By Ragini Suttar
9.4% of the current population in America has diabetes. That is around 30.3 million people; all of whom rely on insulin to survive. Created in 1921, insulin has been used as the main source of treatment for the blood disease for the better part of the century. It was discovered by Canadian researchers (Frederick Banting and Charles H. Best) when they isolated the hormone in a lab. Because of the life-saving properties (type 1 diabetes is fatal without insulin) the researchers who found the treatment were awarded a Nobel peace prize for their discovery. However, after realizing the importance of distributing the drug in an affordable way, Banting and Best sold the patent for the formula to the University of Toronto for a mere 3 dollars.
Unfortunately, the good intentions of Banting and Best have been exploited by Big Pharma and the current price of insulin has skyrocketed from the original price. The original price of 3 dollars has inflated by a whopping 700% to around 270 dollars per vial. However, the cost of production for one vial (10 mL) of insulin is only around 5 dollars. These statistics leave many wondering, “How did this happen?”. Currently, the patent for insulin is held by three major pharmaceutical manufacturers: Eli Lilly and Co, Novo Nordisk, and Sanofi. Due to the monopolistic nature of having three main manufacturers, the competition between these companies rapidly results in heightened prices. Added with the fact that insulin is an inelastic good ( without it, type 1 diabetes patients will die), consumers will have to continue to buy insulin with the ridiculous prices.
This is usually the point where consumers would turn to a generic brand for lower prices, but this also proved ineffective as the patent was held exclusively to the three big pharma companies. That was until earlier this year when Eli Lilly announced that they would be launching a generic brand named “Lispro” who would sell insulin for $137.35 for a vial; a 50% decrease from the Eli Lilly price of $274.70. Even though this is a major step forward from past prices, this new price will only cost one arm from the previous price of an arm and a leg! The price of $137.35 is better, but the lower class citizens will still have to struggle with affording the drug, especially when many of these citizens don’t have health insurance to help pay off these costs. Due to this problem, many diabetic patients have problem-solved with rationing their doses. This should not be done and is nearly as fatal as not taking the drug itself. In 2017, 3 people died from rationing their medicine.
Why hasn’t the government successfully inhibited this inflation? The way that the government can affect the prices of a good is by placing price ceilings on goods. However, due to the way the drug is produced, the price ceiling can not be put on insulin as a whole, but on the patent for the insulin. To evade the price ceilings, big pharma companies usually minorly manipulate the formula and pass a new patent. Because of this evasion, the government has not been able to successfully regulate the price of insulin. This leads to the price-control plan that the Obama administration started and the plans that the Trump administration plans to activate. This plan would involve allowing imports of cheap drugs (currently illegal unless the need is temporary) or implementing similar structures that European countries have on drugs. While the plans for these actions are being debated, big pharma companies are extremely against these plans as they will cut down revenue by millions. Though their opportunity cost will be millions of lives saved and a healthier America.
Image Links
Insulin Bottle
http://d279m997dpfwgl.cloudfront.net/wp/2018/11/AP_120429046457-1000x603.jpg
Chart https://img.washingtonpost.com/blogs/wonkblog/files/2016/10/2300-insulin-price-changes-unadjusted.jpg
Class Ideas are underlined
Works Cited
Barlow, Rich. “Insulin Inflation Is Killing People. Something Needs To Be Done .” Insulin Inflation Is Killing People. Something Needs To Be Done | Cognoscenti, WBUR, 27 Nov. 2018, www.wbur.org/cognoscenti/2018/11/27/protests-insulin-prices-rich-barlow.
Board, Spring 2019 Editorial. “EDITORIAL: What Eli Lilly's New Insulin Says about Our Health Care System.” Indiana Daily Student, 27 Mar. 2019, www.idsnews.com/article/2019/03/what-eli-lillys-new-insulin-says-about-our-health-care-system.
Hirsch, Irl. “Paying the Price for Insulin.” STAT, STAT, 16 May 2018, www.statnews.com/2018/05/17/insulin-paying-the-price/.
“How Insulin Became Unaffordable.” Harvard Political Review How Insulin Became Unaffordable Comments, harvardpolitics.com/united-states/how-insulin-became-unaffordable/.
Prasad, Ritu. “The Human Cost of Insulin in America.” BBC News, BBC, 14 Mar. 2019, www.bbc.com/news/world-us-canada-47491964.
“Unpacking the Rising Cost of Insulin and What It Means for Patients.” DiaTribe, 25 Sept. 2015, diatribe.org/unpacking-rising-cost-insulin-and-what-it-means-patients.
Wbur. “Insulin Has Become Unaffordable. Patients Are Dying In Their Efforts To Ration Doses.” Insulin Has Become Unaffordable. Patients Are Dying In Their Efforts To Ration Doses | On Point, WBUR, 6 Mar. 2019, www.wbur.org/onpoint/2019/03/06/insulin-diabetes-price-cutting-doses.
“What Happens When a Lifesaving Drug Becomes Intolerably Expensive?” The Washington Post, WP Company, 7 Jan. 2019, www.washingtonpost.com/news/magazine/wp/2019/01/07/feature/insulin-is-a-lifesaving-drug-but-it-has-become-intolerably-expensive-and-the-consequences-can-be-tragic/?utm_term=.451e7eff4bbf.
In my personal opinion, I believe that this is a ridiculous scam that is, but shouldn’t be ignored. My cousin who has diabetes has to take insulin before every meal and paying $274.70 for a vial is probably a huge take in her budget! Although she has medical insurance, there are people who cannot afford medical insurance. The fact that people have had to ration their insulin is so incredibly appalling to me. This issue should have been fixed before they were forced to start rationing because they couldn’t afford it. Get it together government!
ReplyDeleteThis piece is really interesting because I've heard a bit about the problems surrounding this insulin crisis. I don't know too many details, but by reading this I was able to understand just how severe this really is because people who are in dire need of the drug may not be able to afford it since the prices are so expensive. And people will continue to pay for it because it's a necessity, so like you said, it's just an inelastic good that the companies unfortunately could continue to raise the price of. I definitely think there should be something done to resolve this issue and come up with more reasonable prices, whether it actually comes down to government involvement or not, people need their insulin to live and people should care enough to do something about it. Thank you for writing this piece, I thought it was really intriguing and quite interesting to read as well. Really opened my eyes on the gravity of what's going on.
ReplyDeleteI think that this article speaks volumes to how Big Pharma has failed the average consumer, as many people cannot afford the drugs that they need to survive. I would say that this is why healthcare has become such a problem--and why universal healthcare is so hotly debated. People complain that others' medical bills are too high, and that they should be solely responsible for their own healthcare--but if the problem was fixed at its roots (the cost of medicine and healthcare grossly inflated past the point it takes to make a reasonable profit), people's medical bills simply wouldn't be overpriced to the point of being unaffordable. I believe that what Big Pharma has done is a perfect example of a shortcoming of Adam Smith's philosophy that all people are inherently good and care about others, as clearly, those upping the prices on insulin or the Epi-pen don't care about anything other than making a profit off of those who are suffering.
ReplyDeleteI find it very interesting that there has been such a steep increase in the price of insulin. The government does not seem to be doing much to stop the inflation rising with insulin. As you said in your article, the government needs to make a price ceiling for insulin. Insulin is what keeps people with diabetes alive and overpricing; it is an extremely bad practice that needs to be controlled. While Trump’s time in office may be coming to a close, I hope he plans to help fix the insulin problem.
ReplyDeleteMonopolies on drugs are certainly major economic and moral issues. Great job summarizing the context specific to insulin! This particular case is severe because of the inelasticity of insulin for a growing number of Americans. I think that there is a need for change to combat the three insulin producers, but I am not confidant that many proposed options would be effective in the long run. As you mentioned, there are ways for big companies to find loopholes around government regulations. I think that it's also important to consider the unintended consequences of government intervention. Significantly cutting revenue for drug producers may decrease their motivation to manufacture top-quality products, or perhaps may decrease efforts towards developing new life-saving medications like insulin.
ReplyDeleteIn a mixed economy, all businesses are trying to maximize their profits because all they want is money. That's understandable, everybody wants money, but selling an inelastic good for over 200$ is just cruel, especially when it's literally a life or death scenario for those that are purchasing insulin. In most of the economic scenarios we talked about in this class,they were all morally ethical because if something's price is too high, don't buy it. If it's insulin however, and it's required for some people to survive, it should be illegal to raise prices well beyond the original price, even if the pharmaceutical companies are exploiting loopholes to keep that from happening. What they're doing is legally ethical, but not morally, and as all of us know, laws and morals aren't the same thing. There's no simple solution to this dilemma that I could think of, but this problem needs to be fixed right away.
ReplyDeleteI agree that we need to lower down the price of insulin. Like you said that there is still a growing a rapid rate of people within the United States and the world being affected by diabetes. By raising the price of insulin from 3.00 to 270 dollars a vial is outrageous. This reminds me of the way epi pens have been increased in pricing due to the founder being the only one in the business providing such a medicine. Not only is the way insulin is being dealt with is similar to what you said, monopolistic companies. They are being able to boost up the price of the products while still getting a high quantity demanded as a result of the growing population. As more and more citizens are having bad eating habits to the over abundance and convenience of junk food, the rate of diabetes will still increase. Meaning the overall consumers will be negatively impacted by this by not only, paying hundreds of dollars. It will overall impact their lives more in the process. While still being positive towards the sellers of insulin.
ReplyDeleteAfter reading this article, I immediately connected it to a similar situation in the EpiPen market. In both cases, these drugs are needed to save people’s lives, which makes then invaluable goods for some people. Unfortunately, they both are quite expensive to purchase because both markets are run in a largely monopolistic fashion. In the case of insulin, there are only a few companies that can produce the product because of patent laws on the formula. Since their own the market that they run, they can raise prices as much as they want. People who require EpiPens or insulin will dish out a large amount of money for the products because they absolutely need them to live. I find it frustrating that there are no price ceilings for these companies, but I also understand why the government can’t mandate a set price, in terms of economic freedom. It will be interesting to see what happens to these markets when the patents expire on the products. I would predict that other companies will try to produce similar products, and a competitive market will open up. This, as we have learned, will be great for the consumers because the prices will lower.
ReplyDeleteIt is sad and heartbreaking that big name corporation find the need to jack up the prices of a lifesaving medicine. I feel that making a generic brand of insulin is a step in the right direction. But we need to further research find a way to create a more affordable option for families that are below the poverty line and don't have the means to provide insulin, along with the bare necessities to live.
ReplyDeleteIt is makes sense to me how these drug companies are jacking the prices up on insulin. I do not understand it from a moral point of view but from the business stand point these companies know that people will pay what ever the cost is because it is a life necessity for them. This being said I think the prices need to be lowered on goods like this because it is something that is able to better human life.
ReplyDeleteBig Pharma is a large problem currently impacting millions of Americans. As you said, due to their monopolistic nature, they are quickly inflating the prices of life-saving, inelastic goods like insulin as well as EpiPens. It is interesting that current attempts to regulate these companies through price ceilings are ineffective. I wonder if rather than instilling these price regulations, legislation should be passed banning the patenting of life saving medications. This would allow for more competition, generic brands, and cheaper prices. Additionally, I think that it is incredibly important to reduce regulation on the import of medications; this would increase the competition within the market and drive prices down while maintaining quality, though it would decrease GDP. All in all, something must be done to change how medication is currently created and distributed because all citizens, regardless of health insurance, should have access to their necessary prescriptions.
ReplyDeleteIt does not seem morally correct to monopolize life necessities, such as insulin or the EpiPen. People's lives rely on these products, so should the government intervene to make them more affordable? Yes. People shouldn't have to settle for a less expensive, but of lower quality medicine. As you mentioned, price ceilings can be effective, but only to a certain point. This is why the government should pass laws that ensure medicine accessibility for all of its citizens and today's insurance only covers a small percentage of such a large quantity. Setting prices as high as 130 dollars for one vile of insulin can cause consumer distress, which could potentially lead to disgraceful behavior with our society. Monopolies only work so long that customers don't share or resell. So are they going to accept government intervention or wait for the bound dominance of consumers.
ReplyDeleteThe difference between the cost of production and shelf price of Insulin is shocking, but it is also something common to the medical field. There are many cases of products with inelastic demand curves, such as Epipens, with heavily inflated prices. This is something that the government needs to step in on, because it is a big problem. While there are lots of debates on health care coverage in the government, more thought could be put into forcing lower the prices in the first place, which would make the problem much better.
ReplyDeleteGreat job describing the situation and providing background information. I wasn't aware of how big of a problem big pharma companies were creating by increasing prices of insulin. It's heartbreaking to see these companies choose money over human life. I think the whole point of economies is to overall improve human life and distribute scarce resources efficiently. By making a life essential drug very hard to get, the economy is moving forward monetarily, but backwards ethically. I understand why the government is having a hard time implementing laws to reduce this discrimination, but appreciate that both the previous and current parties of power are working towards solving this problem.
ReplyDeleteWhile reading this I made multiple connections in the field pharmaceuticals including the high prices of insulin, EpiPens, and even the inflation in pricing over IV Benadryl. Multiple dispensers of these necessary drugs are taking advantage of the oligopolistic or even monopolistic nature of their products and sales. They are able to manipulate prices because of their economic nature and the many barriers involved in competitor companies making these high demand drugs.
ReplyDeleteIn America it's the burden of the consumer to bargain for lower medical prices, where the general public is not good at bargaining; in other countries, the universal healthcare system awards bids to medical companies who can do it at the lowest price level. In other news, Martin Shkreli got put into solitary after using a contraband cell phone to fire one his executives while they were on as safari.
ReplyDeleteWhen looking at the issue you can't simply say the government should do this because it would be nice. The truth of the matter is that the cost of cheaper medicine is higher taxes. So the opportunity cost isn't just money, it's the impact that money has on the economy. Obamacare was something that only a minority of the U.S benefited from but the cost was put on the majority of U.S. Income taxes will most likely rise as a result of decreasing these products. Also most cases of diabetes are a result of poor personal choices. If someone stabs them self in the leg should I help pay their bill no. I wouldn't ask that of a stranger, and I think most people wouldn't either. Why should I pay for your medication. So instead of spending time, resources, and effort trying to pass polices that'll be removed later instead leave other's personal health to themselves. Health insurance is what brings down the cost of these medication so instead of going through the government trying improving the industry that's built around this problem.
ReplyDeleteI have known that many people in the US depend on insulin to survive, but I never knew how expensive it actually was to buy the insulin. It is good to see that Eli Lilly announced a cheaper type of insulin, but the cost is still very high compared to the production cost. You mentioned that the government is having a hard time regulating the price because the companies can just change the recipe, but maybe the government could issue a new group to make the drug for much cheaper, causing the monopolistic corporations to also lower their prices if they want to remain in business.
ReplyDelete