Economies Scale, but not in Health: Insulin and the $327 billion elephant in the room
Diabetes costs the United States over $327 billion per year, and has become the most expensive chronic disease in the nation.
Over 30 million Americans have diabetes, and this costs the United States over $327 billion per year and people with diabetes need insulin to be able to lower their blood glucose and store that glucose as glycogen in the liver. Access to insulin is a life-or-death situation for these individuals.
This is even more of an issue because the price of insulin has skyrocketed — nearly tripling between 2002 and 2013, and this causes many people with diabetes to have to choose whether to purchase a life-saving medication or other necessities for themselves and their families, and this can have both short and long-term health consequences.
As you can see from the diagram above, the insulin supply chain, like those of other prescription drugs, is very complicated, so I’m just going to give a brief overview.
Manufacturers (who set the list price for each insulin product) usually sell their product to wholesalers who deal with the distribution to individual pharmacies (though sometimes a pharmacy chain will deal with the manufacturer directly). Pharmacies then dispense the medication to individuals and collect cost-sharing (if necessary) required by the patient’s health plan. The pharmacy will then submit a bill to the patient’s health insurance plan (if they have one) to be reimbursed for the cost of the medication minus the cost-sharing and with an added dispersal fee. If the patient does not have or use health insurance, then they are charged about the purchase price plus a markup by the pharmacy.
The medication itself takes a relatively direct route from manufacturer to patient, but the flow of money is less direct and transparent.
A study in 2018 estimated that one vial of human insulin costs only $2.28- $3.42 to produce and that one vial of analog insulin costs only $3.69- $6.16 to produce. The same study also revealed that a one-year supply of human insulin could cost $48- $71 per patient and that the same supply of analog insulin could cost only $78- $133 per year. This study only looked at manufacturing costs — not administrative fees, sales, or research and development, regardless, pharmaceutical companies have not explained the discrepancy between the production and retail costs of insulin.
Prices for generics and biosimilars (biological medical products that are highly similar to another already improved biological medicine) are bringing down prices, and overall, retail prices have decreased since 2019 by 6% as a result of the approval of generics and biosimilars. The first generic insulin, insulin lispro, was released by Eli Lilly in 2019 is the generic counterpart to Humalog. Since then, the FDA has approved generic counterparts to Humalog 75/25 (insulin lispro 75/25), Novolog (insulin aspart), and Novolog 70/30 (insulin aspart 70/30). Retail prices of insulin lispro and insulin aspart are about half of their brand name counterparts, and the same goes for mixed insulins, like insulin lispro 75/25 and insulin aspart 70/30. Instead of paying a retail price of over $140 for a Humalog KwikPen, patients can now pay only about $60 for a generic insulin lispro KwikPen, and these savings are similar for other brands and alternatives.
Generics are often the best way to lower drug prices overall, and they contain exact replicas of the active ingredients in the name-brand drug, however, biologic drugs like insulin are extremely difficult to recreate. So, instead, manufacturers often create follow-ons or biosimilars, which are close copies of biological drugs. These biosimilars are usually more expensive than generics (though they’re still less expensive than the name-brand medication) and they aren’t identical to the chemical structure of the brand counterpart.
Basaglar, a long-acting insulin that was approved in 2016, is the follow-on to Lantus, and Admelog, a rapid-acting insulin that was approved in 2017, is the follow-on to Humalog.
The average retail price per unit of Basaglar is $0.27, while the average retail price per unit of Lantus is $0.34. The same slight decrease goes for Admelog and Humalog; Ademlog costs $0.28 per unit while Humalog costs $0.44 per unit.
Keep in mind that an insulin “unit” is not a large amount of insulin. My sister has to take 1 unit of rapid-acting insulin for every 10 grams (this varies between people) of carbohydrates she eats (and more if her blood sugar is high) and about 20 units of a long-acting insulin every night.