Heavyweight insulin-maker Novo Nordisk said Tuesday that it will lower list prices for some of its insulin products by up to 75 percent by the end of the year, following in the footsteps of Eli Lilly, which made a similar announcement at the start of the month. Experts expect the third top insulin maker in the US, Sanofi, to follow suit.
The price cuts come after years of escalating public backlash to the companies' steep price hikes on insulin, which many advocates have described as price gouging. An analysis from 2018 found that insulin list prices were set five- to 10-times higher in the US than in other high-income countries, with average standardized units of insulin going for nearly $100. The cost of producing the products, even the newer insulins, generally falls under $10.In its announcement Tuesday, Novo Nordisk said that it will cut the prices of several products, including Levemir, Novolin, NovoLog, and NovoLog Mix 70/30. With the 75 percent cut, a 10 mL vial of NovoLog will drop from $289.36 to $72.34. A NovoLog Mix 70/30 FlexPen will drop from $558.83 to $139.71.
Amid public outrage over the prices, lawmakers have also been working on ways to force prices down. The companies' voluntary price cuts closely track a federal price cap that went into effect this year via the Inflation Reduction Act of 2022. The law limits out-of-pocket insulin costs to $35 per month for Medicare Part D beneficiaries. When Eli Lilly slashed its prices earlier this month, it also announced programs that cap monthly insulin costs to $35 for people with commercial insurance as well as the uninsured. Novo Nordisk did not offer such a cap in its announcement today, though it noted a hodgepodge of deals and programs.But, while the price cuts may seem linked to last year's Inflation Reduction Act, health policy experts and lawmakers note that a slightly older law may be the real impetus behind the dramatic cuts—the American Rescue Plan of 2021. The law contained a number of provisions to improve health care access and affordability, including one that eliminates a cap on rebates that drug companies are required to pay Medicaid. If the cap was lifted with insulin list prices set as they are now, insulin makers might have had to pay Medicaid programs more than the price of their insulin products every time a Medicaid program had to cover one, likely totaling tens of millions of dollars in payments to Medicaid. But, with the lower list prices, Eli Lilly and Novo Nordisk will dodge those extra payments. The rebate cap is set to lift January 1, 2024—which is also when the companies' price cuts will fully kick in.
The rebate program cap is a little complicated, so here's a breakdown of how it works. It all stems from the Medicaid Drug Rebate Program (MDRP), passed by Congress under the Omnibus Budget Reconciliation Act of 1990. The straightforward goal of the MDRP was to make sure that Medicaid paid the lowest or best possible price for prescription drugs. As such, drug makers who want their drugs covered by Medicaid have to enter into a rebate agreement, under which Medicaid agrees to cover and purchase their products as long as the drug makers pay them back a rebate to keep costs as low as possible. The cost of the rebate is based on a set of formulas that consider things like the type of drug—brand or generic—and market prices.