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**JANUARY 3, 2024**

On the Prospect website

You Are Entering the Infernal Triangle

Authoritarian Republicans, ineffectual Democrats, and a clueless media
BY RICK PERLSTEIN

Untangling the Government Funding Mess

Some technical errors in previous continuing resolutions now threaten a
big cut to nondefense spending. BY DAVID DAYEN

Caltech's Postdocs and Grad Workers Seek Union Recognition

Science graduate student assistants and researchers are at the forefront
of recent unionization efforts in academia. BY JESSICA GOODHEART

Dayen on TAP

****

****

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**** The Insulin Shift

Thanks to Democrats and the American Rescue Plan, insulin prices are
going way down for everyone.

There is an odd New Year's ritual, more sobering than the ball
dropping in Times Square, that involves drug companies raising prices on
their prescription medications. Over 500 drugs

jumped in price on January 1, something we should expect for many years
to come. The government is now seeking to negotiate prescription drug
prices in Medicare, but there is a lag time conveniently built into the
law between the introduction of a drug and when it is eligible for
negotiation. So higher pre-negotiation prices can squeeze out maximum
profits.

But this trend has one important exception: insulin prices, which have
been pushed downward repeatedly. As CNN notes
,
all three major insulin manufacturers are offering at least some of
their products to patients for $35 a month, mostly through dropping list
prices between 70 and 78 percent, which represents a real loss to these
companies. The changes were announced last spring but went into effect
with the turn of the calendar.

The problem is that all of these stories take their sweet old time
explaining

**why**this is happening. I can assure you that insulin company CEOs'
hearts did not grow three sizes over Christmas, leading them to bestow a
gift on the people who rely on their products.

The dynamic also has nothing to do with the Inflation Reduction Act,
which did in fact lower co-payments for insulin to $35 per month for
Medicare beneficiaries with diabetes. That certainly helps that universe
of patients, but if anything, that could make it

**more** likely that insulin companies would gouge everyone else to make
up for the shortfall. So why are they cutting their list prices?

[link removed]

It actually comes from a different law that Democrats passed with no
Republican votes: the American Rescue Plan Act of 2021. As these stories
eventually get around to mentioning, the ARP altered an existing
provision that forces companies to rebate Medicaid when list prices for
its drugs are increased above the rate of inflation. Because Medicaid
gets a 23.1 percent discount of the average manufacturer price, an
inflation rebate could actually lead to drug companies paying Medicaid
money whenever their product is used. Since 2010, that rebate level has
been capped at 100 percent of the list price of the medication. But the
ARP uncapped that rebate, starting in 2024.

What this meant is that, if insulin companies like Eli Lilly kept their
list prices at the same level, they would have had to pay Medicaid up to
$150

for every vial used, per a Stat News estimate. Lilly stood to lose about
$430 million a year to the uncapped Medicaid rebate.

So instead, Lilly slashed list prices by 70 percent, as I reported last
March
.
And its competitors, not wanting Lilly to gain market share with cheaper
prices (and also at risk from hundreds of millions of dollars in losses
from the Medicaid rebate), followed suit. These changes will help all
diabetes patients, not just those on Medicaid.

This is well known in industry circles-"Every major former blockbuster
insulin is going to get thrown under the tires of this policy," one
analyst told CNBC
-but
almost completely unknown to the public. Most of the ARP was temporary,
but this tiny provision, stuck in by House Democrats in a long-sought
change, significantly remedied one of the biggest rackets
in the entire
pharmaceutical system.

It doesn't reform the entire drug pricing system. In particular,
launch prices are skyrocketing, up to $220,000 in 2022, a 20 percent
year-over-year increase. (The higher the launch price, the more
drugmakers can extract before inflation rebates and negotiation kicks
in.) But the insulin shift is a reminder that Congress does have agency
to fix market failures, and that policy matters.

That would be a better reminder if Democrats and the media managed to
inform people about it.

~ DAVID DAYEN

**Follow David Dayen on Twitter**
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