A Shot at Love with Nonprofit Insulin

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This is Beta Cell, a show about people living with type one diabetes. I'm Craig Stubing.

The most important thing I want you to take away from this episode is that the non-profit pharmaceutical company, Civica, has produced a biosimilar of Lantus insulin, which is now available to purchase for no more than $55 for a box of five pens.

It's available under the CalRx label in California, and in the other 49 states under the Civica label at your pharmacy. That's the list price without insurance or copay coupons or patient assistance programs. You walk in with your prescription and $55 and walk out with a box of pens. It's as easy as that.

Civica is working on their own versions of Humalog and NovoLog as well, which will cost the same $55 for a box of five pens, or just $30 for a vial, but they don't have a timeline for when those will be released yet. This is a huge change to the pricing gymnastics we're used to with drugs, and if you're interested in more of how it works now, we have two previous episodes that talk about insulin pricing and copay cap laws, both of which are linked in the show notes.

And in full disclosure, I'm a member of the CalRx Patient Advisory Council. The council doesn't have any decision-making authority for the CalRx program, but we do advise and provide input to the California Department of Healthcare Access and Information on how to improve how the program gets CalRx insulin to patients, including distribution to rural communities, implementing social media campaigns, and disseminating information about CalRx insulin, which is kind of what I'm doing in this podcast. But I'm not doing it in an official capacity, and no one at Civica or anyone involved in CalRx has heard this episode before I released it.

I applied to be a part of this council because I believe in the power of public production of insulin, and I hope that being a part of the council would let me help it succeed. And I'm doing this episode because I want you to understand how important public production is. No one on the council is paid, and no one has any affiliation with pharmaceutical companies. I'll put a link to the council's charter in the show notes for those of you who are interested.

So with all that in mind, here's my conversation with Allan Coukell, the Chief Government Affairs and Public Policy Officer at Civica Rx.

Allan: I knew the founding CEO from work I had done in a prior role, and so not that long after they started the company, I was talking to him and just got really excited about this whole idea of creating a new business model to deliver drugs to patients, but really to solve problems in the pharmaceutical supply chain that weren't being solved with the traditional pharmaceutical model.

Craig: And what were some of those problems that you saw then, and maybe even now?

Allan: So Civica’s original mission, core mission, is around this problem of drug shortages. And so we're now 14 or so years into an era where, at any given time, there are hundreds of drugs in the United States that aren't reliably available. They tend to be really old off-patent drugs, generally very low-cost products, and usually injectable drugs.

And for a bunch of reasons having to do with the way we price drugs in the U.S., they're not that attractive to make, and the supply chain has become very fragile. And so after a number of years of this, a group of health systems and hospitals got together and said clearly the market for these drugs that we need every day in every hospital in the country is not self-correcting. We've got to have a different business model.

And so they created Civica with the mission of being a reliable and affordable supplier of essential medicines, and that led us to do a number of things different from the traditional generic drug company.

And then, as we were on that journey, people really looked at this idea of a non-profit drug company and said, well, what about price? Can you guys tackle some of the drugs in the retail pharmacy setting where, even though they're off-patent, the prices are still really high? And usually generic medicines are a good way to control price, but there are a number of products, insulin being one of them historically, where even though the products are off-patent, the price to consumers is hundreds or even thousands of dollars.

And so we created a sister company and partnership with health plans called Civica Script, with a second mission, which is to lower costs for consumers.

Craig: You're coming in as a non-profit, not having to bring that shareholder value. You're producing it probably at a similar cost as the pharmaceutical companies, but selling it without that huge profit margin.

Allan: Yeah, that's right. And I think there are really two pieces to what we're doing. One is, as a non-profit, we're making these drugs and we're not aiming to generate a huge return for our shareholders. Obviously, like anyone, we have to make back what it costs to manufacture the product and keep the lights on, but we'll price it as low as we can sustainably price it.

But the other piece that's really important is the way pricing works in that retail medicine supply chain. It can be very hard to know what a drug actually costs. And so there's a list price that your health plan never pays, but if you don't have insurance or you're in the deductible phase, you might end up paying for your insulin based on that list price.

And so for years and years, what happened with insulins is every year that list price would go up, and then the pharmaceutical company would pay a rebate that the PBM required. And so the net price, the sort of list price minus the rebate, stayed basically flat. But for the consumer who, at some point in the year, had to go into their own pocket and pay for insulin, they were looking at a drug that had been $40 going up to $600.

And so part of what we're doing is manufacturing insulin and selling it at the lowest sustainable price we can. But the other thing we're doing, which is as important or more important, is trying to get our low price all the way to the consumer at the other end of the pharmacy supply chain — the person who shows up in the pharmacy with a prescription.

Civica insulin has one price. We don't pay rebates to the PBMs. We're transparent about it. In fact, we're so transparent about it that we have a QR code on the packaging that you can scan, and it says you should never have to pay more than, in the case of insulin glargine pens, which we launched in January, $55 for five pens.

Craig: Yeah, let's talk a little bit about that. So as of January 1st of this year, this CalRx-branded insulin produced by Civica is available in pharmacies across California.

If you take Lantus or a generic equivalent, you walk in with your prescription, you say to the pharmacist, “I want this CalRx insulin,” five pens, $55. That's what it costs. Without insurance, that's what you pay.

Allan: That's what it costs without insurance. Now, hopefully with insurance, it's less than that. We would love for it to be available with no copay. We don't control that, of course.

Craig: Yeah, I imagine for most people who have insurance, it would cost less. But even then, it's nice to have that option. And like you said before, there's no coupons, there's no patient assistance program. That's just the price.

Allan: That's right. That's the price.

Craig: And it's kind of weird to wrap your mind around that. It could be so simple.

Allan: Yeah. I do want to pick up on one thing you said, which is you're right: CalRx insulin, which we are making for the state, is only available in California. But the exact same product is available in the rest of the country as Civica insulin. So we have, in fact, shipped insulin to every state in the union now. And our goal is for it to be widely available, and any pharmacy can order it.

Craig: And same price.

Allan: Same price.

Craig: Same price anywhere in the U.S. If I go home to Illinois and I drop my insulin, I go to the pharmacy right there.

Allan: That's the way we hope it works.

Craig: Yeah, I mean, that's the way the system should work. Tell me a little bit about how this partnership specifically with California and the CalRx label came to be.

Allan: So Governor Newsom came into office with a plan for the state of California to start manufacturing its own insulin. At that same time, Civica had announced that we were going to make low-cost insulin for the U.S., and I think it pretty quickly became apparent, both to the state and to us, that it didn't make sense to have two entities really trying to accomplish the exact same thing.

And it's expensive to build a pharmaceutical manufacturing facility. And we're fortunate at Civica because of that business of supplying injectable drugs to hospitals that we talked about before. We have just built a brand-new, state-of-the-art manufacturing facility for injectable drugs.

We still needed to raise money to bring those three insulins to market and develop all of the analytical methods and tests and do the clinical trials and so on that we have to do to demonstrate to the FDA that it's interchangeable with the brand-name products. We had to raise about $200 million, and so what ended up happening is the state of California put $50 million toward the total cost of bringing these products to market.

And in California, we're marketing the product as CalRx. So California is a major partner in funding this, and we've worked closely with them on the planning around the launch and distribution and so on.

Craig: And what does California get for that $50 million, besides the bear logo on the box as opposed to the other 49 states in the union who just get the Civica label without any investment?

Allan: Well, I'd actually put it the other way, which is the other 49 states in the union are benefiting from what California has done, because they are the largest contributor to our fundraising for this product. And we're fundraising for this product through a foundation because we don't want to build those development costs back into the cost of the product.

We really want to raise that upfront, bring the insulins to market, and then we can price it in a way that covers the manufacturing cost and we don't have to recoup that $200 million of development costs. So California has made this investment in the state. It'll be CalRx, but the other 49 states are benefiting from what California has done.

Virginia also has made an investment in supporting insulin manufacturing, and a couple of other states are looking at it too.

Craig: I was really struck by how Governor Newsom described this as not subsidized insulin. This is just lower cost. California isn't spending $50 million to make the cost lower. This is simply cheaper insulin sold to people cheaper without any loopholes.

Allan: I think that's right. I mean, it's a new business model. And California has helped to catalyze that new business model. But the way the governor talked about it at the announcement event was that we're bringing true price competition to the insulin market, and that really crystallizes what we're trying to do, along with transparency.

Craig: What kind of financial benefit do you think California will get from having this cheaper insulin available? Is the state saving money on its state plans?

Allan: Yeah, there's potential in California and in any state for direct state savings. Governments are often the largest employers in their states, and so they provide health benefits to a lot of state employees and retirees. So there's the potential to directly reduce state budget expenses by reducing the cost of insulin.

And then there's also the indirect benefit to other folks in the state who have commercial insurance or other forms of coverage, or who don't have insurance and have to pay out of pocket, to reduce their costs as well.

Craig: Yeah, presumably it's cheaper to make sure people have insulin and they're healthy rather than going to the hospital and then incurring all those costs on the healthcare system.

Allan: Yeah. I mean, there's data going back a few years now that as much as a quarter of the population who were using insulin at some point in the year were rationing their insulin because of cost challenges. And as we know, unmanaged diabetes has really terrible health consequences. So making insulin available and affordable for everyone who needs it in the long run really should help avoid that horrible eventuality.

Craig: Absolutely. And going to those direct costs, I had seen in the press release that the governor's office put out when this was announced the cost to pharmacies specifically. So if I walk down the street and go to my local pharmacy, it costs them $45 to buy a box of these five pens, which then costs me $55. So only a $10 price difference there. Whereas a box of Lantus pens would cost them $92.49. So the cost to the system is very different as well. It's not just me, the consumer, right, that price and how that trickles down.

Allan: Yeah, that's right. And I should say, the $45 is what a pharmacy pays for it. That $55 price is what we're saying is the maximum anyone should ever have to pay. And we want the pharmacy to make a fair margin. They have to stock the product and pay a professional staff and keep the lights on.

So we've sort of said we think $10 is reasonable for insulin. But if a pharmacy chooses to dispense it at a lower price, that's fine. And you're right, if the pharmacy was paying the full wholesale acquisition cost for the brand product, it would be higher. And it’s always hard to know what the ultimate payer, the health plan, is paying after all the rebates and so on. But what we’re doing is just being really transparent and making it as low as we can possibly price it.

Craig: Do you think pharmaceutical companies will react to this?

Allan: I think they are paying attention. We've already seen insulin list prices change a lot in the last couple of years. They've come down a lot from where they were, and I think there are multiple reasons for those changes. But maybe knowing that there's a low-cost insulin coming to market was part of what they were thinking.

But again, it's worth remembering that part of the problem that we're solving is this crazy system that incentivizes high list prices and then big discounts that the consumer doesn't directly see when they're paying out of pocket. And so we're both making insulin available at a low and sustainable price, but also trying to change that whole supply channel so that you don't have these artificially inflated prices that, at the end of the day, only harm consumers.

Craig: Can you speak at all about how this is different from what's been done before? You know, Trump, Biden, et cetera, have done things to try and lower the cost of insulin. There's always a big flashy headline and a press release, but it doesn't seem to have the effect that this is having. But people think that it's done something.

Allan: And so essentially laws have been passed that say to insurance companies, you can't charge somebody out of pocket any more than X dollars. For Medicare, it was $35 a month. In a lot of states, it's been capped at $100. The challenge there is that it regulates how the insurance company designs the insurance benefit, but it doesn't actually do anything about the selling price of insulin.

So it may reduce people's out-of-pocket costs, but what we're doing here is actually launching a product at a low price.

Craig: Could you explain a bit about how, when that copay cap comes out, where that money ends up going? If my Lantus still costs $100 and they can't charge me more than $25, where does that $75 go?

Allan: Well, it ultimately comes from your premiums — insurance premiums.

Craig: So I'm paying for it either way. I'm just paying for it a little bit every month instead of when I go to the pharmacy.

Allan: That's right. Yeah. And in the case of Medicare, we all pay for it as taxpayers.

Craig: And in a way, that is really more of a socialized solution to the problem, right? If you put a copay cap on it and then everyone's premiums go up, that's the opposite of this. That's everyone now contributing to lower insulin prices as opposed to just lowering the price.

Allan: It's socializing the payment, which you can still do, but it would be better, wouldn't it, to socialize the payment on a product that costs less?

Craig: It would be for everyone, I think. How has the reaction from governments been to this idea of public production? Do you see that as a bigger piece of the pharmaceutical pie going forward, non-profit pharmaceutical production?

Allan: Reaction from governments has been uniformly positive, both because this is fundamentally a market-based solution to a problem, but also because it's a new business model built around delivering an essential product to the people who need it without having to return huge profits to shareholders.

So I think there's a lot of potential for this model to address other problems in the supply chain. And in fact, our Civica Script business, which is the business working through retail and specialty pharmacy, has half a dozen drugs out there now. And we're delivering savings for our first one.

There was a study published recently on a prostate cancer drug. We're delivering savings of more than 90% to health plans and more than 60% to individual consumers. So there are more drugs in the pipeline, and I think a lot more potential here to do good.

Craig: Are you worried at all that the pharmaceutical companies will decide, like with the drug shortages we started the conversation with, that it's just not worth it anymore? If Eli Lilly or Sanofi or anyone says, “We can't compete with these guys, we're just going to stop producing Humalog.”

Allan: It's a fair question, and it's one that we do think about. Brand pharmaceutical companies are used to generic or biosimilar competition, and they don't typically abandon their brand products. It's kind of the way the business works, once a drug goes off-patent, eventually there are a number of competitors in the market, and the brand doesn't sell the same volume and the price comes down.

So bringing prices down this way, you wouldn't expect it to drive companies out of the market. One thing that has happened that people are watching is that two of the big three insulin companies are also market leaders on the GLP-1 weight loss drugs. Both Lilly and Novo are now generating much more revenue from those drugs than from insulin.

Now those are both companies with deep, deep roots in insulin manufacturing going back a hundred years, and so they'll probably stay in that business. But n the developing world, some companies have pulled back a little bit. So having Civica in the market with significant manufacturing capacity is a good thing long-term to help ensure continued supply.

Craig: Does Civica have plans to start selling their insulin internationally?

Allan: We don't. Our mission and focus is really the American consumer, and that's what we're focused on.

Craig: Do you know if any other potential nonprofits have talked with you about trying to replicate what you're doing in other markets?

Allan: We have conversations fairly frequently with groups in other countries who are interested in this model. I would say in terms of the developing world, a lot of the medicines that are produced for the developing world come from India. And, there are insulin companies in India that are manufacturing and serving those markets and ramping up production to fill gaps.

Craig: How is healthcare — the cost of drugs, the insurance relationship — do you see that shifting in the future? Do you feel like we're at a point where things are changing from what they used to be like, to what the future might be?

Allan: Well healthcare never stands still, but it also never seems to get any simpler. But there's no doubt it will look different in a few years than it does now. Some of the big PBMs, after years of pressure, have announced that they're moving to more transparent business models. Less of the kind of markup and rebate driven revenue streams, that we've seen for a long time.

So that will flow through the market and, and change the way it works, but I think it'll probably continue to be a very complex market where the consumer at the pharmacy counter has the least choice and the least say in things. I suspect unfortunately, that will continue.

Craig: Now that CalRx has launched in California and people are getting it, using it, and learning about it, what are you most excited to see happen this year?

Allan: We still have a lot of work to do,building awareness that this product is out there. We have a number of health plans in California and around the country that have put this insulin on formulary, but I think there are others that are watching to make sure that it's reliably available and that the distribution channel is there.

So there's a lot of work still to do on getting this product out successfully to everyone who could benefit from it. And then we have an incredibly devoted team, in the R&D, regulatory, manufacturing who are working very hard on insulin manufacturing and continuing to develop. And so there are a lot of milestones still to come on that. And a really dedicated team of people who, almost to a person, have a personal connection to the mission. Even the folks who are technicians, manufacturing technicians, operating the filling lines, quite often someone will say, “you know, my father uses insulin, and so this is personal for me.” And I think it's personal for all of us.

Beta Cell is produced, recorded, and edited by me, Craig Stubing, and our theme music is by Purple Glitter.

To find more information about Civica insulin, you can go to civicainsulin.org, which I'll also link in the show notes.

As you may know, this is an election year in the U.S., so it's a chance for us to vote for lawmakers who want to make healthcare access in this country better. If you're interested in seeing how your federal senators and representatives have voted in the past on bills that would help people with diabetes get access to care and drugs, head over to betacellaction.org and check out the scorecard there. And then tell all your friends and family about it. Plus, you can sign up for a very informative newsletter. And with the risk of making this episode show notes extremely long, I'll link to Beta Cell Action there too.

I'm Craig Stubing, and this is Beta Cell.