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Why insulin is overpriced

January 6, 2020

Topics: Quote of the Day

By Julia Belluz
Vox, November 7, 2019

When inventor Frederick Banting discovered insulin in 1923, he refused to put his name on the patent. He felt it was unethical for a doctor to profit from a discovery that would save lives. Banting’s co-inventors, James Collip and Charles Best, sold the insulin patent to the University of Toronto for a mere $1. They wanted everyone who needed their medication to be able to afford it.


The High Cost of Insulin in the United States: An Urgent Call to Action

By S. Vincent Rajkumar, M.D.
Mayo Clinic Proceedings, January 2020

Alec Smith was 23 when he was diagnosed with type 1 diabetes. He worked as a restaurant manager in Minnesota. At age 26, he could no longer stay on his mother’s health care insurance plan and needed to find his own coverage. On June 1, 2017, he was on his own. The insurance available to him came with a $7600 deductible and a monthly premium of approximately $440. Because he could not afford this, Alec decided to temporarily forego insurance coverage and purchase insulin with cash. Unfortunately for him, the cash price of insulin was far beyond his means. He decided to try and ration the amount of insulin he took till he had enough savings to purchase insurance. Sadly, on June 27, 2017, he was found dead in his apartment of diabetic ketoacidosis.

The most commonly used forms of analog insulin cost 10 times more in the United States than in any other developed country. There have been many other recent reports of deaths in patients with type 1 diabetes because of lack of affordable insulin.

The 3 main reasons cited by pharmaceutical companies for the high cost of new prescription drugs do not apply to insulin. First, the “high cost of development” is not relevant for a drug that is more than 100 years old; even the latest and most commonly used analog insulin products are all over 20 years old. Second, the pricing is not the product of a free market economy. Free market forces are clearly not operational; there is limited competition on price, the person who needs the product is not in a position to negotiate the price, and there is no relationship of price increases over time compared with overall market inflation. The price of insulin has risen inexplicably over the past 20 years at a rate far higher than the rate of inflation. One vial of Humalog (insulin lispro), which used to cost $21 in 1999, costs $332 in 2019, reflecting a price increase of more than 1000%. In contrast, insulin prices in other developed countries, including neighboring Canada, have stayed the same. Insulin pricing in the United States is the consequence of the exact opposite of a free market: extended monopoly on a lifesaving product in which prices can be increased at will, taking advantage of regulatory and legal restrictions on market entry and importation. Third, the arguments that high costs are needed for continued innovation and that attempts to lower or regulate the prices will hamper innovation are not a valid excuse. There is limited innovation when it comes to insulin; the more pressing need is affordability.

Reasons for the High Cost of Insulin

The number 1 reason for the high cost of insulin is the presence of a vulnerable population that needs insulin to survive.

Second, there is virtual monopoly on insulin that has been sustained for decades.

Third, there is the problem of patent evergreening. Newer formulations have prolonged the patent life and extended the monopoly on these products to the present day.

Fourth, there are barriers to the entry of biosimilars. Because insulin is a biological product, similar products that are almost identical to the parent drug are technically referred to as biosimilars and not as generics.

Fifth, there are middlemen who exercise considerable control over market share and stand to gain from a high price. Payments from the insurance company go through a pharmacy benefit manager (PBM) who negotiates the price of insulin with the retail pharmacy (negotiated price) as well as with the pharmaceutical company (in the form of rebates).

Finally, there is the lobbying power of pharmaceutical companies.

Possible Solutions at the State and Federal Policy Level

First, we need protection against monopoly, both for new drugs and for existing drugs.

Second, we need to reform the regulatory and legal processes such that there is an easier path for generics and biosimilars to enter the market.

Third, we need to reform the patent system to prevent overpatenting and patent abuse.

Fourth, we need a governmental or a nongovernmental agency to oversee pricing and make recommendations to Medicare and insurers on the maximum price of new and existing drugs including insulin.

Fifth, we need to ensure that any rebates that are paid by a manufacturer to a PBM are transparent and are passed on to the patient.

Sixth, we need nonprofit generic manufacturing.

Seventh, we need measures and laws that provide access to affordable and safe insulin in emergency circumstances, particularly for patients with type 1 diabetes who find themselves uninsured or unable to afford insulin.

Finally, we need greater advocacy from professional and patient organizations.

The tragedy of insulin prices and the rationing that follows is not something that happens in other developed countries, but it is common in the United States.



By Don McCanne, M.D.

The United States has the most expensive health care system in the world yet its performance falls below that of all other wealthy nations. How could this be?

The story of insulin can serve as a proxy for why our system fails so many of us. The original patent for this essential life-saving product was originally sold to the University of Toronto for one dollar, ensuring that it would always be affordable. Yet American exceptionalism, entrepreneurialism, and preferences for markets over public services has driven the price of insulin to a level that people are dying because they cannot afford it.

Whether the sources of financing for health care systems are predominantly public (taxes) or private (cash or insurance), other nations depend on public oversight of their health care system whereas we shift much of that oversight to the private sector even though we pay more per capita through our tax system than do almost all other nations. Handing public money to the private sector has not served us well in controlling health care spending, and especially has failed to ensure that all of us get the health care that we need.

The Mayo Clinic article lists possible solutions to the problem of overpriced insulin. Note that they are largely public sector solutions and certainly would be helpful. But they alone are not enough because all of the other severe deficiencies in our health care financing system would remain in place. Much more than tweaks, we need a fundamental change from a private business culture to a public service culture in the financing of health care. We can do that with a health care delivery system that is composed of both public and private nonprofit institutions (passive investors have to be eliminated in order to change the culture).

Of course, a well designed single payer model of Medicare for All would do precisely that. In contrast, merely adding a public option such as Medicare for Some would fail to change the culture. Worse, those proposals that would tear down the public financing structures that we do have in an effort to further privatize health care financing would leave us even worse off.

Let’s change the culture. Let’s bring everyone under the umbrella of single payer Medicare for All. We can afford it since we are already paying enough to do it, and all of us would get the care we need.

(On a personal note, The Madison Clinic for Pediatric Diabetes at UCSF was named after our granddaughter. She can afford her insulin, but it is not fair that others will die because they cannot afford theirs. Let’s change the culture.)


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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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