Political promises won’t lower insulin prices

After turning 26, Alec Smith, a type 1 diabetic, was dropped from his parent’s health insurance plan. With no employer-provided health insurance, Alec soon found himself paying $1,300 a month for insulin.

In order to pay his other bills, Alec began rationing his insulin. Less than a month later, he fell into a diabetic coma from dangerously high blood glucose levels. Tragically, he passed away.

More than 34 million Americans currently have diabetes. However, skyrocketing insulin prices have made the indispensable medicine unaffordable for many. According to one study published in JAMA Internal Medicine, about 30 percent of diabetics ration their insulin because of financial struggles.

Responding to this hardship, drug producer Ely Lilly last March released Lispro, a generic version of the fast-acting insulin Humalog. The difference is: Lispro is available for around half the price, costing about $137 per vial or $265 for a pack of five injection pens.

Nearly a year after hitting the market, many are declaring Lilly’s efforts to provide an affordable insulin a “failure.” Sen. Elizabeth Warren’s (D-Mass.) staff, for example, published a report detailing the findings of a phone survey they conducted showing that 83 percent of the 400 pharmacies contacted didn’t carry Lispro. Some were even unaware it existed.

Not satisfied with such industry initiatives, Senator Warren in January reintroduced legislation, the Affordable Drug Manufacturing Act, that would grant Congress the power to negotiate drug prices and promote generic drug development. The legislation even calls on the government to manufacture and “determine a fair price” for insulin and certain other drugs.

Warren’s concerns are well-founded and her proposals are well-intended. But they’re not likely to succeed.

Congress began holding hearings about insulin prices more than a year ago. The Trump administration also has expressed its concerns and has proposed a number of measures to reduce prescription drug prices, such as allowing the importation of lower-priced drugs from Canada.

Despite these undertakings, drug producers began this year by increasing the prices of hundreds of drugs.

Washington has a long history of failure in this area. Government efforts to lower prescription drug prices have been frequent and bipartisan, dating back nearly 30 years.

The reason such efforts don’t work is that they misdiagnose the problem. They fail to recognize that insulin and other prescription drugs are expensive largely because government regulation has helped make them so.

Insulin, for example, is classified as a biological compound. Unlike pharmaceuticals, which enjoy 20 years of patent protection from competition, biological compounds can extend their patents almost indefinitely simply by modifying their product components.

Consequently, insulin producers have continued to tweak their products instead of competing, which would necessitate lowering prices. This has enabled three insulin producers, who account for 99 percent of the market, to extend their patents for more than 90 years.

Rather than looking to new laws and regulations to bring insulin prices down, perhaps we should try the competition. It works elsewhere.

According to the Access to Insulin and Supplies Survey, insulin users in the United Kingdom, Brazil, India, Chile, and Japan, among other countries, pay considerably less for many insulins than U.S. patients — despite the fact that the same insulins are provided by the same producers that supply the United States.

The critical difference is that the other countries don’t offer extended patent protections, forcing producers to lower their prices to remain competitive.

The competition also is helping to lower U.S. insulin prices. As insulin prices were increasing, many pharmacies and retailers, including Walmart and CVS, began offering the insulin ReliOn for as little as $25 a vial. In terms of affordability, this has been a Godsend.

With many diabetics still struggling to manage their conditions, both medically and financially, we need to recognize that politicians can’t solve the problem. In fact, they’ve helped create it. Rather than new laws and regulations what we need is increased competition.

Raymond March, Ph.D., is a research fellow at the Independent Institute, Oakland, Calif., Director of FDAReview.org, and an assistant professor of economics at North Dakota State University.