by University of Southern California

Despite its discovery nearly 100 years ago, insulin's list price has been going up, not down, with trade secrets and other protections preventing researchers from pinpointing who is receiving profits from its sale.  Meanwhile, the net price—what manufacturers receive after accounting for all discounts and payments to distribution system entities—has been falling. So, why aren't patients seeing the savings? 

The researchers analyzed the flow of money across all distribution system participants—manufacturers, wholesalers, pharmacies, pharmacy benefit managers (PBMs), and health plans—and find that middlemen in the distribution process now take home approximately 53% of the net proceeds from the sale of insulin, up from 30% in 2014. Meanwhile, the share going to manufacturers has decreased by 33%.  

This redistribution of profits has led the total cost to the healthcare system—net expenditures — to remain relatively flat.  

"Although manufacturers have been receiving less, the savings from manufacturers taking less are not flowing to patients," said Karen Van Nuys, executive director of the Value of Life Sciences Innovation Project at USC Schaeffer Center. "Those savings are being captured by others in the distribution system, and any policy solution has to look at the entire supply chain."  

The insulin distribution system: A complicated web   

To understand how money in the insulin distribution system has flowed over time, Van Nuys and colleagues Rocio Ribero, Martha Ryan, and Neeraj Sood leveraged 15 different data sources to create a database of insulin expenditures between 2014 through 2018.  

Of a hypothetical $100 spent on insulin, they find manufacturers accrued about $70 in 2014, falling to $47 in 2018. During this time, the share going to pharmacies increased from about $6 to $20, PBMs' share increased from $6 to $14, and the share going to wholesalers increased from $5 to $8. The health plans' share had decreased from $14 to $10 per $100 spent on insulin.  

"Clearly all entities in the pharmaceutical distribution system profit from the sale of insulin," said Schaeffer Center Senior Fellow Neeraj Sood. "But these data suggest increasing profits to intermediaries in the system are playing a key role in keeping net expenditures high."