Who is to blame for high insulin prices in the USA? Big Pharma?

Insulin prices are a big issue in the USA because they seem to be skyrocketing upwards much faster than inflation or anything else. Of course, people are blaming Big Pharma, because they seem to be the major culprits behind the gouging of diabetics.

However, like everything else, the facts behind insulin prices are much more complicated than what you might be reading in the most recent Facebook meme or post about the subject. Because a 4-line meme is so much easier than writing a complicated article about the world of insulin prices.

And I’m going to try to guide you through the travesty of how pharmaceuticals are priced and how it’s a total mess. And remember, this is only about America’s pharmaceutical pricing mess — hopefully, the rest of the world does this better.

Photo by David Moruzzi on Unsplash

All about insulin

Before we get into the pricing mess, let’s talk about insulin first.

Type 1 diabetes is an autoimmune disease that is characterized by autoreactive T lymphocytes (T-cells) that destroy pancreatic islet cells, which are critical to glucose metabolism since these cells produce insulin. These lymphocytes mistakenly attack the islet cells as if they were a foreign body, as they do with a viral or bacterial infection.

Insulin is a small peptide hormone that signals cells to store insulin when blood sugars increase, usually immediately after eating. Without insulin, blood sugars increase quickly which if they get high enough can lead to diabetic ketoacidosis and death.

Up until about 100 years ago, there were no treatments for type 1 diabetes. Once diagnosed, anyone with diabetes would die within a few weeks or months. Then in 1920, two Canadians, Frederick Banting and J.J.R. Macleod, discovered how to isolate insulin. They won the 1923 Nobel Prize for their discovery. Soon thereafter, they were able to isolate large amounts of insulin from pigs and cattle, thereby saving the lives of thousands of diabetics.

Unfortunately, there were several issues with this type of insulin. First, even though insulin has a very conservative structure across species, it isn’t exactly human insulin, so it wasn’t as effective as human insulin. Second, because it was a foreign peptide, occasionally diabetics were allergic to it which meant they could not get the lifesaving insulin.

By the late 1970s, scientists at Genentech were able to utilize genetic engineering to place the human gene for insulin into E. coli and mass-produce human insulin.

Today, there are three companies that dominate the insulin market:

Over the past 40 years, these companies have refined the development of insulin, making it quite different than just plain human insulin. For example, they manufacture short-, medium-, and long-lasting insulin (the time periods are from minutes to hours) which better control blood glucose levels. These are often called “analog” insulins.

Although it is still possible to purchase normal human insulin (which works perfectly fine, though getting good blood glucose control is a bit more complicated), almost every diabetic wants the good stuff — the analog insulins.

Finally, there are some type 2 diabetics that are prescribed insulin, and they use the same types of insulin as type 1 diabetics.

Photo by David Moruzzi on Unsplash

Insulin prices

As I have written about vaccines, the pricing of insulin is much more complicated than the memes and claims make out. Before I start out, I want to be clear that most of the kerfuffle over insulin prices is for the good stuff, that is, the analog insulins. Basic human insulin can be purchased for around US$25 for 1000 IU which could last a month for individuals. Walmart sells analog insulin for around $80 for 1000 IU, which also could last a month for individuals who are good at controlling their diet, activity, and glucose levels.

The complaints about insulin prices appear to be with the more innovative analog insulins which are not generic. And this is where it can get very complicated.

List prices of insulin products doubled between 2012 and 2019, which probably contributed to putting insulin as the focus of public outrage over high drug costs in the U.S. As a result, a bill recently passed by the House and under consideration in the Senate that caps insulin payments at $35 a month for individuals with Medicare or private health insurance.

This is made worse since we appear to be in a diabetes epidemic. In Medicare (the health insurance for seniors and disabled in the USA), about one-third of beneficiaries had diabetes in 2017, up from 18% in 2000. Beneficiaries’ mean out-of-pocket spending on insulin has nearly doubled over the last decade.

An investigation by Karen Van Nuys, Ph.D., and colleagues that was published on 5 November 2021 in JAMA Health Forum examined insulin prices in detail. Here’s what they found, and some of it is going to surprise the reader.

  • Out-of-pocket spending increased considerably in the coverage gap for most users with Part D coverage, which was associated with a substantial reduction in adherence.
  • The three major manufacturers of insulin in the U.S. set the list prices. But in the US pharmaceutical distribution system, pharmaceutical and medical device manufacturers rarely receive the list price. Between 2014 and 2018, the net price received by the three insulin manufacturers decreased by 31%.(I know some of you reading this will say, “good, Big Pharma is hurting.” Unfortunately, these same companies are researching better insulin analogs, actual cures for type 1 diabetes, and better treatments for type 2 diabetes, so without this income, they will probably cut back on this research.)
  • They have been granting increasingly large discounts to middlemen in the distribution system, the pharmaceutical benefits managers (PBM), which would be expected in a competitive market. PBMs negotiate with drug and medical device companies on behalf of insurance companies and large employers. Three companies dominate the PBM market — Express Scripts (owned by health insurer Cigna), CVS Caremark (owned by CVS Health which also owns health insurer Aetna), and OptumRx (a subsidiary of UnitedHealth Group, another healthcare insurer).
  • From 2014 through 2018, the total cost per 1000 IU (usually, one vial) of insulin has not decreased, meaning that even though PBMs are negotiating large discounts from manufacturers, they are not passing those savings on to patients. For every $100 in spending on insulin in 2014, manufacturers received $70, and middlemen in the supply chain, including PBMs, received $30. By 2018, the manufacturer’s share had declined to $47 and the middlemen’s share had increased to $53.

Here’s the key point — Big Insulin reduced their prices by 31% yet the PBMs reduced their prices…oh wait, they didn’t. So the PBMs, who work for the health insurers, did not reduce the prices of insulin for patients. The health insurers control your pharmaceutical purchases, forcing you to buy expensive insulin — essentially, they are running a scheme where they charge you for their insurance and charge you for the higher-priced insulin. And in case you’re wondering, Big Health Insurance is doing this with all kinds of drugs, not just insulin prices.

This leads to a list of questions that Van Nuys and colleagues laid out in another article:

  • Why aren’t patients benefitting more from those discounts off list prices? Believe it or not, cost-sharing provisions such as co-insurance or co-payments in the deductible phase are often based on the list price rather than net prices.
  • Why should intermediaries, such as pharmacy benefit managers, make so much money on insulin sales, and why is their take increasing? The manufacturers are the ones who are developing new diabetes treatments and potential cures, not the PBMs. A bigger share of the net revenue should go to the manufacturers (I hated writing that) and less to PBMs, where the profits just go back to the healthcare insurer who does nothing to improve the economic issues with high insulin prices.
  • Are we just going to keep spending the same amount on insulin in perpetuity, or do we want insulin costs to decline over time, thereby freeing up economic resources to spend on other things like, say, a cure for diabetes? Although I am skeptical that a cure is anywhere close (well, maybe), the manufacturers need to have a built-in system that not only limits their ability to profit from the current analog insulin but also incentivizes them to develop even better analog insulins with better delivery systems. And to maybe find that cure.
  • What goes on in those back rooms where the deals are cut? I’m not saying that Big Pharma is innocent in this game, but in this one case, we have focused on the manufacturers and the imaginary list prices while ignoring the PBMs who are actually profiting from this game. They are the ones siphoning money from patients, the Federal government, and employers, not the insulin manufacturers. The PBMs and other middlemen are raking in the money, but no one is focused on them.

Summary

I told you this story about insulin prices was going to be more complicated than “lock up the Big Pharma executives!!!” I’m not going to say that Big Pharma is innocent, but in this one case, they are not profiting from the increased prices being paid for insulin.

I guess it’s easier to create a meme about Big Pharma rather than Big Pharmacy Benefits Managers. But they are the ones that hurt patients, and those profits aren’t being plowed into research and development of new diabetes treatments (or maybe cures). I’ve always given leeway to Big Pharma pricing because I know it’s a lot more complicated than is often portrayed, and Big Pharma is responsible for research and development so that only happens with profits.

And I cannot emphasize this enough — this problem is not just for insulin, PBMs are getting skyrocketing profits from all the drugs in healthcare plans. Big Pharma is getting lower and lower net prices by giving away larger and larger discounts to PBMs. And you can be assured that PBMs are not passing along those discounts to the patient.

Now let’s start some memes about PBMs.

Disclosure

I am a type 1 diabetic who did research on insulin and insulin-like growth factors for my Ph.D. thesis. I have an insurance plan that covers the cost of my insulin pens and needles, and I have never paid more than $0 for a 90-day supply through my health insurance plan.

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The Original Skeptical Raptor
Chief Executive Officer at SkepticalRaptor
Lifetime lover of science, especially biomedical research. Spent years in academics, business development, research, and traveling the world shilling for Big Pharma. I love sports, mostly college basketball and football, hockey, and baseball. I enjoy great food and intelligent conversation. And a delicious morning coffee!