Want to Prevent Shortages of Lifesaving Products?

Want to Prevent Shortages of Lifesaving Products?

June 18, 2022 0 By Jennifer Walker

With three in every four American babies receiving at least some baby formula by 6 months, the formula shortage risks the nutritional wellbeing of our children. The majority in Congress claimed to solve the problem by giving FDA more money without specifics or accountability. Though Abbott has resumed production, President Biden confirmed after meeting with manufacturers that the shortage will extend at least another 2 months, and so he’ll continue to fly in formula from Europe.

These actions will not get to the root cause of the problem: government tinkering with market forces. Until we change how the federal government runs and make agency decisions transparent and accountable to the American people, we will continue to stumble from one disaster to the next.

Shortages of lifesaving products are not new. They happen when bureaucrats and middlemen make decisions behind closed doors, without transparency or accountability. You might remember shortages of chemotherapy drugs, EpiPens, and more recently, saline solution and the dye used in computed tomography (CT or CAT) scans. Oncologists have been forced to choose which cancer patient gets a dose of chemo. Bee allergic children are told to “just avoid bees.”

The pathway to market for these products is controlled by secret contracts between insurance companies and pharmacy benefit managers (PBMs), who craft the formularies for insurer’s drug plans, or between hospitals and group purchasing organizations (GPOs), gatekeepers that control which products they use. These contracts limit the number of companies that manufacture products that are used in hospitals and nursing homes by eliminating smaller companies from the deals, creating de facto monopolies and driving up prices.

Those of us who practice medicine see the people who face these disasters every day in our work. We are asked to guide parents through shortages caused by people who have little or no connection to our patients, while government officials provide temporary appeasements but no long-term solutions.

This is exactly the same approach the Biden administration, democrats, and a handful of republicans in Congress want to take with the problem of soaring insulin prices. Over the past 20 years, the price of a vial of insulin has increased by more than 1,000%. Our leaders in government want you to believe this is because greedy pharma companies have jacked up the price year after year, squeezing diabetics for every penny they can to keep the supply flowing. The reality is more complex.

Very few people purchase insulin directly from pharmaceutical companies. Most get it through a pharmacy, which uses a PBM middleman to manage the transaction. Pharma companies give PBMs “rebates” in exchange for preferred placement on their formularies (lists of drugs that your insurance covers). These “rebates” are tied to the price of the drug — higher drug prices mean more profits for PBMs. In actuality “rebates” are kickbacks, as evidenced by the fact that the PBM (and the GPO) enjoy a government-sanctioned exemption from the anti-kickback statute.

By controlling the formulary, PBMs control which drugs your insurance will cover. This gives them tremendous sway over the drugs you take and the price you pay for them. They leverage the rules of this game to favor more expensive drugs and keep their profits rolling in. This is exactly what happened with insulin. Express Scripts, the largest PBM, will cover Humalog, Eli Lilly’s branded insulin, but not Lispro, its generic insulin that’s 65% cheaper.

Rather than try to untangle this web of secrecy and self-dealing, both Biden and Congress’s proposal would ignore the middlemen and cap only the monthly cost of insulin at $35. This puts taxpayers and employers on the hook for the rest of the overpriced cost, which flows to PBMs and the insurance companies that own them. It will be business as usual as middlemen continue to rake in massive profits on every vial sold.

Many members of Congress understand this is a systemic problem, yet they won’t tackle the wealthy kickback collectors. Is it possible they think these middlemen are too big to fail?

The Federal Trade Commission just announced that it will open an investigation into PBM practices, and while that is welcome news, we need solutions that get at the root of the problem. One model that would accomplish this was proposed in Matt’s Act (HR 7722), a bipartisan bill that would reduce the insulin co-pay to $20 for the uninsured. HR 7722 removes the middlemen from the insulin market, pays manufacturers a reasonable price, and maintains an open formulary so other insulin manufacturers can also compete in the market, which would drive down prices across the board. This type of model would solve the insulin cost problem for everyone in America — except the PBMs.

In addition, we need immediate transparency for the current and previous kickback contracts for crucial medications that have previously faced shortages — like epinephrine, saline, chemotherapeutics, penicillin, and CT contrast — so we can see how much government sanctioned kickbacks are costing Americans and consider repealing them.

Without these two important steps, we will continue to have shortages in our government manipulated market. It frightens us to think that the infant formula shortage could soon play out much the same way with insulin.

Nikki Johnson, MD, is a pediatric intensivist practicing in Cleveland, Ohio. Marion Mass, MD, is a pediatrician practicing in Philadelphia. They are members of Free2Care, a national coalition of physician and patient organizations advocating for healthcare reform. These are their personal opinions and not those of their employers.