California to produce its own insulin in response to high costs

There are few better indicators of the failings of the American health care system than its inability to consistently provide insulin to Americans who need it.

A drug discovered 100 years ago provides essential, ongoing care for millions of people with diabetes, one of the nation’s most common chronic diseases. But one in six Americans with diabetes who use insulin say they dose their supply because of the cost. Some people spend almost half of their disposable income on the medicines they need to stay alive.

While insulin usually costs less than $10 per dose to produce, some versions of the drug have a list price of more than $200. This is partly because the distorted US market has allowed three companies to dominate the insulin business.
But if some states have their way, that could change.

With California leading the way, a handful of states are considering attempts to disrupt major drugs, starting with insulin. The plan would be to produce the insulin itself and sell it at a price that roughly equals the production costs.
Their premise is: Take the profit motive out of the private market, and maybe states can provide affordable insulin as a completely public company run by civilian employees that doesn’t have to make money. Since these states also purchase many drugs through their Medicaid programmes and state employee health plans, they would also benefit from cheaper drugs.

“If we can lower the price of insulin, we don’t have to make money selling it.” “We can save as a buyer,” said Anthony Wright, executive director of Health Access California, who was one of the main advocates for the public insulin plan and provided guidance to state lawmakers and the office of Democratic Governor Gavin Newsom.
As his colleague Chris Noble, who has type 1 diabetes, pointed out, “just providing a real low-cost option could seriously disrupt the pharmaceutical industry.”

States have become more ambitious in their policies to address the insulin affordability crisis as the problem grows in scope and the federal government appears to be able to take only limited action to address it. The cost of some insulins has risen by 1,000 percent over the past 20 years, outstripping inflation. And the number of Americans with diabetes is projected to increase to nearly 55 million by 2030, from about 37 million today. The federal retiree health insurance programme.

Medicare imposes a $35 monthly cap on insulin costs for its beneficiaries, a provision of the anti-inflation law passed by Democrats last year. But because of arcane Senate rules, they couldn’t impose the same limit on private insurance, which covers more than half of Americans. In his State of the Union address, President Joe Biden called on Congress to cap prices for everyone, but in the short term, state action seems more likely than federal action.

Some states have introduced out-of-pocket limits, but even a small cost burden, as little as $10, can prevent people from getting the drugs they need. States have also sued drug companies that currently manufacture insulin, asking the courts to step in and stop unfair marketing practises that they say drive up the price of the drug.
However, these are half-measures that reduce high costs without fundamentally altering the market that has allowed for massive sales of a drug that costs a few dollars.

Publicly manufactured insulin—or “public choice,” as you might call it—would be a consequential innovation. And if successful, it could open the door to more public projects that produce essential medicines at a lower cost than the private sector.
“I think the window is open now because the federal government has been so limited,” said Dana Brown, who developed ideas for national drug manufacturing while working at the Democratic Partnership.

Why insulin is so stubbornly expensive

Insulin was discovered in 1921 by four men: Frederick Banting, James Collip, John Macleod, and Charles Best. They isolated the insulin hormone from a dog’s pancreas and gave it to another diabetic dog to see if it could control the other animal’s blood sugar and replace the insulin it would normally make on its own. They then quickly tested the extract on a human, a young man with type 1 diabetes, and discovered that it could also control blood sugar in humans.
This was a huge success: before the invention of insulin, people with type 1 diabetes could live for less than three years. The inventors realised the importance of their discovery and sold the insulin patent to the University of Toronto for one dollar, hoping to make it as readily available as possible. “Insulin belongs to the world,” said Banting.
But these selfless efforts have been undermined over the years by private entrepreneurs. Young, for-profit pharmaceutical companies recognised the business opportunity and quickly began developing their own insulin formulations. Long-acting insulins began to enter the market in the 1940s and 1950s.

Then, in the 1980s, pharmaceutical companies invented mass production of human insulin and then focused on developing artificial insulins that could be modified to work faster or last longer. As synthetic insulins became the standard of care in the 1990s and 2000s, the three manufacturers that made them gained greater control of the US insulin market—and in the decades that followed, America’s insulin affordability crisis began.

Most people don’t pay the list price for insulin, although depending on the type of health insurance, patients can be on the hook for a lot of money. A 2017 study found that Americans with high deductibles paid an average of $141 per month for their insulin. Alec Smith, a young Minnesota man with type 1 diabetes, died in 2017 because he couldn’t afford it.

Newer synthetic insulins may be of great value to diabetics who need to time their insulin injections with meals in mind, although it is not clear whether synthetic insulin is more beneficial than bioengineered human insulin for some patients, such as those with type 2 diabetes. However, according to many academic experts, the amount of innovation in the insulin industry does not justify the current price of insulin products. Basically, insulin is still more or less the same product that debuted a hundred years ago.

However, pharmaceutical companies make a lot of money by constantly innovating their products. Consequently, the three major US insulin manufacturers—Eli Lilly, Novo Nordisk, and Sanofi—continue to maintain control over insulin availability in the country. The primary mechanism for lowering prescription drug prices in the United States is to allow generic drugs to compete with brand-name versions. When a company develops a new drug, it is given a period of 10 years or more of exclusivity, during which it is the only one who can make or sell the drug. But after this exclusivity period ends, other companies can make a copy and sell it at a lower price. Research shows that when several generic competitors enter the market, prices drop significantly.

But pharmaceutical companies are able to find ways to extend their monopolies on insulin and other drugs by making small changes to the chemical composition and applying for patent extensions. In the case of insulin, companies can also change the delivery device to protect their market share. Each product is designed for use with specially designed sprayers by the company. Although patents for artificial insulin developed in the 1990s began to expire, these companies still have monopolies, either over their devices or other chemical compounds, making it difficult for generic competitors to enter the market.

Other federal regulations added to the challenge. The FDA began treating insulin as a biologic drug in 2020—meaning it’s made from living materials rather than combining chemicals like conventional drugs—which includes different standards for generic versions (known as biosimilars) and manufacturing. problems given the exact conditions under which these products must be manufactured. Biosimilars can cost up to $250 million to produce and take up to eight years to bring to market, while the investment for traditional generics is only $1 million. And if the FDA doesn’t recognise the new replacement of generic insulin with products already on the market, health insurance companies may not want to cover it, and doctors may not want to prescribe it.

To add another level of difficulty, existing producers can always decide to lower their prices to drive out new generic competitors because of the difference between the retail price and the $10 cost of production. The first biosimilars entered the market in recent years, but only one of them was considered interchangeable with the branded version. Finally, at the end of 2021, it was only $20 cheaper than competing brand insulin. More competition is needed to lower prices significantly.
“We know why this is happening, and our government has done nothing,” said Hilary Koch, whose son has type 1 diabetes and who served on a Maine commission that investigated the state’s ability to produce its own insulin. “We know that thousands, if not millions, of dollars are lost each year due to people being hospitalised or having complications due to poor diabetes care. When we talk about better care, it starts with access to insulin.

Because insulin manufacturers have strong control over the market, they can pay the prices, losing much of their margin, and still make a profit. California is trying to exploit this vulnerability with a plan to publicly manufacture insulin.
California’s plan to make its own insulin
In California’s programme to make generic insulin cheaper, the first two critical steps have already been taken: authorization and financing. The state legislature passed legislation allowing the state to produce its own insulin and appropriated $100 million to support the effort.
The country follows a two-phase approach. Soon, California offered to send existing companies that could subcontract with the state in the coming years to receive the grant as soon as possible.

One possibility would be Mark Cuban’s co-financed drug company, through which the NBA owner and venture capitalist sought to provide cheaper drugs directly to affordable patients. Another is a relatively new nonprofit, Civica RX, launched in 2018 as a collaboration between several hospital systems to produce low-cost generic versions of essential drugs; it aims to launch generic insulin next year. The California deal will be announced in the coming weeks.

But in the long run, the plan is to create a government factory controlled by government workers to produce government drugs. The government would have its own public production facilities, staffed by civilians, who would sell generic insulin at the same cost it costs to produce it, plus perhaps a small percentage of the program’s additional costs.

The $100 million in funding was divided equally between the short and long term.But this long-term vision will take time. Even if the state were to modernize an existing insulin production plant, construction could take years, as could hiring the labour to oversee it. Once in production, California would have to meet more goals—most importantly, to produce a product that the FDA says is interchangeable with existing insulin pharmaceuticals.

The Golden State is probably the best home for such a project. Newsom has done a lot of political and capital behind it.

If California is indeed able to produce its own generic insulin, state lawyers say it will be an almost worthless proposition. Even if private manufacturers dropped their prices dramatically because of a cheaper public option that came on the market, it would still be a win for patients and the government, saving money for Medicaid and government employee insurance programs. Public pharmaceutical production has international precedents: Sweden introduced it in the 1970s, and it continues to work in a modified form where the state is the only shareholder in companies involved in the production and sale of medicines.
One type of competition that private insulin manufacturers have not had to face is a company that does not have to make a profit. I asked the current major insulin manufacturers what they thought of the California initiative. They said they welcome competition and emphasised their efforts to offer more affordable insulin.
But proponents of California’s efforts say lawsuits or other efforts to block them could begin as the state approaches the product hitting pharmacy shelves.

Long-Term Vision for Public Pharmaceutical Manufacturing

If the production of low-cost generic insulin proves feasible in California, the implications could be huge and extend beyond insulin. California would serve as a proof of concept, and a nascent public market for national pharmaceutical production could emerge.
Activists see an opportunity for state governments to disrupt the pharmaceutical industry. Let’s say that California manages to develop its own generic insulin. If it has the production capacity, it can sell insulin to other countries, helping to lower the price of the drug across the country.
Other countries could develop and sell their own generic drugs. Washington state and Maine are already following California’s lead, though not that far behind. Washington has authorized, but not yet fully funded, the development of a public manufacturing programme for generic drugs. Maine has established a bipartisan commission to study the options and is expected to present its final report to lawmakers soon. Michigan lawmakers have also shown interest in such a project.

If California succeeds, it is possible that states like Washington or Maine will finally devote their efforts to another necessary and expensive drug. Other options could include drugs that are in short supply, drugs that have expired patents but lack generic competition, or high-priced drugs that have unequal access, such as EpiPens or asthma medications, Brown said. Countries could then specialise over time in the production of certain drugs and trade with each other for other critical drugs.

This may seem far-fetched, but national pharmaceutical production is not entirely new. Michigan produced its vaccines through a state-owned company until the 1990s. In Massachusetts, the state, through the UMass College System, continues to fund these facilities to produce vaccines that are distributed free of charge to residents of the state.

Long-term privatization trends and  declining public confidence in the government’s ability to carry out large-scale projects, as well as the enormous lobbying power of the pharmaceutical industry, have discouraged officials from such ambitious ideas as the public production of generic insulin. But its spending crisis reached the point where governments were forced to intervene. 

The California trial is the most important test of the concept, and it will be years before we know if it works. But if it does, it could prove to be a turning point in efforts to make essential drugs more affordable for Americans.


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