drug coverage on behalf of employers and others. Additionally, they argue copay caps should be extended to people with other types of insurance or those without insurance—who on average spend more than double on insulin annually compared to patients with private insurance.

Copay caps “do stop the bleeding” by reducing some patients’ out-of-pocket costs, but they don’t address, “why is it that we don’t have cheaper insulin? And why haven’t prices been driven lower?” said Dana Goldman, co-director of the University of Southern California’s Schaeffer Center for Health Policy & Economics.

Americans diagnosed with diabetes make up one of every four health-care dollars spent in the US, according to a November report from the American Diabetes Association. The analysis also found that spending on insulin tripled in the past decade, from $8 billion in 2012 to $22.3 billion in 2022.

‘Long Past Time’

By the time the Inflation Reduction Act imposed a $35 per month out-of-pocket cap for Medicare beneficiaries, several states had already enacted laws limiting what patients with state-regulated commercial health insurance pay for insulin.

Colorado was the first in 2019, setting a $100 per month cap. An additional 24 states have enacted limits ranging from $25 to $100 for a 30-day supply of insulin.

This comes as each of the major insulin manufacturers—Eli Lilly & Co., Novo Nordisk A/S, and Sanofi SA—have capped insulin products at $35 per month.

In Wisconsin, state Sen. Brad Pfaff (D) is hoping to follow the lead of other states, proposing a bill in September to cap insulin copays at $35 for residents in the state with commercial health insurance. He was inspired, in part, to craft the legislation by his own son’s experience with Type 1 diabetes.

“It’s long past time that we make it far more affordable and make it as accessible as possible,” Pfaff said in an interview. He hopes to advance the bill, along with legislation to establish a prescription drug affordability review board, in the spring.

It is “critical to address insulin affordability,” said Stephen Habbe, vice president of state government affairs at the ADA. He cited a 2022 study that found 1 in 6 insulin users surveyed reported rationing their insulin due to affordability issues.

Prescription Coverage

State copay caps “reduce the financial burden of out-of-pocket costs for consumers, but they don’t discipline stakeholders in the insulin supply chain to lower prices or costs,” said Neeraj Sood, a health policy professor and researcher at USC.

California’s plan also “doesn’t address the problem of high margins in the supply chain,” Sood said.

From 2012 to 2019, insulin net prices for payers increased at a slower pace than the list prices set by drug manufacturers, according to a June 2023 study published in JAMA Health Forum.

This was driven in large part by manufacturer rebates to PBMs that have fueled higher list prices, said Goldman, who previously served on an ADA working group tasked with analyzing insulin affordability in the US.

But PBMs have disputed this argument, saying most of the rebates they collect are passed on to health plans, which use the rebates to lower premiums and provide other discounts to patients. The PBM trade group, the Pharmaceutical Care Management Association, says manufacturer list prices and overuse of patents are the main sources of high drug costs in the US.

“PBMs are working with state legislatures to help ensure insulin legislation meets the objective of lowering costs for patients and health plans,” PCMA spokesperson Greg Lopes said in an email. PBMs are also “creating programs that cap, or outright eliminate, out-of-pocket cost on insulins.”

OptumRx, which together with CVS Caremark and Express Scripts control 80% of the PBM market, announced on Nov. 9 that the company would be shifting eight insulin products to preferred status on its lists of covered drugs.

All 50 states have enacted legislation related to PBMs, but they vary in their level of regulation. For example, 29 states require PBMs to obtain licenses or register in the state, and 10 have regulations for the state or a contracted third party to audit PBMs, according to the National Academy for State Health Policy.

Widening Policy Reach

Colorado and Minnesota are the only two states that have insulin caps for those who are uninsured and underinsured, which researchers argue leaves room for more states to extend their policies further.

“The challenge with state-level out-of-pocket caps for insulin is that the caps are often focused on commercial enrollees, many of whom already have out-of-pocket costs below the out-of-pocket cap levels,” said Kelly Anderson, an assistant professor at the University of Colorado Skaggs School of Pharmacy and Pharmaceutical Sciences.

In most states, employer-sponsored health insurance covers about half of the population, with the rest uninsured or covered by non-group plans, Medicaid, Medicare, or military health insurance, according to the US Census Bureau’s American Community Survey.

In Anderson’s state, the copay cap initially only applied to those with state-regulated commercial insurance. But a second law that went into effect in January 2022 created an insulin affordability program to limit copays for anyone with a valid insulin prescription.

“I believe there is ongoing interest in refining out-of-pocket cap policies to increase access,” said Anderson, who has provided consulting to federal health-care agencies, state legislatures, and private companies on insurance design and payment policy.

Affordability issues among people living with diabetes has also prompted conversations about ways to tackle the affordability of equipment used to administer insulin and monitor glucose levels, Habbe said. Some states like Connecticut and Delaware have copay limits on certain diabetes devices and supplies.

Developing multifaceted solutions to insulin affordability issues is important as policymakers look at high prescription drug costs in general, Goldman said.

“If we get this right for insulin, we can get this right for all chronic medications,” he said.