With the exorbitant cost of insulin practiced in the U.S. in the past decade, more and more private health insurers cannot offer this medication to their clients without charging premium prices for healthcare plans. Private and public universities that provide health insurance to students and staff now find themselves trapped in a never-ending cost increase, being forced to raise insurance prices and risk losing competitiveness and students over a life-saving medication that should be affordable to all who need it. At the same time, insulin manufacturers and special groups that can buy insulin at confidential prices report profits in the billions at the expense of people’s health and taxpayer money.
The American Insulin Crisis: A System Built on Debt and Rationing
In America, insulin can cost a diabetic person almost half of their income, while 4 out of 5 people with diabetes have to go into debt to afford this life-saving medication. Those who cannot manage these costs resort to rationing, meaning that they use far less than the recommended dose to keep their diabetes under control. Estimates indicate that across all patients with type 1 and type 2 diabetes living in the U.S., rationing occurs in about 25% of cases. All these patients are at a significant risk of developing complications due to uncontrolled diabetes.
The exorbitant price of insulin in America also drove health insurance costs on the verge of unaffordability for many, while at the same time, private and public insurers, even with premium price practices for diabetics, can no longer support covering these costs. As universities offer students automatic or optional healthcare plans, these educational institutions were among the insurers affected. This phenomenon impacted most self-funded universities, as these universities are no longer able to afford the healthcare costs of their staff and students with diabetes.
Oregon, like other states, passed legislation to cap insulin prices at $35. Yet, this further strains insurers and patients as costs for healthcare plans were increased to compensate for the caps. Now, with the implementation of insulin caps, universities are forced to charge students with diabetes even more for health insurance. Those on private plans are at risk of rationing and subsequent diabetes complications that may cause them to withdraw from higher education, resulting in an indirect impact on university funding.
In the meantime, within just 10 years, insulin manufacturers increased their prices by 1000%, with gross sales having more than doubled from 2012 to 2019, from $13 billion to $27 billion. However, after accounting for confidential discounts granted to Pharmacy Benefit Managers (PBMs) and some insurers, net sales dropped from $8 billion to $5 billion within the same time frame. These differences between gross and net sales amount to an 80% price drop as a result of these preferential discounts. This translates to an unfair yet confidential discount practice through which some purchase insulin at hidden discounted costs. At the same time, manufacturers continuously increased the price of insulin to continue making a profit. All this was done at the expense of those outside their network, including patients whose lives depend on insulin.
Impact of Insulin Price Manipulation on University Healthcare
The Affordable Care Act (ACA) prohibits health insurers from discriminating against clients based on their medical conditions. In practice, for universities, this means that students with diabetes cannot be denied insulin coverage under their healthcare plans. As a result, universities have two options: either offset the costs through higher insurance premiums or regulate insulin access by increasing out-of-pocket expenses. However, the second option is no longer viable in states implementing insulin price caps. Consequently, raising health insurance premiums has become a common practice among private and public universities.
However, as insulin prices continue to rise, university health insurance plans cannot increase indefinitely, as these costs have already surpassed affordability for many students. In response, universities may adopt unorthodox cost-cutting measures, such as limiting covered services, excluding certain insulin brands, reducing coverage for diabetes-related medical supplies, or increasing deductibles. These strategies allow universities to comply with ACA regulations on paper while subtly shifting the financial burden onto students with diabetes.
Nevertheless, regardless of how unfair these practices may seem, universities, as well as other health insurers and patients, struggle to sustain these costs. Moreover, while intended to reduce expenses, these cost-cutting measures often cost universities and students more in the long run. Without proper diabetes management, many students may experience serious health complications, leading some to withdraw from their studies. This reduces university revenue from tuition and has long-term consequences for students, including chronic health issues and reduced earning potential in adulthood.
Holding Insulin Manufacturers and PBMs Accountable
The three insulin manufacturers entrapping the market in the United States., Eli Lilly and Company, Novo Nordisk Inc., and Sanofi-Aventis U.S. LLC, along with PBMs CVS Caremark, Express Scripts, OptumRx, and corporate affiliates, stand now as defendants in multidistrict litigation (MDL No. 3080). Plaintiffs in this MDL are diverse and include patients and various health insurers, including self-funded universities that suffered the most losses due to insulin costs.
The defendants are accused of artificially inflating insulin prices through a complex scheme involving secret rebate agreements between manufacturers and PBMs. These deals allegedly prioritized profits over affordability, leading to skyrocketing list prices while PBMs secured kickbacks. Plaintiffs argue that this manipulation forced insurers, including self-funded universities, to shoulder excessive costs, ultimately passing the financial burden onto students and employees. Additionally, the litigation claims this market entrapment stifled competition, blocking access to lower-cost alternatives like biosimilars and generic insulin.
Considering the evolution of the price of insulin in America, these accusations seem sufficiently substantiated. Additionally, other strategic decisions on the insulin market further reinforce this scenario. For example, Eli Lilly, one of the top insulin producers in America, announced a gradual 70% reduction in insulin costs and framed this as a socially responsible corporate action. However, critics argue that large manufacturers are now stumbling to keep their place on the market as state legislation for partnerships with other companies manufacturing and selling insulin at a fraction of the cost can become a reality.
On a parallel line, it must be recognized that the insulin price manipulation scheme was possible because of the absence of federal legislation that would prohibit manufacturers of life-saving drugs from charging unrealistic prices for patients who quite literally need this medication for survival. The current MDL should thus catalyze the development of state and federal regulations that would limit the ability of pharmaceutical companies and PBMs to engage in price-gouging practices, ensuring that essential medications remain accessible and affordable.
About the Author
Yahn Olson is a legal professional at Environmental Litigation Group, P.C., concentrating on corporate misconduct cases. He is committed to advocating for individuals and organizations affected by unethical corporate practices and strives to hold companies accountable for their actions.