Gaetz’s diagnosis of what’s driving insulin costs misses the root cause

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In late March, after the House passed a bill that would cap the cost of insulin at $35 per month for insured consumers, Rep. Matt Gaetz, R-Fla., tweeted why he voted against the bill.

“Insulin price increases have more to do with increased consumer demand than with bad behavior by Big Pharma, which I hasten to condemn,” Gaetz wrote.

He went on, in a 10-part Twitter thread, to offer weight loss as a potential solution to insulin costs rather than price caps: “90-95% of people with diabetes have type 1 diabetes. 2, which “can be prevented or delayed with good health”. lifestyle changes, such as losing weight, eating healthy foods, and being active. Arbitrary price controls do not replace individual weight controls. Since 2000, the number of diabetes cases in the United States has nearly doubled. The demand for insulin has increased and the necessary price increase has followed. In other words, the price of insulin goes up. as the size increases.”

The tweet drew attention on social media and in the media, but we wondered if there was a link between the demand for insulin and the rising cost of the drug. An economic principle states that, for certain products, if demand increases, prices will follow.

Is this true for insulin, a drug that millions of Americans need to survive?

We contacted Gaetz’s office to request evidence to support his claim, but received no response.

So we asked the experts to explain what’s going on with insulin prices.

Types of diabetes and treatment

Insulin was first discovered in 1921 and patented two years later. The hormone is essential for people with type 1 diabetes because their pancreas no longer makes natural insulin, which is needed to regulate blood sugar. Extremely high blood sugar can be fatal. These patients represent about one-tenth of the total number of people with diabetes in the country.

Some patients need to inject insulin often, at least twice a day.

The majority of people with diabetes, however, have type 2, which has been linked to obesity. Being overweight can interfere with the body’s ability to use insulin effectively, leading to high blood sugar.

“As obesity increases, so does diabetes,” said Dr. Paresh Dandona, a professor at the University at Buffalo School of Medicine who studies diabetes.

But many of these patients are not prescribed insulin as a treatment. About 30% of people with type 2 diabetes use insulin when other drug options fail to treat the disease, Dandona said. For some type 2 patients, exercise and a healthier diet “may help reduce insulin dose, but it does not eliminate its use.”

How Insulin Drug Pricing Works

Drug pricing experts say there is no doubt that the list price of insulin (the amount charged to consumers and their health plans) has risen over the past decade. A 2020 study found that the list price of insulin products increased by 262% from 2007 to 2018, while a 2021 study found that from 2014 to 2018 the list price of insulin products insulin had increased by 40%.

Is there a reason why the price exploded?

Not really, experts said, except that manufacturers and other stakeholders benefit from higher list prices. For example, pharmacy benefit managers — who administer prescription drug benefits on behalf of health plans — are paid based on the amount of rebate they get from insulin manufacturers. If they can negotiate a more favorable place for a manufacturer’s insulin on a drug formulary (a plan’s list of covered drugs), they receive a bigger discount. Insurance companies also benefit from higher rates, as they collect a higher amount on the patient’s share of the cost share and may also receive discounts from pharmacy benefit managers. Additionally, consumers have little bargaining power because insulin is usually an essential purchase.

“Insulin makers set prices based on what the market will bear, not on demand for their products,” said Dr. Jing Luo, an assistant professor of medicine at the University of Pittsburgh, whose research focuses on drug pricing and use.

However, the pharmaceutical industry disagrees with this assessment. PhRMA, the industry group representing pharmaceutical companies, told KHN that while it acknowledges that drugmakers are responsible for the increase in the list price of insulin, manufacturers are not reaping the benefits of the increase. prices. Instead, manufacturers are being forced to raise list prices to offer deeper discounts and rebates to insurers and pharmacy benefit managers. But PhRMA argues that manufacturers aren’t making higher profits because of higher list prices.

“The discounts reduce what health plans pay for insulin by about 84% and these savings should be shared with patients at the pharmacy,” said Brian Newell, spokesperson for PhRMA. “Until we fix this faulty system, patients will continue to face high insulin costs.”

Although in general economic terms high demand can lead to higher prices as it is difficult to produce enough of a product, production is not an issue with insulin as it is easy to increase supplies. and there’s no set amount of insulin that can be made, said Matthew Fiedler, a member of the USC-Brookings Schaeffer Initiative for Health Policy. Insulin demand should therefore not affect prices.

“Production costs are unlikely to change much when more people buy insulin, because production can be increased quite easily, at least in the long term,” Fiedler wrote in an email. “In fact, production costs could eventually drop as more people buy insulin if manufacturers respond by developing more efficient production techniques.”

Ultimately, the list price of insulin is set by the manufacturers, and they and everyone else in the drug pricing system benefits from higher prices, except for the consumers who have to buy it. to survive, experts said.

“As we all know, increased demand does indeed drive up prices. This is especially true for commodities,” Luo said. “Unfortunately, the prices of brand name prescription drugs like insulin are very different from those of plain products.”

Would weight loss help reduce insulin costs?

In his Twitter feed, Gaetz said diabetes cases have nearly doubled since 2000. That’s right.

According to data from the Centers for Disease Control and Prevention, about 12 million Americans were diagnosed with diabetes in 2000. By 2018, the number of new diagnoses had risen to about 27 million.

But a diagnosis of diabetes isn’t always tied to a person’s weight or overall health, especially for people with type 1 diabetes, who rely on lifelong insulin therapy. .

“In fact, people with type 1 diabetes are usually very thin,” said Dr. Eron Manusov, a professor at the University of Texas-Rio Grande Valley School of Medicine.

Additionally, most people with diabetes have type 2, which is linked to weight gain but is not always treated with insulin.

Other factors may play a role in the risk of developing type 2 diabetes, such as genetics, lifestyle and age, Manusov said.

Relieving and treating diabetes isn’t as simple as eating healthier and exercising more, Dandona said.

If everyone ate the same healthy diet and exercised the same amount, some people would still get diabetes because a person’s genes and the environment they grew up in matter, he added.

“To expect that, in some magical way, insulin requirements will go away if patients lose weight is really speaking cuckoo clock country,” Dandona said.

Experts have concluded that while insulin list prices and diabetes cases increased at relatively the same time, they are not related.

“While higher obesity rates likely increased the prevalence of diabetes, it’s unlikely to have had much effect on insulin prices,” said Fiedler, a health economist. “Also, obviously, none of this is to say that reducing obesity or reducing diabetes is a bad thing. It just doesn’t have much to do with insulin prices in a way. or another.”

How does Congress approach insulin pricing?

The House bill would cap the cost of insulin at $35 per month for people who have private insurance or those who receive Medicare. However, the bill does nothing to help uninsured people who need insulin.

Democrats unanimously backed the legislation, as did 12 Republicans. But there was significant opposition, with 193 Republicans voting against, including Gaetz.

The bill now goes to the Senate, where members are considering other strategies to control insulin prices. Details are in preparation.

Our decision

Gaetz said the reason for the rising cost of insulin was that more people were being diagnosed with diabetes, increasing demand for the product. And he linked this increase in diabetes cases to the increase in the number of overweight people in the United States.

Health economists and diabetes experts have told us that while he is correct that diabetes cases are on the rise, Gaetz’s general point is not accurate. His statement is based on a cause and effect argument which does not exist.

They said the rise in insulin prices was not related to high demand for insulin or pressure-created production issues.

Additionally, although the price hike comes as more cases of obesity are reported, medical experts have said they are not necessarily related. Many overweight people who develop type 2 diabetes are not treated with insulin, and experts point out that many other factors help determine whether a person will develop diabetes.

We rate this claim as false.

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