by Andrew Bell
Next year marks the centennial anniversary of the discovery of insulin, a drug which single-handedly transformed diabetes from a death sentence into a manageable chronic condition . The treatment of Type 1 Diabetes – an autoimmune disorder characterized by the destruction of insulin-producing pancreatic beta cells – was especially impacted by this revolutionary medication. Yet instead of celebrating the wonder drug, American politicians will likely continue to debate the exorbitant prices patients continue to pay for this essential treatment. In 2013, more money was spent on insulin than all other diabetic products combined. From 2002 to 2013, prices for the same insulin have almost tripled. Many patients today, who just a few years ago paid $290 for a 90-day supply of insulin, now must pay $900 or more for the same medication or risk hospitalization – or even death . Despite the length of time since its discovery and mass production, insulin costs 10 times more in the United States than anywhere else in the world. Many wonder why, 100 years later, generic insulin has yet to be produced. The answer is not visible in plain sight; the state of the insulin market is the result of numerous forces acting in tandem to benefit everyone with skin in the game – except patients.
The normal progression of a drug into the American market is relatively uniform. After a company debuts a new treatment, they are granted a patent, which functions as a temporary monopoly on the production and sale of that product. When the patent expires, generic companies can produce the same drug without the initial development investment. As a result, it can be sold much more cheaply as a generic. It’s why you can buy generic brands at your local pharmacy for only a couple of dollars; that pharmacy is selling the exact same chemical without the brand name on the next shelf, typically for less money. Insulin, however, has not followed this path. Frederick Banting, who first discovered and extracted the hormone in 1921, sold the patent to the University of Toronto for $1, believing it immoral to profit off of a drug as vital as water to diabetic patients . To produce enough to treat patients on a large scale, he teamed up with pharmaceutical company, Eli Lilly, which was permitted to patent any manufacturing improvements to the drug in the U.S., while the university kept all rights for the rest of the world.
The problem lies within these “manufacturing improvements”, and it’s a striking example of a phenomenon known as evergreening, a process by which manufacturers continually block a drug from entering the generic market. Insulin, as a pharmaceutical, is not a single chemical, but rather a family of related compounds. Put simply, insulin is orders of magnitude larger than most “small-molecule” drugs – the ones in most medicines . It’s practically impossible to know the atomic composition of any one insulin product – and so we settle for extremely similar molecules that have identical effects on the body. And today’s insulin is different from the insulin of the 1920’s, which was extracted directly from beef and pork pancreas. From there, chemical modifications improved the efficacy of the insulin, allowing for fast and slow-acting insulin, improving the potential for treatment. Genetic advancements in the 1970s allowed for the production of actual human insulin, using bacteria into which human genes were implanted. This product was called recombinant insulin and was even easier to modify and improve. The problem is that with every improvement, the company’s patent is renewed. And every time an insulin’s patent runs out, as if by magic, a “new” insulin is released – most of which have no added benefits and are no more effective than their predecessors. This is worth repeating: the majority of these “improvements” have little to no effect on the drug’s efficacy; they are simply slight changes that do nothing of any significance as far as the patient is concerned. In other words, tiny, insignificant changes to the chemical structure of an insulin molecule allow for essentially infinite patent renewals, which means an infinite monopoly on production by the “Big Three” companies that control almost every insulin product sold in the U.S.: Novo Nordisk, Sanofi-Aventis, and Eli Lilly. Conveniently, when a new insulin is released, the companies remove the older, no longer patented product from the market – leaving only the new, expensive insulin. With such a firm grip on a market by these monopolies, and backed with the power of U.S. patent law, it’s no surprise that regulatory solutions thus far have only worsened the state of the insulin market. What the market really needs is insulin from new sources.
It might seem easy, then, for generic companies to start making the old, unprotected insulin. Unfortunately, a slew of other problems have interfered in the U.S. market. Since insulin is such a large molecule, and it is so difficult to know whether or not one “insulin” is atomically identical to another (imagine measuring every brick in a building with a microscope to make sure they’re all exactly the same size), insulin is regulated as a biosimilar rather than a chemical; in other words, while it’s structurally close to real insulin, it’s not identical, and thus not a generic . Biosimilars are subject to much harsher regulation and testing by the FDA, so much so that insulin biosimilars which have been produced and sold in countries around the world are still waiting to be approved for use in the U.S. market . Consequently, for generic pharmaceutical companies, it is simply not worth the time and effort to manufacture older insulin when they could make more money selling easy to produce small-molecule drugs. Patients, then, are limited to the insulin produced by the Big Three and must comply with this monopoly born of overregulation and patent law oversight.
Moreover, the insulin market doesn’t follow the typical market model of economics. In the market for a typical product in which there is little choice for alternatives on the product side, demand will fluctuate to a point at which only those who want a product the most, or those who can afford to buy it, will pay the high price set by monopolistic market forces. Those whose demand for the product is less will not pay an exorbitantly high price, and an equilibrium will be reached. This kind of market functions at least somewhat for luxuries like computer operating systems or high-end televisions, but it is destructive to public health in regards to the drug market, and particularly so for necessary drugs like insulin. As far as insulin is concerned, demand is static; no matter the price, diabetics need it to survive. Patients can neither “use it sparingly”, nor can they ration it to make it last longer, though this hasn’t stopped some patients from trying in dire economic conditions. This was the case for 26 year old Alec Smith, who died in 2017 of diabetic ketoacidosis (a side effect of insufficient glucose/insulin regulation leading to persistent, dangerously high blood glucose and blood acid concentrations) less than a month after he aged out of his mother’s health insurance plan.  Forced to try to make what little insulin he could afford last, he died of a treatable chronic illness.
However, the solution is not quite so simple as removing the barriers to generic insulin or biosimilars. In fact, both already exist, but neither have been able to disrupt the chokehold of the Big Three over the insulin market. Their potential effect on the market is hindered by perhaps the most salient issue, and the one talked about most by politicians and media personalities alike: the intricacies and complexity of the U.S. healthcare system. In short, the process of drugs getting from manufacturer to patient is long and arduous and goes through three major players before finally reaching pharmacy shelves, among which are the manufacturer and a wholesaler, which finally sells the drug to retail pharmacies. From there, when a patient orders insulin, payments from their insurance company go first to an intermediate Pharmacy Benefit Manager (PBM), which negotiates the price with the retail pharmacy and the pharmaceutical company. At each step of the way there is a price markup, resulting in insulin’s shockingly high end-consumer prices.  It is within the operation of this system that the wellbeing of patients is disregarded, and it is on the hands of this system that the hyperglycemic blood of patients like Alec Smith rests.
The life cycle of any new drug begins with the manufacturer. The manufacturer is responsible for creating the drug, and in the case of a new or greatly improved drug, it conducts the research and development in order to bring it to market. They also set the initial price, or list price – this is the price that we often hear about in the media – and is also the price that uninsured patients are forced to pay in full for their medication. For insured patients, that price is modified by, and usually reduced, , their health insurance company. But insurance companies are not biomedical research companies – they only negotiate the price for the drugs manufacturers put on the market; the Big Three retain total control over what insulin is available in the first place . They also have considerable lobbying power. The big three spend a vast amount of money annually on lobbying efforts to prevent changes to the status quo of the insulin market, which has thus far warded off real patient-focused reform efforts.
Wholesalers purchase large quantities of a drug from a pharmaceutical company and sell that stock to individual pharmacies. In doing so, they impose a price markup and profit off of high-volume drug transfer. At work in this industry, however, is the dominance of another big three; the “big three” wholesalers – AmerisourceBergen, Cardinal Health, and McKesson – control an estimated 95% of the wholesale drug market in America . Together, they constitute a monopoly with practically unlimited price-setting potential, and their clients include virtually every big-name pharmacy in the U.S. By the time a drug makes it to the shelf of a retail pharmacy, its price has already been set extraordinarily high by the monopolistic power of both the manufacturer and wholesaler. But the problems don’t end on the pharmacy shelf – even throughout the payment process, there are forces working to maximize profit for intermediate actors at the expense of the patient.
Retail pharmacies are paid through some combination of money coming from the patient, via copays and deductible payments, and their insurance company – if they have one. The payments from the insurance company are relayed to the pharmacy through intermediate companies called pharmacy benefit managers (PBMs). Essentially, PBMs negotiate the price of a drug from both pharmacies and manufacturers. They set a negotiated price – the price the insurance company pays for the drug from the pharmacy, as well as set a price the manufacturer agrees to sell the drug at; the difference between this price and the drug’s list price is known as a rebate. Savings from rebates are typically passed along to insurance companies (although many PBMs keep some rebate profit), and in theory those rebate savings are passed along to the patient . In reality, this is rarely the case, and insurance companies and PBMs reap most of the benefit of these rebates. More worryingly, rebates create an incentive for manufacturers to increase the list price of their drugs. If a manufacturer and PBM agree on a price for insulin, then by doubling the list price of the insulin on the manufacturer’s end, the PBM can “double” the savings – which translates to more business for the PBM at no cost to manufacturers. And since manufacturers want their insulin to be among the PBM’s preferred insulin products, they are motivated to give them as big a rebate as possible. To make matters worse, there is yet another “big three” monopoly in the world of PBMs: Optum, Express Scripts, and CVS control about 75% of the insulin market, making any serious challenges to the system an uphill battle.
Flow chart describing the interactions between insurance company health plans, drug manufacturers, Pharmacy Benefit Managers (PBMs), wholesalers, and retail pharmacies in a typical U.S. drug market. 
Clearly, the issue of insulin prices is multifaceted; while there are a number of other players in the market that contribute to the price inflation,, I’ve chosen to highlight the most blatant examples of harmful interference in the market. Many of the issues in the supply chain (from manufacturer to wholesaler to pharmacy, with insurance company and PBM interference) manifest at high levels of management and regulation; it is unlikely that any one individual can single handedly transform this system overnight. What we can do – as individuals, communities, and concerned groups of people – is change the conversation – and change how we think about the issue. All too often, what we hear from the media, politicians, and lobbyists is little more than a specific direction of the general tendency among these groups to bash insurance companies. Politicians are busy selling their ideas for how the health care system ought to work overall – and while that’s a conversation we absolutely should be having, changing how we regulate the big insurance companies isn’t going to solve the insulin crisis. It is rare indeed that PBMs are mentioned on any major news network or at any major political rally. Nor is evergreening given the attention it deserves. The insulin crisis demands immediate, specific, targeted responses in order to reduce the power that these monopolies have seized and return the benefits of a market economy to the patients -who have for too long been forced to comply with a system which hurts them at every step, and who have been denied any agency or choice.
If there’s any good news about diabetes treatment, it’s that it’s finally starting to get the attention it warrants. Just a few years ago, the price of insulin was a nonissue in mainstream political discussion. Now, it’s one of the most frequently cited examples of failures in our healthcare system by presidential candidates, senators, representatives, and local leaders. But even to this day, insulin is seen as only a small part of a larger problem – just one salient example of an overarching issue. Our healthcare system is flawed – that much goes without saying – but insulin is a different drug than almost all others on the market, and its utter lack of availability must be recognized as a problem in its own right.
What can we do? As students, and members of student organizations, we can prioritize donating to effective charities which contribute to lifesaving research and efforts to improve the treatment of diabetics by insurance companies, such as the Juvenile Diabetes Research Foundation or T1International, which maximize their impact and spend significant funds on research and advocacy.  Consider such charities for your group’s next fundraiser.
But the most important thing you can do, beginning right now, is to change the way you think about insulin. If you haven’t thought of it before, think about all the folks out there like Alec Smith. Folks like Nick Jonas. Folks like me. We all live with a gun to our heads, and the moment our wallet can’t hold us over for another month, the system will claim us as victims, too. And if this is an issue that already hits close to home for you, then don’t be satisfied with the mainstream explanations of “how it is” or by bright-eyed lobbyists and politicians selling you some grand scheme to fix all of our healthcare problems – demand specific action now on behalf of those for whom this nightmare scenario is an everyday reality. Don’t let the insulin crisis be reduced to just a battle in the war against insurance companies.
While insurance companies certainly work hand in hand with the other members of the supply chain to drive up prices, it is too simple to merely leave them with the blame and ignore the other actors, especially when the example of PBMs is at least as influential and arguably much more harmful than anything the insurance companies can do on their own. We need to move beyond a simple game of blame-tossing and start holding the right actors accountable for the right actions. This means pressing regulators and companies to limit the ability of PBMs to conspire with and pressure manufacturers to raise list prices and reform how PBMs make money to separate their income from the prices paid by pharmacies and consumers. Regulations should limit the ability of PBMs, distributors, and manufacturers to form monopolies, not create loopholes that make them inescapable. This issue represents a golden opportunity for modern liberals, for whom affordable access to healthcare is a major tenet of their policy, and conservatives, who shame any kind of harmful governmental or bureaucratic control over the markets, to unite around a common good. And we as citizens should refuse to accept these irregularities as the “norm”, because they are the exception, not the rule. And in a world where thousands of children diagnosed with Type 1 Diabetes – people just like me – are forced every day to choose between paying for groceries or medicine they need to survive another day, anything less is nothing short of cruel.