Why insulin is so expensive in the US and what the Inflation Reduction Act is doing about it

President Joe Biden signed the Inflation Reduction Act went into effect this afternoon with a package that includes sweeping climate and tax initiatives and the biggest change in health care policy since the Affordable Care Act of 2010.

The new law works to reduce skyrocketing drug prices, one of the most intractable problems in the US health care system. It would allow Medicare to negotiate the prices of some drugs and cap beneficiaries’ drug costs at $2,000 a year. One drug in particular became the focus of intense debate in Congress: insulin.

The drug that millions of Americans diabetes I count on the state increasingly inaccessible, and advocacy groups and lawmakers have been pushing for years to take action to help consumers. The Inflation Reduction Act puts a $35 monthly cap on insulin prices for Medicare patients, providing relief to the 3.3 million beneficiaries who use some form of insulin, according to Centers for Medicare and Medicaid Services.

“People pay a lot of money for drugs they need to survive,” says Lisa Murdoch, chief advocate for the American Diabetes Association. 25% of insulin users have limited or skipped doses due to cost, according to a 2019 Yale University study. study, faced with impossible choices. “Am I paying rent or food for my family?” Murdoch says. “Or should I buy this vial of insulin?”

The original proposal would have gone much further and capped the cost of insulin for Americans with private health insurance as well. But as the bill made its way through Congress, Republicans took the initiative after a Senate lawmaker ruled that the cap on private insurance would not comply with the budget reconciliation process that Democrats used to push the bill.

Here’s what you need to know about high insulin prices and the new law.

Why is insulin so expensive in the US?

In the 1920s, the three discoverers of insulin sold the patent to the University of Toronto for $1 each because co-inventor Frederick Banting said insulin “belonged to the world.” But over the past century, the opposite has become true in the U.S., as the cost of insulin has risen dramatically: The average price nearly tripled between 2002 and 2013, according to the American Diabetes Association.

In 2021, the Senate Finance Committee published a report examining the list price of insulin products from three major manufacturers. They found that one commonly used insulin increased by $101 from just five years earlier, while another saw an increase of $159 over the same period.

The reasons for this are complex. Drug pricing involves multiple stakeholders, ranging from manufacturers to pharmacies to health plans, a complex chain that often makes it difficult to trace the source of price increases, Murdoch says. “There is a lack of transparency,” she says. “Prices have skyrocketed without explanation.”

The cost of producing insulin has not increased over the years, according to Chandra; in fact, the average net price of the most commonly used insulins is 20% lower today than it was in 2007, according to commissioned study by Pharmaceutical Research and Manufacturers of America, or PhRMA. But Murdoch cited “evergreening,” a process in which manufacturers slightly change a drug’s formula or delivery method to extend their patents, as one possible factor driving up prices for consumers.

Amitabh Chandra, a professor of public policy and business administration at Harvard, says that while evergreens are part of the problem, they are not the only factor. The search for the latest formulas and middlemen also drive up prices. “Pharmacy management has a strong incentive to negotiate really aggressive rebates with insulin manufacturers,” says Chandra. “But when they negotiate these discounts, they don’t share them with payers. So there are some huge problems in the supply chain here.”

How the Inflation Reduction Act Will Affect Insulin Prices

For the 1 in 3 Medicare beneficiaries who use insulin, the Inflation Reduction Act will reduce their out-of-pocket cost of insulin, with copayments capped at $35 per month. And while they won’t directly affect insulin prices, other provisions in the law, such as allowing Medicare to negotiate prices and placing a $2,000 annual cap on out-of-pocket costs, will provide additional relief for Americans on Medicare who use insulin .

However, the bill would not affect the total cost of the drug — only the amount of the copayment — meaning insulin would continue to be a financial burden for those not covered by Medicare. “It reduces the patient’s pocket [cost]but we are not actually reducing the price that manufacturers charge and receive for their product,” says Chandra.

How diabetes advocacy groups reacted to the bill

For advocacy groups like the American Diabetes Association, the new law contains the kind of policy change they’ve been pushing for for years. “This is a historic moment to see a national co-payment cap for insulin,” says Murdoch.

“It’s great to see our years of advocacy pay off with this long-awaited insulin affordability bill. This major legislation will help our patients who have Medicare and struggle to afford their insulin,” Endocrine Society President Ursula B. Kaiser said in a statement.

But the fact that privately insured patients won’t see that benefit, as Democrats originally intended, means the fight isn’t over yet. “Today’s passage of the Inflation Reduction Act by the US House of Representatives represents progress for the more than 3 million people on Medicare who use insulin, but we must do more to ensure insulin is affordable for all.” JDRF, Group for type 1 diabetes advocacy, said in a statement before Biden signed the bill.

Where can the fight for lower costs continue?

Some drug manufacturers offer copayment caps that can help insulin users pay, but eligibility requirements can make accessing them difficult. Cheap insulin from a nonprofit drugmaker is set to hit the market in 2024. For now, advocates are pushing for policy change at the local and national level.

According to the American Diabetes Association, 22 states and Washington have enacted insulin copayment caps ranging from $25 to $100 for a 30-day supply, which some advocates are seeking to expand nationwide. Others are lobbying Congress to consider the bipartisan INSULIN Act introduced in the Senate in July, which would encourage insulin manufacturers to lower list prices and cap monthly insulin costs for insured diabetics at $35.

“What no one thought would be possible five years ago is now within reach,” says Murdoch, “and we are determined to be in this fight until we get it.”

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Write to Simone Shah c [email protected].

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