Why Insulin is So Expensive in America

The high cost kills diabetics in the tens of thousands. But that may be about to change.

Rita McGrath
Marker
Published in
10 min readJan 28, 2022

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A photograph of an insulin vial and syringes
Photo by Mykenzie Johnson on Unsplash

Some settings create ripe conditions for a business-model destroying inflection point. Unhappy customers, favoring one stakeholder group at the extreme expense of others and operating in such a way that even your allies can’t defend you are all early warnings that change is afoot.

An inflection point?

It looks as though an inflection point for the current insulin business model may be underway. On July 28, the FDA approved an interchangeable biosimilar drug, Semglee. More importantly, a fourth company, Viatrus, will begin to compete in the U.S. insulin market. While the competitive effects are still going to be subject to negotiations among policymakers, PBM’s and the original manufacturers, the presence of potential competition is likely to at least moderate the most aggressive pricing maneuvers.

An even more substantial inflection point may be new developments that make insulin unnecessary for patients with Type 2 diabetes, who constitute 90% of the market. In 2019, the FDA approved oral tablets for the treatment of Type 2 diabetes.

Other efforts to treat diabetes range from cell editing, variations on immunotherapy, and even robotic implants. While they may end up displacing the need for insulin eventually, such therapies are often wildly expensive and are likely to be controversial as governments weigh the benefits.

In my 2019 book Seeing Around Corners, I used the case of the hearing aid industry as an example of how a whole sector could become subject to a major inflection point. The way in which hearing aids were regulated created massive unintended negative consequences. Because providing them was essentially a monopoly, they were too expensive for many people (and not covered by health insurance). Providers were restricted to a just a few, and at the time only six manufacturers produced them, with high margins and markups. Only one in five patients who could benefit from one were able to buy one.

My argument was that eventually such a situation would reach a breaking point, which it finally did in 2021 after a long and grinding battle by…

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Rita McGrath
Marker

Columbia Business School Professor. Thinkers50 top 10 & #1 in strategy. Bestselling author of The End of Competitive Advantage & Seeing Around Corners.