Rebate Trap Keeps Generic Diabetes Drugs Out of Reach

In a practice that policy experts say smothers competition and keeps prices high, drug companies routinely make hidden pacts with middlemen that effectively block patients from getting cheaper generic medicines. Media for Medical / UIG via Getty Images Lisa Crook was lucky. She saved $800 last year after her insurance company started covering a new, less expensive insulin called Basaglar that was virtually identical to the brand she had used for years.

The list price for Lantus, a long-acting insulin made by Sanofi that she injected once a day, had nearly quadrupled over a decade.

With Basaglar, “I’ve never had my insulin cost drop so significantly,” said Crook, a legal assistant in Dallas who has Type 1 diabetes.

But many people with diabetes can’t get the deal Crook got. In a practice that policy experts say smothers competition and keeps prices high, drug companies routinely make hidden pacts with middlemen that effectively block patients from getting cheaper generic medicines.

Such agreements “make it difficult for generics to compete or know what they’re competing against,” said Stacie Dusetzina, an associate professor of health policy at Vanderbilt University School of Medicine.

Here’s how it works: Makers of established brands give volume-based rebates to insurers or intermediaries called pharmacy benefit managers. In return, those middlemen often leave competing generics off the menu of drugs they cover, called a formulary, or they jack up the price for patients. The result is that many can’t get the cheaper drugs unless they shoulder a bigger copay or buy them with no help from insurance.

Brand-drug sellers “pay for position” on the formulary, said Michael Rea, CEO of Rx Savings Solutions, which helps health plans and employers manage pharma costs. “In this country, the most cost-effective drugs don’t necessarily mean anyone will have access to them … [Companies with] the deepest pockets […]

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