[ The high cost of insulin is one of the great injustices of the
US health care system. But now, states like California are looking at
directly manufacturing this essential medicine — a potentially
massive win for both patients and left-wing politics.]
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ARE WE AT THE DAWN OF “INSULIN SOCIALISM”?  
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Leigh Phillips
August 3, 2022
Jacobin
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_ The high cost of insulin is one of the great injustices of the US
health care system. But now, states like California are looking at
directly manufacturing this essential medicine — a potentially
massive win for both patients and left-wing politics. _

NovoRapid (Canada) and NovoLog (US), insulin drugs sold by
Scandinavian company Novo Nordisk. , (Kerem Yucel / AFP via Getty
Images)

 

Prior to the invention of the technique to extract insulin from the
pancreas of animals in 1921, children with diabetes typically died
within a year of the diagnosis. It was a death sentence.

And so the discovery at the University of Toronto by scientist
Frederick Banting has to be chalked up as one of the grand medical
advances of the twentieth century, almost magical in its
transformative power. Physicians at the university described a
reversal of fortune like something out of a fairy tale: “Patients .
. . were brought into the emergency ward, unconscious in diabetic
coma, [and] when injected with insulin they awakened dramatically,
snatched from death’s door,” said Bill Bigelow, a young surgeon at
the university and witness to early trials of the hormone extract.

Two years later Banting and his colleagues, Charles Best and James
Collip, were awarded the US patent for insulin. They sold it to the
university for just $1, and Banting refused to put his name on the
patent. For a doctor to profit from so essential a medical
intervention would be unethical, he believed.

Yet today, the price tag is so high in the United States — more than
$300 per vial, or more than $1,000 a month for some if they lack
adequate health insurance, up from $21 in 1999
[[link removed]] —
that one in four Americans with diabetes has to ration their insulin.
Diabetes has climbed back up the list of causes of death to seventh
place and is the primary driver of liver failure, lower limb
amputation, and blindness. It also increases the risk of mortality
from heart disease, stroke, cancer, and infections, including from
COVID-19. Senator Bernie Sanders has famously taken coaches
[[link removed]] of
patients across the Canadian border to buy the same insulin vials for
just $32.

The profiteering from the three firms responsible for all insulin
production in the United States — and from other market-driven
actors in the American health care system — has become so egregious,
and the harm so significant, that the state governments of California,
Maine, and Michigan are now looking at manufacturing their own
insulin. In Michigan, the man leading the charge for this “insulin
socialism” is even a Republican.

This is the tale of how we got to this point, and how such proposals
for the “People’s Insulin” could not only solve the insulin
crisis, but — if smartly executed — pry open the door to a revival
of large-scale, long-term public investment, economic planning, and
social democracy in the twenty-first century.

Insulin Is Not Like Other Drugs

The University of Toronto is a university, not a chemical production
facility. So after Banting’s groundbreaking discovery, they turned
to the noncommercial Connaught Laboratories (originally established in
1914 to mass manufacture diphtheria antitoxin) to produce insulin in
Canada. Connaught had a mandate to keep medication accessible, and
made the insulin at cost.

Charles H. Best and Clark Noble circa 1920 in Georgetown, Ontario.
(Wikimedia Commons)

For the United States, the University of Toronto turned to Eli Lilly,
an American for-profit pharmaceutical chemical production company. In
exchange for a one-year distribution monopoly, Eli Lilly would produce
the drug. In 1923, it became the best-selling product in the
company’s history, generating profits equal to more than half its
revenue.

Normally over time, the cost of drugs plummets as the private monopoly
of patents runs out and producers of cheaper, generic copies push the
price down. That hasn’t happened with insulin, even after almost a
century of production.

To understand why, we have to take a short detour to understand what
insulin is and how it works.

Insulin is a substance produced in response to food by the oddly named
“islets of Langerhans” — clusters of endocrine
(hormone-producing) cells in your pancreas. It allows glucose to enter
your body’s cells and use it as energy, and tells your body to store
any leftover glucose (a sugar) in your liver. In essence, insulin
regulates the amount of glucose in your blood.

If your body cannot make insulin properly (type 1 diabetes), or
insulin doesn’t work as well as it should or you can’t make enough
of it (type 2), your blood sugar is no longer well managed. Not only
does your body need glucose for energy (hence the fatigue and extreme
hunger that are often signs of the disease), too much of it in the
blood can damage blood vessels, organs, and nerves (hence the liver
failure, strokes, cardiovascular disease, and amputation).

Where most drugs are typically simple, small molecules made through a
relatively straightforward chemical process, insulin is a _protein
hormone_. Proteins are very large, complex, not at all simple
molecules, produced by living cells — in the case of insulin, by the
beta cells in the islets of Langherans. Remember that insulin was
initially produced by extracting it from the pancreases of animals:
very early on from dogs, and shortly thereafter from cows and pigs.
(Insulin derived from animals is no longer sold in the United States.)

Manufacture of _human_ insulins today involves genetically
engineering _E. coli _bacteria so that they contain the gene for
human insulin production, and then deploying these bacteria as insulin
factories. Finally, there are also insulin analogues, which are
synthetically produced, and are altered to change the rate at which
your body takes in insulin. These are very commonly prescribed and can
make it easier for people with the condition to plan their meals.

 

What all these manufacturing processes have in common is that they
replicate the complicated production technique of living organisms,
often using living organisms or their cells as the “productive
facilities.” That is, they are “biologic drugs,” or just
“biologics.” (Other biologics include growth hormones, antibodies,
and some treatments for arthritis.)

The sheer complexity of insulin production makes it financially
unviable for generic drug companies. Thus, instead of generic insulin,
we speak of _biosimilar_ insulin — a biosimilar biologic drug, or
just “a biosimilar,” is a biologic drug that is extremely similar
but not identical to the original. Generic drugs are identical copies
of the original but biosimilars are not because the latter’s
structure (and that of the original biologic drug that the biosimilar
is imitating) depends on the manufacturing process much more than the
former’s does.

While the overall method of manufacturing insulin is public
information, the specific manufacturing process is a trade secret, a
form of intellectual property that does not have an expiration date.

As a result, a biosimilar company must spend a considerable chunk of
money to independently reinvent this manufacturing process. The
estimated investment for a biosimilar is $100-250 million over seven
to eight years, compared to just $1-4 million over a single year for
small-molecule generic drugs.

So here’s the bottom line: while biosimilars are a bit cheaper than
the original biologic, we do not see price declines comparable to a
generic drug company copying the formula for, say, aspirin. This
biological nature of the drug and the fact that the manufacturing
process enjoys trade secret protection explains why there is not much
competition in insulin production (or for that matter, within the
production of other biologics). Most of the global producers of
biosimilar insulins are companies that _already_ manufacture insulin
— because they can lean on their existing knowledge and technology
and don’t have to reinvent the wheel like true competitors would.

In addition, with ordinary small-molecule drugs, pharmaceutical
companies regularly change the molecules in their products ever so
slightly, improving them very modestly, and then re-patent them to try
to keep ahead of the generic competitors. This practice of
“evergreening” is made that much worse for insulin products and
their potential biosimilar competitors by the complexity of biologic
production.

All of this explains why the United States’ insulin problem is not
just an American phenomenon. Europe has not had much success trying to
entice firms to produce biosimilars either.

Frederick Banting on the cover of TIME Magazine, August 1923.
(Wikimedia Commons)

But the debacle doesn’t stop there. Compounding this biochemical,
structural, and manufacturing challenge, most of the pens and other
devices used to deliver insulin — devices that are tied to a
particular type and brand of insulin — carry their own patents. A
potential biosimilar developer therefore _also_ must develop their
own delivery devices, yet another barrier to market entry.

Finally, while biosimilars have no expected, meaningful differences in
effectiveness or safety, because they are similar not identical, they
are subject to additional studies before receiving regulatory
authorization. Unlike generics, biosimilars are not automatically
substitutable for the original. They have to show they produce the
same clinical result and do not pose any greater risk. These extra
studies and authorization steps further inflate the cost.
Consequently, even laudable intellectual property reform — such as
allowing limited disclosure of the manufacturing process and
standardization of devices — would only modestly mitigate the cost
spiral problem.

One way to attack the more fundamental issue — the biological nature
of the drug — would be to ease approval of interchangeability of the
original biologic drug and its biosimilars. This has happened in other
jurisdictions, and in 2020, the US Food and Drug Administration (FDA)
released some new guidance
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this aim in mind while also approving its first biosimilar, Semglee, a
long-acting insulin analogue produced by pharma companies Biocon and
Viatris that mimics Sanofi’s Lantus insulin product. Then in July
2021, the FDA awarded
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first-ever interchangeable designation to Semglee.

Still, biosimilars tend to yield price reductions of about 15 percent,
compared to 50-80 percent for generics. Sanofi’s Lantus runs at
about $280 per vial, or $425 for a box of five pens, while the initial
wholesale list price of unbranded Semglee product is just $99 per
vial, or $148 for the five pens — a marked drop, but still much
higher than in Canada. Viatris priced Semglee at the same sticker tag
as Lantus pens in 2007, and Lantus insulin vials in 2010. Their target
is those without insurance or with high deductibles who need to pay
for their insulin in cash.

The Manchin Family Maneuver

Viatris’s action on insulin is a genuine improvement, enabled by the
FDA’s smart intervention to ameliorate a pathology of market
behavior.

But who is Viatris? Why are they getting in the game? Funny you should
ask.

Viatris is the new name for the firm Mylan, whom you may remember as
the producers of the EpiPen — the epinephrine auto-injectors that
many food allergy sufferers depend on to treat incidents of
anaphylactic shock. Mylan steadily jacked up the price of a two-pack
of EpiPens from $124 in 2009 to $609 in 2016, prompting a public
outcry that forced the firm to issue a generic alternative with a
lower (but still scandalous) $300 price ticket.

Pharmaceutical executive Heather Bresch in 2015. (Wikimedia Commons)

Mylan, which controlled 96 percent of the US market for epinephrine
auto-injectors, was able to engage in these shenanigans by colluding
with Pfizer, the owner of EpiPen’s competitor, Adrenaclick. Pfizer
withdrew Adrenaclick from the market, delivering a monopoly to Mylan,
in return for a cut of the price-gouging proceeds, which would allow
Pfizer to earn more than it would by producing a cheaper competitor.
(Interestingly, over the course of this price-gouging episode, Mylan
was among the largest donors
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the campaign of Democratic senator Joe Manchin, who is also the father
of Mylan’s CEO, Heather Bresch. As the _Intercept_ revealed
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year, her mother, Gayle Manchin, then head of the National Association
of State Boards of Education, encouraged states to force schools to
stock her daughter’s lifesaving and, very expensive, monopoly
commodity.)

Mylan ultimately dropped its tarnished name. Producing Semglee is
another means to launder its terrible brand. And Mylan/Viatris is able
to do so while not really losing out on the insulin bonanza: Semglee
also comes in a branded version, targeting insurers and pharmacy
benefit managers (more on these middlemen and the unique bit of
devilry they get up to in the United States shortly) at about $270 per
vial, or roughly $400 for five pens. This still ends up costing the US
system far more than other nations spend.

And even the $99 unbranded vial of Semglee — sufficient for a few
days to weeks for some — is a rip-off. A 2018 analysis
[[link removed]] of the costs of inputs and
manufacturing processes of insulin production appearing in
the _British Medical Journal _in 2018 showed that treatment with
insulin analogues such as Lantus or Semglee could cost $133 or
less _per year_.

And all these options — speeding up biosimilar approval, easing
interchangeability, trade secret disclosure, standardization of
devices — would instantly provoke stiff opposition from the big
three insulin producers: Eli Lilly, Sanofi, and Denmark’s Novo
Nordisk, which control the entire US insulin market and 90 percent of
the global market.

Even with aggressive antitrust enforcement, the barriers to entry due
to the biologic nature of the drug are still so considerable and the
existing market control so thorough, that other firms are likely to be
dissuaded from even trying. Were a new, private biosimilar competitor
to attempt to establish themselves in the United States, or anywhere
else, the Big Three could temporarily lower their prices and undercut
the upstart. Merck and Samsung Bioepis abandoned their entrance into
the US market for just this reason, and Novo Nordisk has likewise
priced out Indian competitors. As Yale health law scholar Ryan Knox
wrote in a 2021 overview
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the problem: “The hold of the Big Three on the global insulin market
makes it questionable whether it is ‘financially viable’ for new
biosimilar manufacturers to enter the market . . . [e]ven though
insulin could be sold at much lower prices and still yield profits.”

Walmart to the Rescue?

In July 2021, Walmart introduced
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own brand of the rapid-acting insulin analogue, NovoLog, as part of
its ReliOn suite of health products. The price tag: $73 per vial.

“A typical patient using two vials of rapid-acting insulin per month
will spend $1,749 per year for Walmart’s ReliOn Novolog,” said
Hilary Koch, policy manager of the diabetes advocacy group
T1Interational (which, unlike many patient advocacy groups, refuses
funding from Big Pharma). “While much less than the $6,945 full list
price, this is still a very high price for an essential drug.”

For comparison, the ticket price is $6-13 per vial across the rest of
the OECD (Organisation for Economic Co-operation and Development, the
club of developed nations), and the cost to manufacture and bring to
market rapid-acting analogue insulin is $6-7 per vial.

In addition, the ReliOn insulin wears Walmart’s private label, but
is manufactured for the store by Novo Nordisk, one of the insulin Big
Three. Has Novo Nordisk decided out of the good of its heart to give
up on the big bucks?

Unlikely. As seen with the Mylan/Viatris play, a common tactic of
pharma firms facing public scrutiny is to partition off a very
low-income segment of the market, either through means-tested rebates
or a cheaper version marketed at that demographic. Novo Nordisk may be
hoping that by swallowing these losses, politicians and the media will
call off the dogs and allow them to keep rolling in dough in more
lucrative segments of the market.

But even here, it remains to be seen how Sanofi and Eli Lilly will
react to the Novo Nordisk–Walmart gambit, or whether, as with a play
by another of the Big Pharma beasts, they just temporarily undercut
them to force them to withdraw their product.

T1International isn’t taking any chances: it has called for the
introduction of a federal price cap instead of depending on the
suspicious generosity of Walmart and Novo Nordisk.

White-Hatted Capitalist Charity

Amore interesting recent play has come from Civica Rx, a consortium of
philanthropists, health care providers, and insurers. While comprising
both nonprofit and for-profit entities (including Blue Cross Blue
Shield and Kaiser Permanente), the Utah-based consortium as a whole is
not for profit, and already produces some sixty different generic
drugs. In March 2022, Civica announced they would also manufacture and
distribute three different insulin biosimilars without regard for
profit, all for no more than $30 per vial or $55 for a box of five
pens. As mentioned, biosimilars tend to take many years before
commercial availability, and Civica Rx has acknowledged the hurdles in
front of them while setting a tentative release date of 2024.

Civica is certainly to be applauded, but the rationale behind the
operation, as the group’s website admits, is to deliver millions of
dollars in savings to the consortium’s hospital systems, both
not-for-profit and private. The aim is to “create market
stability” and “guarantee volumes” for their partners’ needs.
The soaring cost of insulins (and other drugs) is not just bad for
patients; it’s bad for hospitals and insurers too. Civica’s
charitable endeavor is thus also just a sensible business decision.
And if patients are better off as a result of one set of capitalists
getting frustrated with another set of capitalists, does it really
matter that the former are only doing it for the sake of the bottom
line?

Not really, no. But this dynamic also means that if at any point their
endeavor ceases to be a sensible business decision — if the Big
Three use their market power and exploit the unique characteristics of
insulin production to put on the squeeze, and it no longer is in the
interest of the “white-hatted” capitalists in the Civica
consortium — then they will likely pull out.

That may explain why California governor Gavin Newsom — who
had earlier considered
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with Civica Rx on generics and insulin biosimilars — and Maine and
Michigan decided to push out on their own. And there’s certainly no
harm in both a public option and a charitable option working
separately (or joining forces) to push down prices.

The Dastardly Middlemen

Beyond the unique characteristics of the biological production of
insulin, there is also some extra special American sauce in the mix
that makes the situation particularly egregious compared to anywhere
else: the pharmacy management companies (PBMs or pharmacy benefit
managers).

PBMs are private companies in the US health care ecosystem that act as
intermediaries between drug manufacturers, insurers, and pharmacies.
Three dominate the sector: CVS Caremark, a subsidiary of CVS
drugstores; Express Scripts; and OptumRx. Insurers contract PBMs to
handle negotiations over drug prices with the producers, as well as
handle insurance claims and the distribution of drugs. The original
point of PBMs was to take advantage of the aggregate buying power of
their client insurance firms to bargain down the cost of drugs.

It hasn’t worked out as planned.

Drug manufacturers lose out on big chunks of the colossal US
pharmaceutical market if their products do not end up on
“formularies” — lists of the drugs that will be covered by a
health insurance plan. Who gets to decide which drugs will appear on
the formularies? You guessed it: the PBMs.

 

In order to keep in the PBM gatekeepers’ good graces, drug
manufacturers pay the PBMs kickbacks that they call
“manufacturers’ rebates.” The rebates, which are calculated as a
percentage of a drug’s “list price” (aka the sticker price),
ensure that the PBMs deliver preferential placement on the formularies
to a manufacturer’s drugs: “You got a nice drug there, Larry.
It’d be a shame if, you know, it fell off the formulary.”

To cover the cost of this bribe — sorry, rebate! — the
manufacturers simply hike up the sticker price. This happens with all
drugs, but as a US Senate report
[[link removed](FINAL%25201).pdf] found,
the insulin situation is just that much worse. The PBMs make an
expensive thing even more expensive. According to the president of Eli
Lilly, the cost of the rebates makes up 75 percent of the list price
of the company’s insulin products.

We often lament the villainy of Big Pharma, but we might also want to
offer a little consideration for the perfidy of the shadowy middlemen,
the PBMs, who operate out of the view of regulators, consumers, and
the media, and bring in more than $200 billion annually to manage
prescription services for insurers. PBMs are one of the reasons that
while the United States represents only 15 percent of the global
insulin market, it is responsible for almost half of all revenues from
insulin.

PBMs are so egregious, in fact, that both Democrats and Republicans
are now looking at cracking down on them. In May, Republican senator
Charles Grassley joined with Democratic senator Maria Cantwell
to introduce legislation
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the Federal Trade Commission and state attorneys to go after “unfair
and deceptive” PBM practices that ramp up drug prices. Other
Republican senators, including New Hampshire’s Jeanne Shaheen and
Maine’s Susan Collins, are backing legislation capping PBM insulin
rebates.

Eli Lilly’s Corporate Center in Indianapolis, IN in 2019. (Wikimedia
Commons)

But don’t somehow think drug makers’ hands are clean. In May 2017,
a lawsuit filed in a Los Angeles federal court alleged that one of the
insulin Big Three, Novo Nordisk, colluded with the PBM OptumRx in an
“illegal pricing scheme” to inflate the price of Victoza, a
diabetes drug (not an insulin, but a complementary medication for type
2 diabetes that helps control blood glucose).

And even if the PBM crackdown is successful, it won’t solve the
deeper problem that stems from insulin’s special characteristics.

The Canadian Option

Insulin’s unique characteristics have led some clinicians, chemists,
and public health officials to call the drug a natural monopoly
[[link removed]].
“Unlike small molecules that are granted artificial monopolies,
biologics are best described as natural monopolies,” a quartet of
clinical specialists wrote in _Health Affairs_ last year. “They
are protected by barriers to entry stemming from the scientific
uncertainty that arises from their structural complexity; these
barriers are expensive, time-consuming and risky to breach.”

As a natural monopoly, they argue, insulin requires some form of price
regulation to prevent producers from charging whatever they like. This
could take a number of forms. The Centers for Medicare and Medicaid
services could refuse to pay the higher price for the originator drugs
and only buy biosimilars. The secretary of Health and Human Services
could negotiate drug prices on behalf of all Americans. There could be
limits on pricing that permit cost of production plus some top up, or
prices that deliver a restricted return on investment or some other
specified margin. In other words, price controls.

These are all creative ideas. And aren’t price controls how Canada
keeps its insulin costs so much lower than the US anyway? That’s
certainly part of the story.

In 1987, Canada’s parliament established the Patented Medicine
Prices Review Board, a quasi-judicial body that offered pharmaceutical
companies a quid pro quo: we give you increased patent protection, and
you agree to direct price regulation of your drugs. The price board
sets a maximum price after considering the average price of a basket
of eleven comparable countries in Europe as well as Japan and
Australia (the United States used to be a comparator too, but was
recently dropped due to its outlier prices skewing the average).

On top of this, the Canadian federal government and the provinces use
their joint purchasing power to negotiate the price of a drug even
lower. The ultimate aim — at least on paper — is the creation of a
national pharmacare program that wraps pharmaceuticals into the
Canadian single-payer health care system (although there are big
fights ahead for that battle to be won).

Pharmaceutical companies regularly whine that price regulation
Canadian-style would inhibit innovation, but a 2021 US House
report found
[[link removed]] that
Novo Nordisk, for example, spent more in stock buybacks and dividend
payments than on research and development in each of the last five
years.

So could the price control approach work in the United States?

The California Option

Some states have capped out-of-pocket insulin costs for those with
insurance. Nevada mandated insulin pricing transparency in 2017, and
two years later Colorado became the first state to institute an actual
price cap on insulin. In April, House Democrats managed to pass the
Affordable Insulin Now Act with the help of twelve Republicans. The
act would cap the cost of insulin at $35 a month — again, for those
with insurance, and could allow Medicare to directly negotiate the
price of insulin with drug makers, akin to the Canadian system. (The
bill, now wrapped into
[[link removed]] the
omnibus Inflation Reduction Act, still has to pass the Senate.)

No one, however, is capping the cost of insulin for the uninsured.

Thus, due to the vagaries of the US political system, state-level
“insulin socialism” — the government directly manufacturing the
drug — may ironically be easier to achieve than the ostensibly more
modest and less interventionist approach of cross-the-board price
regulation. Regardless, it certainly would complement price caps,
attacking the insulin challenge from another flank. It should also
drive costs lower still, as well as expand supply and avoid
displacement of the problem to the rest of the world as the Big Three
attempt to recoup any losses in the United States by squeezing other
jurisdictions.

And ultimately price caps, as necessary as they may be, are stopgap
measures. Canada may have price regulation, but prices are climbing
there too. A 2016 analysis
[[link removed]] by the
country’s price review board found that from 2010 to 2015 the
average cost of insulin jumped over 50 percent, far above inflation.
The price increases of all other drugs in Canada over the same period
sat in the low single digits at most, due to the impact of competition
from generics. The board concluded that the insulin price spike was
driven by evergreening — in this case, the greater use of newer,
more expensive long-acting insulins by the Big Three.

The underlying problem of control of production by an oligopoly
remains unsolved.

This may be another reason why California is opting for a more
aggressive approach. California and Canada have roughly the same
population (39 and 38 million, respectively). If Canada’s aggregate
purchasing power is beginning to struggle to keep prices low,
California is unlikely to fare any better.

Creating public drug companies is not pie-in-the-sky fantasizing.
Around the world, from Sweden and the UK to India and Massachusetts,
there are pharmaceutical companies that are owned by the public and
both produce drugs that private firms find insufficiently profitable
and act as a public competitor that drives down the cost of drugs made
by private producers. These firms can also operate elsewhere in the
pharmaceutical supply chain, from manufacture of chemical or
biological inputs to distribution and retail.

By operating outside market imperatives such as profit maximization
and rent-seeking, public drug enterprises are free to prioritize
public health, scientific advancement, economic development, and
researching potentially non-lucrative drugs and other therapeutics
(including for rare diseases), combatting shortages, creating surge
capacity in emergencies, and smoothing out price volatility at other
times.

In recent years, momentum for an insulin public option has been
picking up.

In 2018, Senator Elizabeth Warren came out in favor of the federal
government creating its own insulin biosimilar production facility.
This year, Michigan state senator Curt VanderWall, a Republican,
introduced a scheme for the state government to manufacture its own
insulin and sell it to Michiganders at cost, hopefully at around $50
per vial. VanderWall said he believes the plan would allow the state
to circumvent the PBMs.

Joining Michigan’s efforts, in May, Maine passed legislation
[[link removed]] creating
a commission to investigate whether the state could also produce its
own insulin in tandem with the University of Maine. With its smaller
size, the state may not have the resources or a big enough market, so
the government says it’s open to exploring partnerships with the
private sector or other states, and is petitioning the federal
government to take action.

And last month, in the most concrete “People’s Insulin” action
taken, the California state budget — recently signed by Governor
Gavin Newsom — allocated $100 million for the state government to
contract and manufacture its own insulin via a public enterprise
called CalRx and sell at “close to cost,” available to all. The
details still need to be hammered out, but it looks like
[[link removed]] $50
million of the sum will go to developing low-cost interchangeable
biosimilar insulins and the other $50 million toward building a
California-based insulin manufacturing facility.

At $100 million, this is on the lower end of the aforementioned
average costs for biosimilar production, but still within the range.
So what are the chances of success?

“Other States Might Go: ‘Oh Wait, I Could Do That Too’”

Paul Williams, the head of the Center for Public Enterprise, a US
think tank that promotes public option goods and services along the
lines of what California is planning, says the state is picking a
fight with some real bruisers.

“The Big Three have gone toe-to-toe with folks like Merck, with
Indian generic manufacturers, who have much more experience with this
sort of thing than Sacramento — and won,” he told _Jacobin_.
Merck is the seventh-largest pharmaceutical company in the world, and
one of its major products, Januvia, is one of the biggest selling
diabetes drugs worldwide, albeit not an insulin.

“They’ve got game. If they can price out a hulking beast like
Merck, they’re probably confident they can do the same with the
state of California.”

But Williams believes the concept is sound and that California, as the
most populous state in the union, has a better shot than maybe anyone
else. Even more important, other potential competitors like Merck and
Indian producers of generics that were squeezed out are also
for-profit companies. A state can weather the storms of losses in a
way that for-profits cannot.

If CalRx’s insulin gambit succeeds, it would force other suppliers
to permanently drop their prices to compete.

“The idea of a public option got a bad rap from Pete Buttigieg when
he was talking about it as an alternative to Medicare for All,” adds
Williams. “But that was in the context of trying to defeat a far
better alternative that already demonstrably works in many other
countries.”

So imagine: a state-owned insulin company acts as a public competitor
aiming to euthanize the rentier in oligopolistic markets. It succeeds
in sharply reducing insulin pricing and breaking the back of the
insulin oligopoly — securing a massive, high-profile victory that
demonstrates the public sector’s efficacy after decades of
neoliberal demonization of economic planning and public ownership.

“Other states might go: ‘Oh wait, I could do that too? And for
other drugs?” says Williams. “CalRx can operate as a demonstration
project, showing the feasibility of public enterprises, which can then
begin to expand to not just other drugs, but also other sectors,
de-risking innovation, smoothing out price volatility, overcoming
supply chain shortages — in other words, shaping markets rather than
just letting them rip.”

Of course, lots of questions remain. Will CalRx’s insulin be
restricted to the Californian market, and therefore only drive these
price effects in the Golden State? Could the Golden State join up with
the likes of Michigan and Maine to spread lower insulin prices nation-
(or even world-) wide?

What responsibility does California have to the rest of the country?
To the rest of the world’s insulin patients? If California were to
sell its insulin outside its borders for profit to help fund the
nonprofit program in the state, it would begin to have an interest in
high prices elsewhere — no different from the Big Three.

This is effectively what happened with Novo Nordisk. It is the
profit-making arm of the wealthiest charitable foundation in the
world, the Novo Nordisk Foundation, which focuses on medical research.
Novo Nordisk exists to bankroll the foundation, which hands out
hundreds of millions each year to scientists, clinicians, and various
humanitarian projects. And yet Novo Nordisk has also, for example,
been the object of a 2019 class action lawsuit alleging that it,
together with Eli Lilly and Sanofi, engaged in an “arms race” to
boost insulin list prices.

These latter issues are soluble, so long as California commits to
maintaining a nonprofit ethic throughout its insulin efforts. It is
the market that is the ultimate cause of the problem, rather than
“corporate-ness,” size, or corruption.

Insulin Socialism?

The vision above of a stepwise approach to building back the role of
public enterprise may strike some socialists as overly wonkish or
insufficiently comprehensive in its demands. Some may dismiss it as
mere “social democracy,” rather than socialism.

Frankly, so what? All the grand projects of democratic socialism that
prompt such admiration in the United States and elsewhere — Canada
and Britain’s health care systems, Austria’s public housing, the
panoply of Scandinavia’s social programs and public ownership —
began with smaller, sectoral, or regional demonstrations that later
made the much more comprehensive versions feasible. The province of
Saskatchewan delivered single-payer health insurance first, years
before it was adopted at the national level. The UK’s National
Health Service modeled itself on worker cooperative societies, but on
a nationwide scale. People saw how these socialized and cooperative
modes of enterprise had already worked very well, far better than
their private counterparts, and now trusted that they could work on a
larger scale.

Nor does this stepwise approach exclude the necessity of social
struggle in the workplace, in the streets, and in neighborhoods to win
concessions from elites, or of the need to take legal action against
cartels. On the contrary: they all work together. Street-level fury
— such as the protests
[[link removed]] outside
the offices of Sanofi and Eli Lilly of parents who lost their children
due to insulin rationing, holding their children’s ashes
[[link removed]] as
they did so — generates the political will needed to pass
regulations or set up public enterprises.

History also shows that progressive measures can come from unlikely
sources. In the decades after World War II, it wasn’t just European
social democrats, but also center-right parties that introduced
welfare state measures: the workers movement, through its trade unions
and parties, sharply shifted the political terrain to the left. Elites
were afraid that if they did not give up some of their power and
wealth to deliver social reforms, they would be rendered irrelevant.

We’re not at that point today. The US labor movement is still weak,
and many baseless, evidence-free tenets of neoliberalism still reign
in the Democratic Party. But the shifting political winds since the
2008 financial crash have opened up new possibilities for policies
that at least concede some ground to classical socialist demands for
economic planning. Indeed, this helps explain why insulin socialism is
being touted by moderate Democrats and even Republicans: it’s
enormously popular amid the widespread anger at insulin injustice.

Socialists would be wise to take up this policy and mold it to our own
ends — a “people’s insulin” rather than a “California-only
insulin.” That will mean pressuring Democrats like Newsom and
Republicans like VanderWall: if CalRx is tempted by for-profit sale
outside California or beyond the United States, the Left must explain
why doing so would pit one set of insulin users against another, and
to organize opposition.

The Left must also push to extend the public enterprise principles
behind state manufacturing of insulin to state manufacturing of other
drugs — alongside allied government interventions such as price
regulation, conscious use of procurement to shape markets, and
intellectual property reform — and then to other sectors. Insulin is
far from the only good or service suffering from oligopoly, supply
constraints, and antisocial price effects. Success with these cases
would give us further social license to push for still-greater levels
of intervention, such as nationalization and industrial policy.

Over the long term, the ambition of this stepwise strategy is even
grander. The prize is a suite of pro-worker policies prioritizing
public welfare and prosperity over the market _across the
board_ rather than just as a one-time fix correcting the flaws of a
particular market failure.

Ultimately, what is exciting about California’s public insulin
project is that it is another — but this time more ambitious —
example of the new mood that breaks with the previous four decades of
neoliberal “common sense” telling us markets know best. And CalRx
is not just venting fury at a rigged system: it’s a well thought
out, credible step by America’s largest state to tackle the profound
injustices of the country’s most expensive chronic condition.

At a time when disappointments abound, this is a potentially major
development in the practical process of unrigging that system.

_Leigh Phillips is a science writer and EU affairs journalist. He is
the author of Austerity Ecology & the Collapse-Porn Addicts
[[link removed]]._

* drug industry
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* pharmaceutical profits
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* Socialized Medicine
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