Let's say that you write a bill "you can't sell insulin for over $100". If insulin sellers refuse to sell for less than $100, there's no insulin available.
However, the bill might also say that insurance companies must keep the out-of-pocket costs under $100 or that the state will make up any amount over $100.
In reality, it seems unlikely to harm insulin availability since most jurisdictions have cheap insulin and the cost in the US seems to be significantly higher.
Theoretically, price caps can be set low enough that no one will produce and sell an item. If you capped the price of computers at $100, no one would be making and selling computers and you wouldn't be able to find a computer without going to the black market. Countries like Venezuela have tried price caps on goods and what has happened is that those goods can't be found. Retailers won't sell items for less than they can get them from a supplier and suppliers won't sell for that price, possibly due to the cost of inputs, production, shipping, etc.
In this case, there's evidence that prices have been inflated unfairly with insulin and therefore this just hurts suppliers' margin without really changing availability. However, there is the potential that suppliers won't work with the price restriction. Let's say that you're CVS and you're buying an insulin drug from BigPharmCo at $150. Illinois has a new law such that you can't sell insulin for more than $100 so you tell BigPharmCo that you need supplies at $60 so that you can sell it for $100 and pay for stores, employees, etc. BigPharmCo decides that they'd rather not sell it to you at $60 because they'd rather write off Illinois sales all together rather than reduce their price to $60. Illinois is only about 4% of the US population. If you lower your price to $60, you're losing 60% of your revenue. If you write off Illinois, you're only losing 4% of your revenue.
Now, you might argue that they'd only have to give CVS a discount on supplies for Illinois, but that would be hard to enforce. It seems legal to ship medical stuff across states. Would it be legal to prevent someone from entering into interstate commerce they've always been accustomed to? I have no idea. Maybe suppliers would only supply a certain amount they deemed necessary for the Illinois population to CVS at the discounted price. However, then why wouldn't CVS just stop selling in Illinois and sell the discounted insulin for a higher price in other states?
Even if one can prevent cross-state shipment of insulin, suppliers might deem it worth their while to make an example out of Illinois. If they don't make an example out of Illinois, other states will likely follow. They might get some bad press, but at some point the state would need to act to protect the welfare of its people and repeal the restriction.
I'm not saying that any of these things are good or righteous. It's just harder to force people to do what you want than many people think. Given that forms of insulin are generic, maybe the answer is that we need more generic manufacturers to make it competitive.
Again, I don't think shortages are likely to happen. GoodRx shows generic Humalog available for under $70, but many others are much more expensive. I don't know enough about insulin prices to really know what will happen. However, in many instances, price caps haven't been really effective at helping people.
The actual bill[1] says (more or less) that insurance policies that include prescription drug coverage must cover insulin with a maximum of $100 out-of-pocket expense to the insured for a 30-day supply (page 12 lines 12-18). That $100 limit is indexed to the medical component of the Consumer Price Index (page 13 lines 1-6). It doesn't directly affect the amount suppliers receive, and the state isn't offering to reimburse anyone for the difference. If you don't have insurance which covers prescription drugs then the limit does not apply.
This will most likely lead to higher insurance premiums for policies which cover prescription drugs. Certainly the insurers and suppliers aren't going to be the ones paying for it.
Do we have any idea how much higher the premiums are likely to be?
Google says there are 1.5-3 million insulin users in the USA - lets call it 1% of the population. Let's say that their drugs cost $300 / month, but they pay $100. The extra $200 will be shared between 100 people's premiums, so $2 extra per month.
The media is citing 1.3 million in Illinois alone with diabetes requiring insulin (out of about 12M population; over 10%) and at least some cases where the cost is over $1000 per month. Assuming it averages out to $300 per month as you said, however, that's still $20/mo. extra per person assuming the difference is distributed uniformly across all insured individuals, and that all individuals in the state are insured.
> Theoretically, price caps can be set low enough that no one will produce and sell an item.
But studies show that the US currently pays as much as 7x what the UK does for insulin[0]. How can insulin be so cheap in some places but so expensive in others to the point that manufacturers stop making it?
You're making a hypothetical argument when you don't need to. Since we're specifically talking about insulin, and not placing an arbitrary cap on any drug, there's no need.
We know what it costs to manufacture insulin, and it's literally a few bucks per vial [1]. You're framing this as if it represents the larger debate between fixing medical costs and the free market, but it's not that at all, and no one is going to lose their insulin.
I'm not arguing that they cost $100 to produce, but even in this article they cost more than the stated "<$5 to make". And this doesn't include any recoup of research cost. I'm not arguing for higher insulin cost, even though it seems like I am. I have to buy the stuff and take it or die. On the other hand, a consistent supply and further research into better fast acting and long acting insulins also matter to me, as they make a HUGE difference in the quality of life. It's a double edge sword, unfortunately. Until such time as profit motive is replaced (and I would be ecstatic if it were), those of us with type I diabetes have to thread that needle very carefully =\
In most of the world people can get a month's supply of insulin for less than $100/ month. It's not more expensive to manufacture here, there is just more profit-taking.
You misunderstand. I'm not saying "If the manufacturers decide it costs $110". I mean, if it costs $110. You can't force someone to create things at $110 and sell them at $100... or at least, you can't for very long.
Others are observing that the current prices are not currently anywhere near $100. That's completely unrelated to what I'm explaining.
I'd also point out that is a temporary fact, not a permanent fact. If, let's say, in two months the Coronavirus has mutated into a mark 2.0 and is sweeping through Illinois [1], getting insulin may become much more expensive due to all the measures needed to prevent spread of infection. If it becomes more than $100 worth of expensive, it's going to be difficult to distribute. There can be supply disruptions due to source contamination, whoknows what else. Even if today this seems like a generous cap, an inflexible cap can still be a problem tomorrow.
Of course, the last few years being what they are in online discourse, a large number of you will be inclined to read this as a defense of high prices, rather than what it actually is, which is an observation that price fixing has certain effects and that we don't know the future very reliably. Screwing around with insulin prices just because you can is evil and should be the grounds of a presumptive collusion, oligarchy, or monopoly investigation. But that doesn't mean that fixing the price is a good idea, or going to fix it. Personally I'd suggest getting a few state attorney's together and digging into why the price is so high, with an eye towards criminal charges or anti-trust action, would be much more effective. You might even find that "feels better" than mere price caps. Remove the incentives for people thinking they can get away with this sort of thing scott-free, rather than trying to treat the symptoms far down the pipeline from the root cause.
(Downvoters are invited to consider my replacement suggestion of criminal charges or significant antitrust action before deciding that I'm "defending" anything. This is a silly papering over of the problems by people who ought to have the power to do a lot more.)
The topic is price fixing; the discussion is about the efficaciousness of price fixing.
Why cap when they ought to have the power to look at the root problems? Why fix this one particular thing in a dangerous and probably-ultimately-ineffective way when they ought to be able to address the whole issue of price-gouging medicines more systematically?
(Other than the possibility of this being a band-aid while they do that, but I wouldn't trust a politician's word on that even if they were promising it.)
Except they can't. You have to get FDA approval and jump through regulatory capture hoops. Even for drugs already approved on on the market. See Martin Skrelli's case of a generic medication easily made in science class. Sure it was cheap and easy to make but only his company had the FDA approval to sell it and the cost for a competitor to get approval was significantly higher than any potential profit.
People will die, that's the system we have. The only question is do we relent and give in to what amounts to terrorist demands?
> The US is a global outlier on money spent on the drug, representing only 15 percent of the global insulin market and generating almost half of the pharmaceutical industry’s insulin revenue. According to a recent study in JAMA Internal Medicine, in the 1990s Medicaid paid between $2.36 and $4.43 per unit of insulin; by 2014, those prices more than tripled, depending on the formulation.
> Why Americans ration a drug discovered in the 1920s.
The current top-shelf insulins were not discovered in the 1920s and are considerably better than the ones that were. The older insulins (going back to R, L, N sold in the 80s) are fairly inexpensive; on the order of $25 per bottle (and I believe can be bought over the counter). The newer insulins sell for on the order of $275 per bottle.
The numbers I see say it should cost about $300 for a years supply for me (given my current usage) if everything was optimal (non-greedy, short supply chain). Then assume it goes through 3 hands to get to me (original manufacturer, distributor, plan manager; I'm ignoring the pharmacy since I assume they're at least partially altruistic) and add 50% each time for a total of 1012.50 (300 * 1.5. * 1.5 * 1.5). So even then, it's still less than 100 per month expected cost. Though that's for only the short acting insulin, not the 24hour.
What it would really cost without insurance right now is thousands per month. They're making bank on it.
> It doesn't cost anywhere near $100 to produce a month's supply
Is the $100 indexed to inflation?
Separately, this is a supply-side problem. Why can’t I start a business that manufactures insulin while selling it at a reduced—but profitable—margin? Those barriers to entry are a fundamental issue.
> (g) On January 1 of each year, the limit on the amount that an insured is required to pay for a 30-day supply of a covered prescription insulin drug shall increase by a percentage equal to the percentage change from the preceding year in the medical care component of the Consumer Price Index of the Bureau of Labor Statistics of the United States Department of Labor.
> In 2009, the list price for a 10-milliliter vial of Humalog, a fast-acting insulin made by Eli Lilly, was about $93. Today it costs closer to $275. Similarly, Novo Nordisk's fast-acting insulin Novolog cost almost $93 for a 10-milliliter vial in 2009. Today, it costs about $290. - https://www.businessinsider.com/insulin-price-increased-last...
If you've got any evidence that the inflation rate between 2009 and 2019 was 300%, I'd love to see it.
I seem to recall from an Economist podcast a few years ago (and a brief glance at wikipedia confirm) that humalog was a human biologic, instead of the more common insulin extracted from pig pancreas. The option to take animal or human insulin is likely welcome to folks with adverse reactions or maybe a religious prohibition.
As you can imagine, we don't just extract humalog from human pancreases. They instead modify plants to generate the exact molecule humans would. This is somewhat common these days, but it does take some effort and innovation to cultivate, versus the naturally occurring substances previously used.
I don't know if human insulin is any more effective (wikipedia citations suggest no but...), but the impression I got from the podcast was not really, and that the drug was considered a net loss for its developers.
> Since January 2006, all insulins distributed in the U.S. and some other countries are synthetic "human" insulins or their analogues.
If we truly cared about affordability, why ban additional supply? Even if not everyone can use it, forcing people who need the human insulin to compete with those who could choose seems likely to drive up prices.
tl;dr: Humalog was an alternative to an already existing treatment, and by 2009 it already was enjoying 3 years of import protections from the treatment it intended to replace.
Look at what other countries pay for insulin and you’ll see why this argument holds no water. What’s going on in the US is captive market price gouging, plain and simple.
Just responding to the "Why shouldn't governments" argument, but the obvious counter-response to that is that (at least in its current iteration) the government is pretty bad on slapping its own hand. We see this at the heart of the criminal justice system, and we see its ill effects. That is slowly starting to change, and I think for the better, but it's still pretty bad.
In competitive space, what do we do when the government fails to check itself against anti-competitive behavior?
If the law simply prevents prices higher than $100 in Illinois then manufacturers and distributors might stop selling in the state or only take orders from the state if they have surplus. Either of which might hit availability in the state, especially if the industry tries to make an example out of this.
I guess it also depends on the profit margin at that price and how it compares with the "market price".
Edit: Care to explain the downvotes? I'm just putting forward what could happen in the real word, not voicing my opinion of what is right.
The downvotes are because the opinion you have is not popular, not because it is wrong. You may be right, you may be wrong, that is less important these days.
There will be sacrificial lambs though. People will die because they can't drive out of state to get insulin. It might take a long time to force them to sell it at this cost, and they might win a lawsuit saying it's unenforceable, all while people die because of this legislation. Trust me, I don't like the companies doing this, but only passing the law setting a price ceiling without a secondary law requiring any company who was selling at the time the law was put in place to continue to sell is short sighted. Way too many situations where this ends up killing people.
