December 9, 2022

California Gov. Gavin Newsom recently announced the state will begin making its own insulin to help lower the cost of the diabetes medication. WSJ explains how insulin got so expensive in the U.S. and explores whether a policy initiative like California’s could succeed in driving down costs.

Nothing epitomizes market failures more than the cost of insulin in july california governor gavin newsom announced a first in the nation plan for the golden state to make its own insulin california is now taking matters into our own hands the state is getting into the insulin business because of high prices in 2020 the average out-of-pocket spending by medicare

Part d enrollees was 54 per insulin prescription that comes to an average annual cost of dollars these high prices have made the us a global outlier today americans pay about eight times more for their insulin than the rest of the developed world insulin has really been one of the poster child examples of drug prices run amok all of the entities in these supply

Chains are for-profit companies and so they are looking out for their shareholders none of them has a fiduciary responsibility to patients so why is insulin so expensive in the u.s and could california’s plan to curb insulin costs actually work discovered just over a hundred years ago in 1921 insulin is a life-saving drug essential for the survival of about 7.4

Million diabetic americans or roughly 2 percent of the u.s population before insulin diabetes especially type 1 diabetes was often fatal and lifespans were much shorter part of the reason insulin is so expensive is due to the nature of the insulin market which is controlled by three insulin manufacturers together these companies produce almost 100 of the insulin

Supply in the u.s a representative from novo nordisk wrote in an email we know that not one single solution will work for everyone and continue to develop programs to ensure people with diabetes can get the insulin medication they need in a separate statement a representative from eli lilly wrote in an email lily is deeply committed to insulin affordability

And has long advocated for holistic sustainable policy solutions such as passing through rebates directly to people who use insulin and limiting out-of-pocket costs that can significantly help people who use insulin insulin is complex to manufacture and the regulatory pathway for low-cost versions of biologic drugs in the u.s is less well established and so you

Don’t see a lot of strong competition a 2021 senate investigation also identified middlemen called pharmacy benefit managers or pbms for contributing to the increases the insulin supply chain involves numerous players in a complicated web of relationships within this system pbms are the third-party intermediaries that negotiate prices between drug manufacturers

Insurance companies and pharmacies list price for a drug is the sticker price that is set by the manufacturer sort of like an automobile would have a manufacturer’s suggested retail price but like automotives the list price isn’t what most people end up paying for that professor karen van nuys is an assistant professor at usc who recently published a study about

Insulin affordability after the list price is set manufacturers pay a whole bunch of discounts and rebates and coupons and fees back to people in the in the distribution system and then the manufacturer what the manufacturer ends up taking from that is the list price minus all of those discounts and rebates and fees and that’s known as the net price in 2019

The average net price for diabetes medications produced by the drug maker sanofi was 62 but the average list price was 361 a spokesperson from sanofi wrote in an email despite rhetoric about insulin prices the net price of insulin has fallen for seven consecutive years pbms have demanded rebates for pharmaceutical products for nearly two decades and they are an

Ingrained feature of our healthcare system in recent years america’s high drug prices have spurred startups seeking to deliver lower-cost alternatives earlier this year entrepreneur mark cuban launched the mark cuban cost plus drug company an online store that sells hundreds of low-cost generic medications cuban’s model undercuts the traditional drug supply chain

By selling directly to consumers and cutting out pbms another company that could serve as a model for california is civica rx a non-profit established by a group of hospitals and philanthropic groups similar to cuban startup civica undercuts the established system by cutting out pbms but it also plans to lower costs by bypassing the major drug makers we’ve had

Early conversations from from the very beginning what the state of california is you know they’re going through their selection process to find a partner to do this and you know we wish the state of california well and frankly would be delighted to partner with them should it come to that dan lilliandquist is the chief architect behind civica we only answer the

Markets where we feel like there’s distortion in the market where the markets are functioning well and prices are stable and patients are have accessible drugs we’ll never enter those markets but when we see a failure in an abuse this is a market regulating function in the sense that we will intervene in those markets bring competition to to help force market

Mechanisms to correct the problem civica seeks to disrupt the traditional drug supply chain with a model known as a healthcare utility the concept is built on a membership structure in which different hospital systems partner together to purchase generic drugs from either their own in-house manufacturer or a subcontractor since launching in september of 2018

Civica is now producing 64 generic drugs in march the non-profit announced it will begin manufacturing and distributing low-cost insulin to its patients by early 2024. we’re building a 140 000 square foot manufacturing facility in petersburg virginia which will be online later this year and in that facility we’ll be able to make a hundred percent of the vile

Capacity for insulin for the country civica says it plans to produce three generic insulins and vials and pre-filled pens pricing to consumers will be no more than thirty dollars per vial and fifty five for five penn cartridges if civica or other players introduced low-cost insulin it would affect um how the established players operate i think they would have

To accept lower profit margins than what they’ve been used to so far to reduce its insulin costs california is attempting to circumvent the established market california will spend 100 million dollars in this year’s budget 50 million dollars to develop low-cost insulin the other half would be used to set up an in-state insulin manufacturing facility because

The state is involved and because the state does not plan to make a profit from this they want to make this available at a very low cost newsome’s administration has not announced all of the details of its plan including when its insulin will be available and how much it will cost but a tweet from the governor’s office noted that many americans pay between 300

And 500 a month for the drug and that with california’s insulin that cost would at a minimum be cut in half california’s initiative comes as washington moves forward with its own insulin cost cutting measure and now i’m going to take action that i’ve been looking forward to doing for 18 months on august 16th president biden signed into law legislation to lower

Prescription drug prices the law’s most immediate effects will start next year when people on medicare will see their insulin costs capped at dollars a month

Transcribed from video
Why Insulin Is So Expensive and How California Aims to Produce Its Own | WSJ By Wall Street Journal