Earlier this week we presented data on out-of-pocket spending on insulin during each month in 2017. In that blog, we showed that enrollees in employer-sponsored health insurance paid more out-of-pocket for insulin products at the beginning of the calendar year. We examined the relationship between increasing point-of-sale prices for insulin and higher out-of-pocket spending in January for a subset of individuals who use insulin - those with type 1 diabetes.

A growing number of news stories and research studies about people rationing their insulin in response to high prices – at times with fatal results – has focused attention on the issue of insulin affordability. Using HCCI claims, we find that rising point-of-sale prices for insulin coincided with meaningful increases in what individuals pay out-of- pocket at the pharmacy early in the year. The increase in early year out-of-pocket spending is most pronounced among individuals enrolled in consumer directed health plans where higher deductibles mean individuals are more likely to bear the full cost burden of their prescription drugs at the beginning of the benefit period.

How Point-of-Sale Prices Can Impact Out-of-Pocket Spending

It has been broadly documented that insulin prices set by manufacturers (list price) and charged by pharmacies (point-of-sale price) have been rising in recent years. Earlier this year, HCCI found that the point-of-sale price for insulin approximately doubled from 2012 to 2016. Manufacturer rebates may offset some of the reported increase for insulin prescriptions for people with insurance coverage, but rebates do not necessarily lessen the burden of patients' out-of-pocket spending. As a result, point-of-sale price increases can meaningfully affect what individuals pay out of pocket at the pharmacy, even if the effect on total spending is small. People are particularly exposed to increases in point-of-sale insulin prices when they are in the cost-sharing phase of their insurance benefit. This occurs prior to meeting a deductible, or subsequently, when co-insurance is required before reaching an out-of-pocket maximum. During this phase, individuals are responsible for paying all or a portion of the point-of-sale price of medication. For this reason, it is not surprising to observe higher out-of-pocket spending on insulin in January compared to December of the same year.

Early-Year Out-of-Pocket Spending Highlights Patient Exposure to Price Increases

From 2012 to 2017, the average increase in point-of-sale insulin prices was 103%. We found that year-over-year increases in average out-of-pocket spending on insulin in January followed this increase in the point-of-sale price, though rose somewhat less steeply. Across our full sample, average out-of-pocket spending in January rose from $77 in 2012 to $113 in 2017, an increase of more than 40%.

In contrast to the sharp increase in out-of-pocket spending early in the year, average annual out-of-pocket spending on insulin grew only 11% between 2012 and 2017, from $382 to $424. The difference in trends stems from the fact that annual measures aggregate out-of-pocket spending throughout the year, and so large increases early in the year are moderated by decreases later in the year. For example, we observed an increase between 2012 and 2017 in the share of insulin prescriptions with $0 in cost-sharing during the year.

Increase in Early Year Out-of-Pocket Spending was Concentrated among Individuals Enrolled in High Deductible Plans

Our analyses suggest that individuals are spending more out-of-pocket during the period in the year when they are most likely still exposed to the deductible portion of their insurance benefit. To further test this hypothesis, we looked at January out-of-pocket spending for people enrolled in consumer-directed health plans (CDHPs) compared to those enrolled in other types of health insurance plans.

We found that out-of-pocket spending among those enrolled in CDHPs grew nearly three times faster than for those in non-CDHPs. Among members enrolled in CDHPs, average out-of-pocket spending in January increased from $170 in 2012 to $273 in 2017. Among those in non-CDHPs, the corresponding out-of-pocket spending was $59 in 2012 and $73 in 2017. 

Policymakers Engage to Address Rising Insulin Prices

Rising point-of-sale prices for insulin have garnered substantial attention as stories of individuals with type 1 diabetes who struggle to pay for their insulin are shared. Manufacturer rebates may offset some of the reported increase for prescriptions covered by insurance, but they do not necessarily lessen out-of-pocket spending by patients, particularly at the beginning of an individual's benefit period. Given the opacity of drug price increases, changes in insulin prices are also likely surprising to patients at the pharmacy counter.

Policymakers are already working to address the affordability of insulin. This summer, the co-chairs of the Senate Diabetes Caucus, Senators Collins and Shaheen, introduced legislation aimed at reducing insulin prices. Additionally, the Senate Finance Committee has initiated a bipartisan investigation and the House Committee on Energy & Commerce, Subcommittee on Oversight and Investigations, has held multiple hearings (April 2 and April 10) to understand the drivers and effects of increasing insulin prices. In Colorado, legislation was recently enacted that caps monthly out-of-pocket spending, which may help smooth consumers' out-of-pocket burden throughout the year. You can explore the proportion of individuals with monthly out-of-pocket spending above certain thresholds, and how these proportions vary by state and type of health insurance plan, using the dashboard in our previous post.

As policymakers continue to assess the nature of this problem and potential solutions, it is important to keep in mind that our analysis applies to people with health insurance. For those without, insurance never "kicks in". Though studying this population is outside the scope of our analysis, our results highlight the huge potential burden born by the uninsured due to rising list prices for insulin.