Why Is Insulin Expensive? The Reasons And How To Get It Cheaper!

Posted March 20, 2020 by Michael Chamberlain - See Editorial Guidelines

Those of us who have a need for insulin may often see some variation in the pricing, but whatever the price, insulin can get expensive. 

So, we’re going to offer a clearer understanding of this topic. Below is a clear guide on the cost of insulin, when it was introduced, what the price is now, how the cost increased, why it increased, and a way to vastly reduce your insulin costs. 

But first, here’s the quick summary answer to the question, then we’ll get into more info.

Why is insulin expensive? The following are some main reasons why insulin is expensive: 

  • High switching rate from human to analog insulin
  • The expensive insulin manufacturing and testing process
  • Expensive Testing and trial process
  • Flexible US Government Policies
  • Incomplete insurance coverage
  • Insulin manufacturers evergreening patent rights

Why Is Insulin Expensive

The US spending on diabetes has increased at a rate of 22% per year between the years 2002 to 2012. This accounts for an increment from $10 billion to $12 billion from 2002 to 2012.

But surprisingly, this increment in the cost of diabetes medication tends to come from one single medication, which is insulin. Insulin at $40 in 2001 has now increased to $275 today. Unfortunately, this increase in insulin cost is impacting many lives in negative ways.  

Twenty years ago, the US had around 10 million diabetes patients. This figure has now hiked up to about 30 million people.

Above all, another staggering 89 million people in the US are experiencing prediabetes. This drastic increase in diabetes patients now means that one-third of Americans could have diabetes by 2050.

With such an epidemic diabetes situation, it’s normal for many people to be concerned about the cost of insulin, which is one of the most commonly prescribed medications for diabetes. 

If you’re looking for where you can obtain insulin at a lower cost, then click here to enroll in our patient assistance program, where insulin could cost as little as $50 per month!

Insulin Price Since it was Discovered and How it Increased

In the early 1920s, a process of manufacturing insulin from a cow’s pancreas was discovered. Since its introduction, it worked fine for the treatment of diabetes.

However, continuous research improved the strength of the medication. The medication was purified multiple times to increase the strength, and it worked more effectively than before. During this time, insulin made by using cow pancreas was pretty widely available and affordable to many.

However, towards the 1970s, a new method of producing insulin using bacteria through recombinant DNA technology was found to be more effective.

This method of insulin manufacturing was also affordable, reasonable, and effective in treating diabetes.

However, when the newer versions of insulin were discovered, the older and less costly versions were stopped from production.

The older version of insulin was still sufficient for treating diabetes. However, over 90 percent of diabetes patients, especially those with type two diabetes, were prescribed the newer and more expensive version of insulin.

During the introduction of new insulin, the key manufacturer’s used clever strategies to keep the patent rights extending, or evergreen.

These strategies didn’t necessarily reduce the cost of insulin but allowed the manufacturers to keep increasing the price by continuously extending the patent through some means.

This strategy in the pharmaceutical industry is called “evergreening,” and it’s a very common strategy used in the US drug market.

What exactly happens here is when the patent expires, the patent will be extended through means like a patent on secondary ingredients, a patent on insulin devices like pens, and so on. This will thereby stand in the way for producing generic versions of the insulin, which are cheaper.

Aside from this main reason, the following are a few other reasons that make insulin expensive within the USA. 

High switching rate from human to analog insulin

There are two main categories of insulin – namely synthetic human and analog insulin.

Synthetic human insulin was introduced in the early 1980s, and it was successful in treating diabetes. However, towards the early 1990s, analog insulin was developed to overcome the problems of human insulin and provide much more effective and improved treatment for diabetes. 

As such, analog insulin was successful in working much more quickly compared to human insulin. Analog insulin also worked more consistently with predictable effects for the treatment of diabetes. It also reduced the frequency of low and high blood sugar consistently when compared to human insulin.

As such, the added effectiveness and convenience of analog insulin made it famous among patients, which back in the 1990s was expensive compared to human insulin.

Approximately 96% of insulin prescriptions in the US are for analog insulin because of these benefits.

It should also be mentioned that the prices for both human and analog insulin have spiked up over the years. However, comparatively, analog insulin is way too expensive because of its rising demand and high switching rate.

On average, a vial of human insulin costs around $25, whereas analog insulin costs $323. 

Expensive Insulin Manufacturing Process – Reducing Competition

Why Is Insulin Expensive

Most of us are unaware of how insulin is produced and the challenges involved. Insulin is a large complex molecule, which together uses a recombinant DNA technology to engineer insulin-producing bacteria.

In pharmaceutical terms, the process and the overall complexity involved in producing it makes insulin a biologic drug. Biologic drugs are those that are produced from living organisms or have components of living organisms produced using biotechnology. 

So, because insulin is a biologic drug, if any generic versions or more of biosimilars drugs are produced, they have to go through a strict and expensive approval process by the FDA.

Biosimilar drugs are those that are highly similar to another already approved biological drug. It should also be said that biosimilar drugs can be officially produced only when the original patent right of a biologic drug expires.

So, because of this expensive manufacturing process, even if biosimilar versions are produced, manufacturers can only realistically reduce the cost by a very small margin, which makes insulin still expensive in its generic form.

On average, manufacturers of generic insulin only reduce by around 20% of the cost. The first biosimilar insulin, Basaglar introduced in 2016, costs around $235, which is still deemed expensive despite being a more generic version. 

Expensive Testing and Trial Process Makes Insulin Expensive

The FDA has to carry out tests and trials before approving any medication.

This is done to ensure the safety of the medication to the users. However, the unfortunate thing about these tests and trials is that there’s no exact statement or count on how many tests and trials a medication should pass.

So, because of this, medications will generally have to go through several tests and trials before approval. But in the case of insulin, this test and trial process is extra demanding. 

There is an extra demanding trial process for insulin because insulin is a biologically engineered medication rather than a straight chemically engineered medication.

As such, of course, the multiple tests and trials insulin will have to go through for approval will cost manufacturers a large amount of research and development budget, invariably making the insulin expensive for the end-user. 

Flexible US Government Policies Means Spikes in Insulin Prices

Although it’s not obviously visible, the US government policies also continue to be a trigger for insulin to be expensive.

In many countries, like Canada, for example, government policies are quite strict or are certainly more rigid, making it easier for them to regulate the prices across health boards and health insurance.

Government policies in certain countries are also regulated by a single-payer system, which gives the ability for government intervention to bring medication prices back down when it spikes up. 

Unfortunately, the United States does not have these regulating policies. Instead, they focus on a free and flexible market. This has given insulin manufacturers sufficient power to set and keep rising prices as they please based around the market forces.

And as such, US citizens, unfortunately, have no choice but to pay these prices to get their daily dose of medication.

We should make it clear. Drug manufacturers are not doing anything wrong. They’re merely providing a product at a price that the market dictates.

The US does have a range of government health care programs like Medicare to private insurers, who have all set their own pricing schemes. 

As such, with this free-market pricing system, diabetes patients are at the tail end of the market economy within the US.

To overcome this, patients have now started moving across borders to countries like Canada to get more reasonable and cheaper insulin.

The same insulin, which costs around $340 in the US, will cost approximately $30 in Canada, attracting patients to do cross-border traveling to deal with expensive insulin within the US. However, this is a drastic measure, and in fact, you do not need to go as far as traveling to a different country!

You can obtain your medications, including insulin, via a patient assistance program where you can pay as little as $50 per medication per month. Get more details here.

Incomplete Insurance Coverage

For patients who have obtained insurance coverage, it’s common to wonder why it’s still expensive to afford insulin. Most of these problems come from incomplete insurance coverage, which still makes insulin expensive. 

One of the incomplete insurance problems is where the insurers and payers adjust the list of covered drugs favoring cheaper medications.

This will then cut coverage for some popular medications. One such case was experienced in 2017, where a healthcare program dropped coverage for Lantus, favoring the cheaper biosimilar Basaglar.

What happened here was that customers were then forced to switch to another brand, or had to pay full price for the drug of their choice. 

Another similar incomplete insurance coverage scenario comes from the increased use of high-deductible insurance or coinsurance plans.

Under these plans, patients should pay the full amount for insulin until the deductible amount is reached. So, until this deductible amount is reached, customers would have to pay the full price for insulin, which could cost thousands of dollars each year. 

Also, patients who use insulin and have obtained a Medicare part D coverage will often be stuck at the donut hole.

At the donut hole, they would have passed the initial part D coverage limit but would not have reached the out-of-pocket maximum of $5000. So, at this point, they’ll have to purchase the insulin themselves – albeit at a discount of 65%, which makes insulin still expensive under insurance coverage. 

Insulin Manufacturers Evergreening Patent Rights 

Surprisingly, just three pharmaceutical companies control the majority share of the insulin market.

These companies produce their insulin with precise engineering, which is complicated. This makes it easier to stand out against cheaper biosimilar versions as they’re creating a quality product.

A very recent lawsuit stated manufacturers set high prices to gain a preferred status among health care insurance companies under the list of covered drugs.

So, these high prices make it difficult for patients to get insulin at a lower price, even under insurance coverage.

Why Is Insulin Expensive

These high prices will only increase the premiums, copays, and deductibles under insurance coverage. So, even those who are insured will have to pay a high price to match these high set insulin prices.

Again, this is just mainly down to market forces. And with this monopoly market situation, there is less competition. Less competition means customers generally pay a higher price.

Also, it’s important to remember that competition comes from the introduction of a generic version. But then again, the introduction of a generic version is continuously blocked by a series of evergreening patent rights from the leading manufacturers.

So, with these three main manufacturers having a large portion of the insulin market, it’s fair to expect insulin prices to continue to be expensive.

Further lawsuits have been filed against the three leading manufacturers to open the market and reduce the prices to create more options for insulin users.

Now with all these reasons showing how insulin has become expensive and why even insured patients may incur a high cost for insulin, let’s look at how the drug companies set their prices.

How Drug Companies Set Insulin Prices

The following are some methods and strategies insulin manufacturers use to set their prices, which makes insulin expensive. 

Pricing to secure a position in the PBM

It’s probably fair to say that insulin prices are set with the intention of competing for preferential placement on the PBMs’ (Pharmacy Benefit Management) formularies.

The drug manufacturers offer PBM “rebates,” which is excluding the benchmark price (the price at which its sold).

The PBM’s pocket out a percentage of the difference that is there between the benchmark price and the real (undisclosed) price. The difference in this price is called “the spread.”

The bigger the spread (the difference), the more profitable it is for both the manufacturer and the PBM.

Through this, the PBM’s can make higher profits too. So, because of this simple strategy, the insulin manufacturer who has a higher spread, meaning the high price for their products, is more likely to secure a position on the PBM’s formulary list.

This is one of the strategies insulin manufacturers use to set their prices, which contributes toward making insulin expensive.

Pricing Strategy

Another pricing strategy insulin manufacturers use, which makes insulin expensive, is where the insulin manufacturer sets two prices. 

Out of these two prices, the benchmark price is set publicly, which is what patients pay for. The other price is set exclusively for the PBM’s. The manufacturers then have the option to increase the price of the publicly reported benchmark price (the price patients pay), where they can maintain the reduced price for the PBM’s. 

Pricing Based on Advertising Costs 

Another main concern that affects insulin pricing is the cost of advertising. Especially since the US is one of the two countries allowed to offer direct-to-consumer advertising for prescription medications.

Manufacturers spend billions of dollars on advertising. So, to cover up these advertising costs, they will have to add it to the insulin cost.

The added advertising cost to the manufacturing price can also be one of the reasons for setting insulin prices high, therefore making them expensive.

Pricing to Meet the Increasing Demand 

Why Is Insulin Expensive

It’s estimated that insulin users in North America make up around 14% of insulin users worldwide.

Shockingly, it’s also estimated that these users account for around 50% of total-world-wide sales.

So, with such pathways open within the US market, it’s not surprising that the three main insulin manufacturers can set high prices to maximize profits as any business would. 

All these reasons for setting prices would make sense if one could compare the prices when insulin first hit the market.

Approximately a vial in 1996 cost around $21, where currently, the same vial would cost $452. Also, the manufacturing process, although subject to inflation-based costs, has changed little over the years, and yet the price spike continues.

Back in the days during the 1920s, diagnosing diabetes was identified as a death sentence. Then, thankfully insulin came into existence to remove such death sentences.

Now with the spiking insulin prices, along with patients who can barely afford them, the challenge is getting these medications at sufficiently affordable costs to keep patients alive. 

How to Reduce Your Insulin Costs

Insulin prices cannot be affected by any other means than to seek alternative methods to obtain insulin. The best option by far to obtain insulin is to register for a patient assistance program.

This means that we at Prescription Hope can process a simple application towards providing your meds for just $50 per month per medication.

We work with over 180 pharmaceutical manufacturers and utilize their patient assistance programs to provide you with a flat-rate cost for your medication. Enroll with us to find out if you are eligible to pay only $50 a month for each of your medications.



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