Insulin Insanity: Why are the Prices of Insulin So High in the U.S.?

 Sarah Geiselhart

Professor Horgan 

HST 401

01 May 2024

Insulin Insanity: Why are the Prices of Insulin so High in the U.S.?

Diabetic ketoacidosis, a lethal condition, occurs when the body does not have enough insulin, causing blood sugar levels to become so high that the blood becomes acidic. This, in turn, causes cells to become dehydrated and the body to stop functioning. In 2018, a woman named Nicole Holt-Smith lost her son, Alec, to diabetic ketoacidosis. Alec was one of over 30 million Americans that suffer from diabetes, and one of the 7 million that require daily insulin intake. Alec, like 1 in 4 Americans, was rationing his insulin to try and stretch his supply just a fraction longer to avoid paying the exorbitant out-of-pocket prices of insulin. He passed away just three days before he would receive his paycheck, which is when he had planned to replenish his supply of insulin (Sable-Smith). Over the years, the list prices (what a patient would pay out of pocket, assuming no insurance) of insulin have risen dramatically, negatively affecting the lives of millions of Americans. Humalog, a brand of fast-acting insulin manufactured by Eli Lilly, one of the largest producers of insulin, cost $21 per vial at its debut in 1996. Today, its list price is 10 times that amount (Locklear). 

A 2022 study conducted by Yale University found that most of those individuals who use insulin are insured. 41.1% have Medicare, 35.7% have private insurance, 11.1% have Medicaid, and 9.9% have other insurance. The remaining 2.2% have no insurance coverage whatsoever, and are forced to purchase insulin at list prices. Those who have no insurance pay the most for insulin, followed closely by those who have Medicare (Locklear). Alec was uninsured, as his yearly salary of $35,000 was too high to qualify for Medicaid, but too low to afford any private or state health insurance plans (Sable-Smith). As he was paying the full list price of insulin and rationing his doses, Alec was most likely part of the 14% of Americans demonstrating “catastrophic spending.” In other words, he was spending more than 40% of his post-subsistence income (income available after food and housing) on insulin. Although having insurance is better than not, 61% of those burdened by catastrophic spending are Medicare beneficiaries (Locklear). Medicare beneficiaries who use insulin had, on average, lower incomes than those with private, other, or no insurance. 25 million Medicare beneficiaries (45%), have incomes that fall below 200% of the federal poverty level. This equates to about $24,000 per person, per year. This shows that the extreme list prices of insulin only serve to hurt those that are already struggling to afford the most basic necessities. 

Other countries do not have the same issues with insulin as the United States. This is due to the capitalistic free market approach that the United States has chosen to take towards healthcare. In contrast, we can look at the United Kingdom, which has a universal healthcare system. This means that the government ensures that all residents have access to low-cost healthcare. The government of the United Kingdom ensures that its citizens are able to obtain insulin at an extremely low cost by directly negotiating with pharmaceutical companies. As the largest buyer of insulin in the United Kingdom, the government is allowed to directly set the price of insulin. If one of the pharmaceutical companies does not agree with the price, then they simply miss out on the market, and another company will happily take their market share. This method has worked extremely well; in 2023 the price of a vial of insulin (30 day supply) in the United Kingdom was $7.23. The same vial of insulin in the United States was $275 for those paying out of pocket (Knox). 

This free market approach, combined with the exploitation of current patent laws in the United States and its capitalistic market, lead to these extremely high insulin prices. A theoretical drug development process is as follows: a drug delivered via an injectable pen is developed by Company X; they are granted a patent on the drug and market exclusivity for 10 years. Under their sole control of the market, the prices of the drug skyrocket. When Company X’s patent expires, generic versions of the drug flood the market, and prices of the drug decrease. Company X does not like this hit to their profit, and must find a workaround. As a result, they patent every component of the injectable pen, from the locking mechanism’s spring to the needle that injects the drug. Now, no more generics can enter the market, as the injectable pen is a crucial component that is needed to deliver the drug. Any similar deliverable devices are infringing on Company X’s patent. Company X has regained control of the market, and prices of the drug rise once again.

This technique, called “patent thickets” have been found to extend the legal protection surrounding a drug by an average of 5.2 years. In the case of insulin, any patents companies have on the drug itself are either in the process of expiring or have already expired. However, the insulin itself is useless if there is no way to deliver it to the body, hence the numerous patents on the insulin delivery device. This has allowed three companies, aptly named “The Big Three,” Novo Nordisk, Eli Lilly, and Sanofi, to control 52%, 23%, and 17% of the global insulin market, respectively. Their absolute control establishes extreme pricing barriers; already established companies such as Merck and Samsung Bioepis have completely abandoned the idea of entering the U.S. insulin market (Knox). 

Although this situation may seem hopeless, measures have been taken to alleviate the burden on American consumers. Under the 2022 Inflation Reduction Act, insulin has been capped at $35 for those with Medicare and Medicaid effective January 1, 2023. This resulted in ~70% reduction of the list prices of insulin. If these measures had been taken in 2020, it is estimated that 1.5 million Medicare beneficiaries who used insulin would have saved $734 million in Part D and $27 million in Part B (Sayed, et. al). However, these measures did not alleviate the cost for those paying out of pocket or covered by private insurance. Under the pressure of government action and public outcry, Eli Lilly announced that starting March 1, 2023, it would also set a cap of $35 on its insulin products for the uninsured and those with private insurance (Luhby). Novo Nordisk and Sanofi followed shortly after with the same price cap, though this decision was most likely because they would not be competitive in the market had they kept their previous list prices. It is also important to note that this plan is only applicable at the moment to certain insulin products from each company (their most general types of insulin); consumers will be expected to pay full price for all other products.

A formulation approach is also being taken into consideration. Insulin is a biologic, or a drug derived from living materials. It was originally extracted from the livers of cattle and pigs and then later synthesized from E.coli bacteria starting in 1978. However, the Food and Drug Administration (FDA), had no established biologics approval process until 2020. As a result, insulin was classified as a small molecule drug. Under this classification, insulin was not eligible to have market biosimilars created. A biosimilar is a drug that is highly similar to the biological reference points. From a chemistry standpoint, this means that the active compound of the drug still remains the same, but there can be minor changes in inactive materials as long as they do not affect clinical aspects of the molecule such as potency, purity, efficacy, and safety. The reclassification of insulin in 2020 as a biologic allowed the creation of biosimilars, which began the introduction of competitor insulin products in the United States, thereby improving the affordability and accessibility of insulin. However, this approach does have its share of drawbacks. Around eight years of research and development and $250 million are needed to create a single biosimilar (Scott). As a result of the length and expense, there are currently only two biosimilar insulins on the market, though more are likely on the way. However, even the small presence of these two biosimilar products has had a big impact, as their average list prices are 15% lower than their Big Three counterparts.

The California government is taking a more radical approach to the idea of biosimilar insulins, called the CalRx initiative. Governor Gavin Newsom entered a $50 million, 10-year contract in September 2020 with Civica Rx, a nonprofit drug manufacturer (Ibarra). Their overarching goal is to establish a government factory, operated by government workers, producing government owned medication. Three biosimilar insulins would be created; interchangeable with Eli Lilly’s Humalog, Novo Nordisk’s NovoLog, and Sanofi’s Lantus. Because the biosimilars would be owned by the Californian government, they can be sold to all Californians regardless of insurance status and the price can be set by the Californian government. Governor Newsom has stated that he plans to set the price lower than $35, undercutting the prices set by the federal government’s Inflation Reduction Act and “The Big Three”. However, this plan has yet to produce any tangible results, and Governor Newsom rejected a California state insulin cap in 2023 in favor of his CalRx plan. Despite this, the plan is so viable on paper and the benefits are so great that other states, such as Washington and Maine, are following suit with similar plans (Scott).

The insanity surrounding the pricing of insulin is just one small microcosm of the health care system in America, which is rife with such issues. The system is created to generate the most profit off of those who have the least. In the case of insulin, those without insurance coverage or government aid paid the most for their insulin. This healthcare gap based on wealth and income disproportionately affects our most vulnerable populations – the disabled, the elderly, and racial minorities. It traps these groups in a cycle of poverty, as each attempt at saving money by rationing medication or forgoing treatment has the potential to result in even more severe (and more expensive) injury – or even death. Dedicating significant portions of their income to life-saving medications reduces class mobility, as these groups will struggle to afford education, transportation, and nutritious food. This struggle with insulin goes to show the incredible political power of U.S. healthcare companies, and the desperate need for a change to the system that enables these exploitative pricing models. It is a relief that the U.S. government is finally taking steps to fix our broken system. However, it is still too late for Alec Holt-Smith and countless others who have died as a result of rampant corporate greed.

Works Cited

Ibarra, Ana B. Gavin Newsom Rejected plan to lower insulin copays, saying a better deal is in the works. CalMatters. October 12, 2023. https://calmatters.org/health/2023/10/gavin-newsom-vetoes-insulin-copay-cap/

Knox, Ryan. Insulin insulated: barriers to competition and affordability in the United States insulin market. Journal of Law and the Biosciences, Volume 7, Issue 1. October 9, 2020. https://academic.oup.com/jlb/article/7/1/lsaa061/5918811

Locklear, Mallory. Insulin is an extreme financial burden for over 14% of Americans who use it. Yale News. July 5, 2022. https://news.yale.edu/2022/07/05/insulin-extreme-financial-burden-over-14-americans-who-use-it

Luhby, Tami. More Americans can now get insulin for $35. CNN. January 2, 2024. https://www.cnn.com/2024/01/01/politics/insulin-price-cap/index.html

Sable-Smith, Brahm. Insulin’s High Cost Leads to Lethal Rationing. NPR. September 1, 2018. https://www.npr.org/sections/health-shots/2018/09/01/641615877/insulins-high-cost-leads-to-lethal-rationing

Sayed, Bisma A. et. al. Insulin Affordability and the Inflation Reduction Adt: Medicare Beneficiary Savings by State and Demographics. Office of the Assistant Secretary for Planning and Evaluation. January 24, 2023. https://aspe.hhs.gov/reports/insulin-affordability-ira-data-point

Scott, Dylan. Insulin is way too expensive. California has a solution: Make its own. Vox. February 7, 2023. https://www.vox.com/policy-and-politics/23574178/insulin-cost-california-biden-medicare-coverage