What happens after?

Last week we noted that the insulin companies were about to come under attack over the high cost of insulin issue. Well the assault began yesterday with Congressional hearings. Per a report posted on FirstWord Pharma;

“Two US House Democrats sent letters to Eli Lilly, Novo Nordisk and Sanofi seeking information on why the cost of insulin has skyrocketed in recent years. Frank Pallone, chairman of the Energy and Commerce Committee, and Diana DeGette, chair of the Oversight and Investigations Subcommittee, also asked the companies to disclose net profits for their insulin products for the last 10 years.”

These hearings are just the latest in a series of events that have put the insulin companies in an untenable position. As we have noted in the past there is no way the insulin companies will come out looking good here about all they can do is deal with whatever the eventual fallout is. This is the issue we can want to concentrate on today, what happens after all the theatrics are over.

The high cost of insulin is one issue that has done the impossible it has gone beyond party politics. The President, Republicans and Democrats may not agree on much but one thing they seem to agree on is that insulin costs too much. Given this set of circumstances we believe it’s not a question if something will done rather what will be done and what impact these measures will have on the insulin companies.

Here are what we see as possible actions;

1. Fine and/or settlement

Back in 1998 the four major tobacco companies agreed to pay a minimum of $206 billion over 25 years to settle lawsuits brought by the attorneys general of 46 states. The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs. Congress could use the threat of a fine or more drastic measures to force the insulin companies to settle which they just might do so they can then put this issue behind them.

2. Price Controls

Not exactly sure how this would work but it is possible Congress could institute some sort of price controls either limiting what the insulin companies could charge or only allowing a certain percentage increase in prices from one year to the next.

3. Broader Patient Assistance Programs

All the insulin companies do offer patient assistance programs however Congress could well force the companies to expand these programs and/or change the requirements for eligibility.

4. Full Disclosure

Given the multiple factors that go into what a patient actually pays out of pocket Congress could take a big step and require full disclosure of the discounts and rebates paid by insulin companies. They could go a step further and require them to disclose how they determine prices in the first place.

5. Take pricing out of their hands.

Given that Medicare is an important channel for the insulin companies Congress could take pricing out of the hands of the companies telling them the government will only pay a certain amount. This in turn would likely be followed by private payors who typically model their policies based on what Medicare does. This is not unlike what happened when Medicare went to competitive bidding for glucose test strips.

Of course, it is quite possible a combination of these actions can be taken but suffice it to say something will be done. So, for the insulin companies it’s no longer what will be done but how they deal with whatever the fallout is from Congressional action.

Let’s just hope whatever is done actually helps those patients who cannot afford insulin. Let’s hope after all the theatrics, grandstanding, chest pounding and sound bites that these people get the help that they need. To be honest we aren’t optimistic as the insulin pricing matrix is complex and what a patient pays out of pocket is not solely based on what the insulin companies charge. It’s part of the dynamic but just one piece of a complex puzzle.

It’s somewhat unfortunate that the insulin companies have become the scapegoat here. Again, as we have stated before they are part of the problem but not the sole cause of the problem. Blaming the insulin companies alone for the problem is like Chicago Bears fans blaming their kicker for hitting the goalpost. That may have hurt but had the team played better the ill-fated field goal attempt would have been unnecessary. Something lost on us Bears fans as it’s so much easier to lay the blame on the kicker then it is to acknowledge the team lost this game.

Just as this missed field goal will ultimately cost the kicker his job, the insulin companies will pay the price for a problem they did not create by themselves.