Why Insulin Costs So Much
Hi, thank you for coming back for the latest edition of Beyond Primary Cares blog; Why Insulin Costs So Much. In Beyond Primary Care blogs I highlight healthy and fun recipes, healthcare news, advice for medical conditions, as well as how membership for care works! Dr. Jeff O’Boyle is the owner of Beyond Primary Care, which is an insurance free, membership based family medicine and addiction medicine clinic. Beyond Primary Care is the only Direct Care clinic serving patients in Ann Arbor and throughout Washtenaw, Livingston, and Wayne County giving families and employers peace of mind with healthcare costs by providing affordable, accessible, and authentic primary care services.
The primary purpose of the blog is to introduce healthy lifestyle concepts and answer common questions I receive from patients that I believe are important. I want to start discussions that will help educate, benefit, and improve your well-being.
In this blog post, I wanted to discuss an important healthcare question that often gets talked about: Why Insulin Costs So Much
Why Insulin Costs So Much
First, What Is Insulin
The hormone insulin is produced by an organ in the belly called the pancreas, and insulin production is regulated through a feedback loop based on blood sugar levels in the body. Insulin assists cells in the muscles, fat, and liver to absorb glucose (sugar) in the blood, and that glucose acts as energy for these tissues.
The most common problem associated with insulin is diabetes, and diabetes falls into two categories. Individuals with type 1 diabetes have a pancreas that no longer makes insulin and they need insulin injections to use glucose from meals. Individuals with type 2 diabetes make insulin, but their bodies have resistance to it and most individuals need to take pills or insulin injections to assist their bodies to use glucose for energy.
Insulin can not be given as a pill. Like other proteins, insulin would be broken down too much during digestion and thus it needs to be injected. For type 2 diabetes who need insulin or type 1 diabetes who require insulin, there is no alternative medication.
The Insulin Supply Chain
In economics, inelastic demand occurs when people buy the same amount of a product, whether the price drops or rises. This occurs in many situations, from gasoline to food to medications- like insulin.
My demand for food is relatively inelastic—I will quickly die without it—but that doesn’t mean that any grocery store can extract hundreds of dollars- increasing prices from me each week. If they tried to do so, many other grocery stores will gladly win my business with lower prices and said previous grocery store will lose business (likely for good).
Inelastic demand is only a problem for consumers if there is limited competition among the suppliers of a good. Notably, the lack of manufactures to produce insulin is one of the main culprits of out-of-control costs.
There are only three incumbent manufacturers of insulin serving the U.S. market: Eli Lilly, Novo Nordisk, and Sanofi. Pricing of insulin is very complex and involves many layers of middlemen including wholesalers, Pharmacy Benefit Managers (PBMs), healthplans, and pharmacies. Within the system, there is no agreed-upon price for any insulin formulation.
Kickbacks, Prices, and Middlemen Increasing Your Insulin Prices
According to the American Diabetes Association (ADA), the average list price of insulin has nearly tripled since 2002. In 1996, when Eli Lily’s Humalog first came out, the price for a one-month supply was $21. As of 2019, that vial is around $275, a 1,200% increase on the original price. Further data indicates when one insulin manufacturer increases the price for a given insulin preparation, the other insulin manufactures often increase their prices by a similar amount quickly afterwards.
“Third parties and other barriers to care are not only increasing the prices of insulin, but physicians can’t really do what we believe is right and best practices for our patients and give our patients a voice in their healthcare.” ~ Dr. Jeff O’Boyle
Worse, these manufacturers ruthlessly exploit the patent system to fend off competition. Pharmaceutical companies use lawsuits combined with incremental patent changes that enables the manufactures to extend the patient on the drug. These practices prevent insulin from going generic and other manufactures from producing more affordable versions.
In fact, insulin manufactures and pharmacy benefit managers (PBMs) such as CVS, Express Scripts, United Health, and OptumRx have been accused of artificially inflating prices for insulin in a class action suit brought in 2020. According to the suit, these manufactures aggressively increased the prices for insulin past what they would have charged had there been no scheme.
Health Insurance Doesn’t Help The Insulin Costs
Why doesn’t competition among the BUCAH (BlueCross, United, Cigna, Aetna, Humana) health insurers force the manufactures to offer plans tailored to the different needs of patients? As example, the needs vary drastically from a person suffering from Crohn’s disease versus a type one diabetic). There are complex reasons for this- including the pharmacy benefit managers discussed above- but a major one is the tax privileged treatment of employer provided health insurance.
In 2018, nearly 160 million Americans got their health insurance through heir job, which at best puts a weak bargaining pressure on health insurers brokered through employers rather than employees. This lack of bargaining leaves the employed individual needing the lifesaving medication powerless and exposed to the expensive out-of-pocket costs.
We recognize that cost-containment for life-saving medications such as insulin is a human right. We also recognize that we, the people of Ann Arbor, greater Michigan, and this great nation must unite together to form meaningful solutions.
We commit to doing our small part here at Beyond Primary Care by continuously pushing the status quo of healthcare to seek out more affordable treatment solutions to offset the financial effects our current healthcare system has on those who are most vulnerable.
It’s small, but it’s what we can do well and what we promise to do for those in our care.
Thank you for reading.
– Dr. Jeff O’Boyle with Beyond Primary Care