Illustration: Sarah Grillo/Axios

A new type of a Medicare prescription drug plan will cap insulin costs at $35 per month for people who have diabetes. The Trump administration and every industry group were quick to hype the model as a win for everyone.

Reality check: Medicare's new model will bring some financial relief next year to patients who are struggling to afford their insulin. But experts say it doesn't change actual prices and gives cover to avoid more serious drug pricing reforms during the coronavirus pandemic.

The basics: Companies that sell Medicare drug plans can offer "enhanced" benefits that reduce how much people have to pay at the pharmacy.

  • However, based on complex rules within Medicare's drug coverage gap, these enhanced plans don't receive the full 70% discount paid by insulin manufacturers.
  • As a result, these plans don't offer enhanced benefits in the coverage gap, and that forces some seniors to pay high out-of-pocket sums for their drugs.

Driving the news: A new project through the Affordable Care Act's Innovation Center will allow these types of plans to receive the 70% discount if they cap monthly insulin costs, starting in 2021.

Yes, but: This only applies to insulin. People with diabetes often have to take other expensive medications, which won't get lower copays.

  • The model also doesn't affect the list or net price of any insulin.
  • An out-of-pocket cap means higher premiums for other beneficiaries and taxpayers, which Medicare chief Seema Verma acknowledged.

The big picture: Insulin has been one of the most politically charged medications, as people have died from rationing their insulin due to cost. But the health care industry wouldn't have endorsed this idea if companies didn't think there would be some payoff.

  • Health insurers and pharmacy benefit managers like it because they get to beef up drug benefits for people while taking on less financial risk. "It's a marketing tool to drive enrollment" to all of their private Medicare plans, according to a health care lobbyist.
  • The big insulin manufacturers like it, and have signed up for the program, because it's a relatively small amount of money they will have to pay ($250 million over five years is a pittance to the billions of dollars of annual insulin revenue). In exchange, they get a political talking point and could see higher sales if fewer seniors ration their insulin.

The bottom line: "If I were in the industry and didn't want to see a larger reform package, this is one way to take some heat off," said Stacie Dusetzina, a health policy researcher at Vanderbilt who studies Medicare's prescription drug program.

Go deeper: The boom times of insulin sales

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