This Is The Real Reason Insulin Prices Are Falling
It's not because pharmaceutical executives suddenly care—it's because they have competition.
Sean Morrow: Hey, I’m Sean, I’m a writer for More Perfect Union.
You might remember me from this video where I confessed to accidentally causing complete turmoil at two multi-billion dollar corporations with a joke tweet announcing “insulin is free now.”
But a lot has changed with insulin prices in these few months: all three major insulin producers have made some promise to lower prices.
[The Exchange News Clip]: Eli Lilly is slashing the list price of its insulin by as much as 70%.
[WishTV.com News Clip]: NovoNordis will slash the list price of some insulin by up to 75% next year.
[MSNBC News Clip]: Drugmaker Sanofi is becoming the third major company to cap prices.
Chair Lina Khan’s Federal Trade Commission made a really big announcement: new price cap legislation’s proposed, pricing legislation from 2021 kicked in—and the state of California announced something pretty historic. They’ll start producing their own insulin and selling it at a maximum of 30 dollars, which is especially huge because of the size of California’s economy.
[Gavin Newsom Clip]: We have clawback provisions. We have best price provisions. We have soup to nuts delivery of the entire product $30 no more, no less. If we are arguably now the 4th largest economy on planet Earth, we’ve gotta start acting like it.
Sean Morrow: And while a joke tweet causing any of this is definitely the funniest way for the story to go, I want to talk about some of the very real things that are pushing prices lower, then show you how the insulin triopoly–Sanofi, Eli Lilly, and Novo Nordisk–stands to gain from lowering prices and then go into what we can do to build a truly equitable insulin economy.
Let’s go back to November 2022: the CEO of Eli Lilly, David Ricks was asked about my stupid tweet on stage at an important pharmaceutical conference and said “It probably highlights that we have more work to do to bring down the cost of insulin for more people.”
Here’s a completely unrelated news headline about that guy: “Eli Lilly CEO racked up $21.4M in 2022 pay as stock price hit all-time high.”
Ignore the fact he used the word ‘cost,’ that’s how much a business pays to produce a product, rather than ‘price’ or how much a customer pays, implying Ricks was still focused on protecting his precious profit margins.
But Lilly seemingly made good on that promise in March:
[First on CNBC News Clip, David Ricks]: Here in America, we should be able to solve this problem ourselves and Lilly’s taking this action today to lead again on this issue.
Those price cuts match what Democrats in Congress and President Biden mandated for patients on Medicare and applied it to all patients.
When this happened, I was inundated with messages crediting my tweeting for the change, I even went on TV:
[MSNBC News Clip]:
Announcer: Do you think it’s an accident or a coincidence that it’s Eli Lilly of all people that end up making this announcement?
Sean Morrow: It’s a very complicated issue. I don’t know how truly responsible this tweet was.
Announcer: You can pat yourself on the back, it was a good tweet.
Sean Morrow: But while grassroots efforts and public pressure are important, I want to point to what was really going through the heads of Eli execs when they made this change: first, it actually saves them money.
David Dayen at the American Prospect showcased a little known provision in the American Rescue Plan—a COVID relief bill passed in 2021 with a tie-breaking vote by Vice President Kamala Harris, that was strengthened by the Inflation Reduction Act.
“Medicaid prevents drug companies from raising list prices above the rate of inflation. Any company that does so must pay Medicaid a rebate… since 2010, this rebate has been capped… That changed in the American Rescue Plan. Starting in 2024, the Medicaid rebates become uncapped. And the biggest loser in that policy change is Eli Lilly.”
Lilly even admits in their reports to investors that the rebate is a problem for them—Lilly is lowering their prices just in time for this policy to take effect, theoretically saving them millions or billions of dollars in fees, which probably isn’t a coincidence.
Public pressure is important, but it is most effective when combined with strong government action affecting what these companies really care about: their margins.
Eli Lilly’s price cut also only affects a fraction of their diabetes products, and they’re also–like the rest of the industry–pivoting to non-insulin diabetes medication like their Mounjaro and Novo Nordisk’s Ozempic.
Revenue for the products Lilly cut prices on were already down in 2022, before the price cut was even announced, because they’re focusing on the other stuff.
Another big change came from Chair Lina Khan’s FTC, which has been taking on monopoly power with fervor we haven’t seen since CEOs were called “barons.”
The FTC focused on the parts of our healthcare industry that are quite literally drug cartels: businesses colluding to control prices.
FTC Chair Khan promised to go after the conspiracy between insurance companies and pharmaceutical companies to control prices, specifically focusing on insulin.
Yes, they’re working together, despite Lilly CEO David Ricks blaming insurance companies:
“high-deductible plans really start to grow in popularity around 2011 and ’12. And what that does is it — rather than have a co-pay that’s fixed in your insurance, your out-of-pocket cost is linked to the list price of medications or services you use… So that problem grew and grew as high-deductible plans grew and more people were exposed to the full pricing of insulin without the benefits and the discounts that the system, the health care system was benefiting from, but not individual patients.”
Dude, you know you control “the full price of insulin,” right?
So we have the Medicare rebate fee, the Medicare cap from the Inflation Reduction Act, the possible nationwide cap from the Sanders/Bush bill, and California’s promise to work with an insulin manufacturer to make their own insulin, reducing costs to patients by up to 90%.
The California-produced insulin will be available nationwide, and Governor Newsom promises the state will expand the generic drug program, starting with naloxone—a life-saving drug that reverses opioid overdose, that much like insulin is subject to greedy corporations exploiting patent law to keep it pricey.
These low-prices will ripple across the industry because of the basics of competition: the existing triopoly is being undercut by California.
These government actions all have something in common, they’re not about the government spending more or giving anybody anything for ‘free’ as deriders of universal healthcare may whine.
They’re about forcing insulin producers to be competitive, breaking up monopolies, and demanding at the very least transparency.
This will all cost the taxpayer nothing: California will sell insulin at cost. Caps on prices for Medicare patients save Medicare money, meaning the taxpayer is paying less.
You’ve probably heard the axiom that Americans pay more for healthcare than anyone else in the world, but that goes beyond our horrible lack of universal health care: in other countries the government pays less for drugs than our individual patients and private insurers do.
That’s thanks to pharmaceutical monopoly control, opacity in pricing, and wasteful bureaucracy across the industry.
Grassroots action is still incredibly important: one diabetes advocate pointed out that the Lilly CEO said they’ve been working on lowering prices for “seven years,” exactly seven years after one of the first big “insulin for all” op-eds was published.
And hey, my stupid tweet had more people googling “Eli Lilly” than any other time in a decade.
But Eli Lilly stock hit an all-time high this month, and the entire triopoly will likely be up to their old tricks: manipulating patents, convincing doctors to prescribe more expensive products, and hiding behind the complexity of pricing structures.
So if it really is fake social media accounts that make a difference… we’re on it.