Blinded by the light

Ok let’s get this out of the way upfront feel free to share this post.

Now onto business or what we like to call the never let those pesky facts get in the way of a good crusade. Yes once again Diabetic Investor is being accused of being the devil for simply speaking the truth. No surprise here as once again everyone is up in arms over the “high” cost of insulin. So what else is new.

Yes it seems the crusaders for lower insulin costs are mad at us because we believe insulin companies are entitled to make a profit and that the primary responsibility of these companies is not to sell insulin for as cheap as possible, no their primary responsibility is to make money for their stakeholders.

Listen as we have written before we understand why everyone likes to dump on big Pharma as if they control what a patient pays out of pocket for their insulin. There is no basis for this belief but what heck as we noted earlier never let those pesky facts get in the way of a good crusade. They believe the CEO’S of these companies who make millions are just money grubbing individuals who could care less about patients.

We can understand how they feel this way as these CEO’s do make millions but they forget or aren’t aware it is not the CEO who approves these hefty pay packages. That decision is left to the company’s board of directors. That is one of their
responsibilities. Are these pay packages crazy or even obscene you bet. But then again we just read an article about the how much college football coaches make, pay packages which are also crazy and obscene. Yet these pay packages whether you are a corporate CEO or college football coach are determined by the free market. This is still America remember.

Still we feel its our duty to shed some light on this issue as there is more misinformation out there than what’s said at the daily White House press briefing. So in an attempt to shed light on this darkness allow us to walk everyone through the factors which go into what a patient pays out of pocket for their insulin.

The number that gets all the attention is the WHOLESALE price of insulin or what is commonly referred to as the list price. This is the number that has been rising over the years. This is the number that everyone sees.

Here are some things that aren’t seen;

Discounts or Rebates – as we said in the article on Healthline all the insulin companies care about is the net effective selling price – this is the list price less discounts and rebates. Just by way of example let’s keep this simple – lets say the list price for a vial of insulin is $10 – this is not what the insulin company gets – they go to the payors and offer discounts – let’s say just for grins and giggles that discount is 20% – that knocks $2 off the list price. Next the payor will demand a rebate which actually is just another word for bribe, let’s say that rebate is also $2 – therefore the net effective selling price what the insulin company gets is $6. What no one sees is the amount of discounts given or rebates paid.

The reason the list price keeps increasing is because payors keeping demanding bigger discounts and larger rebates. So in order to keep the net effective selling price at $6 per vial the insulin companies raise the list price knowing full well the payors will want steeper discounts and larger rebates. And around and around we go.

Next lets look at the other number that gets a lot of attention what we like to call the receipt picture. We’ve all seen this a patient walks of out of their local pharmacy takes a picture of the receipt and of course posts it on social media. Naturally the comments start coming how the hell can insulin cost $300 a vial? Where’s the outrage? Let’s get the tar and feathers and string these bastards up.

What gets lost here what isn’t seen;

1. The pharmacy mark up – yes pharmacies are in business to make money too- did the pharmacy mark it up 10%, 20% or 200% we have no idea.

2. The patients insurance – do they have a high deductible plan which forces them into paying the cash price until they meet their deductible. Was this high deductible plan forced upon them by their employer or did they chose this plan over a higher cost lower deductible plan.

Now we’ll stop here for a moment to say yes the cash price for insulin is obscene. For patients who do not have insurance or are “under” insured diabetes is a very costly disease to manage. However we will also note that all the insulin companies do offer programs to help these people. But that isn’t good enough for the crusaders as they say these programs are too complex and take too long. As if the insulin companies should just give these people the discounts or in some cases FREE insulin just because they ask for it. This is just ludicrous.

Yes we’ll get in trouble for saying this but what the heck we’re used to being in trouble, the fact is not all people tell the truth. Yes there is no question there are patients who through no fault of their own need this help. However there are patients who want something for nothing, who believe they are somehow entitled to lower prices just because they have diabetes. Need we point out once again that the insulin companies are not philanthropic entities, that they are not obligated to offer any assistance, that these programs may not be perfect but hey they do exist.

Here’s what really gets our goat let’s say by some miracle insulin was GIVEN AWAY FOR FREE, would anything change. Would we see better patient outcomes? Would we see newer and better insulin’s? Sure there would a group of patients who will do the happy dance but beyond that group what changes? The answer something else the crusaders don’t get is nothing. There is not one piece of hard evidence that shows that the out of pocket cost of insulin impacts patient outcomes.

Folks this is how our healthcare system works. Is it a screwed up system, for sure. However until it changes this is the world we live in. America does not have socialized medicine, we are not a single payor system. Market forces determine what a patient pays out of pocket not the government. As we keep saying this is not a simple math problem where 2+2=4, this is a complex algebraic problem with multiple variables. Each variable goes into what the patient pays out of pocket, and the patient whether the crusaders want to acknowledge it or not is one of the variables.

We wonder if the crusaders have given any thought into what exactly a “fair” out of pocket price is. As Momma Kliff used to say; “Who died and made them king of the castle.” If $10 a vial is too much what about $8 or $6, where does it end. Who determines exactly what a “fair” profit is, assuming of course these companies are allowed to make a profit. When did these crusaders become the judge, jury and executioner.

Listen we could care less about getting called every name in the book, however we wish these people would be more creative with the adjectives they use, bring it on. Momma Kliff did not raise a wallflower who will go quietly into the night. On the contrary we want to shed the light into the darkness, bring some reality into the discussion. We are not about assigning blame or pointing fingers, that might make for a great sound bite or Twitter tweet but it doesn’t solve a damn thing.

Is there a problem yes. Is it widespread no one is exactly sure. Should something be done, of course. The question what and how much should be done. So go ahead and bitch, go tilting at windmills, resort to child like name calling, we on the other hand would prefer solutions that work.