Recently, stories have begun to emerge about diabetes patients driving to Canada in order to save money on insulin costs. The costs of the drug have been growing astronomically, putting a strain on the budgets of patients and forcing them to make hard choices. Since pharmaceutical companies have shown little inclination to control their own costs or slow the rate of their price increases, some states have been looking into legislative measures to do it on their own. Colorado has become the first state to pass a law that has capped the cost of insulin, providing critical help for those who suffer from diabetes.
According to a recent study, the cost of insulin doubled from 2012 to 2016. The rate of price growth has far outpaced the rate of inflation and insurance companies are passing much of the price increase onto consumers. This has caused a hardship for patients who may already be suffering financially from a chronic illness.
The rapid price increases are becoming a policy issue for state governments. Some have taken various measures in effort to protect consumers from the drug companies. For example, the Minnesota Attorney General filed a lawsuit against three insulin manufacturers for price gouging. Private plaintiffs have also filed similar suits, and there is a class-action suit against the three drugmakers that was filed by 67 diabetics.
Colorado has attempted to implement a different solution to the problem. The state’s legislature recently passed a bill for the governor’s signature to cap a patient’s monthly contribution to their costs of insulin at $100. While this bill did not directly go after the drugmakers by limiting the price that they may charge, it did protect the patients by limiting what they have to pay. This legislation makes insurance companies responsible for capping the cost that the client must pay and picking up the difference. Then, it is up to the insurer and the drugmaker to hash out what may be billed to insurance. Thus, patients will no longer be subjected to price increases for the cost of insulin. It is unclear what the impact is on patients who do not have insurance since the individual mandate of Obamacare has been repealed.
The new law also directed the Colorado Attorney General to launch an investigation into the insulin pricing practices of the drug companies. If the investigation reveals any violation of the law, the Attorney General is to take legal action against the companies. This is in addition to the investigations launched by other states.
While Colorado is the first state to take this type of action, it will hardly be the last. While legislation addressing prescription drug prices is stalled in the United States Congress, one can expect that states will take the lead in this area. Legislators from numerous other states have asked Colorado legislators about this law, hoping to introduce similar legislation in their own states. While any possible price gouging on the part of the drug companies will not completely disappear without Congressional action, the states do have the ability to control the situation of their end. Stories such as that of a Minnesota man who died of diabetes complications because he was rationing his insulin have compelled state lawmakers to act where Congress has not.
Still, these price caps will not necessarily drive down the overall price of insulin. The increased cost will be passed along to the insurance companies, who will likely recoup this money by raising premiums on their customers. The situation will not be completely addressed without drug price legislation from Congress. Executives from the three major insulin manufacturers have been called to testify in front of Congress and they have faced widespread pressure about the price increases. Still, the price caps passed by Colorado, while not exactly capping the price, can set a precedent for other critically necessary drugs that are subject to large price hikes by the drug companies.
Given the public pressure and the possibility of additional legislation, drug companies are taking small measures to avert any laws that could cut their profits. Eli Lilly has introduced a cheaper version of one of its insulin drugs. In addition, while the rate of price increase this year is still double the rate of inflation, it is lower than in previous years. Nonetheless, the drug companies have continued previous practices that keep prices higher. For example, the drug companies continuously make minor changes to the drug formulas to keep their products under patent protection. The major reason why insulin is so expensive is because there are no generic versions of the drug.
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