California said it will bypass big pharma and have the state government directly make and sell low-cost insulin.
According to the California governor's office on the 16th (local time), California Gov. Gavin Newsom announced that, through the state's own drug brand CalRx, it will supply low-cost insulin starting Jan. 1 next year. Analysts said the move could both ease the burden on diabetes patients suffering from soaring drug prices and serve as a starting gun to break the monopolistic structure of the U.S. pharmaceutical market.
According to AP and others, the suggested retail price for CalRx insulin is set at $55 (about 76,000 won) for a pack of five, or $11 (about 15,000 won) per injection pen. Compared to prices of similar products on the market, that is between half and as low as one-eighth. Data released by the California state government show that comparable products supplied by drugmakers to pharmacies are priced at $88.97 for Eli Lilly's Rezvoglar and $92.49 for Sanofi's Lantus. Eli Lilly's Basaglar, which has higher concentration or longer action, is $313.98, and Sanofi's Toujeo reaches $411.09.
Insulin is a medicine developed in the 1920s, more than 100 years old. It is a hormone essential for blood sugar control and is mainly prescribed for diabetes patients. According to the American Diabetes Association, California alone has about 3.52 million diabetes patients, or about 11% of the state's adults.
In the United States, insulin prices have steadily risen because a few big drugmakers, including Eli Lilly, Sanofi, and Novo Nordisk, have an oligopoly on the market. These companies have faced class-action lawsuits over allegations that they colluded on prices.
Most advanced countries, including Korea, have governments that negotiate prices directly with drugmakers to control overall drug costs. But the United States follows a free market principle in which drugmakers set the highest price the market can bear. On top of that, pharmacy benefit managers (PBMs), intermediaries, are involved. PBMs negotiate drug price discounts (rebates) with drugmakers on behalf of insurers, and the opacity of this process is cited as a major reason for inflated final prices. Drugmakers also raise prices each year, citing high research and development (R&D) expense. As a result, with the government leaving price controls alone and a complex distribution structure as the rationale, the U.S. drug market has taken root as a system that bears the highest drug prices in the world.
According to U.S. health consumer groups, the price of an insulin prescription that was around $25 in the 2010s has now soared to $300 per pack for a typical employer-sponsored health insurance enrollee. Patients without insurance have to pay $400 (about 550,000 won) per pack. Gov. Newsom said, "No Californian should ration insulin or go into debt to survive," adding, "We did not wait for the pharmaceutical industry to do the right thing; we took action ourselves."
The insulin initiative will revolve around the CalRx program that Gov. Newsom first conceived in 2020. Under this program, the California state government contracts directly with a nonprofit drugmaker to produce generics and supplies them directly without adding profit. California is the first among the 50 U.S. states to create its own drug brand and begin sales.
The California state government poured a total of $100 million (about 138 billion won) in massive state funds into the insulin initiative. The Los Angeles Times reported that in 2023 the state signed a $50 million contract with nonprofit drugmaker Civica Rx to prepare for insulin production. The remaining $50 million was allocated to establishing an in-state manufacturing plant. Observers noted this is a "economy of scale" made possible because California ranks No. 1 by a wide margin among the 50 states in economic size (top five globally). Politico reported that for this reason other states will find it hard to hastily follow similar health policies.
Starting in January next year, California will first roll out the biosimilar "Glargine," which has the same ingredient as Sanofi's Lantus, sold by a global drugmaker for $92, at $55. After gauging the response, the state plans to supply all three of the most widely used insulins, such as Aspart and Lispro. It is also reviewing options to directly supply or stockpile asthma treatments and abortion pills in the future.
Major U.S. media predicted the policy will further solidify the standing of Gov. Newsom, considered a leading contender for the next presidential election. Since his gubernatorial campaign, he has billed himself as a "health care governor," making health care cost reductions a key pledge. The supply of low-cost insulin is expected to be recorded as a case in which that pledge produced tangible results. The insulin initiative could also be interpreted as a policy that carries on the spirit of the Affordable Care Act (Obamacare) pushed by former President Barack Obama. While Obamacare increased enrollment and expanded access by boosting insurance coverage, Newsom's policy is seen as seeking fundamental expense reductions by lowering the prices of the drugs themselves.
Allison Hart, director of community development at T1International, told the California governor's office that she welcomes the state's policy to prioritize people over profit and secure insulin at stable and transparent prices.