Can you really blame capitalism for insulin prices?
By Jim Waters
The American Diabetes Association reports that the cost of insulin has nearly tripled since 2002.
Democratic presidential candidate Bernie Sanders blames the lack of a cheaper alternative on capitalism.
“The inventors of insulin sold its patent for $1. Eli Lilly now charges $360 a month for the drug and made $3.2 billion in profits last year,” tweeted Sanders in a post linking to a BBC News story about Laura Marston, a Richmond, Virginia, woman whose payments for the diabetes drug reportedly cost nearly $3,000 a month and who had twice been forced to sacrifice most of her possessions to obtain.
Is capitalism to blame?
Not when you consider the shenanigans employed by the virtual monopoly of a handful of insulin-making companies to extend the drug’s patent, making a generic or biosimilar alternative virtually impossible.
Sanofi, Eli Lilly and Novo Nordisk hold more than 90% of the world’s insulin market, and use various tactics to box out generics.
Sanofi, for example, filed 74 different patent applications on Lantus, its long-acting insulin.
Most exasperating is the fact that many of those applications came after the drug reached market and involved the smallest of changes, which are allowed to delay the development of cheaper — but just as medically effective — alternatives.
“Drug makers seek extensions to their exclusivity when they add pill coatings and alter inactive ingredients, extending their monopoly but offering no marginal advantage to patients,” writes Laura Williams, a contributing editor for the Foundation for Economic Education.
The situation with insulin — for which no alternatives are available despite the fact the drug has existed for a century — is a blatant example of how monopolies can harm society and even cost lives by blocking competition.
A few years ago, Merck dropped plans to pursue a cheaper biosimilar version of Sanofi’s insulin.
What usually causes such a drastic change is that the incumbent company, in this case Sanofi, pays the potential competitor — here it’s Merck — to cease pursuit in a maneuver known as “pay for delay” that’s legal but distasteful, especially when it denies the possibility of accessible medicines.
Fortunately, such “reverse settlement” payments, as they’re known in the industry, have nearly disappeared altogether.
However, changes in prescription-drug policies being considered by the U.S. Senate — known as “pay for delay” legislation — would essentially throw the bed out with the bedpan.
While well-intentioned in wanting to make sure that reverse-settlement payments aren’t part of future healthcare policy, the proposed legislation would disrupt a current mechanism which allows agreements giving generic manufacturers what they want and need most: a certain date of when they can begin offering their drugs on the market.
Keeping this policy in place will offer the incentive needed for manufacturers of generics and biosimilars to innovate and invest in research needed to make those drugs a reality.
Removing it would unintentionally allow brand-name drug companies to continue stymying the free market by abusing the patent process, the single greatest obstacle to more alternatives.
Another legislative proposal to avoid would remove authority for approving quality standards drug manufacturers must meet from U.S. Pharmacopeia, an independent agency, to the Food and Drug Administration itself, which moves in the wrong direction in terms of consumer safety and confidence.
The CREATES Act being considered by the Senate as part of an omnibus healthcare bill offers an opportunity to limit the mischievous loopholes discovered and exploited by big pharmaceutical companies, who — like all cronyists — want to shut out competition and exacerbate America’s number one healthcare problem: cost.
According to IQVIA, a health-care data firm, generic prescription drugs saved Kentucky $5.7 billion in 2017, $3.2 billion of which were savings reaped by the commonwealth’s Medicare and Medicaid programs.
Imagine how those savings might increase should we remove the barriers to free-market capitalism while calling out the real culprit: crony capitalism.
The Bern should consider the difference.
Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. He can be reached at firstname.lastname@example.org and @bipps on Twitter.