Insulin pricing crisis

By Yahn Olson  

Photo Courtesy of Adobe Stock

With rising insulin costs, several states issued legislation that either abolished copays or capped these prices at around $35. While this approach alleviates the economic pressures set on patients with diabetes, caps on insulin directly impact private and public health insurance providers as these entities now need to supplement these costs. 

Universities are among these organizations, whereby healthcare plans offered to students with diabetes are now more expensive. Concomitantly, as the cost of health insurance cannot be inflated to cover the entire exorbitant cost of insulin, universities now need to pay for the rest.

In 2023, California Governor Gavin Newsom vetoed legislation capping insulin at $35 per month and instead focused on a state-led initiative coined CalRx in partnership with CIVICA to develop and manufacture a biosimilar insulin product sold at an affordable $30 per 10 milliliters. However, this product has yet to receive approval from the Federal Drug Administration (FDA). Without a transparent timeline for recent developments, it may still be years until similar products enter the market. In the meantime, patients and health insurance providers must pay unjustified inflated insulin prices.

Addressing insulin cost with the wrong pressure points

Insulin is very cheap to manufacture, with costs ranging from $2 to $4 per vial. Yet, from manufacturing to marketing, this cost can go up 200 times. The U.S. is an isolated case, as comparative data from 33 developed nations demonstrate that insulin is nine times more expensive in America than the average costs practiced by these countries.

As insulin costs consistently increased, patients had to either get into debt to pay for it or ration their dosages with potentially severe health risks along the line. By 2022, 25% of patients with diabetes in the U.S. rationed their insulin, while almost half of these patients spend 40% of their income just to buy this life-saving drug.

In response to these concerns, in 2022, the federal government enacted the Inflation Regulation Act, capping insulin copay for people with state-funded insurance at $35. Notably, this capped insulin prices only for the Medicare insured, and, while this approach lifted the financial burden on these patients, it increased economic strain on these government health insurance plans, as the federal state now needed to cover the remainder of the cost.

States that implemented caps for private health insurance providers suffer a similar effect. Now, these organizations, including universities, need to cover the cost of insulin for students. In this context, universities are forced to increase health insurance prices and risk the health of their students while doing so, which may cause many to abandon their studies altogether.

On a parallel line, the name of the Inflation Reduction Act wrongfully attributes the increased costs of insulin to inflation, which is not the case. While inflation did indeed increase in the past few years, the rate of inflation growth does not justify the hundredfold increase in insulin prices. Nothing else explains this constant rise in insulin prices other than corporate greed at the expense of public and private insurers and, most of all, at the expense of patients. The government should, therefore, focus on applying pressure on insulin manufacturers charging unjustifiable prices for this drug rather than diverting these costs to its treasury or other private actors.

Multidistrict litigation for insulin price manipulation

The soaring cost of insulin in the U.S. has led to multidistrict litigation (MDL No. 3080) against major insulin manufacturers and Pharmacy Benefit Managers (PBMs). Plaintiffs here are patients, universities and public institutions, alleging that insulin manufacturers engaged in coordinated price-fixing, drastically inflating the cost of insulin through secret rebates and exclusionary contracts.

PBMs are also accused of manipulating the drug pricing system to maximize corporate profits at the expense of those who rely on insulin for survival. By systematically raising the cost of insulin and limiting competition, the pharmaceutical industry allegedly exploited a captive market, forcing universities, private insurers and government programs to bear the financial burden.

While universities and insurers continue to face skyrocketing healthcare costs, real change will require holding pharmaceutical companies accountable for their pricing schemes rather than shifting the burden to insurers and taxpayers.

Yahn Olson is an experienced attorney at Environmental Litigation Group, P.C., where he provides legal representation and case evaluations for people who suffered harm due to corporate misconduct.