If legislators are truly committed to helping diabetics and reducing prices, they should focus on cutting the red tape surrounding insulin biosimilars.
The INSULIN Act seeks to cap insulin prices, but government would better reduce costs for diabetics by removing barriers to competition.
W hen Sir Frederick Banting discovered insulin, he sold the patent for one dollar, saying that “insulin does not belong to me, it belongs to the world.” But in the 100 years since Banting’s discovery, the price of insulin has soared to unbelievable heights. Since 1996, the price for a month’s supply has risen by 1,200 percent and counting.
The INSULIN Act aims to tackle this problem by capping the price of insulin at $35 a month. Insulin affordability is a worthy goal, but the INSULIN Act puts a Band-Aid over a bullet hole. Any legislation aimed at reducing insulin prices will be ineffective until legislators enact a structural overhaul to remove the administrative bloat surrounding insulin production.
Insulin has long been used as the poster child for the failures of a market-based health-care system. But as anyone who has taken an introductory economics course knows, when firms have to compete, prices fall, quality increases, and firms are more innovative.
The “Big Three” insulin producers (Eli Lilly, Novo Nordisk, and Sanofi) have been protected from biosimilar competition, allowing them to halt innovation while raising prices. Like generics, biosimilars are created to mimic another drug, called the reference drug. The primary difference between generics and biosimilars is that generics can be exact copies of the reference drug because they are mimicking chemical compounds, while biosimilars can only be “highly similar,” since the reference drug is made of a living organism. Most biosimilars on the market are chemotherapy drugs, either for the treatment of cancer or rheumatoid arthritis, but over 500 biosimilars for various medical needs are currently being developed.
While different scientifically, generics and biosimilars serve the same economic purpose of generating competition in the prescription-drug market. Other medications face competition from biosimilar drugs that forces the makers to reduce costs, but with a complex regulatory web and obtuse patent protections, the Big Three have an almost unbreakable hold on the market, leaving diabetics bearing high costs for a drug they can’t live without.
As more biosimilars have made it to market, prescription-drug prices have fallen. List prices for biosimilars are 15 to 35 percent lower than list prices of reference drugs, and in the aggregate, drugs with six or more biosimilars on the market saw a price reduction of 95 percent.
Most biosimilars for biologic drugs, such as insulin, were grouped under an expedited approval process through the Biologics Price Competition and Innovation Act of 2009. But insulin wasn’t categorized as a biologic until March 2020, effectively prohibiting biosimilars. The government’s categorization before March 2020 set insulin-biosimilar innovation back over a decade.
While the recategorization was a welcome change, biosimilar production still proves difficult. Hopeful entrants have been pushed into a “regulatory dead zone,” further stalling innovation. All applications filed before the change were automatically denied, sending the producers back to square one. And with an average approval process that takes two to five years, it’s unlikely that we will see a large amount of biosimilars on the market anytime soon.
In fact, only two biosimilars have received approval since the change, one of which was produced by Eli Lilly, which had previous authorization to produce insulin generics.
The thicket of patents that surrounds insulin producers further protects them from competition. Sanofi, for example, has filed over 70 patent applications, with 94 percent being filed after their insulin went on the market. These patents have allowed Sanofi to be competition-free for over 37 years — almost twice as long as the 20-year period already granted to drug companies who create a new drug.
The regulatory complexity and patent thicket has left diabetics to choose between bearing the cost or utilizing risky maneuvers to ration their drugs. By enacting a price control, the INSULIN Act further entrenches this dichotomy. Pharmaceutical price controls, like any other price controls, have been shown time and again to generate shortages, reduce innovation, and increase wait times for products, among other unintended consequences. The institution of a price control would serve as yet another barrier to insulin access.
Congress is right to tackle insulin affordability. But price controls are merely a politically convenient, Band-Aid solution. If legislators are truly committed to helping diabetics and reducing prices, they should focus on cutting the red tape surrounding insulin biosimilars. Reducing this administrative bloat would inject competition into the market and give diabetics the medications they need at a price they can afford.