Governor’s effort to lower insulin prices is a smart investment

Gavin Newsom is taking aim at the three greedy insulin drugmakers who have made billions in profits at the expense of Californians with Type 1 diabetes who must take the medication every day to survive.

The governor announced Saturday a new $100 million, 10-year contract with the nonprofit drugmaker Civica RX to make insulin available at a cost of no more than $30 per vial. Half of the money will go toward developing the insulin product, and the remaining $50 million will be invested in a manufacturing facility.

Insulin costs about $10 per dose to produce. In 1995, the price stood at $24 per vial. Today, the drug can cost more than $200. Consequently, one in six insulin users say they are forced to ration their doses because they can’t afford the cost.

Newsom believes the state can help patients who now pay out of pocket thousands of dollars a year. While it won’t be easy, he deserves credit for trying to break the oligopoly that’s making basic prescription drugs unaffordable.

California faces significant challenges to make the plan a reality. Creating an insulin product can take years to develop and must be approved by the Food and Drug Administration. Some health experts question whether private insurers will cover California’s product.

The three major insulin manufacturers — Eli Lily, Novo Nordisk and Sanofi — control about 90% of the insulin market in the United States and are ruthless in undercutting efforts to break their stranglehold on the market. But there are clear signs they are feeling public pressure to reduce their prices.

In January, the 4 million American seniors on Medicare with Type 1 diabetes saw their insulin costs capped at $35 per month, thanks to government subsidies from the Inflation Reduction Act. In February, in his State of the Union address, President Biden called on Congress to extend that benefit to all Americans.

Rather than wait for Congress to take action that could reduce their profits, Eli Lilly announced March 1 it would cut prices for its most commonly prescribed insulin, Humalog, and for another insulin, Humulin, by 70% beginning in October. Novo Nordisk and Sanofi followed suit, saying they would cut costs for their products by 75% next year.

Meanwhile, in California, Newsom is not limiting his efforts to insulin. But since he was elected in 2018, Newsom has struggled to fulfill his campaign promise to reduce consumers’ overall prescription drug costs.

In 2019, he signed an executive order allowing California to use its bulk purchasing power to negotiate lower prices for the state’s counties. But few counties have taken advantage of the program. Starting this year, California will use the state’s purchasing power to reduce prescription drug costs for the 14 million residents enrolled in Medi-Cal, the health insurance for low-income Californians.

The size of California’s prescription drug purchasing power will make it difficult for private drugmakers to ignore. But, as Newsom has acknowledged, it could take years to reduce prescription drug prices.

California’s effort to create a public drug market is an innovative way to disrupt the pharmaceutical industry. The governor’s approach is a smart investment for California.

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