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WASHINGTON, D.C.— People with diabetes and the safety-net providers who care for them are bearing the brunt of the actions by a small group of drug companies to deny or limit 340B discounts to hospitals that partner with community pharmacies. A new report that 340B Health issued today finds the three major manufacturers of insulin in the U.S. are reaping additional profits due to their 340B policies. The federal government has told the companies that their actions are unlawful, but they are challenging those determinations in federal courts.

Eli Lilly, Novo Nordisk, and Sanofi control more than 90% of the nation’s insulin supply, and all three are withholding 340B discounts when their drugs are dispensed at community pharmacies under contract with 340B hospitals. Due to these manufacturers’ historical price increases on their insulin products, the three companies are required to provide deeper discounts for those products when selling to a 340B-eligible hospital, health center, or public health clinic. By denying discounts through sales involving community pharmacies, the companies can charge significantly higher prices. As a result, company executives have publicly reported their firms are earning higher revenue in 2020-21.

The impact on diabetes goes beyond insulin, as the companies involved in this dispute manufacture other top-selling drugs that help patients with diabetes regulate their blood sugar. The major diabetes drugs affected represent the lion’s share of spending on diabetes drugs for the 34 million people living with the disease in the U.S., the report finds. The total U.S. market for diabetes drugs reached $49.4 billion in 2019.

Key findings of the report are:

  • In 2019, diabetes drugs manufactured by these companies accounted for 91% of all diabetes drug spending by Medicare Part D;
  • 61% of Medicare Part D spending on all drugs made by these companies was for diabetes products; and
  • Nine out of the top 10 diabetes drugs made by these companies are more heavily discounted than other 340B drugs due to significant price increases and the 340B program’s inflation penalty.

Between 1999 and 2019, the makers of insulin increased the prices of their products by 1200%. Under the 340B statute, if a drug company hikes its price faster than inflation, the size of the discount grows. While the minimum discount for name brand drugs is 23.1%, in the case of nearly all the diabetes drugs in question the discounts have risen to the point that safety-net providers are required to pay one cent per unit. By withholding 340B discounts, the companies can erase those penalties on sales to pharmacies.

According to a 2020 report by the leaders of the Senate Finance Committee, the companies engaged in a practice known as “shadow pricing,” in which one company increased its insulin price and was followed by similar actions from the other two. In this case, Lilly started cutting off 340B discounts in July 2020, followed by Novo Nordisk in January 2021, and Sanofi in March 2021.

“One in 10 Americans is living with diabetes, and these drugs are life-saving medications for them. The actions of these drug companies, in violation of federal law, are harming safety-net hospitals and the patients living with low incomes whom they serve,” said 340B Health President and CEO Maureen Testoni. “These companies have significantly raised prices and, one by one, are cutting access to required discounts. These actions must stop now.”

In addition to the insulin drugs, the report identifies other top-selling diabetes products manufactured by Merck and Boehringer Ingelheim (see illustration below). These companies recently limited access to 340B discounts through community pharmacies – Merck on Sept. 1 and Boehringer Ingelheim on Aug. 1.

Top Diabetes Drugs by Part D Medicare Spending

Brand Name Manufacturer Total Part D Spending
Januvia* Merck Sharp & D $3,535,983,474.00
Lantus Solostar* Sanofi-Aventis $2,495,768,701.50
Trulicity Eli Lilly & Co. $2,273,120,392.90
Novolog Flexpen* Novo Nordisk $1,844,090,301.60
Levemir Flextouch* Novo Nordisk $1,622,206,516.90
Victoza 3-Pak* Novo Nordisk $1,527,143,435.80
Jardiance* Boehringer Ing. $1,447,765,688.20
Humalog Kwikpen U-100* Eli Lilly & Co. $1,218,126,350.70
Tradjenta* Boehringer Ing. $1,187,579,077.40
Lantus* Sanofi-Aventis $1,158,911,973.

*Penny-priced drugs

Source: Analysis of Medicare Part D Dashboard. Data for 2019. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/MedicarePartD

On May 17, the Health Resources & Services Administration (HRSA), the federal agency charged with oversight of 340B, sent letters to six drug companies ordering them to restore 340B discounts and begin planning to repay overcharges to 340B safety-net providers by June 1. None of the companies has complied, and all six have gone to federal courts attempting to block HRSA from taking enforcement action. No decisions have been rendered to date. HRSA also told the drugmakers that they could be liable for civil monetary penalties of up to $5,000 for each instance of overcharging. Those fines would be in addition to repayments to hospitals, health centers, and clinics.

“It is time for the government to take the critical next step and begin to levy penalties on these companies,” Testoni said. “They have ignored HRSA’s warnings, and two of them adopted their policies after HRSA informed the first six that their actions were in violation of federal law. The harm to providers and patients is real and must cease.” 

CORRECTION: Earlier versions of this release and report misstated the list of companies controlling more than 90% of the U.S. insulin supply. They are Eli Lilly, Novo Nordisk, and Sanofi.

Contact: Richard Sorian at richard.sorian@340bhealth.org or 202-536-2285.