4 ms·

That's not what is happening. It has nothing to do with a patent monopoly or recouping any investment: FTA: >In 1996, a vial of Humalog produced by Eli Lilly

That's not what is happening. It has nothing to do with a patent monopoly or recouping any investment: FTA: >In 1996, a vial of Humalog produced by Eli Lilly cost $21. Today, it's priced at $324 despite the cost of production remaining steady. >Rising costs are nothing new. Insulin prices tripled from 2002 to 2013, and doubled between 2012 and 2016. To put this into perspective, in 1996 a vial of Humalog produced by Eli Lilly cost $21. Today, it's priced at $324 despite the cost of production remaining steady. If everything is working as intended, it begs the question, what institution intended for patients to die from rationing insulin[0], and why is the USA ok with that institution's intention? [0]https://www.ontrackdiabetes.com/live-well/diabetes-management/insulin-rationing-what-it-why-its-so-dangerous https://www.ontrackdiabetes.com/live-well/diabetes-managemen...

lotsofpulp 5y ago
If it was developed in 1996, the patent protection would have expired by now. If the cost of production was "steady", then the question is why is a competitor not jumping in to make and sell something that would earn them a huge profit margin?
- reddiky 5y ago
  https://www.hopkinsmedicine.org/news/media/releases/why_people_with_diabetes_cant_buy_generic_insulin https://www.hopkinsmedicine.org/news/media/releases/why_peop...
- DerpyBaby123 5y ago
  Do you doubt it was developed in 1996? Do you have evidence that the cost of production has significantly risen? Otherwise, you seem to be repeating the old economics joke: "The young economist looks down and sees a $20 bill on the street and says, “Hey, look a twenty-dollar bill!” Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”"
  - lotsofpulp 5y ago
    When there is a claim that there exists an arbitrage opportunity worth billions of dollars, I would consider it common sense to consider why has no one claimed the arbitrage opportunity yet. The world has many very smart people spending many hours working very hard to find these opportunities, so the likelihood of it just sitting there like a $20 bill on the street, and not being picked up, seems quite small. I do not know the answer myself, so I am interested in finding out. reddicky posted this: https://www.hopkinsmedicine.org/news/media/releases/why_people_with_diabetes_cant_buy_generic_insulin https://www.hopkinsmedicine.org/news/media/releases/why_peop... which sort of answers it: >Biotech insulin is now the standard in the U.S., the authors say. Patents on the first synthetic insulin expired in 2014, but these newer forms are harder to copy, so the unpatented versions will go through a lengthy Food and Drug Administration approval process and cost more to make. When these insulins come on the market, they may cost just 20 to 40 percent less than the patented versions, Riggs and Greene write. So it looks like there is some expensive expertise involved and investment into R&D that needs to be done.
    - pimeys 5y ago
      Although... I needed to buy a vial of the newest fast insulin in Spain last year without an insurance. One vial was 28 euros, which is much less than people in US have to pay. The insulin in question is Lyumjev from Eli Lilly.
    - DerpyBaby123 5y ago
      Yes there is expertise and capital costs involved, which make it not an arbitrage play. It is more like a cartel, which seems to explain what is going on here, with the 3 insulin producing companies all fixing their prices together (at least in the US) In theory there is 'nothing' stopping another company from coming along, even a group of Biohackers may try to do something - I wonder if that's been done... :)
    - curryst 5y ago
      The reason no one will pick it up is because there are massive capital investments to get something like that up and running, and the existing manufacturers can just drop their price to compete with you as soon as you get up and running. Now you have to recoup your capital costs in a saturated market, and your competitors can probably make insulin cheaper than you due to pre-existing economies of scale. I would imagine that even other companies already in the pharma space would be interested. They don't want to play the race to the bottom game with billions of dollars in upfront costs. If anything, it's probably more profitable to make a new form of insulin that you get to patent. Which is how we end up where we are.
nceqs3 5y ago
This is an incredibly stupid comment. Net price in Humalog has decreased since 2014 [0]. The PBMs jack up the list price so they can get their fat rebates. [0] = https://www.cnbc.com/2019/03/25/eli-lilly-discloses-pricing-data-for-its-popular-insulin-humalog.html#:~:text=The%20net%20price%20is%20the,%24594%20per%20patient%20each%20month https://www.cnbc.com/2019/03/25/eli-lilly-discloses-pricing-....
- lotsofpulp 5y ago
  Eli Lilly's profit margin is double digit, usually around 20%. Managed care organizations (insurance companies), which own the PBMs, have profit margins of ~5% or less.
  - nceqs3 5y ago
    That is a nonsense talking point from the industry. They use passthrough revenue to distort their profit margin. Express scripts is closer to 15% and CVS is closer to 10%. See https://www.fiercehealthcare.com/payer/facing-criticism-pbms-may-be-downplaying-profit-margins https://www.fiercehealthcare.com/payer/facing-criticism-pbms....
    - lotsofpulp 5y ago
      CVS net profit margin is in the 2% to 3% range: https://www.macrotrends.net/stocks/charts/CVS/cvs-health/profit-margins https://www.macrotrends.net/stocks/charts/CVS/cvs-health/pro... Cigna purchased Express Scripts in Mar 2018, and has profit margins of 3% to 5% over the last couple years. https://www.macrotrends.net/stocks/charts/CI/cigna/profit-margins https://www.macrotrends.net/stocks/charts/CI/cigna/profit-ma... If these PBMs are making lots of profits, then they are simply subsidizing losses elsewhere in the MCO. The total costs paid for insurance premium plus out of pocket costs by the end user in the US would not be affected.
      - nceqs3 5y ago
        You are not addressing my main point which is that these MCO's distort their "net margin" stat using accounting tricks. And yes PBM's are INCREDIBLY profitable. Express scripts made 4.5 billion in net income in 2017. They have never produced a drug that has saved a life. PBMs are important but they should not be able to put a gun to these pharma companies heads because they control the formulary. CVS net margin includes their retail business. You can't compare AWS's margin to Walmart's e-commerce margin.

lotsofpulp 5y ago

If it was developed in 1996, the patent protection would have expired by now. If the cost of production was "steady", then the question is why is a competitor not jumping in to make and sell something that would earn them a huge profit margin?

reddiky 5y ago
https://www.hopkinsmedicine.org/news/media/releases/why_people_with_diabetes_cant_buy_generic_insulin https://www.hopkinsmedicine.org/news/media/releases/why_peop...
DerpyBaby123 5y ago
Do you doubt it was developed in 1996? Do you have evidence that the cost of production has significantly risen? Otherwise, you seem to be repeating the old economics joke: "The young economist looks down and sees a $20 bill on the street and says, “Hey, look a twenty-dollar bill!” Without even looking, his older and wiser colleague replies, “Nonsense. If there had been a twenty-dollar lying on the street, someone would have already picked it up by now.”"
- lotsofpulp 5y ago
  When there is a claim that there exists an arbitrage opportunity worth billions of dollars, I would consider it common sense to consider why has no one claimed the arbitrage opportunity yet. The world has many very smart people spending many hours working very hard to find these opportunities, so the likelihood of it just sitting there like a $20 bill on the street, and not being picked up, seems quite small. I do not know the answer myself, so I am interested in finding out. reddicky posted this: https://www.hopkinsmedicine.org/news/media/releases/why_people_with_diabetes_cant_buy_generic_insulin https://www.hopkinsmedicine.org/news/media/releases/why_peop... which sort of answers it: >Biotech insulin is now the standard in the U.S., the authors say. Patents on the first synthetic insulin expired in 2014, but these newer forms are harder to copy, so the unpatented versions will go through a lengthy Food and Drug Administration approval process and cost more to make. When these insulins come on the market, they may cost just 20 to 40 percent less than the patented versions, Riggs and Greene write. So it looks like there is some expensive expertise involved and investment into R&D that needs to be done.
  - pimeys 5y ago
    Although... I needed to buy a vial of the newest fast insulin in Spain last year without an insurance. One vial was 28 euros, which is much less than people in US have to pay. The insulin in question is Lyumjev from Eli Lilly.
  - DerpyBaby123 5y ago
    Yes there is expertise and capital costs involved, which make it not an arbitrage play. It is more like a cartel, which seems to explain what is going on here, with the 3 insulin producing companies all fixing their prices together (at least in the US) In theory there is 'nothing' stopping another company from coming along, even a group of Biohackers may try to do something - I wonder if that's been done... :)
  - curryst 5y ago
    The reason no one will pick it up is because there are massive capital investments to get something like that up and running, and the existing manufacturers can just drop their price to compete with you as soon as you get up and running. Now you have to recoup your capital costs in a saturated market, and your competitors can probably make insulin cheaper than you due to pre-existing economies of scale. I would imagine that even other companies already in the pharma space would be interested. They don't want to play the race to the bottom game with billions of dollars in upfront costs. If anything, it's probably more profitable to make a new form of insulin that you get to patent. Which is how we end up where we are.

nceqs3 5y ago

This is an incredibly stupid comment. Net price in Humalog has decreased since 2014 [0]. The PBMs jack up the list price so they can get their fat rebates. [0] = https://www.cnbc.com/2019/03/25/eli-lilly-discloses-pricing-data-for-its-popular-insulin-humalog.html#:~:text=The%20net%20price%20is%20the,%24594%20per%20patient%20each%20month https://www.cnbc.com/2019/03/25/eli-lilly-discloses-pricing-....

lotsofpulp 5y ago
Eli Lilly's profit margin is double digit, usually around 20%. Managed care organizations (insurance companies), which own the PBMs, have profit margins of ~5% or less.
- nceqs3 5y ago
  That is a nonsense talking point from the industry. They use passthrough revenue to distort their profit margin. Express scripts is closer to 15% and CVS is closer to 10%. See https://www.fiercehealthcare.com/payer/facing-criticism-pbms-may-be-downplaying-profit-margins https://www.fiercehealthcare.com/payer/facing-criticism-pbms....
  - lotsofpulp 5y ago
    CVS net profit margin is in the 2% to 3% range: https://www.macrotrends.net/stocks/charts/CVS/cvs-health/profit-margins https://www.macrotrends.net/stocks/charts/CVS/cvs-health/pro... Cigna purchased Express Scripts in Mar 2018, and has profit margins of 3% to 5% over the last couple years. https://www.macrotrends.net/stocks/charts/CI/cigna/profit-margins https://www.macrotrends.net/stocks/charts/CI/cigna/profit-ma... If these PBMs are making lots of profits, then they are simply subsidizing losses elsewhere in the MCO. The total costs paid for insurance premium plus out of pocket costs by the end user in the US would not be affected.
    - nceqs3 5y ago
      You are not addressing my main point which is that these MCO's distort their "net margin" stat using accounting tricks. And yes PBM's are INCREDIBLY profitable. Express scripts made 4.5 billion in net income in 2017. They have never produced a drug that has saved a life. PBMs are important but they should not be able to put a gun to these pharma companies heads because they control the formulary. CVS net margin includes their retail business. You can't compare AWS's margin to Walmart's e-commerce margin.