Why is insulin dominated by a few companies globally and if bacteria are used to produce human insulin, why can no other company replicate this?
In: Biology
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It’s one thing to make some insulin of some quality.
It’s a totally different thing to make a lot of insulin, in such a high quality that it is safe for humans, consistently.
Not only that, you also need to *prove* that you can make it in high quality consistently, with loads and loads of certifications and paperwork and tests.
And all that while you still have to make enough money.
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No other company replicates this because the insurance companies only negotiate with the large manufacturers so new startups would not only have to make themselves known to insurance companies but would also have to more than likely financially incentivize the insurance companies to recognize them, which the insurance companies will promptly ignore because the copay on insulin is so monstrously high that it doesn’t make sense for them to stop the deal they have with current manufacturers when they get to charge higher premiums with the current brands
In short, it simply isn’t profitable for new entrants. The market is dominated by the “big three” manufacturers, Novo Nordisk (Denmark), Sanofi (France) and Eli Lily (USA). There are smaller manufacturers based in developing countries, but they don’t sell to Western nations. There’s no Russian or Indian insulin in the US. Why not? Surely it would be cheaper?
Well, in the US the prices are set by middlemen companies called PBMs. They negotiate sales between manufacturers and insurance companies, and they get a cut of the sales. So, they have an incentive to negotiate *high* prices, and they actually force the big three insulin makers to raise their prices. [This practice was investigated by the Senate Finance committee](https://www.policymed.com/2021/05/senate-finance-committee-releases-insulin-investigation-results.html) which announced its findings earlier this year.
Recently, though, [Novo Nordisk started supplying rebranded insulin direct to Walmart](https://www.fiercepharma.com/pharma/agreement-novo-nordisk-walmart-to-revolutionize-insulin-access-deep-discounts) bypassing PBMs. The price is, naturally, much lower. In other countries, such as the UK, the prices are negotiated by the government and is a fraction of the US prices.
All this means that the price of insulin could drop at any moment if a new company tried to take market share. The business proposition is shaky, so it isn’t worth entering the market.
edit: for those saying that patents are the issue, I draw your attention to Sanofi’s patent on Lantus which expired in 2015, which led to a biosimilar insulin (basaglar) being introduced from Eli Lilly. However, the price of Basaglar is similar to Lantus. Clearly, increased competition from expired patents is not sufficient to lower prices in the US. Other mechanisms are controlling the price.
Just to say: the guys that discovered insulin, Banting and Best, did so while working at the University of Toronto. They thought it was so important, they sold their patent to the University for $1, with the understanding that insulin would not be treated as a cash cow.
didn’t work out that well, but their hearts were in the right place.
When you invent something you can get a protection for that thing known as a “patent,” which prevents others from taking or using that idea for a period of time, usually 20 years in the United States. This is done to encourage innovation, as even the smallest inventor can take advantage of a good idea and make money off of it. If you invent something a major company cannot just start making your invention and take all the money, because you have a patent and could sue. After the patent expires others can make and use whatever was patented.
With drugs what this means is that 20 years after a pharmaceutical company makes a new drug other companies make it too. These drugs, known as “generic drugs,” are the exact same drug and are usually cheaper, often much more so. When a drug is patented you can charge whatever you want because you are the only one who makes it. You also charge more because you want to make back the money you spent researching and developing the drug, which can be a massive amount of money. Because generics are cheaper pharmaceutical companies usually drop the price of the name brand drug when the patent expires. Since the drugs are exactly the same there is no real reason to pay 10 times as much for the brand name.
However these generic drugs are only covered by most insurance if they are considered “therapeutically equivalent.” So if you are prescribed Examplein your insurance company will cover a generic drug that is exactly the same, but not a generic drug that is similar but not the same.
So when the patent is about to expire the companies that make insulin change the formula or process just enough to get a new patent and make it so that the generic insulin is not therapeutically equivalent to the new stuff. Because the generic is not “therapeutically equivalent” it won’t be covered by most insurance and the companies can continue to charge top dollar.
The obvious solution would be to ban this practice, but that isn’t really possible, or at least it is much harder than it sounds. The companies that are making these changes are actually improving the product, the newer forms of insulin are better than the old ones. Banning this would mean that people would not have a reason to try and improve a pharmaceutical that already exists because they couldn’t make money on it. In addition that kind of change would predominantly hurt small companies and inventors for a bunch of reasons that won’t fit here.
TL;DR: It’s not that nobody else can replicate insulin, it is that you are not allowed to replicate the specific type(s) of insulin that these major companies produce, which means that generic (and much cheaper) forms of insulin are not covered by most health insurance.
Agree with most of what else has already been said.
To add… at this point Insulin is a commodity product (a basic product where there is little or no differentiation between manufacturers). Examples of other commodities in the medicine world would be Acetaminophen, Ibuprofen, Aspirin, etc. where there’s no meaningful differences between manufacturers.
As a result, there are very low profit margins on the sale of the product. What happens after it leaves the manufacturer is more complicated. As tends to happen with other commodity manufacturers (steel mills, paper mills, oil refineries, wood mills) there tend to be very few, but rather large facilities that produce the product but run 24/7 for the sake of being as efficient as possible in order to maximize what little profit they can make.
There are many companies producing insulin and it’s so cheap it’s almost unbelievable. Unit of insulin(just the drug, not counting epipen etc) costs about 1 cent. But I’m talking about EU.
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