Pharmaceutical mega-giant Eli Lilly announced Wednesday that it will place a cap of $35 a month on the out-of-pocket cost of the insulin it produces. The decision has drawn a lot of praise for the company, a major change compared to the previous thwacking it’s taken for wildly overcharging for the lifesaving drug.
But let’s not pretend this is some form of corporate altruism from Eli Lilly. Instead, it’s the best move available for a company caught in the middle of three pressure points: political and public outrage; policy shifts at the state and the federal levels; and looming competition in the market that has been a very long time coming.
When insulin was discovered in the early 1920s, the inventors received an American patent, which they then sold to the University of Toronto for a grand total of $3. Not $3 million. Three dollars.) The university turned to Eli Lilly to produce the new drug in exchange for a one-year distribution monopoly. Since then, Lilly has become one of three major sources for insulin in the U.S., alongside France’s Sanofi and Denmark’s Novo Nordisk.
Rather than keep with the spirit of the discoverers’ generosity, insulin has become a major profit-maker for its producers.
Rather than keep with the spirit of the discoverers’ generosity, insulin has become a major profit-maker for its producers. As NBC News reported last year, it can be notoriously hard to pin down the exact cost of a vial of insulin, as “what an individual will pay depends on a number of factors, including what type of insulin they are using, insurance status and whether they’re eligible for a rebate from the drugmaker.” But what’s clear is that the price has skyrocketed in last two decades, especially for those who are paying full retail price.
One study published in 2020 found that between 2007-2018, list prices for some insulin products increased by more than 200%. The cost of insulin for patients with Type 1 diabetes nearly doubled from 2012-2016, the nonprofit Health Care Cost Institute found in a 2019 report. Even people with private health insurance have felt the impact of rising rates: as KFF found last year, more than 20% of insulin users on private insurance pay above the $35 per month rate Eli Lilly is now offering. That rate is on par with the amount that the company charged for Humalog, one of its insulin products, back in 2001.
There have been some smaller attempts from the manufacturers to appear magnanimous. “Each insulin company also has programmes for eligible patients to obtain insulin for cheaper prices, which usually involve obtaining a co-pay card from a website,” Dr. Irl Hirsch wrote in The Lancet last year. (Eli Lilly had just such a program set up during the pandemic.) “Unfortunately, few patients know about these programmes and it is unclear whether pharmacists promote them,” Hirsch continued. Patients have instead gone to great lengths to get around this hardship, including traveling to Mexico or Canada to buy their vials.
Small wonder then that a tweet sent out in the brief period of rampant impersonation during Twitter’s initial Twitter Blue rollout under Elon Musk struck such a chord. “We are excited to announce insulin is free now,” writer Sean Morrow wrote as “Eli Lilly” in the massively viral tweet, causing a dip in the company’s stock price and a lot of discussion as to why a company worth nearly $300 billion charges so much for a drug that people need to not die.
Congressional Democrats have especially harnessed the anger at this state of play, including at a 2019 hearing where members tore into all three major manufacturers for their price increases. The House Oversight Committee’s then-Democratic majority released a report in 2021 that accused the companies of having “engaged in strategies to maintain monopoly pricing and defend against competition from biosimilars.”
The company isn’t leading so much as seeing where the wind is blowing.
Attempts at the federal level to counter the rapid rise of insulin pricing have varied in their success. The House last March passed the Affordable Insulin Now Act, which would have “capped insulin prices at either $35 a month or 25% of an insurance plan’s negotiated price.” A similar proposal made its way into what would become the Inflation Reduction Act in the Senate — but was ultimately limited to Medicare recipients when Republicans blocked the part that would force private insurance companies to follow suit.
Making things more complicated for Eli Lilly and other insulin manufacturers, “nearly two dozen states have passed measures in the past few years capping the out-of-pocket costs for some patients,” Stateline’s Michael Ollove reported in January. But who’s covered by those caps — and how much patients are allowed to pay maximum — vary wildly. For now, only Colorado and Minnesota limit how much uninsured residents can pay per month.
What really sealed the deal ahead of Eli Lilly’s announcement is the rising pressure from competitors in the insulin market. Last year, Civica Rx, a nonprofit generic drug company, announced plans to produce its own generic versions of the various insulin drugs on the market to sell at a price “of no more than $30 per vial and no more than $55 for a box of five pen cartridges.” The Virginia facility it’s building to handle production is expected to come online next year, about the same time that California, in partnership with Civica Rx, will begin manufacturing its own insulin supply for residents as well.
Eli Lily may be the first of the major insulin manufacturers to take this much-needed step, offering relief to the millions of diabetic patients in the U.S., but the company isn’t leading so much as seeing where the wind is blowing. With Congress, the public, and other companies nipping at their heels, Eli Lilly seems to have calculated that the window for it to get any goodwill for what was quickly becoming a business necessity was closing fast.
