WORKWEEK

California Governor Gavin Newsom announced his state would manufacture its own insulin to make the medication more affordable for Californians with insulin-dependent diabetes. Neither the federal government nor other states have made a direct effort to lower insulin prices.

The Deets

California will allocate $100M of its state budget to lower insulin costs:

• $50M allocated to build the insulin manufacturing plant.
• $50M allocated to cover the costs of manufacturing and distributing insulin.

While it’s unclear what insulin will be priced at for Californians, it’s assumed it’ll be “low-cost.”

The Price to Pay for High Insulin Costs

The list price for insulin increased around 10% per year from 2007 to 2018. However, inflation alone cannot explain such an increase. Instead, the increasing complexity of drug supply chains and shady negotiations between manufacturers and intermediaries (pharmacy benefit managers) likely contributed—and continue to contribute—to such price increases.

Insulin has therefore become unaffordable over the past two decades for the 7M Americans with insulin-dependent diabetes. In fact, around 15% (1.2M) of Americans needing insulin reached catastrophic spending on the medication between 2017 and 2018. Catastrophic spending is spending more than 40% of postsubsistence family income—money available after paying for food and housing—on insulin alone. Of the 1.2M Americans who reached catastrophic spending, two-thirds were Medicare patients.

Dash’s Dissection

Solutions thus far to address high insulin prices have been Bandaid solutions. Colorado, for example, has set a $100/month limit on what Coloradans pay for insulin while the federal government is trying to cap insulin at $35/month. California, however, is directly addressing the root cause of the high insulin price problem: the drug supply chain.

California’s solution is akin to Mark Cuban’s new drug company Cost Plus Drugs, where medications are made in-house and directly sold to consumers, cutting out all the intermediaries in the drug supply chain.

Like Mark Cuban, Governor Newsom is done waiting around for the federal government to figure out how to effectively lower insulin prices. The mindset is, if no one else is going to do it, I’ll just do it myself. While it’s more difficult to go solo, sometimes it’s the only solution left. And, it’s probably the best solution there is.