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Over the past 15 years, insulin prices have more than doubled. Pharmaceutical companies have been on the receiving end of most of the blame, and the chorus of angry voices has grown louder given Speaker Nancy Pelosi’s H.R. 3 bill, which shows that Americans pay three times more for the same medicines than Europeans do.

My firm, Vital Transformation, has been at the center of both the H.R. 3 debate in Congress and the International Pricing Initiative of the Department of Health and Human Services. For the last several months, we’ve been looking closely at the costs charged under Medicare Parts B and D. The strangest data we saw was related to insulin spending by Medicare Part D.

Company Insulin Drug Medicare Part D Spending 2017 Total Reported U.S. Sales 2017 Difference
Sanofi Lantus $4.184 billion $2.813 billion -$1.371 billion
Sanofi Toujeo $541 million $503 million -$38 million
Novo Nordisk Novolog $2.235 billion $1.629 billion -$606 million
Novo Nordisk Levemir $1.404 billion $1.429 billion +$25 million
Eli Lilly Humalog $1.535 billion $1.717 billion +$182 million
Eli Lilly Humulin $172 million $884 million +$712 million

Using the raw data extracted from the 2017 Medicare Part D Spending Dashboard, we saw that Sanofi’s insulin drug, Lantus, had $4.2 billion in Medicare Part D sales. But when we looked at Sanofi’s audited corporate report from the same year, we saw that U.S. sales for Lantus were listed at $2.8 billion, a full $1.37 billion less in revenue. Mind you, the sales listed in the audited corporate report were for all U.S. sales, not just for Medicare Part D.


We found the same situation with Sanofi’s insulin drug, Toujeo. It had “missing” revenue of $38 million. Novo Nordisk’s Novolog had $606 million in unallocated sales. All told, the unallocated insulin sales that were reported in Medicare Part D but not booked on the corporate balance sheets of Sanofi and Novo Nordisk total a bit over $2 billion.

How could $2 billion in sales simply vanish into thin air?


Perhaps the clue is in the sales of Lilly’s Humulin. That medication had only $172 million in Medicare Part D sales, yet booked $885 million in total U.S. sales. It is interesting that the drug with the lowest Medicare Part D sales had more than five times the sales volume outside of Medicare Part D. In contrast, Sanofi, with the biggest spread between what it books as revenue in its annual report and what it credits in Medicare sales seems to get the largest Medicare Part D sales volume.

The vanishing sales could represent the influence of pharmacy benefit managers, companies that act as brokers between insurance companies and drug manufacturers. The idea is that they work to bring discounts to insurers that should be reflected in lower premiums. This is generally done by driving the use of generic drugs, which lowers the overall cost of treatment. In the case of expensive, branded medicines, pharmacy benefit managers are supposed to drive a hard bargain with drug companies and then pass any savings onto the insurer or plan sponsor — though there is no guarantee or regulation requiring them to do that.

The deductibles for drugs under Medicare part D are calculated based on the list prices paid at the counter by the people who take them. Given the current lack of transparency related to who gets to keep the discounts negotiated by pharmacy benefit managers, they may have an incentive to put costlier, branded drugs into their plans and pocket the difference between the negotiated rebate and the net price to the consumer.

According to the Commonwealth Fund, pharmacy benefit managers “report that in many of their contracts, 90% of rebates are passed on to health plans and payers. However, small payers and employers have reported that they did not receive this share (i.e., 90%) of savings.” There is growing concern that these companies may be hanging onto rebates and offering coverage on their formularies only to those companies providing the biggest, fattest margins.

While our data aren’t proof that pharmacy benefit managers are gobbling up some, if not all, of this insulin margin, it is possible, even probable. It is also possible to imagine a scenario in which PBMs play the drug companies off one another, offering the largest insulin sales volume to those providing the biggest margins in the PBMs’ direction. It’s likely this practice would continue unabated and isn’t restricted to the year 2017.

So where is the $1.3 billion in missing sales for Sanofi’s Lantus and $606 million in missing sales for Novo Nordisk’s Novolog? It might be sitting in PBM bank accounts. One thing for certain is that it isn’t coming back to consumers as discounts and it isn’t going to the pharmaceutical companies that make the products.

In January of 2019, the Trump administration proposed the Pharmacy Benefit Manager Rebate Rule to curb rising drug prices broadly. This rule would have specifically ended this practice, as it required pharmacy benefit managers to transparently quote all list price rebates. Sadly, the administration killed the plan a few months later. That was a shame, as it seems likely that there is something afoot beyond normal market forces regarding the prices and volumes of insulin products in Medicare Part D.

People with diabetes are the biggest losers by paying higher prices due to lack of transparency.

Duane Schulthess is the managing director of Vital Transformation, a consultancy that helps define the impact of new technologies and regulation in the health care sector, and a senior associate of the United Kingdom’s Royal Society of Medicine. This research described here was funded by the U.S. Chamber of Commerce, the California Life Sciences Association, and PhRMA.