Major American pharmaceutical companies are reducing the cost of insulin to cut down on expenses.

Major American pharmaceutical companies are reducing the cost of insulin to cut down on expenses.

The major insulin producers in the United States have individually pledged to decrease the pricing of their merchandise. This initiative will benefit them financially by reducing the sum they would typically need to pay Medicaid in rebates.

Making headlines: Sanofi has announced that it intends to apply a maximum limit on the amount individuals with private insurance pay for Lantus, their most frequently prescribed insulin, so that they only pay $35 monthly. This move is in line with the actions recently taken by Eli Lilly and Novo Nordisk.

In a nutshell, President Biden and some members of Congress put pressure on companies to limit the amount that people have to pay for insulin. This happened after the Inflation Reduction Act set a limit on how much Medicare beneficiaries can be charged per month for this medication.

Use your brains: The corporations declared that they are reducing expenses so that individuals can have access to reasonably priced medications. However, Novo Nordisk and Sanofi's adjustments will start on January 1st and overlap with the removal of a restriction that restricts the amount of discounts that manufacturers have to give back to Medicaid.

In simpler terms, the government wants to make sure that Medicaid spends the least amount of money possible on medication. So, in order for drug companies to have their products included in Medicaid's coverage, they have to promise to pay back a portion of the sale price as a rebate.

The cost of insulin had increased significantly to the point where the discount was larger than the actual price of the medication. However, regulations constrained pharmaceutical companies from charging more than the established cost for insulin.

According to Spencer Perlman, who is the director of health care research at Veda Partners, Eli Lily is evading payment of approximately $430 million for Medicaid rebates yearly, while Novo Nordisk would keep $350 million. This was reported by Bloomberg.

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