Focusing on the wrong metrics

Focusing on the wrong metrics

Over this past weekend much has been written regarding the “high” cost of insulin. On Sunday the New York Times published an opinion piece entitled “Break Up The Insulin Racket”. In that piece the author states;

“To make insulin more affordable, we need more competition. Nothing would do this faster than a “generic” form of insulin. (Technically, because insulin is made using bacteria, it should be referred to as a “biosimilar” instead of a “generic”.) Unfortunately, there isn’t one available in the United States.

This is true, in no small part, because the big three have cleverly have extended the lives of their patents, making “incremental” improvements to their insulin. It is not clear whether the newer insulin products are significantly safer or more effective than their predecessors, yet the strategy has been effective: There is no generic insulin, and over 90 percent of privately insured patients with Type 2 diabetes who are prescribed insulin get the newer and more expensive products.”

Just yesterday posted a piece entitled “The High Cost of Insulin (And a Plea to Lilly)”. In that post the author states; “The high cost of insulin has long been a sore spot among the Diabetes Community. And the dust was stirred up again when Eli Lilly executives made comments about their increasing profits from insulin during a recent earnings call (covered in this Market Watch story).”

While the author did try and present a balanced perspective on the complex dynamics of insulin pricing, (the full post can be read at the implication was clear – the high cost of insulin is preventing patients from properly controlling their diabetes.

Just this morning Novo Nordisk (NYSE: NVO) released data from their SWITCH 1 study, according to a company issued press release;

“Novo Nordisk today announced the headline results from SWITCH 1, the second of two 2×32-weeks randomised, double-blind, cross-over, treat-to-target trials, comparing the safety and efficacy of Tresiba® (insulin degludec) and Lantus® (insulin glargine U100). The overall purpose of the trial was to compare the hypoglycaemia occurrence in people with type 1 diabetes treated with Tresiba® or insulin glargine.”

The release goes onto to state;

“The trial met the primary end-point by demonstrating non-inferiority in the rate of severe or blood glucose confirmed symptomatic hypoglycemia of Tresiba® compared to insulin glargine.”

While these events may not seem related they are and they say a great deal about what’s happening in the insulin market. They also point out, to Diabetic Investor anyway, how everyone is focusing on the wrong metrics.

First the author of the New York Times piece is inaccurate on several fronts. Right now there are 5 long-acting insulin’s one of which is a biosimilar. There are also 4 short-acting insulins on the market and while there is not yet a biosimilar short-acting on the market there will be. It’s not a question of if this will happen but when it will happen.

We also disagree that the newer insulin analogues are not safer or more effective than their predecessors. There is a mountain of clinical data which backs this up.

One area where we do agree is that Novo and Sanofi (NYSE: SNY) have failed to make true improvements to their long-acting insulin’s. That the improvements have been incremental rather than truly innovative. We noted this when Sanofi tried to convince everyone that Toujeo was better than Lantus, a strategy which failed. Novo is making this same mistake with Tresiba. The reality is yes these two newer long acting insulins are somewhat better in terms of hypoglycemic events but not that much better than Lantus, the world’s most popular long acting insulin.

The reality is payors, the people who control the keys to the insulin kingdom, see things the way we do. These newer long-acting insulins are good products yet not worthy of premium reimbursement as the older products when used properly do the job just fine.

What both pieces fail to recognize is that what a payor pays for insulin has nothing to do with what insulin therapy actually costs a patient. While there is a small percentage of patients who do not have insurance or are under-insured therefore forcing them to pay cash for their insulin. The vast majority of insulin using patients have coverage and the real cost of this therapy isn’t that expensive. Here’s why, unlike cash paying patients the only out of pocket cost these patients have is their co-pay. Even as co-payments have increased over the years, something that has nothing to do with the companies that make insulin, these co-payments pale in comparison to what a cash paying customer pays.

This same argument was used when looking at why patients fail to monitor their glucose levels regularly. Many stated that the high cost of test strips was preventing patients from testing on a regular basis. As we noted back then only a small percentage of patients, less than 10%, were actually paying the full retail cost for their test strips. That the majority of patients were paying a small fraction of that as the only cost they had to cover was their co-payment. We further argued that even if test strips were given away for free there would be no increase in testing frequency. As we noted many times the reasons patients don’t test regularly is they do not value the information gained from these tests.

Now Diabetic Investor would not definitively state that if insulin was given away for free that we would not see a corresponding improvement in patient outcomes, we do believe this to be true. The unfortunate fact is the majority of insulin patients are not properly educated on how to use insulin. The fact is giving away insulin for free would not do anything if these patients don’t understand how to use insulin effectively.

The 800-pound pink elephant in the room that no one wants to acknowledge is that cost is not directly linked to outcomes, while numerous studies have conclusively proven that patient education is directly tied to outcomes. That educated patients achieve better outcomes as they understand the reasons why they are doing what they are doing. Diabetic Investor has said it many times ask any physician the number one reason why their patients aren’t achieving better outcomes and almost universally the answer isn’t the cost of their therapy regimen, it’s actually following their therapy regimen. Therapy compliance or the lack thereof, is the number one reason why patients do or do not achieve better outcomes.

This focus on cost is not just misguided it’s dangerous as it fails to acknowledge what’s going on in the real world. Yet this focus on cost is also very understandable, as the theory is lower costs will lead to better outcomes even though there is no hard evidence to back up this claim. And just which cost should we be focusing on, the cost a payor pays or the co-payment the patient pays? Should we blame the makers of insulin that in order to contain costs employers have increased co-payments? This is like blaming a car manufacturer for a drunk driving accident.

The harsh reality here is that focusing on the cost of insulin is easier than properly educating patients or improving therapy compliance. Yet, even if these advocates are successful and the cost of insulin goes down, we doubt much will change in terms of better patient outcomes. This is not say something shouldn’t be done for those patients who either don’t have insurance or that are under-insured. Rather more should be done to educate patients so they can understand why they are doing what they are doing.

Whether these people want to acknowledge it or not, the villain here is not the companies that make insulin, nor is it the payors. The real villain here is the very nature of our healthcare system, a system which focuses not on outcomes but on costs. A system which fails to acknowledge that better outcomes actually lead to lower costs. That even if insulin was free this would not do anything more than kill innovative.

The bottom line here is that cost is part of the equation but this issue alone won’t solve the problem and quite frankly it’s misguided to think it will.