Illinois governor signs law capping insulin costs at $100 per month

[Nithavela]

Senate Bill 667 was signed into law on Friday, January 24 that will cap out of pocket insulin costs at $100 for a 30-day supply. “Health care is a right for all, not a privilege and that is why I am so proud that we created an insulin price cap that successfully puts patients above profit,” said Governor JB Pritzker.

Illinois governor signs law capping insulin costs at $100 per month

 

[Quid est Veritas?]

The end result by fixing prices will be to limit supply. Insulin will be shifted by suppliers to states where they can profit more, so Illinois will always be last in the queue once the rest have had theirs. This can easily result in shortages. Not the best of decisions in my book, but just shooting yourself in the foot.

If you have high costs, either reduce demand or increase supply. Get the burden of diabetes down by encouraging lifestyle modification and less type II diabetics will need insulin. Otherwise, negotiate bulk buying for the state or price support (though expensive and liable to increase costs in the long run itself), to assure profitability. Price fixing has never worked, whether it was Diocletian, Lenin, or whomever tried it.

 

[HatedByAll]

The expensive insulins are the fast acting insulins. Used in pumps and as a bolus dosage. This type of insulin is injected at the time it is needed. Basically at the time the user eats 15 grams of carbohydrates, they need one dosage of insulin. With a pump, the pump also releases a small amount of insulin throughout the day as the basal dose. Basically, this is the minimum amount of insulin the body needs to function. This description is overly simplified, but should be close enough to understand this principle.

A type one diabetic needs these fast acting insulins and a pump is a real godsend. But most type 2 diabetics can use N or R insulin. These are slower acting insulins and dirt cheap compared to the fast acting insulins. The reason a type II diabetic would use a faster acting insulin would be to take a bolus dosage with a meal. But, most type two diabetics can time their meals and control their CHO in such a way they do not need a bolus dosage. As the disease progresses they will eventually have the same needs for insulin that a type I diabetic does, but that is usually years after they are first diagnosed. For the most part, they can use the cheaper insulin; but, they have to time and watch their portions very closely when eating.

I said all that to make one simple point. The cost of the fast acting insulin is not due to type II diabetics who could simply make a change to their lifestyles. The demand is due to type I and long term diabetics and mainly those who use a pump. Those diabetics can both lower their insulin needs by lifestyle changes, but only by small amounts. Not enough to be the reason for the increased cost of these products.

 

[Nithavela]

The end result by fixing prices will be to limit supply. Insulin will be shifted by suppliers to states where they can profit more, so Illinois will always be last in the queue once the rest have had theirs. This can easily result in shortages. Not the best of decisions in my book, but just shooting yourself in the foot.

If you have high costs, either reduce demand or increase supply. Get the burden of diabetes down by encouraging lifestyle modification and less type II diabetics will need insulin. Otherwise, negotiate bulk buying for the state or price support (though expensive and liable to increase costs in the long run itself), to assure profitability. Price fixing has never worked, whether it was Diocletian, Lenin, or whomever tried it.

If 100$ cause supply issues, how do people in Germany survive, where a months supply costs 65€?

 

[Quid est Veritas?]

If 100$ cause supply issues, how do people in Germany survive, where a months supply costs 65€?

I don't know how the US drug market works nor the German one. All I know, from basic economics and history, is that price capping is counter-productive. If they are paying more than that now, then presumably that is the value the market currently places on it, and thus supply diminsh or will shift elsewhere, where presumably people are willing to pay more. It isn't as if anyone has a monopoly on Insulin production.

 

[Nithavela]

I don't know how the US drug market works nor the German one. All I know, from basic economics and history, is that price capping is counter-productive. If they are paying more than that now, then presumably that is the value the market currently places on it, and thus supply will shift elsewhere where presumably people are willing to pay more. It isn't as if anyone has a monopoly on Insulin production.

Free market economics tend to break down when demand is inflexible.

Also.. there basically is a monopoly on insulin production.

 

[Quid est Veritas?]

Free market economics tend to break down when demand is inflexible.

Also.. there basically is a monopoly on insulin production.

It only breaks down if both demand and supply are inflexible. If demand is high enough, then others may be incentivised to start producing their own biosimilars by the profit motive. The problem is that currently prices aren't yet high enough to make this feasible and thus in the long run bring down costs as more suppliers enter the market. This law breaks down the free market, not the reverse. You can't complain about an 'insulin monopoly' of a few pharmaceutical companies, when passing measures functionally cementing it in place.

 

[Larniavc]

Illinois governor signs law capping insulin costs at $100 per month

But what about the shareholders and the board?

Won’t these communist practices impact on their bottom line?

Not to mention it de incentivises people from not choosing the diabetic lifestyle.

Who’s the real bad guy here?

 

[Quid est Veritas?]

I don't know much about the US system, but in South Africa the government sets drug prices by the Single Exit Price regulations for the last decade or so. The end result has been that new drugs are slow to become available due to lack of profit motive, if at all; many small pharmacies have been forced to close leaving mostly large chains; limited availability and shortages in the State sector were exacerbated; medical aids enforce using of generics in most cases; and it is even argued the end result has been artificially high prices for certain drugs like statins, though keeping costs lower in general. Regardless, the supply has been hampered, both in variety and quantity, and left fewer companies able to compete.

We shall see, but in general, price caps don't seem defensible to my mind. It is short-termism, not an answer to the problem of cost-creep in Medicine.

 

[Nithavela]

But what about the shareholders and the board?

Won’t these communist practices impact on their bottom line?

Not to mention it de incentivises people from not choosing the diabetic lifestyle.

Who’s the real bad guy here?

Personally I think it's the drug companys own fault. They obviously didn't shell out enough "campaign contributions".

 

[KCfromNC]

If 100$ cause supply issues, how do people in Germany survive, where a months supply costs 65€?

Canada's probably an easier comparison, given that somehow shipping a product across a lake changes the very foundation of the laws of supply and demand.

 

[Nithavela]

Canada's probably an easier comparison, given that somehow shipping a product across a lake changes the very foundation of the laws of supply and demand.

It doesn't, though.

The pharma companies will just sell their Insulin for 100 dollars, or close to that, and still make a tidy profit doing so.

 

[Quid est Veritas?]

Supply and demand of pharmaceuticals will function very differently in Canada vs the US; as they have different taxes, regulations, regulatory bodies, laws and structures in place. The medical systems are also radically different. Of course, it is much easier pointing at 'evil Big Pharma' than acknowledging 200 years of political and structural separation (though the companies' hands are probably not completely clean either) .

 

[Hank77]

Canada's probably an easier comparison, given that somehow shipping a product across a lake changes the very foundation of the laws of supply and demand.

Canada and Mexico. And Illinois isn't the only state taking action.
This article is from the Kaiser Health News - khn.org

This story is part of a partnership that includes Side Effects Public Media, NPR and Kaiser Health News.
...
In Utah last year, the Public Employee Health Plan took this idea to a new level with its voluntary Pharmacy Tourism Program. For certain PEHP members who use any of 13 costly prescription medications — including the popular arthritis drug Humira — the insurer will foot the bill to fly the patient and a companion to San Diego, then drive them to a hospital in Tijuana, Mexico, to pick up a 90-day supply of medicine.
...
This idea had been in the back of Fenner’s mind for a while. Her son was diagnosed with Type 1 diabetes nine years ago, meaning he needs daily injections of insulin to live. The list price of the modern generation of insulin has skyrocketed since his diagnosis. On one trip to the pharmacy last year, Fenner was told that a three-month supply of insulin would cost her $3,700.

That same supply would cost only about $600 in Mexico.

Americans Cross Border Into Mexico To Buy Insulin At A Fraction Of U.S. Cost

 

[Ana the Ist]

Illinois governor signs law capping insulin costs at $100 per month

If only they could do that for all medical expenses....

 

[Lulav]

The expensive insulins are the fast acting insulins. Used in pumps and as a bolus dosage. This type of insulin is injected at the time it is needed. Basically at the time the user eats 15 grams of carbohydrates, they need one dosage of insulin. With a pump, the pump also releases a small amount of insulin throughout the day as the basal dose. Basically, this is the minimum amount of insulin the body needs to function. This description is overly simplified, but should be close enough to understand this principle.

A type one diabetic needs these fast acting insulins and a pump is a real godsend. But most type 2 diabetics can use N or R insulin. These are slower acting insulins and dirt cheap compared to the fast acting insulins. The reason a type II diabetic would use a faster acting insulin would be to take a bolus dosage with a meal. But, most type two diabetics can time their meals and control their CHO in such a way they do not need a bolus dosage. As the disease progresses they will eventually have the same needs for insulin that a type I diabetic does, but that is usually years after they are first diagnosed. For the most part, they can use the cheaper insulin; but, they have to time and watch their portions very closely when eating.

I said all that to make one simple point. The cost of the fast acting insulin is not due to type II diabetics who could simply make a change to their lifestyles. The demand is due to type I and long term diabetics and mainly those who use a pump. Those diabetics can both lower their insulin needs by lifestyle changes, but only by small amounts. Not enough to be the reason for the increased cost of these products.

Exactly and many are children or juveniles.

 

[iluvatar5150]

The end result by fixing prices will be to limit supply. Insulin will be shifted by suppliers to states where they can profit more, so Illinois will always be last in the queue once the rest have had theirs. This can easily result in shortages. Not the best of decisions in my book, but just shooting yourself in the foot.

If you have high costs, either reduce demand or increase supply. Get the burden of diabetes down by encouraging lifestyle modification and less type II diabetics will need insulin. Otherwise, negotiate bulk buying for the state or price support (though expensive and liable to increase costs in the long run itself), to assure profitability. Price fixing has never worked, whether it was Diocletian, Lenin, or whomever tried it.

While I'm generally not a fan of price-fixing (for reasons you outline), things don't necessarily have to play out that way:

If insulin can still be sold profitably at this new $100/mo price, then there will likely still be supply.

If other markets outside Illinois already have as much supply as they need, then there is no advantage for manufacturers to shift supply out of the state. The product would just go unsold.

Bulk buying via is just another form of market manipulation - you're essentially combatting a monopoly with a monopsony. That certainly can work, though it's got its own weaknesses (e.g. if state officials are too cozy with the industry people against whom they're negotiating).

And you've outlined the problems with price support.

 

[Hank77]

@Nithavela
Isn't the $100 per month out-of-pocket cost? If they have insurance it can still be billed to the insurance company to pay their share.

 

[Trogdor the Burninator]

In Utah last year, the Public Employee Health Plan took this idea to a new level with its voluntary Pharmacy Tourism Program. For certain PEHP members who use any of 13 costly prescription medications — including the popular arthritis drug Humira — the insurer will foot the bill to fly the patient and a companion to San Diego, then drive them to a hospital in Tijuana, Mexico, to pick up a 90-day supply of medicine.

Surely this is the ultimate proof of how insane the US health system is - when an insurance company sends their patients to another country for medicine.

 

[Trogdor the Burninator]

I don't know how the US drug market works nor the German one. All I know, from basic economics and history, is that price capping is counter-productive. If they are paying more than that now, then presumably that is the value the market currently places on it, and thus supply diminsh or will shift elsewhere, where presumably people are willing to pay more. It isn't as if anyone has a monopoly on Insulin production.

That's only true if either (a) the price is fixed below or very close to cost, or (b) the alternative "open" market has limitless demand.

Otherwise the pharma company would continue to supply both markets, and still make a profit. Sure they'd make more profit in the fully open market, but they would still profit in the regulated market as well.