States Tackle High Out of Pocket Costs for Insulin but Lack Tools to Bring Rx Prices Down

This spring, Congress enacted the most significant expansion of the Affordable Care Act in over a decade, dramatically enhancing marketplace subsidies for health insurance consumers. Left out of that bill, however, were policies to relieve consumers from high prescription drug costs. While Congress continues to debate the issue, states are partially filling the policy void by focusing cost-sharing relief on people who suffer from diabetes.

One in four patients with diabetes reported that they had to ration their supply of insulin because of the high out of pocket cost. The average out-of-pocket cost for insulin over a one year period for a privately insured person is $613, but the cost sharing obligations vary widely across health plan type. There is a growing body of evidence that insulin rationing can worsen health outcomes, and lead to higher costs associated with hospitalizations and other complications. This is prompting many states to enact or consider insulin copay caps. These bills generally impose a statutory limit on how much an insured patient can be charged in cost-sharing for insulin, although they notably do not relieve uninsured patients of their out-of-pocket obligations. Eighteen states have enacted some form of an insulin copay cap and seven others have legislation pending.

Capping copays for insulin can be a win-win for state lawmakers who want to do something about prescription drug costs but are loathe to take on the powerful pharmaceutical industry. Pharmaceutical manufacturers strongly oppose efforts to curb high drug prices, but they are supporters of insulin cost-sharing caps. Conversely, insurers say their health plan formularies are just a reflection of the high and rising prices that drug manufacturers charge for their products. Advocates of the policy say insurers have failed to protect patients from the growing cost of insulin, and patients need relief now. However, some consumer advocacy organizations have concerns that copay caps will quell public pressures to reduce prices and allow the pharmaceutical industry to avoid accountability.

These caps provide some relief to patients in need, but they come with a number of limitations. First, state copay caps only serve patients who are in state-regulated health plans, which leaves out approximately 67 percent of privately insured residents who are enrolled in a self-funded plan. One estimate found that Colorado’s copay cap only touched three percent of residents with Type 1 Diabetes under the age of 65. Additionally, the savings from the out-of-pocket obligation will likely just shift to burden people with higher premiums or higher cost sharing for other services. People with other chronic diseases could face growing out-of-pocket costs as a result. Arguably the most significant limitation is that copay caps are a downstream remedy to a problem with a lot of upstream causes. Reducing what people are obligated to pay out of pocket does nothing to address the underlying price of the drug.

Tackling prescription drug affordability can be a particularly challenging area for state lawmakers. Pharmaceutical manufacturers have been adept at raising legal barriers to efforts to regulate drug prices, and have poured resources into lobbying campaigns to defeat such efforts. While some states have made progress reducing prescription drug spending for their Medicaid programs or the state employee health plans, it has been more challenging to use their policy levers for the majority of residents who are privately insured.

This policy trend is another illustration of the limitations states have to reform a legally complex and politically fraught issue. Ultimately, the problem of insulin affordability will only be solved if Congress does something about the underlying prices. Senate Finance Chair Ron Wyden outlined a proposal last month that would enable Medicare to negotiate drug prices with pharmaceutical manufacturers and allow other public and private payers to piggyback on the results of those negotiations. If Congress is successful, it would relieve states of the need to rescue patients from the often exorbitant out-of-pocket costs associated with insulin and many other lifesaving treatments.

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The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.