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
Because building businesses and factories is expensive, you still have to make money, and your forthcoming competitors can gut you by simply lowering their price. One of the most important concepts to understand in economics is [barriers to entry](https://en.wikipedia.org/wiki/Barriers_to_entry), the fixed costs one must expend in order to even start a business in a particular industry. So, for a business like pharmaceuticals, you’ve got a lot of barrier to entry. You’ve got to recruit technical talent, you’ve got to acquire expensive equipment for both manufacturing and testing, and you’ve got regulatory hurdles you’ve got to clear, you can’t simply just start making a drug and sell it directly to pharmacies, governments have approval processes to ensure your product isn’t going to harm people.
However, as others in the thread have pointed out, it’s not the cost of manufacture which is hiking up the prices. It’s the inelastic demand. If you’re diabetic, you *need* insulin. End of story. So you’re going to pay for it at whatever price you need to in order to not die. Also, the amount you’re going to consume isn’t going to change if the product is made more cheaply. There’s no pricing strategy manufacturers can pursue that’s going to make them more money, other than the biggest gouge they can get away with.
This is a little-discussed problem with free markets. One of the critical aspects of a truly free market is that you need to be free to **NOT** make a purchase if the price is too high. But for many goods, like housing, health care, and education, that’s very bitter choice to make.
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Not sure if [this Verge Science](https://youtu.be/9CdydQNfAXE) video has been linked but it’s interesting and about insulin. It discusses why it’s expensive.
In the USA there are a bunch of laws that make it really expensive, difficult, complicated, and time consuming for new companies to start manufacturing or selling drugs. So there is little incentive to compete with the existing companies when there are so many other things your business could do instead.
From https://slatestarcodex.com/2019/04/30/buspirone-shortage-in-healthcaristan-ssr/:
>The story goes something like this. The FDA demanded that generic drug manufacturers pass FDA inspection before setting up shop. But the FDA didn’t have enough inspectors to review manufacturers in a timely manner. So companies kept asking the FDA for permission to enter the generics market, and the FDA kept telling them there was a several year waiting period. In 2012, Congress recognized the problem. Politicians, FDA officials, and industry leaders agreed on a new policy where generic drug manufacturing companies would pay the FDA lots of money (about $300 million last time anyone checked), and the FDA would use that money to hire inspectors so they could clear their backlog of applications.
>The good news is, the FDA hired lots more inspectors and they are now pretty good at responding to generic drug applications in a timely way. The bad news is that the fees to the companies were designed in a way that subtly encouraged monopolies in generic drug markets. I don’t understand all the specifics, but there seem to be two main problems.
>First, if you manufacture a drug, the FDA will charge you a fee, but the fee doesn’t scale linearly with how much of the drug you produce. So suppose Martin Shkreli owns a very big Daraprim factory. The FDA might charge him $1 million per year to fund their inspectors. Suppose you are a small businessman who is angry at Martin Shkreli’s fee hike, and you want to open a competing Daraprim factory in your small town, using your small amount of personal savings. Probably your factory will be much smaller than Martin Shkreli’s. But the FDA will still charge you the same $1 million per year. At worst this means you make no profit; even at best, Shkreli’s economy of scale gives him a big advantage over you. So you may decide not to enter the market at all
Insulin prices are already extremely low in plenty of places around the world. Government regulation in the US (FDA) precludes shipping it over.
It really breaks my heart to see discussions like this. My father was a type 1 diabetic here in the UK for over 65 years. He never had to pay a penny for his insulin, it was managed so well that there were never any side effects.
There is a new company attempting to make it to sell it much much cheaper and under cut those massive companies. The problem is it us a difficult process and funding is bit easy to come by
Well, mostly due to regulations.
…when random DIY biohacker youtubers can do it with supplies they bought online, then its a good guess that red tape plays a big part.
I think that’s why the https://openinsulin.org project got started. Not sure how successfully they’ve been. But it’s a neat idea at least.
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