California wants to make cheap insulin. Here’s how it could work | MarketingwithAnoy

Insulin was first discovered in 1921, and the following year a 14-year-old boy suffering from diabetes became the first person to be treated with it. The medical breakthrough won a Nobel Prize in 1923. The hormone was originally taken from the pancreas of cows and pigs, but in 1978 scientists figured out how to make a synthetic human version. It was the first drug produced via genetic engineering. Since then, three companies have dominated the US insulin market: Eli Lilly, Novo Nordisk and Sanofi.

Making insulin is no small task. It is considered a biologic drug, a drug that is made using living cells. Biological substances are made of large molecules and are complex to manufacture; in contrast, most current drugs are small molecule drugs that are chemically derived and can be easily mass produced.

To produce insulin, scientists start with large tanks of yeast or bacterial cells modified with a human gene that contains instructions on how to make the insulin protein. The yeast or bacterial cells secrete the protein, which is then extracted and purified into vials or injectable pens. “It’s not just about combining some ingredients and getting a chemical reaction. There’s a lot more that goes into making a complicated biologic,” says Walid Gellad, director of the University of Pittsburgh Center for Pharmaceutical Policy and Prescribing. Eli Lilly, for example, employs about 5,000 engineers and other scientists to oversee its insulin-making process, according to Antoinette Forbes, associate vice president of public affairs.

In the past, manufacturers could not produce cheaper versions of insulin even if they wanted to. Because biologics are not traditional drugs, they could not be copied as generics—drugs that are chemically identical to brand names. A 2010 law changed that and created a process for the Food and Drug Administration to approve biosimilars. The FDA streamlined the way for insulin in 2020, paving the way for more competition. That approved the first insulin biosimilarSemglee, which may be replaced by Lantus, in July 2021. According to GoodRxSemglee costs about $100 per vial, while Lantus can be $300 or more.

The high cost of insulin has also been blamed on pharmacy benefit managers (PBMs), companies that act as intermediaries to negotiate prices between insurance companies and drug manufacturers. Manufacturers compete to have their drugs covered by health plans by offering discounts and rebates that critics say allow them to raise their original list prices. PBMs, in turn, take a cut of these rebates. Practice was the subject of a two-year bipartite study by the Senate Finance Committee, the results of which were published in January 2021.

“The reason for the price increase is this discount game being played, not because the product has improved or it costs more to manufacture,” said Campbell Hutton, vice president of regulatory and health policy at JDRF, a New York-based nonprofit that funds research into type 1 diabetes. California’s plan requires no such rebates.

When contacted by WIRED, representatives from Eli Lilly, Novo Nordisk and Sanofi all wrote that they are not making more money as insulin prices rise for patients. They said the actual revenue they earn from their insulins after discounts and rebates has continued to decline over the past several years. Adam Gluck, senior vice president and head of U.S. corporate affairs at Sanofi, wrote that the net price of its insulin — what the company makes after paying rebates — has fallen 54 percent since 2012. “PBMs have demanded pharmaceutical rebates for nearly two decades, and they are an ingrained feature of our healthcare system,” he wrote.

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