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Contact

:
S T A T E M E N T T O T H E
Communications Director
(541) 257-8878 J O I N T I N T E R I M T A S K
media@t1df.org
F O R C E O N F A I R
www.t1df.org
P R I C I N G O F
Issues:
Drug pricing in Oregon:
P R E S C R I P T I O N D R U G S
OPDP’s failure to deliver
‘lowest prices,’ with 100%
manufacturer rebate pass-
through at the pharmacy Revised May 19, 2018.
point of sale, to uninsured
and underinsured HB 4005 should not be needed. The Oregon Prescription Drug
individual Oregonians. Program (OPDP) created in 2003, with expanded access to all
uninsured and underinsured Oregonians via 2006’s Ballot
Documents: Measure 44, should already be delivering to under- and uninsured
See footnotes. individual Oregonians net price transparency and the lowest
available price, net manufacturer rebates, at the pharmacy point of
sale.

Summary
If this Task Force on Fair Pricing wants to achieve the stated goals of HB 4005—drug-pricing
transparency and lower prescription drug prices to Oregonians—it should begin by
investigating why OPDP, a program over which the Oregon government has plenary control,
has not fulfilled its statutory mandate to deliver the lowest price available, i.e. point-of-sale
rebate pass-through to individual members.

Lantus insulin was among the three drugs showcased by Oregonians for Affordable Drug
Prices Now during this year’s hearings in support of HB 4005. Oregonians for Affordable Drug
Prices Now, a campaign organized by third-party payers such as Moda Health—OPDP’s third-
party administrator—recruited patients to testify in support of HB 4005. These recruited
patients apparently included Debbie Gehlken of Newport, an individual with insulin-

Page i of vii
dependent diabetes.1 On February 5, 2018, Ms. Gehlken told Oregon legislators that she was
buying Lantus insulin from Canada at $95.35 per vial because she could not afford the
$260.28 per vial she would have had to pay at her local Newport pharmacy.2 Lantus (with its
2016 list price: $239) was also included in the list of “Top 100 Price Increases” submitted by
Representative Rob Nosse to the Oregon House Committee on Health Care on February 5,
2018, in support of HB 4005.3 Senator Linthicum, noting that he and his daughter both have
type 1 diabetes, also raised the issue of insulin prices in testimony regarding HB 4005 (citing
Lantus’ list price: $256 per vial in February 2016). 4 Members of Oregonians for Affordable
Drug Prices Now, UNITE HERE Local 8, OSPIRG, AARP Oregon, Oregon AFSCME, Oregon
Progressive Party, the Oregon Nurses Association, SEIU—Oregon State Council (“Our
members want to know why the price for their insulin has increased 300% over the last 10
years.”), The League of Women Voters of Oregon, Oregon School Employees Association
(OSEA), and Oregon AFL-CIO intervened in support HB 4005, allegedly for the purpose of
providing their members with access to
affordable drugs. None of these groups or
“This bulk purchasing program [was]
individuals mentioned OPDP.
designed to allow participants to
The Oregon Prescription Drug Program (OPDP) receive discounted prices and rebates,
was expanded, following passage of 2006’s making drugs available to participants
Ballot Measure 44, to cover uninsured and at a lower cost.” — 2003 Summary of
underinsured Oregonians exposed to list Legislation, A Publication of Legislative
prices, i.e. to prevent the drug price/access
Administration Committee Services
crisis HB 4005 now purports to remedy. Most of
the above-mentioned organizations supported
OPDP’s expansion to under- and uninsured Oregonians in 2006. OPDP was subsequently
opened to union plans. As of February 2018, OPDP served over 200,000 members enrolled
in the Oregon Educators Benefits Board (OEBB), Public Employee Benefits Board (PEBB),
SAIF, the Eastern Oregon Coordinated Care Organization, and other self-insured union plans

1Testimony available at: https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/140531
and https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/146256 (referring to Oregon
Health Plan, and OPDP member programs PEBB and OEBB, but not OPDP).
2https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/140531. Today’s OPDP per vial
price is $264.81. https://mp.medimpact.com/mp/secure/LaunchProductFrameset.jsp
3 Exhibit available at: https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/140167
4 Testimony available at: https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/140549

Page ii of vii
and government programs statewide, as well as over 300,000 under- and uninsured
Oregonians.5 The Oregon Health Authority (OHA) spent approximately $1.2 billion in 2013–
15 on prescription drugs. OPDP is the second largest program among OHA’s four distinct
areas of pharmacy expenditures.

According to Moda Health, OPDP Third-Party Administrator, “under- and uninsured residents
benefit from the preferential drug prices that the OPDP discount card has made possible.”6
This is a gross misrepresentation.7 OPDP program members (union plans and government
programs) receive their share of the manufacturer discounts and more.8 OPDP individual
members, under- and uninsured Oregonians with chronic medical conditions who rely on life-
saving ‘deep discount’ specialty drugs such as insulin, do not.

As of May 2018, the Oregon Prescription Drug Program's per-vial price to individual
members for Lantus is $264.819—$5 higher than the pharmacy price quoted by Debbie
Gehlken in support of HB 4005 and $9 higher than the list price shown in Senator Linthicum's
presentation10—instead of the much lower net price (approximately $65) actually paid by

5Testimony of Moda Health, OPDP Third-Party Administrator on February 5, 2018, available at: https://
olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/140506.
6Testimony of Moda Health, OPDP Third-Party Administrator on February 5, 2018, available at: https://
olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/140506
7 Robert Judge, Director, Pharmacy Services Moda Health, testified that uninsured Oregonians “benefit from the
preferential drug prices that the OPDP discount card has made possible.” Mr. Judge, however, stated to Charles
Fournier, T1DF vice president, on May 18, 2018 (following the meeting of this Task Force on Fair Pricing of
Prescription Drugs), in front of Trevor Douglass (OPDP Director), Dana Hargunani (Chief Medical Officer — Oregon
Health Authority), and Andrew Stolfi (Insurance Commissioner — Department of Consumer and Business Services),
that Moda Health does not actually pass any rebates to OPDP discount card members because pharmaceutical
companies, he alleged, prevent Moda Health from doing so.
8 Since OPDP individual members do not receive any part of the manufacturer rebates earned through sales under
the OPDP discount card program, their share of the rebates is likely used by OPDP to pay for the program’s
administrative costs and to offset the drug costs of the institutional program members, including union and state
employee plans.
9These OPDP prices for insulin are marginally lower than pharmacies’ cash prices that uninsured must pay. (The
pharmacy’s cash price is also called usual and customary price or U&C price.) They are consistent with the
pharmacy prices negotiated by payers and PBMs in Oregon, i.e. Oregon Average Actual Acquisition Cost (list
price plus wholesaler’s distribution fee) plus pharmacy’s dispensing fee, from 3% to 6%.
10See also graphs submitted on March 2, 2018, by Senator Linthicum, available at: https://olis.leg.state.or.us/liz/
2018R1/Downloads/FloorLetter/2403

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third-party payers, including OPDP, after they receive massive rebates from Sanofi amounting
to over 70% of Lantus’ list price. 11

Under- and uninsured Oregonians were supposed to gain access to the lowest price
available—for Lantus as well as other life-saving brand-name drugs—through OPDP. OPDP was
created to negotiate large rebates from the manufacturers of brand-name drugs, comparable
to the volume-purchasing rebates negotiated by large employers and insurers. OPDP was
supposed to pass those rebates through to individual discount card members, so they would
benefit from the program’s negotiating power. OPDP has not delivered those rebates to
individual discount card holders. OPDP has obtained these rebates,12 but only passes them
to institutional programs and union plans — not to under- and uninsured individuals (discount
card members). HB 4005 supporters are thus now blaming drug manufacturers for a price
and access crisis actively generated by the Oregon Health Authority’s own breaches of the
laws that established and expanded OPDP—including SB 875 (2003), Ballot Measure 44
(2006), and SB 362 (2007).

If OPDP were not overcharging its individual members, patients like Debbie Gehlken would
not need HB 4005, and they wouldn’t be buying insulin from Canada. They would be buying
Lantus insulin with OPDP discount cards, at their local Oregon pharmacies, for about $65 per
vial (plus a small dispensing fee). That’s the average approximate net cost to insurers and
large employers for analog insulins after rebates, and that’s likely about what OPDP is paying.
The willful ignorance that the Oregon legislature has embodied in HB 4005 is now directly
injuring under- and uninsured Oregonians who rely on deep-discount brand or specialty
drugs to stay alive. This Task Force must recognize that OPDP’s ongoing overcharging of
Oregonians for life-saving medications is directly exploiting some of Oregon’s most
vulnerable people, and is, in the process, putting the health and lives of Oregonians at risk.

11The estimated net realized price of Lantus insulin and other insulins is a matter of public record. See, e.g., The
Challenge of Drug Price Transparency, Mason Tenaglia, QuitilesIMS VP Payer & Managed Care Insights (December
2016). Net pricing information is also provided by third-party health consulting groups (SSR Health, IBM Truven,
IQVia / IMS Health) and financial analysts (Credit Suisse, e.g.: US Pharmaceuticals 2017 Outlook, https://research-
doc.credit-suisse.com/docView?
document_id=x744896&serialid=jqpXv9hakzYEokgnKchb4A1AQvWzTV95Lv0qoiZOu20%3D).
12 OPDP receives discounts (in the form of effective rate guarantee) for specialty drugs from its Third-Party
Administrator (Moda Health) and PBM (MedImpact) that are within 0.7% of the rebates received by large employer
groups and between 2.9% and 4.9% of the rebates negotiated by large commercial insurers. See: Moda Health
Northwest Prescription Drug Consortium, Competitive Market Assessment, The Burchfield Group, June 30, 2017,
slide 9.

Page iv of vii
The Oregon government has full control over OPDP. OPDP’s third-party administrator, Moda
Health, directly and via its PBM, MedImpact, already receives massive rebates from
manufacturers. OPDP could thus offer low drug prices, no more than 5% higher than
commercial health plans’ low net prices, to under- and uninsured Oregonians right now,
without HB 4005 or any other legislated solution.

The Oregon Legislature’s Task Force on Fair Pricing created by HB 4005 should thus begin by
addressing the immediate relief Oregon can provide to under- and uninsured Oregonians at
the pharmacy point of sale: access to OPDP’s net prices via rebate pass-through to discount
card members. This Task Force should, accordingly, start by asking OHA and Governor
Brown’s administration the right questions:

• Why don’t uninsured and underinsured Oregonians who subscribe to OPDP’s discount
card program already have net pricing transparency and 100% rebate pass-through on
brand-name drugs like Lantus insulin?

• Why is OPDP charging individual discount plan members full list price for opioid drugs,
analog insulin, and glucagon emergency kits?

• If OPDP does not pass rebates to all individual members in the form of low net prices
(and it demonstrably does not), what does OPDP do with the discount card program’s
share of the manufacturer rebates and discounts it prides itself on receiving via its 100%
rebate pass-through agreements with Moda and MedImpact?

• When will OPDP finally transition to drug-by-drug rebate negotiation for specialty drugs,
as recommended by The Burchfield Group in June 201713 and stated by Trevor Douglass
in April 2018?14

• If OHA already has access to all pricing data (including manufacturers’ net prices) via
OPDP, what is the purpose of HB 4005? Is HB 4005 a blame-shifting tool to distract
public attention from OPDP’s past and ongoing failure to pass manufacturer rebates

Moda Health Plan, Inc. Northwest Prescription Drug Consortium, Competitive Marketplace Assessment (“2016
13

Market Check”), June 30, 2017.
14NW Prescription Drug Consortium, Slide 16, available at: http://healthcare.oregon.gov/shiba/Documents/shiba-
opdp-presentation.pdf

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through to under- and uninsured Oregonians in the form of the promised lower prices at
the point of sale?

• Finally, when will OPDP be audited to assess why it has actually failed to pass through
rebates to all Oregonian discount plan members in the form of the lowest possible drug
prices, and how much should be refunded to members whom OPDP has required to pay
unrebated list prices for drugs on which the program receives deep discounts?

Mere compliance with the provisions of HB 4005 will cost Oregonian taxpayers over $1
million over the next 4 years—without delivering any reduction in drug prices to under- and
uninsured Oregonians at the pharmacy point of sale.15 This is a waste of taxpayer money and
an unconscionable evasive maneuver that obscures the availability of immediate relief, in a
program that is entirely under OHA’s control.

OPDP already receives massive manufacturer rebates. OPDP could immediately pass these
rebates to its discount card members in the form of low prices at the pharmacy point of sale.
The Type 1 Diabetes Defense Foundation thus urges the Oregon Legislature, Governor
Brown and the members of the Task Force on Fair Pricing of Prescription Drugs to refocus this
Task Force toward auditing the OPDP discount card program’s current failure to actually
deliver the lowest available price to under- and uninsured Oregonians—and toward
immediately accessible remedies that would deliver low drug prices to Oregonians.

152018 Joint Committee on Ways and Means, Subcommittee Recommendation (February 23, 2018), available at:
https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/146827

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Table of Contents

Oregon Prescription Drug Plan (OPDP) .......................................................................................1

Negotiated rebate pass-through to individual members (access to low net negotiated
prices) was the primary benefit an expanded OPDP was to deliver. .......................................4

OPDP has failed to deliver net negotiated prices to individual OPDP members who use
deep-discount rebated drugs like insulin. .................................................................................10

Only fixing Oregon’s existing prescription drug program will immediately achieve the
stated goals of HB 4005 and deliver price relief to under- and uninsured Oregonians. ....14

Page vii of vii
Oregon Prescription Drug Plan (OPDP)

The Oregon Prescription Drug Plan (OPDP) is a bulk drug purchasing program established in
2003 (SB 875).16 “This bulk purchasing program [was] designed to allow participants to
receive discounted prices and rebates, making drugs available to participants at a lower
cost.”17 The Oregon Prescription Drug Program has now been in the business of managing a
prescription drug benefit program for fifteen years.18

The purpose of the program is to purchase prescription drugs or reimburse pharmacies for
prescription drugs in order to receive discounted prices and rebates; make prescription
drugs available at the lowest possible cost to participants in the program; and maintain a list
of prescription drugs recommended as the most effective prescription drugs available at the
best possible prices.

Enrollees apply for the program through the Department of Administrative Services, and the
department issues each participant a card that may be used when purchasing prescription
drugs to secure discounts. Originally, program participation was limited by age and income,
but Ballot Measure 44 (2006) opened the program to all Oregonians without prescription
drug coverage.

2006’s Ballot Measure 44 promised that expanding OPDP to all Oregonians would deliver
“the best possible prices,” to be achieved by “negotiat[ing] price discounts and rebates with
prescription drug manufacturers.”19 SB 362 (2007) further expanded eligibility to those who

16Sponsored by State Sen. Bill Morrisette, D-Springfield (retired) and Representative Mitch Greenlick,
D-Portland, District 33, http://www.oregonlegislature.gov/Greenlick. Rep. Greenlick also sponsored SB 362 in
2007. He was director of the Kaiser Permanente Center for Health Research and Vice President for Research, Kaiser
Foundation Hospitals, for more than 30 years, until he retired from KP in 1995. He is now professor emeritus and
past chair of the Department of Public Health and Preventive Medicine in the Medical School of OHSU.
172003 Summary of Legislation, A Publication of Legislative Administration Committee Services, available at:
https://www.oregonlegislature.gov/lpro/summleg/2003SummaryOfLegislation.pdf
18As stated in the preamble of HB 4005, “the state has a substantial public interest in the price and cost of
prescription drugs... [D]isclosure of information relating to the cost and pricing of prescription drugs [provides]
accountability for prescription drug pricing.” Compliance with HB 4005 can thus be immediately achieved by the
State of Oregon, via its own prescription drug program, OPDP, managed by OHA through Moda Health and its
PBM, MedImpact.
19“Governor Kulongoski Supports Measure 44 As Another Step to Reduce Health Care Costs for All Oregonians,”
Official 2006 General Election Voters’ Pamphlet, p. 87.

Page 1 of 15
are underinsured for prescription drug coverage and to private entities and labor
organizations.

OPDP purchases prescription drugs via the Northwest Prescription Drug Consortium (NPDC),
an interstate joint venture between Oregon and Washington (OPDP & WPDP) established in
2006. OPDP is thus generally referred to as a multi-state pharmaceutical bulk purchasing
program. OPDP is also a state-sponsored prescription discount card program administered
by Moda Health and using MedImpact as its PBM. Oregon-based Moda Health (dba Moda),
previously known as the ODS Companies, Inc. (dba as ODS Health), is the current contractor
(third-party administrator or TPA) for the consortium. 20 Since 2007, Moda has handled all
services for the consortium, including network development, claims processing, benefit
administration, all drug management programs, mail order, and more recently the group
purchasing organization programs for facilities and eligible employer and union groups.
MedImpact Healthcare Systems, Inc. (dba PilotRx) handles all claims processing and
pharmacy payment.

The full amount of the rebates is paid or credited directly to the Participating Programs. As
eloquently explained by Oregon’s Governor Brown to the U.S. Senate H.E.L.P. Committee in
March 2018, “Innovative programs [like the Oregon Prescription Drug Program and the
Northwest Prescription Drug Consortium with Washington] have enabled Oregonians to
benefit from more aggressive prescription drug pricing, a result of pooling our drug
purchasing. Since 2007, groups that joined the Consortium have seen savings on their
pharmacy benefit programs, more aggressive prescription drug prices, 100% pass- through
pricing on drug costs and manufacturer rebates, lower administrative costs and complete
program transparency.”21

20 Negotiating manufacturer rebates, monitoring prescription patterns, collecting payments, centralizing
transaction data and maintaining adequate records regarding the disbursement of prescription drugs are usual
corporate functions of this type of organization. Pharmacy Benefit Managers (PBMs) and prescription drug benefit
administrators collect, aggregate and report on prescription drug acquisition costs, manufacturer rebates, net and
list prices, claims expense and usage (including prescription volumes) by client type and dispensing location
during the normal course of their business. Since prescription drug retailing and benefit management is also the
core business of Moda Health, as a private commercial insurer (competing with OPDP), historical drug pricing
information can be retrieved from Moda and MedImpact IT systems. Moda also maintains extensive historical
pricing records, to the CDN and county level, for financial reporting, statutory/commercial actuarial valuation as
well as internal estimating and modeling purposes.
21Kate Brown, Governor of Oregon, Testimony before the Senate Committee on Health, Education, Labor and
Pensions, March 8, 2018. Available at: https://www.help.senate.gov/imo/media/doc/Brown11.pdf

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Participating Programs thus obtain the lowest net cost for prescription medications. As a
result, these programs (state programs, union plans and employer groups) access, via NPDC/
OPDP, specialty drugs at a net price that is broadly equivalent to the price negotiated by
commercial insurers. The Consortium’s pass-through rebate arrangements apply to both
traditional and specialty drugs. Rebates and other remuneration are 100% auditable by OPDP
to the National Drug Code (NDC) level. OPDP's stringent performance guarantees are
measured and confidentially audited yearly — but they are not subject to any mandatory
disclosure from a regulatory authority. 22 OPDP card discount program is thus totally opaque,
i.e. operated by OHA outside any form of meaningful public reporting and accountability.

OPDP’s program price is statutorily defined by ORS 414.312(1)(c) as the “lowest possible
cost” under ORS 414.312(2)(b); it is as further defined by OHA Rule 431-121-2000(17) to
mean the reimbursement rates and prescription drug prices established by the OPDP
Administrator directly or indirectly through a contract with a designated entity, including … all
applicable manufacturers discounts and rebates.” There is only one definition, and this
definition applies to all participating programs as well as OPDP discount card program.

Individual members of the discount card program, an integral part of OPDP, should then
benefit from the low net prices that the expanded discount card program has enabled OPDP
to obtain.23 The Oregon Drug Prescription Program is supposed to help low-income
uninsured and underinsured Oregonians afford the high cost of prescription drugs. Yet
though OPDP negotiates deep discounts from manufacturers for analog insulins and other
brand-name drugs, individual OPDP discount card members pay unrebated list prices for
brand and specialty drugs such as analog insulin and glucagon/glucagen hypokits.

22 OPDP is not subject to public reporting requirements, and OHA mandates that performance audits of its rebate
program remain confidential. The Oregon All Payer All Claims Database (APAC) is a database that houses
administrative health care data for Oregon’s insured populations. OPDP itself is not an insurance carrier—OPDP
does not provide health insurance to its individual members. OPDP’s third-party administrator does not provide
any service to OPDP’s individual members “in relation with health insurance coverage.” Moda, acting as TPA for
OPDP’s drug prescription services to individual members, isn’t a TPA within the meaning of APAC. As a result,
OPDP’s TPA, as a drug bulk purchasing service to individual uninsured members, isn’t subject to any mandatory
reporting requirements under OHA Rule 409-025-0110. Even if OPDP were reporting to APAC, a query of the
APAC database would not provide any information regarding negotiated prices. The APAC database does not
track OPDP’s negotiated program prices and associated manufacturer rebates — it only tracks pharmacy claims
expense (OHA Rule 409-025-0120(d), Data File Layout, Format, and Coding Requirements).
2364% of all OPDP individual members now belong to the discount card program. The expanded discount card
program has more than doubled the size of OPDP; OPDP is thus in a position to negotiate larger discounts and
rebates from manufacturers.

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Negotiated rebate pass-through to individual members
(access to low net negotiated prices) was the primary
benefit an expanded OPDP was to deliver.

Supporters of Measure 44 universally described negotiated rebate pass-through to individual
members (access to low net prices that commercial insurers receive) as the primary benefit an
expanded OPDP would deliver to under- and uninsured Oregonians:

• The Oregon Nurses Association stated that OPDP would allow uninsured working
Oregonians with diabetes, who couldn’t
afford the insulin they need, to have “Oregon consumers deserve the same
access to affordable insulin.24 negotiating power as big insurance
companies.” — Laura Etherton, Oregon
• OSPIRG argued that “Oregon consumers
State Public Interest Research Group
deserve the same negotiating power as
(OSPIRG) (2007)
big insurance companies” and noted that
“uninsured Oregonians pay 61% more
than what the drug companies charge federal agencies like the Veterans Administration
for the same drugs. That’s because the uninsured have no one negotiating lower prices
on their behalf. [OPDP] offers a smart solution, leveraging the buying power of more
Oregonians to negotiate lower prices. Joining together, consumers have the power to
negotiate a fair price for our prescriptions.”25

• SEIU Local 503 also pledged that, with OPDP, “Oregonians will have the right to
negotiate reduced prescription prices – just like the big insurance companies do now.” 26

• The AARP argued that OPDP would give uninsured, but also insured with high out-of-
pocket costs (e.g. seniors on Medicare Part D who fall into the “donut hole”) access to a

24“Oregon Nurses Ask for your YES Vote on Measure 44 for affordable prescriptions,” Official 2006 General
Election Voters’ Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 87.
25“Oregon consumers deserve the same negotiating power as big insurance companies,” Official 2006 General
Election Voters’ Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 95.
26“SEIU 503 MEMBERS URGE A YES VOTE ON MEASURE 44,” Official 2006 General Election Voters’ Pamphlet, 1 of
2 Voters’ Pamphlet State Measures, p. 97

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valuable safety net in the form of affordable life-saving medicines, increase access to
more affordable life-saving medicines, and rein in prescription drug costs.27

• The AFL-CIO noted that “[w]e all know
“Measure 44 allows working families to
that buying in bulk saves money. This
buy in bulk and negotiate real savings,
holds true for buying medicine. The more
just like veterans and big insurance
Oregonians join together, the more
companies.” — Tom Chamberlain,
power we have to get discounts that
President, Oregon AFL-CIO (2007)
lower health care costs for all of us.”28 Tom
Chamberlain, President, Oregon AFL-CIO,
also candidly admitted that “Measure 44 won’t cost taxpayers a single extra penny,
because the administrative expenses to run this program are already in place. By
negotiating with drug manufacturers and pharmacies, and gaining health care savings
across the state, Measure 44 pays for
itself”29 — i.e. manufacturer rebates earned
“Measure 44 will help stem the
by under- and uninsured Oregonians who
skyrocketing cost of health care for all
buy brand and specialty drugs would be
used to offset the program costs instead Oregonians by lowering prescription
of decreasing the cost of these drugs to drug prices for more than a million
this subset of patients. Oregonians who currently lack
prescription drug insurance coverage.”
• The Oregon State Fire Fighters Council
— Lynn Lundquist, Oregon Business
hoped that “Measure 44 [would ensure]
Association (2007)
that everyone in Oregon gets a fair deal.
Individuals [would] have the same bulk
purchasing power that the big insurance companies have when they negotiate lower
prices with the drug companies.”30

27“AARP Oregon urges “YES” vote on Measure 44,” Official 2006 General Election Voters’ Pamphlet, 1 of 2 Voters’
Pamphlet State Measures, p. 88. Jerry Cohen, AARP State Director was a Measure Sponsor. AARP was also one of
the key sponsors of HB 4005.
28“The Oregon AFL-CIO wants health care to be affordable for ALL Oregonians,” Official 2006 General Election
Voters’ Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 89.
29“The Oregon AFL-CIO wants health care to be affordable for ALL Oregonians,” Official 2006 General Election
Voters’ Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 89.

“Measure 44 will make prescription drugs more affordable and help 1 million people stay healthy,” Official 2006
30

General Election Voters’ Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 90.

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• The League of Women Voters of Oregon believed that OPDP “will lower prescription
drug costs by up to 60 percent for more than one million Oregonians estimated to be
without prescription coverage, by allowing them to be part of a purchasing pool [and
thus benefit from] the savings realized
from deep discounts, rebates and grants “Uninsured Oregonians are charged
negotiated with drug companies.”31 more for their prescriptions drugs than
insurance companies or other big
• Measure 44 Sponsor Senator Bill
purchasers are. It’s not fair. That’s why
Morrisette pledged that “[u]nlike the
we support Measure 44.” — Christy B.
federal government’s prescription drug
Mason, Deputy Director, Our Oregon
plan, the Oregon Prescription Drug
(2007)
Program … actually lowers prescription
drug prices… [and has] a strong track
record of saving participants as much as 60% off their medications.”32

• The Oregon AFSCME Retirees Association pledged that “participants can use their
OPDP card at 90% of Oregon pharmacies and nationwide chains to pay the discounted
price for their prescriptions.”33

In their statements in support of Measure 44 published in the Official 2006 General Election
Voters’ Pamphlet, supporters mentioned “diabetes” five times, “insulin” two times, and
“chronic disease” seven times. In 2018 the same groups, supporting HB 4005, did not
mention OPDP once—despite the same heavy emphasis on ‘out-of-control’ insulin prices and
diabetes.

Measure 44 passed with 78% of the vote.34 OPDP has a clear and uncompromising mandate
for passing the full benefit of low negotiated drug prices net of manufacturer rebates
(equivalent to the low net prices negotiated by commercial insurers) to under- and uninsured
Oregonians. Despite its political legitimacy, this mandate has yet to be implemented.

31“The League of Women Voters of Oregon supports Measure 44,” Official 2006 General Election Voters’
Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 90.
32“An Important Message from Measure 44 Sponsor Senator Bill Morrisette,” Official 2006 General Election Voters’
Pamphlet, 1 of 2 Voters’ Pamphlet State Measures, p. 91.
33“An Important Message from Oregon Seniors,” Official 2006 General Election Voters’ Pamphlet, 1 of 2 Voters’
Pamphlet State Measures, p. 91.
34 https://ballotpedia.org/Oregon_Ballot_Measure_44,_Prescription_Drug_Purchasing_Program_(2006)

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Senate Bill 362,35 passed by the House in 2007, subsequently expanded OPDP to include
underinsured Oregonians but also labor organizations and employer-sponsored health plans
—the same groups that this year supported HB 4005. SB 362, like HB 4005 some years later,
was passed on an emergency basis, “for the immediate preservation of the public peace,
health and safety.”36 The emergency clause was added as Section 3 (previously the audit
clause) by the House Committee on Health Care out of concern for “individuals who lack
insurance or are underinsured for prescription
drug coverage.”37
“Currently, these persons pay the
According to State Representative Nancy highest prices that the market will bear
Nathanson, by “piggybacking on [November for prescription drugs. Under Measure
2006] successful Ballot Measure 44, [SB 362 44, they will be able to get their
was to] greatly increase the number of people” medications at the best prices we can
who should have benefited from lower drug negotiate for them.” — Theodore R.
costs.38 Governor Ted Kulongoski promised, in Kulongoski, Governor (2007)
April 2007, that “[t]hrough the power of bulk
purchasing for prescriptions and by pooling
resources together, the state is able to negotiate lower prices for prescriptions than what
individuals and businesses normally could negotiate.“39

OPDP has more than doubled in size, but the savings did not materialize for individual
members of its discount card program who need ‘expensive’ brand and specialty drugs such
as Lantus insulin.

35 https://olis.leg.state.or.us/liz/2007R1/Measures/Overview/SB362
36“This 2007 Act being necessary for the immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2007 Act takes effect on its passage.” SB 362, Section 3, available at:
https://olis.leg.state.or.us/liz/2007R1/Downloads/MeasureDocument/SB362/Enrolled.
37 https://olis.leg.state.or.us/liz/2007R1/Downloads/MeasureAnalysisDocument/5079
38Representative Nancy Nathanson, Democrat - District 13 - Eugene, http://www.oregonlegislature.gov/
nathanson. Statement on SB 362: https://www.oregonlegislature.gov/nathanson/Documents/
newsletter_041807.htm
39 Press release from Governor Ted Kulongoski, April 26, 2007,“ Governor Signs Legislation to Expand the Oregon
Prescription Drug Program.” This document was deleted from the Oregon State Archives at oregon.gov sometime
after April 11, 2018, but it is still available via Google cache at:
http://webcache.googleusercontent.com/search?q=cache:XIKDFjlpZiIJ:archivedwebsites.sos.state.or.us/
Governor_Kulongoski_2011/governor.oregon.gov/Gov/P2007/
press_042607.shtml&num=1&client=safari&hl=en&gl=us&strip=1&vwsrc=0

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Through OPDP, Lantus insulin should now be available to under- and uninsured Oregonians
for a low net price at or below $68.25 per vial.40 And yet, in February 2018, Debbie Gehlken,
an individual with insulin-dependent diabetes who testified in support of HB 4005, told
Oregon legislators that Lantus insulin, at her local Newport pharmacy, then cost $260.28 per
vial —a price consistent with the Oregon Average Actual Acquisition Cost and CMS’ National
Average Drug Acquisition Cost in late 2017.41 She reportedly could not purchase Lantus
insulin in Oregon at a price remotely close to the low net price negotiated by commercial
health plans (about $65 per vial) or even to the higher price she paid a Canadian retailer
($95.35 per vial).42

In her testimony, Ms. Gehlken did not mention OPDP’s failure to give her access to the lower
prices available to commercial insurers; she solely blamed insulin manufacturers for her
plight, accusing the pharmaceutical industry of price gouging resulting in “Oregonians like
[her] paying too high a cost just to stay healthy.”43 Ms. Gehlken did not apparently realize that
OHA’s OPDP—not Sanofi—could have prevented her from overpaying for her Lantus insulin,

40Lantus is one of the most heavily rebated analog insulins (over 70% of list price). Assuming a supra-competitive
net price of $65 (consistent with national average rebating off list price as estimated by industry observers and
data aggregators such as SSR Health), OPDP’s guarantee should result in a net price of $68.25 — at most 5% above
the average net price received by large commercial health plans. As of May 2018, OPDP's per-vial price to
individual members for Lantus is $264.81. OPDP drug prices can be checked via: http://www.oregon.gov/oha/
HPA/CSI-OPDP/Pages/Drug-Costs.aspx
41 The Oregon Health Authority (OHA) received federal approval from the Centers for Medicare and Medicaid
Services to implement AAAC reimbursement methodology for prescription products dispensed to OHP clients on
a fee-for-service basis. For brand drugs like insulin, this method reflects the true pharmacy acquisition cost for
drugs and the cost of distribution more accurately than artificial proprietary pricing constructs like Wholesale
Acquisition Cost. FAQ available at: http://www.oregon.gov/oha/HSD/OHP/documents/aaac-qa.pdf. Both the
OAAAC and NADAC databases are updated on a weekly basis, thus providing actual list prices for specialty drugs
(inclusive of distribution fee). Current NADAC for a 10 ml vial of Lantus is $258.38 (https://data.medicaid.gov/
Drug-Pricing-and-Payment/NADAC-National-Average-Drug-Acquisition-Cost-/a4y5-998d/data). Current Oregon
AAAC is $259.06 as of April 13, 2018. (http://www.mslc.com/uploadedFiles/Oregon/AACArchive/
OHA%20Brand%20Web%20Listing_20180515_state.pdf). In October 2017, the AAAC for that same vial was
$246.72. The price quoted by Ms. Gehlken for Lantus insulin was therefore the pharmacy actual acquisition cost
plus a dispensing fee that would barely cover a pharmacy’s cost for dispensing (about $12 per script for a retail
chain based on a June 2017 survey of dispensing fees in Oregon). Pharmacies’ cash or Usual & Customary prices,
the prices they charge to individuals without insurance, is generally AAAC plus a 15% dispensing fee (or $284 for
that same vial of Lantus insulin as of February 2018). The price quoted by Ms. Gehlken was thus likely either the
OPDP price then offered by MedImpact or the list price then used by her insurance company for reimbursement
purposes (coinsurance or ‘cost’ sharing).
42Presumably these purchases were made via a Canadian online retailer. In person at Canadian pharmacies, a 10
ml vial of analog insulin can be purchased over-the-counter for about USD $25.
43 https://olis.leg.state.or.us/liz/2018R1/Downloads/CommitteeMeetingDocument/146256

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had OPDP not been left “unchecked and unaccountable to Oregonians.”44 Patients like her
are not the victims of market dysfunction; they are the victims of regulatory dysfunction and
systemic breakdown of public oversight over an OHA-managed public PBM program that has
for years been overcharging under- and uninsured Oregonians (discount card program
members) while, on the other hand, delivering the full benefit of its low net negotiated prices
to state employee health plans and union plans. Patients like Ms. Gehlken have been the
victims of Oregon’s failure to execute the mandate delivered by the laws that created and
then expanded OPDP.

The State of Oregon has the power, and now has the duty, to fulfill its legislated mandate by
immediately directing that the OPDP discount card program pass estimated rebates, in the
form of the lowest possible net prices, to its individual discount card members at the
pharmacy point of sale.45

44In 2018, none of the many patients, nurses, pharmacists, doctors, hospitals, health care advocates, health plans,
and others who came together to support HB 4005 in cooperation with the payer-sponsored coalition Oregonians
for Affordable Drug Prices Now mentioned OPDP at all during hearings for the bill. During those hearings Moda
Health, OPDP Third-Party Administrator, misrepresented the benefits OPDP delivers to its individual prescription
discount card members.

To make individual Oregonians whole, OHA might also have to refund past and current OPDP discount card
45

members for overcharges on deep discount rebatable specialty drugs.

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OPDP has failed to deliver net negotiated prices to
individual OPDP members who use deep-discount
rebated drugs like insulin.

OPDP seeks rebates from manufacturers, Group Purchasing Organizations and Wholesalers
in order to provide the lowest possible drug prices to all participants in the program.
Underinsured individual participants are supposed to be able to purchase, though OPDP,
prescription drugs at the same discounts large employer groups receive.46

At the program level, OPDP benefits from 100% rebate pass-through agreements (including
pharmacy costs and rebates) with a flat administration fee per paid transaction (instead of
rebate retention rate), resulting in “100% transparency on pharmacy discounts, rebates and
administration fees.” In March of this year, Governor Brown testified to the U.S. Senate HELP
committee that state programs like OPDP and the Northwest Drug Pricing Consortium obtain
“100% pass-through pricing on drug costs and manufacturer rebates.”47 These rebates are
not passed through to individual discount card members, under- and uninsured Oregonians.

As of February 2007, OPDP had enrolled approximately 12,500 individual enrollees with an
average savings of $28 per prescription.48 These Oregonian seniors were supposed to
receive 60% discounts on their drug prices.49 In 2017, NPDC (OPDP and WPDP) facilitates
more than $800 million in annual drug purchases for over 1 million people in participating
groups and facilities. As of February 28, 2018, 305,407 un- or underinsured Oregonians (or
123% of the state’s reported uninsured rate) relied on OPDP for purchasing their drugs.50
OPDP officially reports that, in 2017, “Discount Card Program Members” received an average

Background Brief on Prescription Drugs, Legislative Committee Services (September 2014), available at: https://
46

www.oregonlegislature.gov/lpro/Publications/BB2014PrescriptionDrugs.pdf
47Gov. Kate Brown, Testimony before the Senate Committee on Health, Education, Labor and Pensions, (March 8,
2018), available at: https://www.help.senate.gov/imo/media/doc/Brown11.pdf
48 https://olis.leg.state.or.us/liz/2007R1/Downloads/MeasureAnalysisDocument/5077
49“Statement in favor of Ballot Measure 44 by Theodore R. Kulongoski, Governor,” Official 2006 General Election
Voters’ Pamphlet, p. 87. Available at: http://sos.oregon.gov/elections/Documents/pamphlet/2006/general-
election-measures.pdf
50In 2017, the uninsured rate in Oregon was about 6.2% or 245,000 Oregonians. See: http://www.oregon.gov/
oha/HPA/ANALYTICS/InsuranceData/2017-OHIS-Early-Release-Results.pdf

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78% rebate on list prices, i.e. only spent $4,628,314 for point-of-sale claims expense
(pharmacies’ acquisition costs or list prices) amounting to $17,056,153.51 And yet, OPDP
prices all opioid and insulin brand or specialty drugs sold to individual discount card
members at full, unrebated, list prices. 52 For example, OPDP charges its individual discount
card members $269.85 per 10 ml vial for Humalog insulin and $270.71 for Novolog. OPDP's
per-vial price to individual members for Lantus is $264.81.53 Meanwhile, nationwide, average
net cost to large employer plans or insurers for these same vials of insulin is about 1/4 this
amount, around $65 per vial.

Whatever savings OPDP may negotiate as a program, OPDP’s claim that discount card
program members receive a 78% rebate on average is thus likely to be grossly inaccurate.54
Manufacturer rebates are paid to OPDP by Moda as lump sums on a monthly schedule. These
rebates are not passed through to discount card members at the point of sale on a drug-by-
drug basis in the form of the lowest price available. Nor has OPDP passed through these
rebates to the individual members who bought rebated specialty or brand-name drugs in the
form of post-transaction refunds.55

51 Slide 23, http://healthcare.oregon.gov/shiba/Documents/shiba-opdp-presentation.pdf
52T1DF performed spot checks via MedImpact’s online tool and monitored the acquisition of a vial of Novolog
insulin via an individual OPDP Discount Card Program membership.
53These OPDP prices for insulin are marginally lower than pharmacies’ cash prices that uninsured must pay. (The
pharmacy’s cash price is also called usual and customary price or U&C price.) They are consistent with the
pharmacy prices negotiated by payers and PBMs in Oregon, i.e. Oregon Average Actual Acquisition Cost (list
price plus wholesaler’s distribution fee) plus the pharmacy’s dispensing fee, from 3% to 6% of acquisition cost.
OPDP drug prices can be checked via: http://www.oregon.gov/oha/HPA/CSI-OPDP/Pages/Drug-Costs.aspx
54 It is unclear how a discount card program that does not pass manufacturer rebates through in the form of lower
net prices could deliver 78% rebates at the point of sale. This ‘rebate’ possibly refers to the artificial spread
between Oregon actual acquisition costs (the pharmacies’ actual acquisition costs) and the pricing benchmark
called AWP. For generic drugs, actual acquisition costs are within AWP minus 75% and AWP minus 85%
depending on utilization mix. This spread is not a rebate or discount because AWP is not a price (it is jokingly
referred to in the industry as “Ain’t What’s Paid.” It is an artificial composite benchmark generated by third-party
consultancies (via proprietary algorithms) for the purpose of coordinating reimbursement transactions. In the
alternative, 78% ($12,427,839) may be the actual amount of undistributed discount amounts earned by OPDP
discount card members and kept by OHA to offset overall program costs—thus amounting to a condition-specific
fee solely paid by members with medical conditions treated with deep discount rebatable brand and specialty
drugs.
55OPDP could refund rebates, even under the current contract, by directing Moda Health to provide either the
estimated net price for the dispensed drug and/or a drug-by-drug breakdown of the monthly lump sum payment
based on the actual rebates, and thus net price, obtained by Moda’s PBM MedImpact. Moda could also make
estimated rebate information available to OPDP’s auditor for the purpose of assessing the reasonableness of its
price guarantee payment.

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The requirement that the Joint Legislative Audit Committee conduct a performance audit on
the operation of the Oregon Prescription Drug Program to identify net savings, if any, to the
participants in the program was deleted from SB 362 in committee.56 To date, no public audit
of OPDP’s discount card program has been performed to explain the discrepancy between
the high list prices offered by OPDP to individual members (unrebated list prices) and its
claim of 100% rebate pass-through.57

The Oregon Health Authority (OHA) has structured OPDP’s contracts with Moda to specifically
prevent OPDP from publicly documenting drug-by-drug rebate allocations, i.e. net prices.
OPDP’s contract with Moda delegates the annual audit of Moda’s rebate negotiation and
rebate program performance to an independent third party, with only summary information
disclosed to OPDP, keeping drug-by-drug rebate evaluations, and thus net price estimates,
outside OPDP’s public records and thus out of reach of the public.58

OHA has, however, the authority to demand that Moda Health and its PBM, MedImpact,
allocate these lump sum payments on a drug-by-drug basis based on the manufacturer
rebates they actually receive. Doing so would also lead to improved commercial
performance. A recent evaluation by outside consultants The Burchfield Group concluded
that the current mechanism used by OHA/OPDP to pass through manufacturer rebates leads
to sub-optimal commercial outcomes. As a result, “specialty drug pricing [i.e. discount
obtained] is below market.”59

In order to reduce OPDP’s net costs for specialty drugs, OPDP’s own consultant has
recommended “eliminating the effective rate guarantee over all specialty drugs and
obtaining drug-by-drug pricing,” with reimbursement to pharmacy networks based on

Senate Committee on Health and Human Services, February 7, 2007, at https://olis.leg.state.or.us/liz/2007R1/
56

Downloads/MeasureAnalysisDocument/5077
57While OPDP has never been officially audited since 2007, Oregon Health Plan is routinely audited. See, e.g.,
http://www.oregon.gov/oha/HSD/OHP/DataReportsDocs/
2017%20Professional%20Dispensing%20Fee%20Analysis.pdf
58 See, e.g., http://healthcare.oregon.gov/shiba/Documents/shiba-opdp-presentation.pdf. The Type 1 Diabetes
Defense Foundation, in March 2018, submitted two public records requests for rebate and drug pricing
information. These requests have not been responded to.
59Moda Health Northwest Prescription Drug Consortium, Competitive Market Assessment, The Burchfield Group,
June 30, 2017, slides 12 and 13.

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acquisition cost plus fee.60 Instead of auditing OPDP and requiring the immediate
implementation of the Burchfield Group’s recommendations—creating a drug-by-drug pricing
structure that would finally result in passing the low net prices OPDP negotiates with
manufacturers through to under- and uninsured Oregonians, it seems that Oregon’s
legislature, union plans and health insurers have instead focused the state’s attention on
passing a blame-shifting ‘transparency’ law, HB 4005, that implausibly asserts the state is not
otherwise capable of understanding pricing in a sphere where Oregon has played an active
role for 15 years.

Under- and uninsured Oregonians desperately need lower prices at the point of sale. But HB
4005 will not deliver any price relief to under- and uninsured Oregonians as long as OPDP is
allowed to continue overcharging its individual members of its discount card program.
Correcting OPDP’s failure to pass through low negotiated prices at the pharmacy point of
sale is the obvious first step in addressing a drug price/access crisis that HB 4005 has itself
declared to be an emergency.

60Moda Health Northwest Prescription Drug Consortium, Competitive Market Assessment, The Burchfield Group,
June 30, 2017, slide 13.

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Only fixing Oregon’s existing prescription drug program
will immediately achieve the stated goals of HB 4005 and
deliver price relief to under- and uninsured Oregonians.

Oregon can achieve both the stated goals of HB 4005— “drug pricing transparency” and
“lower prices to Oregonians”—tomorrow, simply by directing that OPDP fulfill its legislated
mandate to disclose net negotiated costs and deliver 100% point-of-sale rebate pass-through
to individual members.

This Task Force should thus:

• Investigate how the State of Oregon has used the manufacturer rebates OPDP has
obtained during the past 15 years on deep-discount rebated drugs like insulin and why
OPDP has continued to charge individual OPDP members full list prices for heavily
rebated diabetes and opioid drugs, among others. Individuals like Newport resident
Debbie Gehlken, who testified in support of HB 4005, would not have any need to buy
insulin from Canada if OPDP were delivering its low net negotiated prices to uninsured
or underinsured Oregonians who have high out-of-pocket costs or find themselves in the
Medicare Part D donut hole.

• Investigate OPDP’s failure to refund any portion of the manufacturer rebates OPDP has
received to the individual Discount Card Members who have purchased heavily rebated
drugs.

• Investigate OPDP’s current contract with Moda, including the structure of its rate
guarantee, audit regime and point-of-sale pricing in relation to OPDP’s mandate to
charge Discount Card Members the lowest possible prices.

• Investigate OPDP’s ongoing failure to transition to drug-by-drug pricing/rebating for
specialty drugs and to actually pass manufacturers’ rebates to Discount Card Members in
the form of the lowest possible net price at the pharmacy point of sale.

• Investigate the Oregon Department of Justice’s and Department of Consumer and
Business Services’ ongoing failure to audit OPDP regarding its failure to deliver promised
savings to Discount Card Members while programs, such as the Oregon Educators

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Benefit Board (OEBB), have received the full benefit of manufacturer rebates and other
discounts.

• Seek public disclosure of OPDP’s estimated net prices for deep discount specialty drugs
that Moda and MedImpact have negotiated with drug manufacturers on behalf of OPDP
and that OPDP should have passed through to its discount card members, under- and
uninsured Oregonians, in the form of the lowest prices available.

• Address, in its final report, OPDP’s breach of the public trust. 


About T1DF. The Type 1 Diabetes Defense Foundation is a nonpartisan Oregon-
based nonprofit 501(c)(3) dedicated to advancing equal rights and opportunities for all
people with type 1 and other forms of insulin-dependent diabetes. We focus on the
significant social impact of living with a condition that requires patients to make constant
dosing decisions with a drug that, without careful management and constant monitoring, can
kill them. T1DF strives to improve the regulatory, legal and social ecosystem essential to
development and adoption of new technologies and therapies, with an explicit commitment
to inclusive policies that will deliver for all Americans with diabetes, insured and uninsured,
equal access to standard-of-care pharmaceuticals and equipment.

T1DF accepts no funding from the pharmaceutical, pharmacy benefit management, or
insurance industries.

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