“Eli Lilly also noted that while the list price for Humalog has gone up, the company receives a lower average net price now than it did in 2009. The company said its third-quarter earnings report on October 25 showed the insulin’s U.S. revenue fell 14 percent, driven by a 24 percent decline in net price.”
How? How in the f*ck does this happen?
Well, you see, there’s MANY layers between the manufacturer and the patient.
The patient buys insulin from a pharmacy, and the pharmacy bills a pharmacy benefits provider, who is contracted with by an insurance company. The PBM negotiates pricing with the manufacturers, and takes a cut for being the “middleman” in the whole system. The pharmacy’s cost involves getting the drugs from a distributor, who is getting the drugs from the manufacturer. Some of those layers operate in parallel, some serve no purpose other than to provide an additional profit-taking layer to the whole process.
The ACTUAL price of a vial of Humalog (from Lilly direct) is only about $32.00. BUT, when you have distributors, retailers, PBMs, and others ALL inserting themselves in the chain and taking their cuts, you wind up with the retail price of ~$300.00.
Of course, not all insurance companies operate that way. Kaiser operates their own pharmacies, and buys direct from Lilly. There’s just the manufacturer, the insurance company, and the patient. So, if you’re a Kaiser patient on a “Gold” plan, you’re only paying 20% of Kaiser’s cost per vial, or a little over $6. On a “platinum” plan, that drops to about $3/vial.
A big part of the cost is the inherent inefficiencies in the way most health plans operate with regard to prescription benefits.