The State and its flagship University could collaborate with BCBSM to develop a local supply of low cost, Pure Michigan insulin

Insulin prices have been making headlines recently. By some measures, prices per unit of insulin have doubled or tripled in recent years, seemingly without justifiable reason. The US currently spends ~$15 billion p.a. on insulin, but has only three insulin suppliers, so oligopolistic pricing behavior is not surprising. To be sure, drug companies are innovating, and Congress may yet step in, but until then, diabetics (and insurers to a lesser extent) are at the mercy of the insulin cartel. Or are they?

Nearly 30 million Americans have diabetes. All ~1 million with Type 1 diabetes require insulin, as do about 20% of those with Type 2 diabetes. At 7.7% penetration, ~762 k Michiganians have diabetes, of which an estimated ~180 k would require insulin. Those numbers are all expected to rise.

Some insulin users are now spending >$5700 annually on the medication, and on average, insulin costs $607 per diabetic; As such, insulin spending in Michigan likely exceeds $460 million each year (by comparison, the state of Michigan collected $478 million in gas taxes in 2017), or it least it should exceed $460 million if all cases were diagnosed and a quarter of patients didn’t ration their doses.

As Dr Ofri recently noted in the New York Times, diabetics are under pressure because of the high insulin costs as well as insurance shenanigans. Some insurers are reportedly changing what insulins they cover so often that patients cannot fill prescriptions. Others are raising copays. Others simply do not include insulin in their preferred medications. Rationing and poor diabetes management result in an extra $5000 per person in healthcare costs.

To address price gouging and minimize the public health effects and systemic costs of poorly managed diabetes, the State of Michigan, along with its flagship university (Michigan) and its healthcare infrastructure as well as its top health insurer (BCBSM), should consider collaborating to locally produce off-patent, biosimilar insulin. The state, university, insurers (and healthcare providers), as well as Michiganians could all benefit from such an arrangement. The nation as a whole might benefit also.

The state could provide funding, incentives, and regulatory support to a new B Corporation or similar public-production of insulin. In addition to public health benefits, the state would be investing in a strengthening its economic cluster for drug production, local job creation, retention of hundreds of millions of dollars in the state’s economy.

The university could find more productive uses for its capital expenditures (rather than shinier and shinier new buildings), possibly converting some facilities it bought from Pfizer to insulin production. It could enrich its academic experience for students in fields related to pharmacy, supply chain, and manufacturing. It could also allocate some of its massive endowment to such a social enterprise, earning a more ethical return.

BCBSM (and other insurers) would of course benefit from lower cost insulin and protection against future cost increases for off patent insulin. They (and hospitals) would also have a more stable diabetic population to care for, hopefully at lower costs (up to $950 million savings p.a., if a quarter of cases that are currently rationing insulin are able to better manage the disease). BCBSM could invest in Pure Michigan insulin production and also commit to incentivizing its use among covered patients.

Diabetic Michiganians would of course benefit from lower costs and (hopefully) more stable use of insulin (no rationing) and better health. Local diabetics would also have a more stable source of insulin in the face of possible global shortages (or if corporations stop producing insulin when regulators make it less profitable). All Michiganians would benefit from lower insurance premiums over time. Michiganians would also benefit from a stimulus or boost to our local economy (if $460 million no longer disappears to the out-of-state insulin cartel each year).

Diabetes is a big problem in Michigan, where direct medical and indirect costs of the disease are estimated to be near $10 billion per year. Insulin is a major driver of increases in the cost of diabetes. However, big problems create big opportunities.

Setting up socially-oriented, high quality, analog insulin production for the public in Michigan won’t be easy. The federal government is also looking for more competition in insulin production and is positioning itself to help such an endeavor, but it can take investment of $250 million or more to bring such a biologic drug like insulin to market. Other innovations may also disrupt the market or mitigate the need for such a venture.

Even so, Michigan, U of M, and Blue Cross Blue Shield of Michigan should explore this possibility. “Generic” insulin is expected to save 20–40% off market prices. If such a project only saves 15% off the cost of insulin, the direct social savings could rapidly pay back (~$70 m p.a. just in Michigan) any required startup investment. Insulin sales into other states and indirect savings in lower Michigan diabetic care costs are further upside, as would be the potential to expand into other generics that are not widely produced and are at risk of exploitation by “investors”.

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