Insulin and medical innovation | EDITORIAL

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Competition, not government price controls, is the best way to lower prices. And now a group of hospitals are applying this principle to insulin.

The rising cost of insulin is a major problem for uninsured diabetics. They need insulin to survive, but the costs have skyrocketed. The list price of insulin nearly tripled between 2002 and 2013. From 2014 to 2019, the average retail price increased by 54%.

Understanding these price increases takes more analysis than lamenting “greedy companies”. Businesses that sell food, entertainment, cars, and other goods and services are similarly motivated. But the prices of these products — even with the inflationary spurt created by the reckless spending of Democrats — have not risen as quickly.

It’s important to understand that larger insulin purchasers usually don’t pay the list price. Insurance companies and drug benefit managers negotiate deep discounts. Sometimes these discounts offset most of the list price increase.

Consider what Bloomberg discovered while reviewing Humalog, an insulin made by Eli Lilly & Co. Between 2009 and 2015, the list price per milliliter rose from $12.34 to $29.36. That’s a massive leap for uninsured customers. But the price paid by insurance companies went from $9.46 to $10.06. “After rebates, the average price insurers pay for Humalog rose slightly less than the 9.5% rise in inflation during this period,” Bloomberg reported.

None of this helps the uninsured person who needs insulin. But the problem is exacerbated because there is much less competition in the insulin market than in the market for other products. In addition, the market for insulin and other drugs is often distorted by the fact that consumers often do not pay directly for these products.

Generic drugs should have relieved the cost pressures of such an old drug, but insulin is a biologic drug. As The Washington Post reported, this requires “a special ‘biosimilar’ regulatory framework from the Food and Drug Administration that wasn’t fully established until 2020.”

Remember, the next time a politician suggests more government is the solution to high drug prices.

Still, the need remains for a generic version of insulin that is more affordable for the uninsured. A number of major US hospitals are forming a consortium to build a massive pharmaceutical plant in Virginia that they hope will provide just that. The group plans to sell insulin for $30 a vial once production begins in a few years. Five injection pens will cost $55. This is much less than the list price of brand name insulin.

This is the type of healthcare innovation that should be rewarded and encouraged. Reducing regulatory barriers and limiting drug patent extensions would be much more effective than fixing prices.

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