Insulin Products and the Cost of Diabetes Treatment
Updated November 19, 2018
Insulin Products and the Cost of Diabetes Treatment
Insulin is a hormone that regulates the storage and use of
The ideal treatment regimen for diabetics would closely
sugar (glucose) by cells in the body. When the pancreas
mimic the way insulin secretion occurs in the body. This
does not make enough insulin (type 1 diabetes) or it cannot
would involve a consistent insulin level between meals
be used effectively (type 2 diabetes), sugar builds up in the
combined with a mealtime level of insulin that has a rapid
blood. This may lead to serious complications, such as heart
onset and duration of action to match the glucose peak that
disease, stroke, blindness, kidney failure, amputation of
occurs after a meal. The original insulin, also called regular
toes, feet, or limbs. Prior to the discovery of insulin
insulin, is a short-acting type of product with a duration of
treatment, type 1 diabetics usually died from this disease.
action of about 8 hours, making it less suitable for
providing 24-hour coverage.
There were 23.1 million diagnosed cases of diabetes in the
United States in 2015 according to the Centers for Disease
In the late 1930s through the 1950s, regular insulin was
Control and Prevention (CDC). Adding an estimated 7.2
altered by adding substances (protamine and zinc) to gain
million undiagnosed cases brings the total to 30.3 million
longer action; these are called intermediate-acting insulins.
(9.4% of U.S. population). People with type 1 diabetes,
One such advance (neutral protamine Hagedorn, or NPH)
about 5% of U.S. cases, must have insulin injections to
was patented in 1946 and is still in use today. It allowed for
survive. For those with type 2 diabetes, about 95% of cases,
the combination of two types of insulin in premixed vials
many can control their blood glucose by following a
(intermediate-acting and regular insulin), making a single
healthy diet, losing weight, maintaining regular physical
daily injection possible for some patients. In 1982,
activity, and taking oral medications, but some require
recombinant DNA technology allowed for the replacement
insulin injections to control their blood glucose levels.
of animal insulin extracted from cattle and pig pancreases
by human insulin (Humulin R) made in a laboratory
Data collected in the 2010-2012 National Health Interview
fermentation process using microorganisms. These
Survey from diabetics aged 18 or older indicate that 14%
advances still did not mirror the normal release of insulin.
are treated with insulin alone, 14.7% are treated with both
insulin and oral medication, 56.9% are treated with oral
Over the past few decades, slight modifications of the
medication alone (not insulin), and 14.4% are not treated
insulin molecule—called insulin analogs—have been
with either medication. The price of various insulin
developed. This has resulted in five types of insulin
products has risen significantly. From 2001 to 2015, the
products on the market: long-acting, rapid-acting,
price of one type of insulin (insulin lispro) increased 585%
intermediate-acting, short-acting (regular insulin), and
(from $35 to $234 per vial). One vial might last a patient
premixed. In the early 2000s, the long-acting insulin
less than two weeks. Given the number of Americans
analogs, Lantus (insulin glargine) and Levemir (insulin
dependent on insulin, Congress may be interested in
detemir), entered the market. In addition, the rapid-acting
considering whether consumers have access at a reasonable
insulin analogs Humalog (insulin lispro) and Novolog
cost.
(insulin aspart) were developed to allow for quicker
absorption and shorter duration of action at mealtime.
Insulin Discovery and Development
Insulin was discovered nearly a century ago, in 1921, by
The insulin analogs more closely replicate normal insulin
researchers at the University of Toronto; their U.S. patent
patterns in the body, and more patients are now using these
was later sold to the university for $1. Manufacturing
new products. In 2000, of privately insured adults with type
challenges resulted in collaboration with Eli Lilly in 1923
2 diabetes using insulin, 19% were using analog insulins;
in order to make enough insulin for the North American
by 2010, 96% were using these products. However, studies
market. They also licensed the right to produce insulin to
suggest that for type 2 diabetes, the more expensive analogs
other firms including a Danish company which eventually
do not provide an advantage over regular insulin in
became Novo Nordisk.
controlling glucose levels or preventing diabetes-related
complications, but they are more convenient for the patient.
Insulin is a small protein composed of 51 amino acids.
Because it is made from a living organism, it is considered
Insulin Regulation and Production
to be a biologic, or biological product. Like many other
In the past, all biologics, including insulin, were regulated
biologics (such as drugs or vaccines), insulin was obtained
by the National Institutes of Health (or its precursors) under
in the past by extraction from animals. Production has
the Public Health Service Act (PHSA). In 1941, Congress
changed over the years as researchers have made alterations
gave the Food and Drug Administration (FDA) authority
to insulin, easing its use by the patient.
over the marketing of insulin. As a result, insulin has been
regulated as a drug under the Federal Food, Drug, and
Cosmetic Act (FFDCA) rather than as a biologic under the
https://crsreports.congress.gov
Insulin Products and the Cost of Diabetes Treatment
PHSA. In the United States “generic” insulin products are
begin to occur. In July 2017, FDA granted tentative
referred to by FDA as “follow-on” products and are not
approval to a second insulin glargine product, Lusduna
called biosimilars (which are regulated under the PHSA).
Nexvue, made by Merck. However, in October 2018 Merck
However, under a provision of the Biologics Price
announced that it is discontinuing Lusduna. Some industry
Competition and Innovation Act (BPCIA) of 2009,
analysts believe Merck’s decision was due to the drug
biologics approved as drugs under the FFDCA will
rebates offered by the three manufacturers of insulin
transition to biological licenses under the PHSA in March
products. For drugs such as insulin with a high list price,
2020. BPCIA was enacted as Title VII of the Patient
manufacturers may use a high rebate to gain placement on
Protection and Affordable Care Act (ACA, P.L. 111-148).
an insurance company formulary. This results in making the
drug more affordable for insurance plans, but the drug
Currently, three firms—Eli Lilly, Novo Nordisk, Sanofi
remains expensive for the uninsured, as well as for those
Aventis—account for over 90% of the global insulin market
with high cost-sharing insurance plans.
and produce the entire insulin supply for diabetic patients in
the United States. For the most part, insulins produced by
Price of Insulin, Cost of Manufacture, and Profit
these companies are brand-name drugs. In general, brand-
The price of a drug often has very little basis in the cost of
name drugs cost more because the drug manufacturer has
manufacturing a drug. Also, it is very rare to find data on
free rein in setting the drug price due to a government
manufacturing costs; this is considered to be proprietary
sanctioned monopoly for a defined period of time. Brand-
information. However, a 1995 paper in Biotechnology and
drugs are protected from market competition by (1) patents
Bioengineering focused on the process used by Eli Lilly in
issued by the U.S. Patent Office and (2) a regulatory
the commercial production of insulin using E. coli bacteria.
exclusivity period granted by FDA under the Drug Price
The authors found that the total cost involved in making
Competition and Patent Term Restoration Act of 1984 (P.L.
enough insulin to treat one patient per year is $33.60. This
98-417), also called the Hatch-Waxman Act. According to
amount would be altered by inflation, but would be offset
some analysts, lack of price competition in the U.S. insulin
by process improvements.
market is a contributor to the high cost of this vital drug.
Most of the manufacturing cost (94.2%) is associated with
The price of a drug is directly affected by the number of
the recovery and purification of insulin; the remainder
different manufacturers marketing the drug. According to
(5.8%) is the fermentation process using E. coli. The
an FDA analysis of generic chemical drugs, “the first
economic analysis includes the cost of raw materials,
generic competitor prices its product only slightly lower
product separation materials, facility overhead (depreciation
than the brand-name manufacturer. However, the
and maintenance of the facility), treatment and disposal of
appearance of a second generic manufacturer reduces the
waste materials, and labor of plant operators and laboratory
average generic price to nearly half the brand name price.
scientists who perform analysis of the process and product
As additional generic manufacturers market the product, the
(quality control/quality assurance). It does not account for
prices continue to fall, but more slowly. For products that
other costs, such as the cost of vialing and quality assurance
attract a large number of generic manufacturers, the average
of vialing, distribution costs, promotion and advertising
generic price falls to 20% of the branded price and lower.”
costs, and briefly mentions research and development cost
recapture.
One “generic” insulin product—or what FDA calls a
“follow-on” product—is being marketed in the United
In the case of insulin, however, much of the initial basic
States. Eli Lilly received tentative approval for Basaglar
research—original drug discovery and patient trials—was
from FDA in August 2014. Final approval occurred in
performed 100 years ago. Other more recent costs, such as
December 2015 following resolution of patent issues with
developing the recombinant DNA fermentation process
Sanofi-Aventis, maker of the brand product, Lantus (insulin
(over 35 years ago) and the creation of insulin analogs
glargine). The Basaglar application was submitted to FDA
(about 20 years ago) may account for some portion of the
under Section 505(b)(2) of the FFDCA and relied on the
current price of insulin products, but exactly how much is
FDA’s finding of safety and effectiveness for Lantus. Eli
known only by the manufacturers. The pricing of insulin
Lilly began marketing Basaglar in the United States in
could also reflect accounting for research costs of other
December 2016; by the end of December 2017, Basaglar
drug products, both the past costs of drugs that were not
had captured about 17% of the U.S. Lantus volume share.
successful as well as future products that are currently
under development.
Because three firms manufacture all the insulin used in this
A September 2018 study published in BMJ Global Health
country, the market behaves differently from the usual case
calculates that a year’s supply of human insulin could be
in pharmaceutical markets where generic competition
$48 to $71 per person and between $78 and $133 for analog
results in price reductions following patent expiration and
insulins; this amount would cover production costs and still
the end of the exclusivity period granted by FDA under
deliver a profit to the manufacturer. How much profit is fair
Hatch-Waxman. Basaglar, the only follow-on insulin
is another piece of the drug pricing puzzle. A November
available in the United States, is made by one of the three
2017 Government Accountability Office (GAO) report
insulin-making firms, Eli Lilly. Basaglar’s approval has not
found that the average profit margin was 20% in 2015 for
resulted in a new insulin manufacturer on the U.S. market.
the largest 25 drug companies, compared with 6.7% for the
largest 500 companies in general. The three insulin
Industry observers believe that as other pharmaceutical
manufacturers are among the largest 25 drug companies.
companies enter the insulin market, price reductions may
https://crsreports.congress.gov
Insulin Products and the Cost of Diabetes Treatment
IF11026
Judith A. Johnson, Specialist in Biomedical Policy
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11026 · VERSION 3 · NEW