Capping Costs: How Insulin Price Control Sets a Precedent for Future Drug Policies
Idris Syed
In the United States today, 37 million adults have been diagnosed with either type 1 or type 2 diabetes.1 Type 1 diabetic patients are unable to produce insulin, and thus require regular insulin treatments to survive, while type 2 diabetic patients are characterized by insulin resistance and may or may not be treated with insulin. The diabetic population in the United States has rapidly grown in recent decades, with the percentage of Americans with diabetes jumping from 0.98% in 1958 to 7.40% in 2015, causing an ever-increasing need for accessible insulin.2 However, as rates of diabetes have risen, so too has the cost of insulin, restricting the access of many patients to the medication necessary for their survival. Unsurprisingly, the number of people succumbing to diabetes has also risen in recent years due to the high prices of their treatments, including insulin.1 The past decade has seen insulin prices soar to new heights, with little being done to combat the inflated prices before the passage of the Inflation Reduction Act (IRA) in 2022.
Manufacturing insulin has been greatly improved over the years, with companies replicating and harvesting pancreatic beta cells, which are responsible for endogenous insulin production.3 Though the process is lengthy, these methods are high-yield, resulting in the relatively cheap mass production of insulin. However, although the last decade has seen the production of insulin expand, its price has only risen, rather than decreasing as expected. The parallel increases in the production and price of insulin suggest a systemic price gouging scheme encompassing all major manufacturers. A study in 2021 concluded that the average cost of producing a vial of insulin ranges from $2.28 to $3.42. However, this same vial could be sold and distributed at $3.69 to $6.16.4 This is a 160% to 180% markup per vial of insulin that people may die without. It is often argued that high drug prices such as these could help provide funds for future research; however, Sanofi Aventis—one of the major insulin manufacturers—decreased its research in 2020 by 10% as they deemed it necessary to allocate funds to the “priority sectors” of the company.5
To combat the unnecessary rise in the cost of insulin, President Biden signed the IRA in August 2022, simultaneously targeting inflation within the United States and implementing numerous other policy measures. Since then, millions of Americans have been saving on their healthcare costs, as one of the provisions included in the IRA instituted a strict co-payment cap on insulin pricing for Americans enrolled in Medicare. Importantly, around 57% of diabetic individuals in the United States are insured through public programs such as Medicare or Medicaid, which historically cover only 66% of the costs of diabetes for these individuals.6 On January 1st, 2023, Phase 1 of the IRA was implemented, removing the deductible and capping insulin copayments at $35 for enrollees in Medicare Part D.1
Although this insulin price regulation applied to only some Medicare enrollees, it spurred the three largest insulin manufacturers – Eli Lilly and Novo Nordisk, along with Sanofi – to independently reduce the costs of their insulin products. On March 1st, 2023 Eli Lilly announced that they would cut insulin prices by 70% and abide by President Biden’s executive order capping their out-of-pocket costs for insulin at $35 per month. Novo Nordisk shortly followed, announcing a 75% price reduction in their insulin products, with Sanofi subsequently announcing a 78% insulin price reduction. These price cuts represented a sharp departure from previous precedent, which for many years had been excessive profit margins off of insulin. In recent years Eli Lilly has seen revenue of $22 billion off of only $979 million in insulin-related costs – a small fraction of the revenue.7 Similarly, companies such as Sanofi looked to create a bigger impact on the future of insulin production and research, given projections that the industry would grow by $50 billion in 2015.8
The arbitrary – and often prohibitively expensive – pricing of insulin is best observed from its fluctuation between 2012 and 2024. The price of insulin reached its peak growth from 2012 to 2016 when prices were around $500 for a 30-day supply of insulin.9 Over a similar time frame, the total cost of diabetes rose from $245 billion in 2012 to $327 billion in 2017. This 2017 figure included a staggering $237 billion in direct medical costs for those affected and nearly $90 billion in lost productivity.6 The trend of rising prices changed after 2019 as insulin prices in a 30-day supply decreased by 8%.9
The high price of insulin was singular to the United States, with peer countries having significantly lower prices.10 For example, the average cost of an insulin vial in the United States in 2018 was $98, while countries such as Canada had an average cost of $7 per vial.11 These findings suggested that the cost of insulin could have been lowered in the United States before the IRA, just as many other countries were able to do through the implementation of World Health Organization guidelines and the enforcement of national laws.12 However, given the United States’ historical lack of regulatory power over the pharmaceutical market, companies have long gone unchecked in their revenue and profit due to therapeutics such as insulin.
The future of commercial pricing for many pharmaceutical drugs with a similar necessity to patients as insulin remains unknown. However, based on the effect of the IRA, the government has proved itself more than capable of controlling the commercial pricing patterns of pharmaceutical drugs. Notably, the government was able to enact de facto price regulation of medications by restricting out-of-pocket costs for Medicare D enrollees, without specific regulation of the costs faced by patients with private insurance. This mechanism of price control should be more frequented earlier by the government to protect Americans from price gouging and similar schemes by pharmaceutical companies. Thus, the IRA was not solely a victory for the many Medicare D enrollees it directly supported, but also for the millions of insulin users across the United States, providing a strong pathway forward for American drug pricing control.
References
[1] Sayed BA. Insulin affordability and the Inflation Reduction Act - Aspe [Internet]. Available from: https://aspe.hhs.gov/sites/default/files/documents/bd5568fa0e8a59c2225b2e0b93d5ae5b/aspe-insulin-affordibility-datapoint.pdf. Accessed May 3, 2024.
[2] Centers for Disease Control and Prevention (CDC). Long-term trends in diabetes. April 2017. 2018.
[3] Weiss M, Steiner DF, Philipson LH. Insulin Biosynthesis, Secretion, Structure, and Structure-Activity Relationships. [Updated 2014 Feb 1]. In: Feingold KR, Anawalt B, Blackman MR, et al., editors. Endotext [Internet]. South Dartmouth (MA): MDText.com, Inc.; 2000–. Available from: https://www.ncbi.nlm.nih.gov/books/NBK279029/.
[4] Beran D, Ewen M, Laing R. A global perspective on the issue of access to insulin. Diabetologia. 2021;64(5):954–962. doi:10.1007/s00125-020-05375-2.
[5] Sanofi. Our Healthcare Pipeline - Research, R&D portfolio [Internet]. Available from: https://www.sanofi.com/en/our-science/our-pipeline. Accessed May 3, 2024.
[6] Hayes TO, Ashton F, Parente S. Insulin Cost and Pricing Trends [Internet]. AAF; 2020. Available from: https://www.americanactionforum.org/research/insulin-cost-and-pricing-trends/#_edn3.
[7] Grassley CE, Wyden R. Insulin: Examining the Factors Driving the Rising Cost of a Century-Old Drug [Internet]. United States Senate; 2021. Available from: https://www.usatoday.com/in-depth/news/50-states/2019/03/21/diabetes-insulin-costs-diabetics-drug-prices-increase/3196757002/.
[8] Cohen D, Carter P. How small changes led to big profits for insulin manufacturers. BMJ. 2010;341. doi:10.1136/bmj.c7131.
[9] Gordon BS. Insulin Prices in ESI Nearly Doubled from 2012–2021, with Effects of Emerging Biosimilars Evident in Recent Years [Internet]. HCCI; 2023. Available from: https://hcci.org/insulin-prices-in-esi-nearly-doubled-from-2012-2021-with-effects-of-emerging-biosimilars-evident-in-recent-years.
[10] Mulcahy AW, Schwam D, Edenfield N. Comparing Insulin Prices in the United States to Other Countries. Rand Corporation; 2020.
[11] McGrail S. Insulin Prices 8x Higher in the US Compared to Similar Nations [Internet]. PharmaNewsIntelligence; 2020. Available from: https://pharmanewsintel.com/news/insulin-prices-8x-higher-in-the-us-compared-to-similar-nations. Accessed October 9, 2020.
[12] Beran D, Ewen M, Laing R. Constraints and challenges in access to insulin: a global perspective. Lancet Diabetes Endocrinol. 2016;4(3):275–285.
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