Insulin was first discovered in the 1920s by a team of Canadian scientists. They sold the patent to the University of Toronto for just $1, hoping the school would license the product to multiple companies to prevent a monopoly that would lead to high prices.
But over time, the insulin market was slowly cornered. Today, only three companies produce most of the world’s insulin. In the United States, the line between an insulin manufacturer and a patient is not straight. It zigzags between insurance companies and drug benefit managers — third parties who manage prescription drug benefits for health plans.
It’s this system that has kept the cost of insulin much higher in the United States than in other countries, as more companies benefit from the higher price, said Kasia Lipska, an associate professor at the Yale School. of Medicine.
“It creates this really weird incentive,” Lipska said.
California will try to break this incentive. The reason more companies haven’t entered the insulin market is that if they did, established manufacturers would undermine them, making it impossible to recoup their investment, said Anthony Wright, executive director of Health Access. California, a consumer advocacy group.
But California is in a different position because in addition to selling insulin, it also purchases the product each year for the millions of people benefiting from its state-funded health plans. This means that if the California product lowered the price of insulin in the market, the state would still benefit.
“That’s why California’s market power matters,” Wright said. “For a Wall Street investor, lowering the cost of insulin means you may not be able to recoup your investment. For California, lowering the price of insulin is a real savings for taxpayers as well as for our residents.
Still, there’s no guarantee that California’s plan will work. For one, insurers and drug benefit managers might not cover California insulin products, making it harder for patients to obtain them.
Sarah Sutton, director of public affairs for Pharmaceutical Research and Manufacturers of America, said a better idea would be for California to focus on “common sense solutions” to address the role pharmacy benefit managers play in pricing. insulin.
“It would bring real relief to patients right now,” she said.
Dr. Mark Ghaly, secretary of the California Health and Human Services Agency, said he hoped a state as large as California making its own insulin would significantly reduce the role of drug benefit managers in insulin pricing .
If successful, Ghaly said, he thinks California-brand insulin would be priced so competitively that patients could buy it off-the-shelf for less than going through their insurance plan.
“We expect to save hundreds of millions of dollars for California through this,” Ghaly said. “This gives us the opportunity to create a blueprint for health care affordability that has so far been beyond the reach of states and, frankly, the federal government, and it’s really exciting to see where that can go.”