The Business of Insulin

In 1921 Frederick Banting and medical student Charles Best, working in laboratory space provided by J.J.R. Macleod at the University of Toronto, first isolated insulin. Prior to their work, diabetes was literally a death sentence. People who developed diabetes would go into diabettic ketoacidosis, and die in hospitals because doctors had no means to treat them. From the Wikipedia article on insulin: “On January 11, 1922, Leonard Thompson, a 14-year-old diabetic who lay dying at the Toronto General Hospital, was given the first injection of insulin.”

The patent for insulin was sold to the University of Toronto for one half-dollar (Canadian). The scientists hoped that affordable insulin would become available quickly. The University then granted non-exclusive licenses to several medical companies.

Pharmaceutical companies have a different goal than making insulin affordable and available. While they can’t patent insulin itself, they can patent and/or keep secret the processes by which they produce and purify insulin. Purified insulin derived from animal sources was the only type of insulin available to diabetics for roughly 60 years. The first synthetic insulin was produced using E. coli in 1978. In 1982 the first commercially available biosynthetic human insulin was sold under the brand name Humulin. The vast majority of insulin currently used worldwide is now biosynthetic recombinant “human” insulin or its analogues.

The analogues are chemically similar to the original insulin, but not identical. Some of the man-made forms are slower-acting and do not require refrigeration, which makes them more convenient and more useful than original insulin.

If making insulin affordable and available is the goal for our society, then the price at which insulin is sold should be related to the cost of producing insulin, with something like a 10% markup so the company producing it can make a reasonable profit. What actually happened is, between 2002 and 2013, the price of insulin went up by more than 300%, and then nearly doubled again by 2016, for an overall price change of 5-6 times the 2002 price.

This is graphically illustrated by a chart from Business Insider:

insulin-prices-humalog-novolog-v2

The cost of production has not gone gone up accordingly. Using the official US consumer price index, inflation caused $100 of cost in 2002 to become $133.41 in 2016. that’s a 33% increase, not 300% or 600%.

According to Fortune Magazine, the 11 drug manufacturers on their Fortune 500 list showed an average profit of 22.3% on a total of $288.5 Billion in revenue. Over 64 Billion dollars in profit in a single year does not even include executive salaries, bonuses, advertising expenses and other unnecessary expenses.

Now, the drug company spokespersons will tell us that the cost of insulin has nott really¬†gone up as much as the numbers quoted above would indicate, because the negotiated prices paid by large insurers are actually much lower. The giant percentage increases are just the list price. What the spokespersons will not mention is the list price is exactly what individual consumers pay, including individuals on Medicare who find themselves in the infamous “donut hole” for deductibles.

In consequence, diabetes is still a death sentence for some millions of diabetics in the United States, not because there is no known treatment (as was true a century ago) but just because they can’t afford the insulin. True, it’s a slower death. Meanwhile, insulin is available in Canada for anywhere between 1/4 to 1/10 the cost, depending on what type of insulin you’re looking for. The cheapest, generic insulin derived from animals, is still available in Canada, but not at all in the United States, just because Canada has effective consumer advocates.

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Author: Art Myatt

Retired engineer and environmentally aware activist with Green Party of Michigan, Sierra Club and Alliance to Halt Fermi 3.

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