Why is insulin so expensive?

Before 1922, a diagnosis of Type 1 Diabetes—a life-long condition where the pancreas cannot produce insulin—was more often than not a death sentence. All doctors could do at the time was suggest a carbohydrate-restricted diet and exercise. 

Then, in 1922, Frederick Banting and Charles Best discovered that injecting insulin extracted from cattle and pigs into patients effectively treated the disease. For the first time, diabetic patients had a life-saving treatment option. 

Fast forward approximately 40 years, and there are now three manufacturers—Eli Lilly, Novo Nordisk, and Sanofi—who produce a wide variety of insulin products, from rapid-acting forms (such as Humalog and Novolog) to long-acting ones (such as Lantus and Levemir). 

Yet, diabetes is currently one of the most expensive chronic diseases in the U.S.; the economic cost is approximately $327 billion. Specifically, type 1 diabetes, which affects 1.6 million Americans, puts an extreme financial burden on patients, as well as a logistical burden since treatment requires consistent access to insulin. Yet this life-saving drug costs more than 8x in the U.S. than any other nation, leaving 25% of patients unable to afford their medication. 

Why is insulin still so expensive? 

Typically, a drug’s price decreases over time as the medical benefits of that drug are established and the initial research costs are recuperated. Prices also typically go down when more manufacturers start producing the drug, which creates competition. 

Insulin is not a new drug, although it’s been proven that it is a medically-necessary one. And there are also three different manufacturers producing it. However, instead of decreasing, the price of insulin has only increased. From 2012 to 2018, insulin costs increased by 14% every year. 

There are two main reasons for this mind-boggling phenomenon, which we’ve summarized below. 

Reason #1: No generic version

It is a well-established economic fact that competition can drive down prices. When it comes to prescription medications, this typically occurs when a generic version of a drug is introduced to the market. The company that first develops and patents a drug owns the ability to make that drug formula for an exclusive period. The intention of this is to allow that drug company to make back the costs they invested in researching and inventing this new drug. 

However, once that exclusive period passes, their patent on the drug formula expires. That’s when other pharmaceutical manufacturers can produce versions of that drug, which are called “generic” equivalents. This increases the number of versions of the drug a patient has to choose from, thus encouraging competition between manufacturers, which then leads to lower prices. 

However, this has not happened with insulin. While patients do have the ability to choose from three different manufacturers, all three only produce brand-name versions of insulin. In other words, there are currently no generic forms of insulin available. And again, it’s the generic form of a drug that is typically significantly cheaper than brand-name versions. 

This leaves patients between a rock and a hard place. Their only option is to choose from equally-expensive versions of brand-name insulin. One reason for the lack of generic insulin may be that insulin belongs to a class of drugs that are notoriously hard to manufacture. It is considered a “biologic” drug, which is harder to make because they tend to be more “complex molecules.”

In addition to manufacturing complexities, a practice called “patent greening” is suspected to be partially responsible. Patent greening refers to the practice of manufacturers making small tweaks to their medication formulation to extend the exclusivity period of their patent and prevent other competitors. According to a study by Johns Hopkins, for more than 90 years, pharmaceutical companies have been making small improvements for this purpose. 

Reason #2: Not Enough Price Regulation

A second culprit for the inordinately high cost of insulin lies in the lack of price regulation of the existing insulin manufacturers. This is a broader problem in U.S. healthcare overall. The journey of a drug going from production to a patient’s medicine cabinet is riddled with middlemen. The lack of transparency around this process leaves room for these middlemen—in addition to large chain pharmacies and manufacturers themselves—to artificially inflate prices.

Unfortunately, the FDA cannot regulate pricing. Their purpose is to review and approve drugs based on efficacy and safety, not to monitor pricing. This responsibility falls to lawmakers instead; indeed, in many states, lawmakers are currently trying to lower insulin costs at the state-government level. But given the slow nature of the legislature and the pushback these lawmakers face from pharmaceutical companies and health insurance providers, this is not an easy task

Proposed laws that focus on limiting the price set by manufacturers are nearly guaranteed to fail, according to advocates for lowering insulin prices. Instead, lawmakers often try to focus on putting a limit on how much insurance companies can charge in the form of co-pays. However, this doesn’t help the millions of Americans who are uninsured (a number that has dramatically risen due to COVID-19). 

What’s next? 

In 2019, Colorado became the first state to cap the cost of insulin at $100, including out-of-pocket costs for those who are uninsured. While this is a victory for the diabetic population, the change is slow-going, and much more is needed. 

High insulin pricing, like all problems with American healthcare, remains a complicated and nuanced issue with no easy solution. However, at the end of the day, whatever the reason that is causing the hike in insulin prices, patients are the ones paying the ultimate price. When you are diagnosed with Type 1 diabetes, there is no “choice” when it comes to treatment. Insulin is life-saving. 

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