Why Insulin Is So Expensive in the U.S.

PJoe Biden, a resident of New York City signed today the Inflation Reduction Act. This package includes tax and climate changes as well as the largest change in health care policy since 2010.

New law will help to reduce skyrocketing drug costs, one of America’s most difficult problems. It will allow Medicare to negotiate some drug prices and place a $2,000 yearly out-of-pocket maximum for beneficiaries’ medicine costs. Insulin was the subject of intense congressional debate.

Americans suffering from diabetes are increasingly unable to afford the insulin they need. Advocacy groups as well as lawmakers have worked for many years to ensure that this happens. Inflation Reduction Act imposes a $35 monthly limit on insulin prices for Medicare patients. It provides relief for the approximately 3.3 million Medicare beneficiaries that use insulin according to Centers for Medicare or Medicaid Services.

“People are paying a lot of money for medication they need to survive.” says Lisa Murdock, chief advocacy officer for the American Diabetes Association. According to Yale University’s 2019 study, 25% of insulin users are forced to cut back or skip their doses due the high cost of insulin. This leaves them with few options. “Do I pay for rent or food for my family?” Murdock says. “Or do I buy this vial of insulin?”

Original proposal had proposed to limit insulin prices for Americans who have private insurance. But as the bill moved through Congress, Republicans stripped the initiative after the Senate parliamentarian ruled that a private insurance cap wouldn’t comply with the budget reconciliation process, which Democrats used to pass the bill.

Here’s what you need to know about high insulin prices and the new law.

Why is insulin so pricey in America?

In the 1920s, insulin’s three discoverers sold the patent to the University of Toronto for $1 each, because co-inventor Frederick Banting said insulin “belongs to the world.” But in the last century, the opposite has become true in the U.S., as the price of insulin has risen dramatically: the average price nearly tripled between 2002 and 2013, according to the American Diabetes Association.

A report was released by the Senate Finance Committee in 2021 that looked at the prices of insulin products from three large manufacturers. One insulin that is most commonly used had a $101 increase in price compared to five years ago. The other saw an $159 rise over the same time period.

These are complex reasons.. Murdock says drug pricing can involve multiple parties, including manufacturers and pharmacies, as well as health plans. A complex chain of actors often means it is difficult to determine the cause. “There is a lack of transparency,” she says. “Prices have risen dramatically with little explanation.”

Chandra claims that insulin manufacturing costs have not increased in recent years. In fact, today’s average net price of insulins used most is now 20% less than it was in 2007 according to PhRMA (Pharmaceutical Research and Manufacturers of America). This study was commissioned by PhRMA. But Murdock cites “evergreening,” a process in which manufacturers slightly change the formulation or the delivery method of a drug in order to extend their patents, as one possible factor for the increase in prices to consumers.

Amitabh Chandra, a professor of public policy and business administration at Harvard, says that while evergreening is part of the problem, it isn’t the only factor. Prices rise due to increased demand for new formulations, as well as middlemen. “Pharmacy benefit managements have a strong incentive to negotiate really aggressive rebates with insulin manufacturers,” says Chandra. “But when they negotiate those rebates, they don’t share them with the payers. So there are some huge problems in the supply chain here.”

What the Inflation Reduction Act will do to insulin prices

The Inflation Reduction Act will result in a reduction in insulin’s out-of-pocket cost for the one-third of Medicare beneficiaries who take insulin. Co-pays are limited to $35 per month. And while they won’t directly impact insulin prices, other provisions in the law, such as allowing Medicare to negotiate prices and placing a $2,000 annual cap on out-of-pocket costs, will provide further relief for Americans on Medicare who use insulin.

However, the bill will not impact the overall price of the drug—just the copay amount—meaning that insulin will continue to be a financial burden for those not covered by Medicare. “It’s reducing the patient out of pocket [cost], but we’re not actually reducing the price that manufacturers charge and receive for their product,” says Chandra.

What diabetes advocacy organizations did to react to the bill

For advocacy groups such as the American Diabetes Association, the new law contains the kind of policy change they’ve pushed for over many years. “This is a historic moment, to see a national copay cap on insulin,” says Murdock.

“It’s wonderful to see our years of advocacy work pay off with this long-awaited insulin affordability bill. This pivotal legislation will help our patients who have Medicare and struggle to afford their insulin,” said Endocrine Society President Ursula B. Kaiser in a statement.

But the fact that privately insured patients won’t see this benefit as Democrats originally intended means the fight isn’t over yet. “Today’s passage of the Inflation Reduction Act by the U.S. House of Representatives represents progress for the more than 3 million people on Medicare who use insulin, but we need to do more to ensure insulin affordability for everyone.” JDRF, a Type 1 Diabetes advocacy group, wrote in a statement before Biden signed the bill into law.

Next stop in the cost-cutting fight

Although copay caps can be used to help insulin users pay their bills, some drug companies offer them as a benefit. However, they can sometimes prove difficult to obtain due the strict eligibility criteria. The market will soon see low-cost insulin from a non-profit drugmaker in 2024. Advocates are calling for change at both the national and local levels.

According to the American Diabetes Association (ADA), 22 states have implemented insulin copay caps that range from $25 to $100 for supplies lasting 30 days. Some advocates want to extend this nationwide. Some are lobbying Congress for the consideration of the bipartisan INSULIN act, which was introduced in the Senate last July. It would encourage insulin makers to lower their prices and limit the monthly insulin cost for covered diabetics to $35.

“What no one thought would be possible five years ago is now closely within reach,” says Murdock, “and we’re determined to be in this fight until we get it.”

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