Simple Breakdown: Why Is Insulin So Expensive?

Aug 12, 2021 by David Wood

Simple Breakdown: Why Is Insulin So Expensive?
The problems with the American healthcare system are complex and far-reaching. The same can be said about the issues that have driven up the cost of insulin to the point that 1 in 4 people living with diabetes are forced to ration the drug.

One of the best articles for explaining the high cost of insulin was published by Mayo Clinic Proceedings in 2019.

According to this article, there are six reasons insulin prices have risen by over 1000% in the last 20 years.

1. The customer base for insulin is a vulnerable population willing to pay any amount for this life-saving drug. This fact, combined with the complications that arise from other reasons listed here, most especially a lack of market competition, has led to greed that survives even as these vulnerable people die.

2. There is a virtual monopoly in the insulin market that has existed for decades. According to the article: 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. Currently, there are only three companies authorized to sell insulin in the United States.

3. Patent abuse and evergreening. Every change, no matter how slight or inconsequential, that is made to an insulin formula results in patent extensions. Add to this the fact that analog insulins can be covered by multiple patents (Lantus currently has 70) and you end up with a drug that cannot be easily replicated and sold for less.

4. Barriers to biosimilar market entry. While this has improved in recent years thanks to congressional intervention and FDA support, getting biosimilar insulin to market has always been very difficult. The overuse of patents, frivolous lawsuits by large corporations, and difficulties obtaining coverage are the main reasons biosimilar drugs have historically not been pursued. 

5. PBMs and middlemen with considerable control over market prices. Pharmacy benefit managers are responsible for taking drugs and marketing them to wholesalers and pharmacies. These middlemen use their substantial power over the market and the conflicting interests of their many customers to drive up their cut of the profits. This results in huge increases in insulin prices over very short periods of time.

6. The lobbying power of pharmaceutical companies. The Big Three spend huge amounts of money on lobbying and advertising each year in order to thwart any attempts by the government to implement real solutions to the problems outlined above. Most recently, these companies have taken to creating “authorized generics” of their own products as a cheap PR move. Unfortunately, these more affordable products are intentionally not being widely distributed and make up a very small percentage of the insulin purchased each month.

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