Diabetes Patients Suffer From Skyrocketing Prices of Insulin
March 3, 2016
Insulin has been used to treat diabetes since the 1920s. The World Health Organization has placed insulin on its list of essential medications that states it should be “available at all times in adequate amounts and in appropriate dosage forms, at a price the community can afford.” Dr. Kasia Lipska recently wrote an Op-Ed in the New York Times, Break Up the Insulin Racket, in which she describes the drug’s market in the US as being non-competitive and much more expensive than it should be. Describing how a 90 year old treatment could still be expensive for an American patient, the piece is a journey through the prescription drug market and informative about how drug companies extract huge profits from payers and hurt access, increase costs, and worsen outcomes.
Dr. Lipska describes the insulin market as a “racket” because it is only produced by three companies, Eli Lilly, Sanofi, and Novo Nordisk. These companies made $12 billion in 2014. A large part of these profits came from sales of insulin. Not only is the price for insulin high, it is rising:
“From 2010 to 2015, the price of Lantus (made by Sanofi) went up by 168 percent; the price of Levemir (made by Novo Nordisk) rose by 169 percent; and the price of Humulin R U-500 (made by Eli Lilly) soared by 325 percent.”
The price is out of control because these three companies have cornered the market by producing newer treatments allowing them to extend their patents. There is little evidentiary support that the new treatments have improved outcomes or safety, but they do come with high price tags.
“There is no generic insulin, and over 90 percent of privately insured patients with Type 2 diabetes who are prescribed insulin get the newer and more expensive products.”
By limiting the market, these drug companies have left doctors with only high priced and expensive options for patients with diabetes. By extending their patent supremacy these companies have managed to keep the market from opening up to a “generic” or biosimilar alternative. Generics can be one of the few areas of stability in the healthcare price wars, when they are not being absorbed by companies like Turing Pharmaceuticals. But research shows that, beyond merely providing a less expensive alternative, generics also tend to lower the prices of their name-brand competitors.
“The first generic competitor usually sets a price that is only slightly below the branded insulin. Research shows that once there are two manufacturers of a generic drug, the price typically drops by about half; with eight, it drops to about a fifth.”
The patent on Sanofi’s biggest insulin treatment is about to expire so there will be more competition, but because it would be a biosimilar, and not a traditional generic, it will take longer to bring to market. However the price of insulin is not just high because of lack of treatments, but also because of the way the industry is structured. The middlemen in the prescription purchasing arrangement, Pharmacy Benefit Managers, are large contributors to the high prices. Originally they were established to negotiate better prices for insurance companies, but they may be walking off with most of the savings. The “big three” PBMs, Express Scripts, CVS Health, and OptumRX make $200 million a year in revenue. They negotiate lower prices from drug makers, eager for their market share, but they may not pass along much of their savings with their clients.
The PBMs “get ‘rebates’ from drug manufacturers’ payments based on sales or other criteria, which look suspiciously similar to kickbacks. The rebates are not publicly disclosed, but they are sizable. Industry analysts estimate that those payments, and other back-room deals, amount to as much as 50 percent of the list price of insulin.”
The market is set up to keep prices high and force people to make impossible choices. The article mentions a woman, treated by Dr. Lipska, who is covered by medicare, but struggles to afford her insulin when she hits the “doughnut hole.” That is when she starts rationing her insulin injections. Ultimately complications from limiting her dosage could prove costly, but the current system is not incentivizing the best results. A system that was focused on outcomes and paid for value could be more comprehensive and affordable. The unfortunate element to this story is not how uniquely burdened people with diabetes are, but how common this story is for many Americans.