In the United States, three companies (Eli and Lilly Company, Novo Nordisk Inc., and Sanofi U.S.) produce almost all of the nation's insulin.
These three are the primary producers of insulin because producing insulin is complex and expensive compared to other drugs like over the counter pain killers.
Outside of this, incremental changes and new filings to each company's insulin patents make it very difficult for new producers to break into the market.
Due to this oligopolization of the market, they have been able to raise prices year over year to absurd rates without insurance, coupons, or other cost saving measures.
From an economic standpoint, the problems are twofold: there is not enough competition in production for insulin and the market is organized in a way where lower prices and coupons are avaliable, but only to those who spend time to look.
The purpose of this website is to assist diabetics in their search for affordable insulin.
While it is difficult to introduce more competition to the insulin market, especially because of the entrenched political power of the pharmaceutical industry, the additional information provided through this website helps decrease the information gap between buyers and sellers.
A key concept for understanding the economics of insulin is that of elasticity.
Elasticity measures how much buyers cut back on consumption when prices rise and vice versa.
Since reducing insulin intake from the perscribed amount is potentially dangerous, insulin is regarded as effectively inelastic.
This means that regardless of price, buyers will still buy their perscribed amount of insulin since the consequence for not doing so is potentially fatal.
A number of factors enable the big three to raise continuously raise prices.
Because of the extremely limited competition in the insulin market when one company raises prices, instead of lowering prices to get more people to switch to their brand, the other two follow suite and raise their prices as well.
This strategy is known as "shadow pricing" and is not possible in more competitive markets because buyers will simply leave to buy the product from another company at a cheaper price.
In competitive markets, the amount of companies makes intercompany collusion much more difficult, especially because there is more to be lost by raising prices.
Outside of "shadow pricing", the big three use advertising to promote more expensive insulin products that are nearly identically effective to other alternatives. Negotiations between drug manufacturers and pharmacy benefit managers (who act as middle men between manufacturers and pharmacies) with perverse incentives raise also serve to raise prices. During negotiation, PBMs raise prices in order to extract benefit for themselves at the cost of the consumers when they pay for insulin at the pharmacy.
While the coupons avaliable on the pages listed on the main page are defintely helpful for those in need, they are not a perfect solution to the problems of the insulin market.
These programs are almost entirely opt-in, meaning that buyers who are not aware of them will be paying more.
Having these programs be opt-in creates an information barrier for affordable insulin.
Furthermore, coupon programs do not address the fact that the insulin market is consolidated in a way that gives the producers too much market power and room to exploit buyers.
A better solution to this issue would likely involve using the government's anti-trust capabilities to break up the major insulin producers and allow more companies to enter the market.
In addition to this, a government firm could be introduced into the market that sells insulin at the cost it makes to produce.
This would provide additional cost-effective competition in the market that would force all producers around or lower than the rate of the government firm.
Read more about it here!