[Insulin’s cost crisis is spurring states to pursue a public
version of an essential medication. ]
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INSULIN IS WAY TOO EXPENSIVE. CALIFORNIA HAS A SOLUTION: MAKE ITS
OWN.  
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Dylan Scott
February 1, 2023
Vox
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_ Insulin’s cost crisis is spurring states to pursue a public
version of an essential medication. _

Insulin, photo by Sprogz (CC BY-NC-ND 2.0)

 

There are few better emblems of the failures of the US system of
medical care than its inability to consistently provide insulin
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Americans who need it.

The drug was discovered 100 years ago, and it provides essential and
ongoing treatment for millions of people living with diabetes, one of
the most common chronic diseases in the country. And yet one in six
Americans
[[link removed]] with
diabetes who use insulin say they ration their supply because of the
cost. Some people end up spending nearly half of their disposable
income
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a medicine they must take to stay alive.

Though insulin generally costs less than $10 per dose to produce
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some versions of the drug have a list price above $200. This is in
part because, in the US, a warped market has allowed three companies
to dominate the insulin business.

But if some states have their way, that may be about to change.

With California leading the way, a handful of states are considering
trying to disrupt the market for essential medications, starting with
insulin. The plan would be to manufacture and sell insulin themselves
for a price that is roughly equivalent to the cost of production.

Their premise: Take away the private market’s profit motive and
maybe states can deliver affordable insulin as a wholly public
enterprise, run by civil workers, that does not need to make money.
Because these states buy a lot of drugs too, through their Medicaid
programs and the health plans for government workers, they would also
reap the rewards if those drugs are cheaper.

“If we can drop the cost of insulin, we don’t have to make money
on selling it. We get the savings as a purchaser,” said Anthony
Wright, executive director of Health Access California, which has been
a leading advocate of the public insulin plan and provided guidance to
state legislators and Democratic Gov. Gavin Newsom’s office.

As his colleague Chris Noble, who has Type 1 diabetes, put it: “Just
providing an actual at-cost alternative has the potential to really be
disruptive for the pharmaceutical industry.”

States have become more ambitious in their policies for tackling the
insulin affordability crisis because the scale of the problem
continues to grow and the federal government seems capable of taking
only limited action to address it. The price of some insulin had grown
by 1,000 percent over the past 20 years
[[link removed]], far outpacing inflation.
And the number of Americans with diabetes is projected to grow
to nearly 55 million by 2030
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current figure of roughly 37 million
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Medicare, the federal health insurance program for seniors, is about
to institute a $35 per month cap on insulin costs for its
beneficiaries, a provision of the Inflation Reduction Act
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Democrats passed last year. But, because of the Senate’s arcane
rules, they could not establish the same cap for private insurance,
which covers more than half of Americans.

A few states have passed their own out-of-pocket caps, but even a
small cost burden, as little as $10
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can discourage people from taking necessary medications. States have
also sued the drug companies that currently produce insulin, asking
the courts to intervene and stop the unfair market practices that they
say inflate the drug’s price.

But those are half measures, chipping away at the high cost without
fundamentally altering the market that has allowed a drug, which costs
a few dollars to produce, to be sold at an enormous markup. A publicly
produced insulin — a public option, you might call it — would be a
consequential innovation. And if successful, it could open the door
for more public projects to produce essential medications more cheaply
than the private sector.

“I think there’s a window open now because federal action has been
so limited,” Dana Brown, who has developed ideas for public
pharmaceutical production
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her work at the Democracy Collaborative, told me.

Why insulin is so stubbornly expensive

Insulin was discovered in 1921
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four men: Frederick Banting, James Collip, John Macleod, and Charles
Best. They extracted the hormone insulin from the pancreas of a dog
and gave it to another dog with diabetes, to see if it could control
the second animal’s blood sugar as a substitute for the insulin it
would normally make on its own. They then quickly tested the extract
on a human, a young man who had Type 1 diabetes, and found that it was
successful in managing blood sugar in a person too.

It was an enormous breakthrough: Before the discovery of insulin,
people with Type 1 diabetes could expect to live less than three
years [[link removed]]. The
inventors recognized the significance of their discovery and sold the
patent for insulin to the University of Toronto for $1, with the hope
of making it as easily available as possible.

“Insulin belongs to the world,” Banting reportedly said.

But those altruistic aspirations have been, over the years, eroded by
private enterprise. Fledging for-profit drug companies recognized a
business opportunity and quickly began developing their own insulin
products. Longer-lasting insulins started coming on the market in the
1940s and ’50s.

Then in the 1980s, drug companies figured out how to mass-produce
human insulin and then focused on developing artificial insulins that
can be tweaked to make them act more quickly or last longer. As
artificial insulins became the standard of care in the 1990s and
2000s, the three manufacturers that produced them gained more control
over the US insulin market — and in the following
decades, America’s insulin affordability crisis took off
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Most people don’t pay the list price for insulin, though depending
on the kind of health insurance they have, patients can be on the hook
for a lot of money. A 2017 study
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that Americans with high-deductible insurance plans paid an average of
$141 per month for their insulin. A young man in Minnesota with Type 1
diabetes, Alec Smith, died in 2017 because he could not afford the
$1,300 out-of-pocket price
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once he was dropped from his parents’ health insurance when he
turned 26.

The newer artificial insulins can be very valuable for people with
diabetes who need to time their insulin injections with meals in mind,
though it is not clear that artificial insulin is more beneficial than
bioengineered human insulins for some patients, such as those with
Type 2 diabetes. But, according to many
[[link removed](19)31008-0/fulltext] academic
[[link removed]] experts
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innovation in the insulin business hardly justifies the current costs
for insulin products. Insulin is still, at its core, more or less the
same product that debuted a century ago.

Nevertheless, pharmaceutical companies stand to make a lot of money by
continually refreshing their products. Thus, the three major insulin
manufacturers in the US — Eli Lilly, Novo Nordisk, and Sanofi —
continue to do that, and thereby maintain their control of the
country’s insulin supply. The main mechanism the US has for bringing
down prescription drug prices is allowing generic drugs to compete
with brand-name versions. When a company develops a new drug, it gets
a period of exclusivity, 10 years or more, in which it is the only one
able to make or sell that drug. But after that exclusivity period has
passed, other companies can make a carbon copy and sell it at a lower
price. Studies find
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several generic competitors come on the market, prices drop
significantly.

But pharma companies are savvy about finding ways to extend their
monopolies, with insulin and other drugs, by making minor tweaks to
the chemical compound and asking for a patent extension. In the case
of insulin, the companies can also modify the delivery device to
protect their market share. Each product is meant to be used with
specific, company-designed injectors. Though the patents on the
artificial insulin developed in the 1990s have started expiring, these
companies continue to hold and extend monopolies on either their
devices or other chemical compounds, making it harder for generic
competitors to enter the market.

Other federal regulations have added to the challenge. The FDA began
to treat insulin as a biologic drug in 2020 — meaning it is made
with living materials instead of combining chemicals like conventional
pharmaceuticals — which comes with a different set of standards for
generic versions, which are known as biosimilars, as well as
manufacturing challenges given the precise conditions these products
must be made in. Biosimilars can cost up to $250 million to produce
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up to eight years to bring to the market, versus a one-year investment
of as little as $1 million for conventional generics. And unless the
FDA recognizes a new generic insulin as interchangeable with the
products already on the market, health insurers might not want to
cover it and doctors may not be willing to prescribe it.

To add one more layer of difficulty, the current manufacturers can
always decide to drop their prices to crowd out new generic
competitors, given the gap between the retail price and the $10 cost
of production. The first biosimilar drugs have come onto the market in
the past few years, but only one of them has been deemed
interchangeable with the brand-name version; ultimately, in late 2021,
it was priced at only $20 less
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the brand-name insulin it was competing with. More competition is
needed to meaningfully depress prices.

“We know why it’s happening and our government has failed to take
action,” Hilary Koch, whose young son has Type 1 diabetes and who
sat on Maine’s commission exploring the feasibility of the state
producing its own insulin, said. “We know that there are thousands
if not millions of dollars lost every year from people ending up in
hospital or people having complications due to poor management of
their diabetes. When we talk about improved management, that starts
with access to insulin.”

Given their tight control of the market, insulin manufacturers
could afford to lose a lot of their margin by cutting prices and
still make a profit
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That is a vulnerability that California, with its plan for the public
production of insulin, is trying to exploit.

California’s plan to produce its own insulin

California’s program to produce a cheaper generic insulin has
already cleared the first two critical steps: authority and funding.
The state legislature passed a bill creating the authority for the
state to produce its own insulin and it has appropriated $100 million
to support the effort.

The state is taking a two-phase approach. In the short term,
California has put out a request for proposals from existing
enterprises that could produce generic insulin for the state as a
subcontractor in the next few years in order to try to deliver relief
as soon as possible.

One possibility would be Mark Cuban’s at-cost drug company
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venture capitalist has sought to provide cheaper medications directly
to patients who pay out of pocket. Another is a relatively new
nonprofit enterprise, Civica RX
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which launched in 2018 as a collaboration between several hospital
systems to produce cheap generic versions of essential medicines; its
goal is to bring a generic insulin to the market by next year.
California’s contract is expected to be announced in the coming
weeks.

But in the long term, the plan is for a government factory operated by
government workers producing government-owned medication. The state
would have its own public production facilities, staffed by civil
workers, which would sell generic insulin for the same cost needed to
produce it, plus perhaps a small percentage to cover auxiliary costs
for the program.

The $100 million in funding is split evenly between the short and long
term. But that long-term vision will take time. Even if the state were
to retrofit an existing factory for insulin production, that
construction work could take years, as would hiring a workforce to
oversee it. Once production is up and running, California would need
to hit more targets — most importantly producing a product that the
FDA says is interchangeable with existing insulin medications.

The Golden State is probably the best home for a project like this.
Newsom has put a lot of political and literal capital behind it, and
the state’s politics are such that Democrats are likely to remain in
control for the foreseeable future. The generic insulin plan should
have a long enough runway to see if it works.

If California really can produce its own generic insulin, then
advocates in the state say it will be an almost can’t-lose
proposition. Even if the private manufacturers were to drop their
prices dramatically in response to a cheaper public option coming on
the market, that is still a win for patients and for the state, which
would save money on Medicaid and state employee insurance programs.
There are international precedents for public drug production: Sweden
adopted one in the 1970s and it continues to operate in a modified
form in which the state is the only shareholder in companies that
produce and sell drugs.

The one type of competition private insulin manufacturers have not had
to face is a venture that doesn’t need to make a profit. I asked the
current major insulin manufacturers what they thought about
California’s initiative. They said they welcomed any competition and
pointed to their own efforts to provide more-affordable insulin.

But the advocates working on the efforts in California think
litigation or other efforts to slow them down could begin as the state
gets closer to putting a product on pharmacy shelves.

The long-term vision for public pharmaceutical production

If manufacturing a cheap generic insulin proves viable for California,
the consequences could be enormous and stretch far beyond insulin.
California would provide proof of concept, and a fledging public
marketplace for public pharmaceutical production could potentially
emerge.

Advocates see an opportunity for state governments to disrupt the
pharmaceutical industry. Let’s say California were to prove
successful at developing its own generic insulin. Once it has the
manufacturing capacity, it could sell that insulin to other states,
helping lower the drug’s cost across the country.

Other states could develop and sell generic drugs of their own.
Washington State and Maine are already following California’s lead,
though they are not as far along. Washington has authorized, but not
yet fully funded, the development of a program for the public
manufacturing of generic drugs. Maine created a bipartisan commission
to explore the possibilities, which is expected to deliver its final
report to lawmakers soon. Lawmakers in Michigan have also expressed an
interest in such a project.

If California succeeds, it’s possible that, eventually, a state like
Washington or Maine would devote its efforts to a different essential
and expensive medication. Other options could include drugs
experiencing a shortage
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with expired patents but no generic competition
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or high-priced medications with inequitable access such as EpiPens or
asthma drugs, Brown said. States could then over time specialize in
manufacturing specific medicines and trade with one another for other
critical drugs.

This may sound far-fetched, but the public production of medicine is
not entirely novel. Michigan used to produce its own vaccines through
a state-run enterprise until the 1990s. Massachusetts still does,
through the UMass college system, with the state providing funding to
those institutions to produce vaccines, which are distributed to state
residents at no cost.

Long-term trends toward privatization and the declining public trust
in government’s ability to accomplish major projects, along with the
mighty lobbying power of the drug industry, worked to discourage
public officials from ideas as ambitious as the public production of a
generic insulin. But the crisis of its costs has reached the point
where states are compelled to intervene.

California’s experiment will be the most important test of that
concept, and it will be years before we know whether it worked. But if
it does, it could prove a pivotal moment in the effort to make
essential medicines more affordable for Americans.

_Dylan Scott [[link removed]] covers health
care for Vox. He has reported on health policy for more than 10 years,
writing for Governing magazine, Talking Points Memo and STAT before
joining Vox in 2017. _TWITTER [[link removed]] RSS
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