Why insulin prices are troublingly high

Lawmakers in the House and Senate are zeroing in on legislation that would lower the price of insulin, reigniting questions over how the the cost of this essential medicine was able to skyrocket in the U.S. and remain so high.

On Thursday, House Democrats passed a bill to cap the monthly cost of insulin at $35 a month. The legislation would save Americans money, but it would do little to solve the broader problem of high drug prices.

Sen. Jeanne Shaheen (D-N.H.) this week said that she reached an “agreement in principle” with Sen. Susan Collins (R-Maine) on legislation to lower insulin costs. There is no finalized legislative text yet, but Shaheen said it would target pharmacy benefit managers (PBMs), middlemen that negotiate with drug companies on the behalf of insurance plans.

The diabetes drug has become emblematic of the drug pricing crisis in the U.S., with many diabetics resorting to rationing their insulin.

While drug companies often argue patients don’t pay the list price for a drug, some patients do have to pay out-of-pocket for drugs until they meet their deductible. Price increases also impact people without insurance.

According to the most recent data from the Department of Health and Human Services, released in 2020, the U.S. pays “dramatically” higher prices for insulin compared to other countries in the Organization for Economic Co-operation and Development (OECD).

At that time, the U.S. paid $98.70 per standard unit of insulin, while other countries like Canada, Australia and the U.K. all spent less than $15 per unit.

Most higher-income countries set price controls for pharmaceuticals, ensuring the cost of patented drugs doesn’t become out-of-reach for consumers. However, the U.S currently has no regulations on drug pricing, meaning manufacturers are able to set any price they choose.

A history of anti-competitive pricing

Insulin was first discovered by researchers at the University of Toronto in 1921, and has not been significantly improved in the past 100 years.

The patent was sold to the University of Toronto for a dollar in the hopes that it would be made widely available for patients in need.

As the Lancet detailed in a report last year, shortly after the University’s patent on insulin expired in 1940, the Department of Justice investigated three companies — Eli Lilly, Merck and Bristol-Myers Squibb — for anti-competitive pricing tactics.

Today, three companies control the nearly 100 percent of the world’s insulin: Eli Lilly, Sanofi and Novo Nordisk.

Lack of regulations

Previous legislative attempts to change the price of insulin have so far proven ineffective.

An opaque pricing system devised by drugmakers, insurers and PBMs has made it difficult for lawmakers to effectively counteract the sky-high cost of insulin. The parties involved in pricing insulin have regularly passed the blame amongst each other when asked who was ultimately responsible for the high cost of insulin.

Last year, the Elijah E. Cummings Lower Drug Costs Now Act was reintroduced in the House. The bill would establish European-style drug price controls in the U.S. and grant the HHS the authority to negotiate with pharmaceutical companies on the drug prices in Medicare Part B and Medicare Part D.

Similar bills, such as the Freedom from Price Gouging Act and the Capping Drug Costs for Seniors Act of 2021, were also introduced in the House last year, though neither have advanced far.

Democrats have long pushed for broader legislation to lower drug prices and included in their sweeping Build Back Better package a measure to allow Medicare to negotiate lower drug prices in some instances.

However, that package stalled due to concerns from Sen. Joe Manchin (D-W.Va.). In the meantime, Democrats are turning to narrower insulin legislation, highlighting an issue popular with voters.

No alternatives until recently

Last July, the Food and Drug Administration approved the first=ever generic form of insulin available in the U.S.

Once the drug became available on pharmacy shelves in November, the FDA’s decision meant that pharmacists can automatically substitute the generic Semglee for the brand-name Lantus without needing a prescriber to intervene.

Semglee is typically about half the cost of its brand-name counterpart.