Keeping My Public Options Open

In this episode of Building Local Power, Chris Noble, the Director of Organizing at Health Access California, and Allison Hardt, the Community Development Director at T1 International, share their personal experiences accessing life-saving medication in America that ultimately led to their efforts supporting the CalRx plan to publicly produce life-saving medications, starting with insulin. Chris was diagnosed with Type 1 diabetes at age five, setting in motion a chain of events that motivates his efforts to bring awareness to the market failures that exacerbate the high cost of medicine in the United States. Allison witnessed the challenges her mother faced as a nurse in an increasingly impersonal healthcare system and eventually, through her partner, became intimately familiar with the daily struggles and unbearable costs associated with accessing insulin.

In the second half of the episode, ILSR Co-Director Stacy Mitchell delves into the hidden world of pharmacy benefit managers (PBMs) — their role in the pharmaceutical industry and how their practices hinder people like Chris and Allison from obtaining essential medicines at reasonable prices. She explains how three PBMs currently dominate the industry, controlling over 80% of all insured prescriptions in the United States, enabling self-dealing practices that undermine fair competition and transparency at the expense of people’s health. Stacy calls for a “marriage of antitrust policies and public action,” a two-pronged approach to promote competition by decentralizing power and increasing public investment. 

Reggie Rucker: Hello and welcome to Building Local Power. I am your co-host, Reggie Rucker, and we are back with episode nine, our final episode of this season, where we are highlighting frontline stories in the fight at against monopoly power, by talking with people from all over the country who are actively engaging in building more equitable, thriving local economies. Our last episode featured Kay Eady in rural Georgia, talking about why she’s fighting for a universal broadband to improve health access in the rural South. On this closeout episode, we stay on the topic of health access and go out west to where California is proving how the public sector can get involved in the production of life-sustaining medicines so that folks don’t have to buy their insulin from some guy on Craigslist to save their life. It sounds crazy, it’s a real thing, you’ll hear about this later in the episode. But to get into it, let me pass it to my co-host who is the cream cheese icing on my carrot cake, Luke Gannon. What’s up Luke?
Luke Gannon: Aw, thank you Reggie. Now, if you listen to our last episode, you’ll recall that Reggie and I don’t have the same views on the best way to avoid getting sick, but we learned today that we share a love for good carrot cake. But anyway, this is the last episode of the season and it’s a very special one. Chris Noble, the Director of Organizing at Health Access, and Allison Hardt, the Advocacy Manager at T1 International, join us on the show today weaving us through their journeys of accessing life-saving medication in America. We are going to start at the beginning. Here’s Chris.
Chris Noble: I was born in Southern California. My parents moved pretty quickly to a town called Oceanside, which is in North County, San Diego, in southern California. Really great place to grow up, great public schools. My family, my two parents and my brother, I had a beagle growing up, we were all pretty close-knit, pretty classic Southern California ’90s childhood. We really loved growing up into the Sierras and seeing all the beauty that California has to offer.
Luke Gannon: As Chris explored the Sierra with his family, Allison was living the life of a mid-westerner.
Allison Hardt: I grew up in Indiana, in a suburb of Indianapolis, so originally from the Midwest, and spent my first 18 years there. I think as a kid I was a pretty introverted child, I enjoyed art and reading and playing with my then best friend who lived right across the street from me conveniently, spent a lot of summers swimming in her pool, and yeah, kind of had that Midwest suburban childhood.
Luke Gannon: Chris also found himself spending a lot of time in the water, as you do in a town called Oceanside. He recalls his favorite job, other than the one he’s doing now, being the time he spent as a lifeguard, even though it sometimes got dangerous.
Chris Noble: I remember being a lifeguard on the Marine base down there, Camp Pendleton, I remembered very clearly on every 4th of July, it was always a huge to-do, obviously in a Marine base, it was a huge celebration. There was thousands, if not tens of thousands of people on our tiny mile and a half long beach, and we call it the Superbowl of lifeguarding, where you are literally fishing people out of rip currents 10, 20 times a day. And I do remember one time some folks were just out there on floaties, just having the time of their life, not realizing they’re in a rip current, and I had to go swim after them probably about a half mile off the beach, and I see tiny little bottles in their pocket and I’m like, “Okay, what are we doing out here? Y’all are half mile off the beach. We need to pull you back in.” So just not a care in the world, floating off to sea, but that’s the job of lifeguard, got to go out there and save them.
Luke Gannon: Life-threatening situations were nothing new to Chris at this point. Chris was diagnosed with type 1 diabetes early in his life and it was then that he learned what it meant to be brave.
Chris Noble: I was diagnosed at five years old, which is kind of common for type 1 diabetes, but I remember at the time just kind of feeling like I almost had a stomach bug for a while, I was losing weight and my parents thought I had maybe a stomach flu and they took me in. They took me to a nearby hospital in Vista, which is right next to Oceanside, and the doctor took my blood test and realized that my blood sugar was about six times higher than it was supposed to be, and that those symptoms that I was showing was actually the precursor stage to a really severe condition called diabetic ketoacidosis. So it was very good that I got in at the time that I did because that diabetes ketoacidosis, or DKA, can be life-threatening.
I’m very fortunate, I think, in retrospect now, to be diagnosed at such a young age because I had no idea what to expect, I was five years old, I didn’t know that what was happening to me was a very different thing than what any other child would be going through. I thought, okay, well this is just what I’m doing now. I don’t feel good. I go to the hospital, I feel better. My parents on the other hand, were very scared. On my mom’s side of the family, there are a few folks with diabetes, so it does run in the maternal line. My dad had no idea what was going on, was very concerned for me, but wasn’t showing it. Obviously kind of presenting a kind of confident dad who’s trying to just be there for his son. But after the fact, he told me they were terrified because I think my mom especially knew exactly what this would mean, it’s a life sentence of having to manage this condition.
So me being the happy go lucky five-year-old in San Diego, I’m like, “Okay, cool, let’s go to the hospital, I guess. I don’t know. Sure.” And that kind of started a week long bootcamp of really my beginning transition into being a full on insulin dependent diabetic. So nurses would come in, they’d teach me how to poke my blood or poke my fingers to extract blood to do blood sugar tests. Suddenly my parents were learning how to do insulin injections. So I got very close with my nurse at the hospital, we became kind of lifelong friends honestly, because she was just really helpful and helped bring some confidence and reassurance to us, and she also connected me with other people in the community that have type 1 diabetes.
Luke Gannon: From a young age, Allison became acquainted with the healthcare system, as her mother, a nurse, played an influential role in her understanding. She swiftly recognized the indispensable role that nurses held in the lives of all of their patients.
Allison Hardt: My mom was a pediatric nurse at Riley Children’s Hospital in Indianapolis, before my brother and I were born. She actually stopped working outside of the home when she had my brother. And so when I was growing up, she was a stay-at-home mom and then worked as a preschool teacher and supporting in our classrooms as teachers and things like that, to be close to us. She actually had left nursing at that point because it was really hard, I think once she had kids to, she was working in the ICU and dealt with a lot of children being very ill and passing away, and it was something that was really challenging always, but when she had her own kids and she also really always wanted to be a stay-at-home mom. And then after we were older, she then returned to nursing, which I was really proud of her for.
She went back to school, got recertified and went back in an outpatient surgery center capacity. And I think even though she wasn’t actively a nurse while I was young, I think that experience definitely influenced a lot of her perspectives, she had so many stories to share. And she talked a lot about the relationship that nurses have in the hospital system, they’re really the angels and anyone who’s been in the hospital knows that the person that’s going to be with you on an hourly basis and the person that really knows what’s going on in terms of your immediate care, the person that’s going to get to know you and help really in more of that emotional support capacity too, it is the nurses and they do so much amazing work. After she went back to work, she talked so much about how much it had changed as a profession and also just the system she was operating in, where when she was a nurse in the ’80s, she had a lot more of that autonomy and just relationship building with the patients.
And that when she went back to nursing, that we are in an era of really big hospital systems and as the practices she worked for got acquired by a huge hospital network in Indiana while she was working there, and just how impersonal it had started to feel. And it was so much about the bottom line and just that emphasis on how much money you’re saving in the interactions, versus what’s maybe best for the patient. And a lot of those themes that I think did influence other experiences once I started having them, around why I advocate for insulin access just kind of corroborated what I was seeing in other places in our healthcare systems.
Luke Gannon: Allison is not diabetic herself, but her partner Matthew has type 1 diabetes meeting. Matthew changed her life.
Allison Hardt: I met Matthew, my partner, when we were in grad school together. We both went to Tyler School of Art in Philadelphia for painting, got our MFAs there. And before I knew him, I had never been, at least not that I knew, close to anybody who had type 1 diabetes. And so getting to know him really was my entry point into everything about it, both the day to day of what it was to manage, and also just the insulin cost and the anxiety around what was happening. And so at the time that I met him, it was, I guess I’ll say a little bit earlier on, it continued, I like to say that our relationship maps to the insulin price crisis in the US pretty well because I feel like we were getting to know each other when it was becoming quite an issue, and then it just kept getting worse and worse and worse. And so that escalation I saw first he had with how he was having to interact with insurance and with some of these issues.
So the tipping point for me is a story that I’ve shared a lot, with his permission, which he was diagnosed with type 1 when he was seven, and then that was in 1985. So for him, when he was diagnosed, there was a lot of, I think, anxiety, and if you talk to his mom about this, about what it means to care for somebody when you’re a child, especially just with this condition that you really, it’s every day, all day, you’re thinking about all of the decisions and just the implications, testing your blood sugar constantly, wanting to make sure that you’re okay, there’s a lot of that. But for her, when he was diagnosed, the part of the conversation that was not included was anything about cost. And when we hear from doctors now who are dealing with this, that’s baked into when they talk to people getting diagnosed, is this is going to be something you need to think about in terms of it’s going to influence every other decision you make because you’re going to need to be thinking about how expensive it can be.
Chris Noble: I have a chronic condition that requires daily, if not constant, checking in with myself. Type 1 diabetes is a condition where you’re trying to balance your blood sugars, you’re always on this rollercoaster of your blood sugar’s going up and down, and every input that you have into your body, whether food, water, exercise, sleep, stress has some impact on you maintaining that level of homeostasis. And so diabetics are always checking in with themselves and saying, “What do I need right now to get back to good?” And I think being in that mindset all the time for the last 25 plus years, because I was fortunate enough to have a family and a healthcare system where those needs were met and I was able to be relatively healthy, I was also able to then think, okay, well what systemic issues are there out there so that everyone can have the same ability to stay healthy and at that level of homeostasis, why can’t everyone feel this way? And what systems are in place that enable this health and what systems are in place that are hurtful or damaging to our ability to be healthy?
And so that just came out of me just doing a self-assessment and saying, “Okay, well if I’m good, what isn’t good about this and what can we do to get a world where everyone can have the medicines that they need and the health infrastructure in place for us to thrive?”
Luke Gannon: These market failures that Chris is describing are not theoretical. In 2016, Allison and Matthew faced a life-threatening situation.
Allison Hardt: Around 2016, Matthew went to our pharmacy to pick up his insulin prescription. He went two days early. He had had a bad case of the flu and ran through his insulin quicker than he usually would, which is very common when you have type 1 and you get ill, your blood sugars or any kind of illness, it will usually make your blood sugars fluctuate widely. For him, they go really high, which means you have to take more insulin to keep them down, and so he went through it much quicker than the amount that was on his prescription. And the pharmacist told him that because his insurance wouldn’t cover it until the following Monday, this was on a Friday, he would need to come back on Monday, but he was going to be out that day of insulin or he could pay the out-of-pocket cost for his pens, which at that time was $1,500.
And so his insurance wouldn’t cover, it would’ve been about $80 if his insurance had would’ve covered it. And the thing about having type 1 is that you cannot go a weekend without taking your insulin because it’s something that everybody’s body produces all the time who doesn’t have diabetes. We all need insulin. And it is regulating, it’s a hormone that’s regulating your body all the time, and you can go into diabetic ketoacidosis if you are not taking your insulin for two days and you’ll be very, very sick and you can even die. And so the option is pay or die. And so it was a Friday, Matthew was trying to get ahold of his doctor to adjust his prescription because that was the pharmacist recommendation, but he couldn’t get through to the office, his doctor was not available, the pharmacist wasn’t able to help any further. They just said, “Call your doctor.”
So it was going back and forth for a few hours of phone tag with everybody. And then again, he was insured, he had his prescription, he had a primary healthcare provider, he’d been diagnosed with type 1 since 1985, but he was unable to get the insulin he needed because he couldn’t afford that $1,500 as a surprise payment. Waiting two days wasn’t an option, and he went to Craigslist. He found someone who was selling NovoLog pens that their uncle no longer needed because they’d switched brands, met him in a gas station parking lot and paid him $20 and got the pens. So that experience, the level of watching his fear and desperation and were sitting in the parking lot of the pharmacy and it’s right there. And knowing that, yeah, you’re going to take this, I mean, it’s definitely a risk. People do it every day, getting insulin or supplies from folks that are sharing, and there is a risk too, but just seeing that that was the option and that was hard.
Luke Gannon: It was not too long after this experience that Allison found T1 International and started volunteering. Shortly after she was hired on full-time as an advocacy manager.
Allison Hardt: When I started volunteering with T1 International, I was really surprised, though maybe shouldn’t have been, to just find so many people having the same story or versions of it and just not realizing. I think we hear this so much from people before they are getting involved in the insulin problem movement or disconnecting with other folks, there can be a feeling that you’re the only one that’s experiencing it and it is really stressful. There is a feeling of failure or just that it doesn’t feel good to not be able to afford what you need to keep yourself well or to be in these situations where it’s demeaning that your life is dependent on this, again, on this system that it’s like you’re right there and you can’t get what you need.
And then to find other people that are experiencing it, of course, don’t want other people to be experiencing it, but there was definitely that sense of we’re not alone in this. And it’s not his fault, it’s not something that he’s doing, it’s like this is a system that has been created and so many people are suffering because of it. And then also we have collective power, we’re coming together and we have an ability to make change together because we are all … it’s not one person saying, “I’m having this experience and this is a problem.” It’s so many people that are running into these issues, and that brings a lot of power for changes.
Luke Gannon: Chris emphasized that one of the most important parts of living with diabetes is having a community of people who have had similar experiences. One of the roles that Chris’s nurse played, who he mentioned earlier, connected him to camps for children with diabetes. These played an instrumental role in not only learning about his condition, but empowering him to make systemic change.
Chris Noble: Now after graduating from UC Berkeley, I was about 21, 22, thought I’d go back to camp. And at the end of the camp session, which let me just give some context, it was three months of camp where we’re up in Big Bear Mountain, all the insulin is donated, so it’s free to all of the camp attendees, but also the counselors that have type 1. And then I remember at the end of the summer session, it was in August, as we’re wrapping up camp and doing our kind of camp wide cleanup, all of the medical staff collected all of the donated medicines and insulins and kind of set them out in front of the medical tent. And the camp counselors that didn’t have insurance at the time, of which there were a few, would actually go up and kind of collect whatever leftover donated medicines were left behind.
Many of these people were my friends. I mean, these were my best friends the last three months. And suddenly they’re filling backpacks full of insulin vials and pump supplies and syringes, knowing that they’re not going to have camp until the December winter camp starts. And so they’re trying to count, “Okay, well, I use this much insulin. This is how much is available. Is this close to expiring?” Trying to do that calculation as if you’re gathering water to walk through the desert, but you’re filling up backpacks full of donated insulin to carry you through until winter session, where you can get another large bolus of medical supplies that hopefully carry you through to the summer, and that was their health insurance.
And so I remember seeing that and being terrified of that. This is the system that they have to work within because they can’t afford health insurance, and that terrified me. It actually chilled me to my core that we are living in a world where that is what people have to resort to stay alive, and I found that unacceptable. And so that led me into pivoting away from the clinical trial, hard research direction and really getting more into public health systems and eventually pharmaceutical access and advocacy, which brings me to over 10 plus years of kind of working in this space. And whether it’s at the state level, the federal level, even the international level, trying to understand what systematically needs to be improved to ensure that everyone everywhere has the medicines that need to thrive.
Luke Gannon: Chris and Allison’s stories both demonstrate how difficult it is to access affordable insulin, sometimes impossible. This is because we have three major insulin manufacturers, Eli Lilly, Novo Nordisk, and Sanofi that control 98% of the global insulin market.
Chris Noble: These companies are largely deciding the prices at whim for their insulins. You would hear some of them, their lobbyists say at what the market will bear. And what that means to people, to everyday people is what is the highest amount that we can be charged that won’t kill us? Because if they kill us, then they lose a customer, but they still want to make as much money as possible off of these insulins and so they will charge at what the market will bear. That’s in the United States, where we have absolutely no price controls. We’re one of two countries in the world that don’t have price controls, I think New Zealand is the other one. Every other country in the world has some form of price controls. So here, these companies are able to raise their prices as much as they want, many times those increases in prices are in lockstep.
So one company raises their prices, the other company matches it, and they are able to control the market and the prices that they set in that regard. So that obviously presents a problem, especially in a state like California, which I think we are a fairly unique but not entirely unique example, in that we’re a gigantic state. There’s tens of millions of people here, anticipated around three million folks are insulin dependent. That’s very rough estimates. Many of those folks are low income and they’re on some of our state-based programs. So our Medicaid program called Medi-Cal is the state-based health insurance program for low-income Californians. Many of those people are insulin dependent and completely dependent upon the state funding that insulin. So Governor Newsom comes into office in 2018 and suddenly realizes we’re spending so much money on essential medicine that is priced ridiculously high, absurdly high, unacceptably high.
And so him and leaders in our legislator here at the state, start looking into, okay, well what can we do to bring down the cost of these generic medicines? And they start looking at what other states are doing. And this is also in partnership with my organization, Health Access California, who is a consumer health advocacy coalition. Many states are trying to enact price controls, so actually trying to bring down the price or establish lower prices to then be put onto these companies. Well, that’s tried in many different instances, and these pharmaceutical companies are putting a firewall against those efforts. They’re systematically blocking them, the lobbyists are coming out in full force saying, “No, it’s against the law for you to be regulating our prices as a private company. That’s not going to work. That’s not happening. That’s unconstitutional.”
And so I think here in California we saw a unique opportunity. We have three million people that are dependent upon insulin in just the public program alone. There’s a market failure in these companies producing an insulin that’s at cost, which we do know, there was a report published in BMJ, I think in 2016, 2017, that showed you could manufacture one vial of human insulin, a vial lasts two weeks to a month depending upon your personal usage, for as low as $5 for one vial. $5 to produce one vial of insulin. Same vial, when it came onto the market in 1996, exact same vial, Humalog, NovoLog, it was about 25, $26 for that vial. That’s an okay amount, giving that distribution and cold chain storage, all of those additional costs associated with getting the medicine to the actual consumer, 25, $26, it seems like these companies are trying to get the medicine out to folks.
That exact same vial now, which is off patent because patents last 20 years, the patents expired in 2015, that exact same vial of insulin is now over $300. And that’s for two weeks of medicine, remind you, two weeks of medicine and you’re not done, you have to take it every two weeks for the rest of your life, every day for the rest of your life. So what did the state realize? The state realized that, okay, well we’re spending a lot of money on purchasing this insulin at this absurdly high price. What if we just made our own own? What if we just made our own insulin and the cost savings alone would pay for this program very well? It would pay for it most instantaneously. And what other generic medicines can we potentially include that would not only save the state money, but also just help people and save people the burden of having to pay for these high price medications? And so that was the initial impetus behind the Cal RX program.
Luke Gannon: T1 International also played a hand in advocating for state manufactured insulin in California, knowing that this kind of momentum and legislation would eventually have a ripple effect on other states.
Allison Hardt: That provides an opportunity to get outside of the system that exists more. When we talk about insurance and PBMs and the insulin manufacturers, a lot of the solutions that are being proposed or that will happen, are fixing a piece of it, but the whole thing is so broken that it’s hard to see the results for patients. I think what was really exciting about public manufacturing and something like a public private partnership, as is happening in California, is the more that the public sector can be involved, the more the accountability is to citizens and taxpayers and not to shareholders, and just getting more of that public involvement in these systems to have some of that accountability. Because what we’re seeing is that when it’s purely a privatized system, it’s not working for people, and then the incentives are not helping people get what they need. The corporations are doing what they’re meant to do, they’re designed to make a profit, but it’s healthcare and it’s people’s lives, and so we really believe patients should be put over profits.
Luke Gannon: The California model of state manufactured insulin is critical in changing the lives of people living with type 1.
Chris Noble: As a person with type 1, I do think this is a huge, huge development for people that are insulin dependent. This will ensure that not only an affordable and accessible insulin is out there and readily available to everyone in California, but that there will be really a market pressure for these other companies to have to then match a $35 competitor. So it’s radically disruptive in these other companies that are suddenly having to compete with a $30 vial, so that pressure alone is a mission accomplished. But also that the fact that there’s a $30 option here at the state, that it will be sustainably and reliably available to folks, I mean, that quells my anxieties that I felt when I was at that camp and people were drastically filling backpacks full of insulin vials, because now they can just go to their local CVS, show that they have a doctor’s note, with a prescription and spend the $30. And if $30 dollars is a barrier, I would like to see other additional assistance programs for people in that scenario as well.
In terms of insulin, this is a huge win. In terms of the broader kind of healthcare system, I certainly hope to see the Cal Rx program be brought to scale. I think public manufacturing is a fantastic workaround to a system that’s incentives are distorted for the patient and for the consumer. For-profit medicine results in high prices and having people to pay what the market would bear, which many times results in you having to make a decision between paying rent, buying groceries, and buying your medication. And that’s just not a world where health is a human right and that our ability to access the healthcare that we need is guaranteed.
Luke Gannon: Healthcare should be a guaranteed right for every person. Although the US isn’t there yet, many states are looking toward other public options that will decrease the price of insulin and other life-saving drugs.
Allison Hardt: We also have a lot of interest from other states. So Michigan already has public manufacturing of pharmaceuticals. In their history, they did produce vaccines at one point, and also Massachusetts has a history and currently produces vaccines through MassBiologics, which is affiliated with a university system now, but is fully a public entity. And so there’s precedent for the public manufacturing of pharmaceuticals in the United States. Here in Oregon, we have a public PBM, called ArrayRx, and actually Connecticut just signed on to be a part of that. So it’s not manufacturing the product, but it’s using the power of the public sector to negotiate drug prices as public PDM states working together to kind of harness their buying power and the public power that they have to be negotiating on drug prices, is really exciting to see.
Luke Gannon: I hope both Chris and Allison’s stories have moved you as much as they moved me. To keep learning and keep fighting for affordable healthcare, Allison and Chris shared a couple of book recommendations that inspire them and inform their work.
Allison Hardt: Bad Pharma is a book that I think was really helpful for me. I think it inspired just because it emphasizes the need for patient voices and patient representation in all forms of the process. One that we like to cite a lot on our team, which is not specific to the pharmaceutical industry or to this, the Hope in the Dark, by Rebecca Solnit, just in general, I find to be a good one to return to for staying inspired when things feel tricky.
Chris Noble: There was a book published this last year, this is kind of coming out of the COVID pandemic, but still lessons abound. It was by Emily Bass, it’s called How to Stop A Plague. And it’s coming out of the HIV/AIDS advocacy movement of Act Up and how people power resulted in the radical dropping of lifesaving HIV medication and using those similar lessons then to talk about COVID-19 and the advocacy around COVID-19 and what the next pandemic is going to call on all of us as everyday people to do to ensure that we have access to the life-saving medications that we need. So How To Stop A Plague, by Emily Bass, I would highly recommend.
Luke Gannon: Wow, I am truly blown away with our guests today. Thank you so much, Chris and Allison, for telling your stories and for fighting for health justice for you, your families and communities across the nation. Stay tuned for the second half of this episode, where we circle all the way back to our very own Stacy Mitchell where she explains how pharmaceutical benefit managers are driving up drug prices and the importance of public options. Today I read the kindest person in the room is often the smartest, and I immediately thought of my fabulous co-host, Reggie Rucker. Throwing it to you, Reggie.
Reggie Rucker: Well, this episode’s already been really emotional and you’re over here hitting me right in the feels, Luke. But thank you, I really appreciate it. So I was going to say we’ve been lucky this season to have episodes full of really smart, really kind, really dedicated people to come on and share their stories with you all. But occurs to me it’s not luck, it’s people all coming together, rising to the moment to do what’s necessary for themselves, their families and their communities. And those type of people tend to gravitate toward each other, find each other, and build really beautiful things together. And I’ll say, I think that’s why you found us. I think that’s why you’re listening to this podcast, because you too are one of those really smart, really kind, really dedicated people looking to build something beautiful, and you feel seen here. We see you.
And we know that there are others in your circle like you that would also feel connected to something really beautiful by listening to this podcast. So don’t be stingy, be kind, share this episode with them. This is the last time you’ll hear this ask for a couple of months while we go on summer break, so now’s the time, right now. Pause this episode, send that share, then come back for our interview with ILSR co-director, Stacy Mitchell, who’s going to talk about the most hidden yet powerful part of the healthcare system that’s wreaking such havoc on folks like Chris and Allison and her partner, and how we move forward to make our families and communities healthier, stick around.
Thank you so much, Stacy, for joining us again. It’s great to have you back to help us wrap up this season. So all of our listeners, actually they just heard from Chris Noble and Allison Hardt, and how they both have these very personal relationships to the issue of affordable and accessible life-saving drugs, insulin in their case, and how that informs their advocacy on the issue. So what we wanted to do with you today, because you’ve been doing a lot of work on looking at this issue of pharmacy benefit managers and how their place in the pharmaceutical industry and keeps people like Chris and Allison from getting the medicines they need at a reasonable affordable price.
And I can speak for myself, I think this is true of most people, they know they’re insure, they know their medical provider, but this PBM, this pharmacy benefit manager is kind of an unknown entity that’s mixed up in all of this and little obscure, but very important. So can you walk us through, just give us a crash course, what a PBM is, how they operate in the market such that they create all these types of distortions in the marketplace?
Stacy Mitchell: Yeah, happy to, and always nice to be on Building Local Power. Yeah, I mean PBMs are, as you said, no one’s ever heard of them, but they’re the most powerful parts of the healthcare system that no one has ever heard of. They essentially sit, they sort of sit between your health insurance company, drug manufacturers and the pharmacy where you get your prescriptions. And so health insurers contract with PBMs, large employers also contract with PBMs, Medicaid plans contract with PBMs. And what the PBMs do is ostensibly they negotiate with the drug manufacturers to get the pricing from the drug makers and then they set up a list of approved drugs for that insurance plan, based on those pricing deals. And then they manage those prescription benefits on behalf of the insurer, and so when your pharmacist submits the claim for reimbursement, it goes to the PBM who decides how much the pharmacist gets reimbursed and so basically manages all of your insurance benefits.
That all sounds like normal and perhaps helpful and efficient in the system, but the reality of PBMs is something entirely different. So there are three PBMs that dominate the industry, they control more than 80% of all insured prescriptions in the country. The largest of them is CVS Health, which of course CVS owns Aetna, the big insurer, they are the largest retail pharmacy and they own the biggest PBM. The other two dominant players also own their own retail pharmacies, mail order pharmacies. And so all of this brings me to the fact that what is going on with PBMs is that they are self-dealing in all kinds of ways. So we see CVS increasing reimbursement rates to independent pharmacies. If you use a local pharmacy, sometimes they’re not even getting as much back as they paid for the drug because it’s CVS who wants to put them out of business and take over the pharmacy market. So there’s self-dealing going on that way.
And then the so-called negotiations with the drug makers, as it turns out, are not necessarily the PBM trying to get the best deal on behalf of patients and insurers. Instead, the PBMs are doing these negotiations in secret, where they’re getting all kinds of kickbacks. And so the drug maker is like, “Hey, you put my drug, my version of insulin on your list as the one that’s approved, we’re going to hand you part of the cash that we just made overcharging.” And all of this is very opaque, we actually can’t see into a lot of these transactions, but there’s a ton of dirty dealing going on.
Luke Gannon: So Stacy, can you talk about how these monopolistic entities, what the effect it has on consumers, on the ground level, on people who need these medications?
Stacy Mitchell: Yeah, I mean, in the case of the market power of PBMs, the two biggest effects is that we already have highly concentrated drug makers, a handful of these companies that make most of our major drugs, and that level of concentration gives them a lot of power to raise prices. And indeed, we’ve seen Eli Lilly and these other companies just jacking up insulin prices and other drug prices. In the US, we pay something like two and a half times as much for our drugs as they pay for the same drugs in Canada and in other countries. And so you’ve already got those problems with the drug makers, and then you layer on the PBMs, and this is like a Batman and Robin co-conspirator situation here, where the PBMs are getting these kickbacks from the drug makers in exchange for putting these inflated drug prices on the list.
And so one big effect for ordinary people is outrageous drug prices and the inability to afford medications, particularly for chronic illnesses like diabetes. And then the other big effect is that the PBMs are driving independent pharmacies out of the market. And so there are lots of communities that have now become pharmacy deserts, there’s no local pharmacy, and that is particularly rural communities and Black and Brown communities in cities because those are neighborhoods and communities that have traditionally been served by independent pharmacies. And so it’s been a real hardship for many regions of the country where, for example, in parts of Northern and down East Maine where I live, there are no pharmacies. You might have to drive an hour or two hours to get your prescriptions. And the big chains, CVS are like, “Well just use our mail order,” but mail order is not a substitute. Like you sick today, you need antibiotics today, you can’t wait a week for something to show up in the mail. There are all kinds of problems with mail order, it’s not a substitution to this lack of pharmacies and these extraordinary prices.
Luke Gannon: A little while back, I heard you explain the state of North Dakota’s relationship to the pharmaceutical industry at the Maine Center for Economic Policies annual conference. You mentioned how North Dakota has banned new chains from coming into their state. Can you talk about this model and how it might be used at the national scale?
Stacy Mitchell: Yeah, I mean, I think it’s a model that other states should adopt. It’s the only state in the country that prohibits corporations from owning pharmacies. So all of the pharmacies in North Dakota are owned by local pharmacists. There are a couple of exceptions, some chains that were there that were grandfathered in, so there’s a handful of chain owned pharmacies, but for the most part, it’s only independent, locally owned pharmacies. The law was passed back in the 1960s and there’s some European countries and maybe some other countries around the world that have a similar ownership law. And the idea behind it is that you should not have healthcare decisions being made by people who aren’t healthcare professionals. And so you don’t want Walmart making decisions about the provision of pharmacy services, you want it to be in the hands of a pharmacist. That’s the logic of the law.
And what we see in North Dakota is that they have far better pharmacy service. There are many, many more pharmacies per capita in North Dakota than any other state. You find pharmacies, even in the smallest towns, places that would, in many other parts of the country, not have a pharmacy at all, you’ll find a pharmacy. And those pharmacies, especially in the very small communities, are the front lines of healthcare delivery. That’s where people go for a lot of healthcare advice and guidance from a pharmacist because these are not places that have hospitals or urgent care centers and the like. And we know that those pharmacies provide a much higher level of care than a chain pharmacy does, they do more free testing, they spend much more time with patients and so on. And North Dakota has among the lowest prescription drug prices in the country. And so it’s a model that is in fact much cheaper because you don’t have all of this self-dealing and price gouging that goes on everywhere else.
One of the questions that that kind of raises is if independent pharmacies are so competitive in North Dakota, if they’re just so demonstrably better and cheaper than the chains, why is it that we don’t have … why are they declining in so many other parts of the country? And the answer is the PBMs, it’s CVS cutting those reimbursement rates, driving pharmacies out of business. North Dakota, the pharmacies still have to engage with the PBMs because they have the same insurance as everybody else and that sort of thing. But because they’re the only game in town, because CVS doesn’t have pharmacies there, the independents actually have a level of leverage in those negotiations. Not 100%, North Dakota has also been passing some PBM regulatory measures and things like that, so it doesn’t 100% solve for it, they also need to do regulations. But the fact that the independents, because of the pharmacy ownership law, it really changes the dynamics in their dealings with the PBMs.
Something else that’s worth noting on this issue of PBMs is that the states really have been leading the way in passing laws around transparency, capping certain kinds of fees that the PBMs can charge. And there are a couple of states that have, and this fits into the public options idea, states like Ohio and Kentucky, where they have canceled their contracts, their Medicaid contracts with the big PBMs, and have then gone and done a contract with a much smaller PBM where it’s on fair terms for both the state and for the patients and for the local pharmacies. And so states have a lot of opportunity in this market to insert themselves in a way that can benefit people and benefit local pharmacies.
Reggie Rucker: Again, we had this conversation with Chris and Allison earlier, talking specifically about what they did in California to say, “Okay, we’re going to create competition in the market by producing the drugs ourselves at the state level.” What are your thoughts on that? Do you think Cal RX is a good model to be effective at bringing down the cost of insulin or other drugs that they may move into producing?
Stacy Mitchell: Absolutely. I mean, when you have corporations that have made it absolutely clear that they have no interest in actually serving the purpose for which they were created and allowed to operate by our laws, then absolutely the public sector should step in and provide those goods and services and offer what is clearly very needed competition in this sector. If it weren’t for the concentration and the collusion that we’re seeing among all these companies, this wouldn’t be a problem. But we don’t have that kind of competition, and to me, we really need this two-pronged approach. We need to use regulations and antitrust laws to break up the concentration, to regulate the drug makers and the PBMs, to insist that they’re held to the kind of standards that we all deserve. And then the second thing we need to do is to make those investments in areas where there’s clearly a lack of competition.
And this may be particularly relevant in the context of drugs like insulin, which are widely needed, very low cost to make, this is not something that should be a big profit center. And so in that sense, it’s a really appropriate place for public investment and public provisioning and manufacturing of those drugs. I think it’s also worth thinking about, and indeed we have seen since Cal RX began to get in motion, together with some of the pressure that the Biden administration, particularly through the Federal Trade Commission is now putting on PBMs and drug makers, because of those actions by government, we’ve in fact seen Eli Lilly and others cut the prices of some of these drugs. So we are already benefiting from the effects of that public action. The other thing I wanted to say about this is that this is something that is worth thinking about in the context of lots of areas of our economy, this idea of marrying anti-monopoly policy and regulation with public investment and public options.
This notion that if the market is not providing what we need, we can do it ourselves and introduce options that really work for people and that compete with the other companies and thereby, sort of discipline them through the market when we need to move our economy in a fundamentally or a part of our economy in a fundamentally different direction and how the public sector can really help drive that transition. And then the last thing I would say is, and I think this speaks in some ways to the drug issue, is areas where we have just allowed, because of the mistakes on antitrust policy, because of the lack of enforcement, we have allowed a level of extreme concentration to arise in the last few decades. And it is going to take multiple approaches to rectify those problems and to bring back a healthy ecology to these industries.
And we see this in the food sector, in ag, we see this in drugs. I mean, there are a number of different sectors that you all have been talking about on the show all season, where we need some targeted public investments to help open up competition in addition to the anti-monopoly and antitrust actions that we need.
Reggie Rucker: That’s great. So we’re getting to our final question, normally our final question is about a book that you would recommend on this topic or something that inspires your work, but I think you’ve been here enough to where I think we’ve probably got a few books from you already. And since this is the last episode of the season, I wanted to see if we could get you to help us tie a bow on it. And it’s helpful because you were on early on in the season and got to talk after AJ and then get to know AJ relatively well and get to know more about the North Tulsa community and Oasis Fresh Market and just his influence in that community, and on the broader issues that we work on and care about. And so whether it’s the dollar store issues, the grocery store issues, and then how we now over the last few episodes have been talking about broadband and pharmaceuticals, there’s this through line that points to all the ways in which the issues that we care about and work on are important to people’s health.
There’s, going back to the dollar stores again and broadband, and again, you just mentioned it earlier here on the pharmacies, and how these are particularly important in rural communities or communities of color. So there are these through lines that we noticed as we’ve moved throughout the season. And what’s consistent also in all of these is the importance of just people on the ground doing really heroic work. So in saying all that, the question to you is how do you think about this relationship between the truly inspiring important work that individuals are doing in their communities, and at the same time to not be reliant on or for communities that have to depend on these heroic figures to get basic needs, like groceries or medication? How do you square that circle and make sense of what we should be expecting of communities, but also what we should be expecting of our elected officials and federal agencies and things of that nature?
Stacy Mitchell: I think what this season … I mean, this season was so powerful and what you and Luke have done with the podcast season, and what we try to do with our work across ILSR, is to connect the expertise and the lived experiences of people on the ground who are navigating things that are just not working very well and often, as you said, are doing amazing, innovative things in their communities and charting a path for here’s what a different way of doing things looks like and here’s how much better things can be. And we saw that across this season, whether it’s AJ’s Grocery Store or the innovative things that the Tenants Union is doing in terms of thinking about new housing models and so on, and then connecting those to the big policy issues that effectively structure our economy and structure what’s possible. And what I see right now is that in so many of these areas, as you said, we have these superheroes who do amazing things, but we shouldn’t need superheroes to be able to have groceries and to have affordable drugs and to have all the things that we need.
And basically, we’re creating an uphill fight for communities and for people trying to achieve these things because our big policy pieces are working against those local solutions, working in favor of consolidating corporate power, undermining the community solutions in so many different kinds of ways. And so what I think this season is really helping to do is to drive that expertise on the ground in the direction of changing things like antitrust policy, housing policy, drug policy, in ways that suddenly, I mean, if we did that, if we shifted antitrust and really went after concentrated power and opened up the opportunity for local grocery stores and community-based food systems, and we adjusted our banking laws to supply those new enterprises with the capital that they need, suddenly we would have 1,000 flowers blooming. We would have all of these folks who are working on food system stuff at the local level, be able to do things and really make change in a much easier way than they can right now. I mean, I thought this season was amazing at really doing that, and it’s something that we’re really pushing throughout our work at ILSR.
Reggie Rucker: Thank you so much, Stacy. This season has been a thrill to be a part of, and I think as much as anything, because it’s reflective of the work that we do here, happy to be a part of it and be able to tell these stories with you, with Luke. And yeah, appreciate everyone out there listening as well.
Luke Gannon: Thank you so much, Stacy.
Stacy Mitchell: My mind is already thinking about and anticipating what I know is already shaping up to be a really exciting, terrific new season.
Reggie Rucker: Yeah, that’s such a great tease. I should have been prepared to give that.
Luke Gannon: Yep, you heard Stacy say it, this is the final episode of our season, but worries aside, next season, we are jumping in to some merger mysteries. Stay tuned. Thank you so much, Stacy, for this thought-provoking conversation and for tying such a perfect bow on this final episode. Thank you to all of our listeners for tuning in to Building Local Power. You can find links to everything discussed today by going to ilsr.org and clicking on the show page for this episode. That is ilsr.org.
Reggie Rucker: If you like this episode, this season, please share it with your family, your friends, the random people that follow you on social media, because you’re such a great follow everyone. And remember, all of your reviews and likes on your favorite streaming platform really does help with the fancy algorithms to get this podcast in front of more people. And your donations are essential to help us keep this podcast going and support the research and resources that we make available on our website for free. We truly welcome and appreciate it all. And one last thing, if you want to send us an email, let us know what you think of the show, maybe share with us your favorite carrot cake recipe. I didn’t know some people made them with walnuts, some people don’t use raisins, which feels kind of blasphemous. Anyways, you can do that by sending an email to blp@ilsr.org.
This show was produced by Luke Gannon and me, Reggie Rucker. The podcast is edited by Drew Birschbach and Luke Gannon. Our theme music for this season is composed by Andrew Frank. Thank you so much for listening to this season of Building Local Power.

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Music Credit: Andrew Frank, ILSR’s Digital Communications Manager

Photo Credit: Em McPhie, ILSR’s Digital Communications Manager

Podcast produced by Reggie Rucker and Luke Gannon

Podcast edited by Drew Birschbach and Luke Gannon

Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

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Luke Gannon is the Research and Communications Associate for the Independent Business team.

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As Communications Director at the Institute for Local Self-Reliance, Reggie develops communications strategies and leads campaigns to build public support for ILSR local power initiatives. Contact Reggie with media inquiries.

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