House Insulin Bill is a Missed Opportunity

Recently, the House passed the Affordable Insulin Now Act (H.R. 6833), which would cap the cost of insulin at $35 per month for those enrolled in Medicare and private health insurance plans. It would be paid for by extending a pause on a Medicare Part D rebate rule. Though the Congressional Budget Office (CBO) scored the bill as fully offset, H.R. 6833 would increase total drug costs and national health expenditures, and its enactment would be a missed opportunity for lawmakers to truly lower prescription drug costs.

The bill’s insulin price cap and pay-fors were originally included in the House-passed Build Back Better Act. However, that bill would have done far more, and lowered overall prescription drug costs. It would have allowed Medicare to negotiate the price of certain drugs, capped all drug price growth to the rate of inflation, permanently repealed the Part D rebate rule, and included a broad redesign of the Medicare Part D reimbursement formula, among other provisions.

It's understandable that lawmakers have embraced individual pieces of the Build Back Better Act, given that the legislation has been on hold for the past few months. However, capping insulin costs as a standalone bill presents a problematic situation where the popular and cost-increasing part of the bill would be separated from cost-reducing reforms.

While the Affordable Insulin Now Act would reduce out-of-pocket costs for patients, it does so by shifting costs rather than lowering the price of insulin. Lower cost-sharing would be more than offset by higher premiums and taxpayer costs. Meanwhile, payments to drug manufacturers would likely increase due to higher usage and stronger pricing power.

Overall, CBO projects the bill would increase federal costs by $11 billion and private sector costs by roughly $20 billion over a decade. We estimate total national health expenditures would rise by $25 billion to $30 billion. The federal costs in the insulin bill are $10 billion more than the costs in the Build Back Better Act due to the lower drug prices from other provisions in Build Back Better. 

The increased federal spending would be more than fully offset by extending the pause on the Part D rebate rule. This offset is at least somewhat gimmicky since the Administration is unlikely to allow the rule to go into place either way. And instead of directing the remaining savings into deficit reduction, lawmakers have chosen to funnel them into the Medicare Improvement Fund, a piggy bank that can be used to finance future spending.

Fiscal Impact of Provisions in Affordable Insulin Now Act 

Policy  Cost/Savings (-)
Cap Insulin Costs in Medicare (Outlays)* $6.6 billion
Cap Insulin Costs in Private Plans (Receipts)* $4.8 billion
Funding for Medicare Improvement Fund  $9.0 billion
Cost of Provisions  $20.4 billion
One-Year Moratorium on Part D Rebate Rule  -$20.4 billion
Total Cost of Affordable Insulin Now Act  $0
Increased Costs on Private Health Insurance from Insulin Cap  ~$20 billion
Net Increase in National Health Expenditures from Insulin Cap  $25 to $30 billion

Sources: Congressional Budget Office and Committee for a Responsible Federal Budget.
*The effect of the cap on marketplace subsidies is split between these two categories

While it is good that the bill is fully offset, its measures create more problems. First, the bill’s new permanent costs are paid for with temporary savings – a classic budget gimmick. Second, as described above, the bill would substantially increase rather than reduce economy-wide drug and health care costs.

More fundamentally, failing to pair the insulin cost cap with drug policy reforms that lower the price of insulin and other drugs is a wasted opportunity to reduce national health expenditures and promote fiscal responsibility. Instead, policymakers should approach the issue of high prescription drug costs more holistically – as the Build Back Better Act would have – to achieve real savings and enact reforms that control cost growth.

There are many options for reducing prescription drug costs and bipartisan interest in doing so. The Senate Finance Committee recently held a hearing on the subject, which included discussion of the Build Back Better Act's provisions along with other reforms to the pharmacy benefit manager market and the ability of pharmaceutical manufacturers to extend patent protection and market exclusivity for drugs. The hearing also included discussion of provisions in the bipartisan Prescription Drug Pricing Reduction Act, which would include inflation rebates and a Part D redesign, but strengthened Medicaid drug rebates and did not include Medicare drug negotiations or an insulin cost-sharing cap. 

Fiscal Impact of Prescription Drug Reforms 

Policy  Build Back Better Act (2022-2031) Pricing Reduction Act (2021-2030) Affordable Insulin Now Act (2022-2031)
Medicare Drug Price Negotiations  $76 billion n/a n/a
Part B and D Inflation Rebates (Medicare & Medicaid)  $49 billion $80 billion n/a
Commercial Drug Inflation Rebates  $34 billion n/a n/a
Part D Benefit Formula Redesign  $2 billion $3 billion n/a
Strengthen Medicaid Drug Rebates  n/a $14 billion n/a
Cap Insulin Cost-Sharing  -$1 billion* n/a -$11 billion
Other Drug Policies  n/a $14 billion -$9 billion
Savings from Drug Price Reforms  $160 billion $111 billion  -$20 billion
Repeal of Rebate Rule  $143 billion n/a $20 billion (One Year) 
Total Savings from Drug Pricing Reforms  $303 billion n/a $0
Lower Premiums and Cost-Sharing  Unknown  $73 billion -$20 billion

Sources: Congressional Budget Office and Committee for a Responsible Federal Budget. Positive numbers indicate savings and negative numbers indicate costs.
*Includes interactions with other drug savings

Our Health Savers Initiative has proposed other policies to lower prescription drug costs, such as limiting evergreening and injecting price competition into Medicare Part B drugs. Put simply: there are plenty of options out there for policymakers to make progress on reducing prescription drug costs and lowering health spending.

It is clear that high insulin costs are a pressing issue for both policymakers and patients. These and other high prescription drug costs should be addressed in a comprehensive set of reforms that help patients, reduce federal spending, and lower health costs as a whole.