Why Eli Lilly is voluntarily capping insulin costs at $35 a month

A box of Eli Lilly’s insulin medication Humalog sits on a pharmacy shelf.
Eli Lilly announced it would cap the out-of-pocket cost of insulin for virtually all customers at $35 per month. | Daniel Acker/Bloomberg via Getty Images

The campaign to cut the cost of insulin just scored a major victory.

Drug companies are coming under immense pressure over prescription drug prices, particularly essential medicines like insulin — and they are starting to respond more aggressively.

On Wednesday, Eli Lilly, one of the three major US manufacturers of insulin, announced it would cap the out-of-pocket cost for virtually all customers at $35 per month. People who have private insurance will automatically have their out-of-pocket costs limited to $35 per month. People who are uninsured will need to download a savings card created by the company in order to receive the same benefit. The move is an expansion of a previous program that provided a $35 out-of-pocket maximum to only certain eligible patients.

The $35 monthly limit will match the provision passed by Congress in the Inflation Reduction Act that caps the out-of-pocket costs for an insulin prescription for people on Medicare to $35 per month. Democrats in Congress had originally wanted to extend that cap to other forms of insurance as well, but they could not under the special legislative process they used to avoid a Republican filibuster, the rules of which limit their ability to regulate the private sector. Now one manufacturer is taking the step voluntarily.

Eli Lilly also announced it was reducing the list price of its non-branded insulin to $25 per month, and cutting the list price of its brand-name and most commonly prescribed insulin, Humalog, by 70 percent by the end of 2023. (The list price of a 10-milliliter vial is currently about $275.) Many people do not currently pay the list price, but people who are uninsured or who have a high-deductible health plan can have particularly high out-of-pocket costs because of how high the list prices are set.

Drug makers are under a lot of pressure on insulin costs — and it seems to be working

The company’s move comes amid a sustained storm of scrutiny and hints of dramatic actions by the government to try to rein in costs for insulin. More than 8 million Americans with diabetes rely on insulin; for people with Type 1 diabetes, it is essential, and it becomes a necessity for some people with Type 2 diabetes as well. Yet recent surveys have found that one in six people who use insulin say they ration the drug because of the cost.

That’s because the price of some insulin has grown by 1,000 percent over the past 20 years, far outpacing inflation. Though insulin generally costs less than $10 per dose to produce, some versions of the drug currently have a list price above $200. In the US, a warped market has allowed three companies to dominate the insulin business: Sanofi, Novo Nordisk, and Eli Lilly.

Though the original discovers of insulin sold its patent for $1 a century ago, private companies soon entered the market for this new miracle drug. They developed important improvements, making different versions of the drug that last longer or act quickly in order to meet a patient’s needs. But those innovations have also served to justify price increases and patent protections that have driven the drug’s costs skyward in recent decades, even as the medicine at its heart remains fundamentally the same.

Patients and the public at large are furious, and the companies have also had some embarrassing public episodes — like a case of Twitter impersonation proclaiming free insulin that briefly tanked Eli Lilly stocks and an acknowledgement by its CEO that insulin should “probably” be cheaper — that have only heightened the crisis.

One in 10 Americans has diabetes. The insulin cost crisis seems to have struck the general public as too absurd even for America’s dysfunctional health care system. The sheer number of people potentially affected or who know someone who could be affected, insulin’s life-saving properties for the people who depend on it, and the gross disparity between the cost to produce it and the price these companies charge for it has created sustained pressure for the government to act. Voters of both parties say in overwhelming numbers that they want lawmakers to do something about the cost of insulin and on drug prices more broadly.

Congress took a noteworthy step with the $35 monthly cap for Medicare in the IRA. But states have been moving on even grander plans.

California has authorized $100 million for a public insulin project, putting real money behind the idea of the government production of essential medications like insulin. In the short term, the state plans to partner with an existing enterprise — such as CivicaRx, a nonprofit conglomerate of hospital systems developing cheap generic drugs — to get its hands on a cheaper insulin supply sooner. But in the long term, the idea is to build a publicly owned factory, staffed by civil workers, which would produce its own generic insulin and sell it at roughly the price of the drug’s production. There will likely be legal, regulatory, and scientific obstacles to achieving that goal, but that is the plan.

Other states, such as Washington and Maine, have signaled an interest in similar projects. Michigan Gov. Gretchen Whitmer, with a freshly won Democratic majority in the legislature, recently called for that state to invest $150 million to eventually produce its own insulin.

Advocates advising California’s effort told me that the state’s plan could succeed one of two ways: Either the state builds its own factory and sells cheap insulin, or the current manufacturers decide to drop their own prices in response. Because California also buys a lot of insulin through its Medicaid program (with 15 million enrollees, more than the entire population of most states) and state employee health plan, it wins either way.

“If we can drop the cost of insulin, we don’t have to make money on selling it,” Anthony Wright, executive director of Health Access California, a health care consumer advocacy group, told me. “We get the savings as a purchaser.”

A possible sign that drug makers are feeling that pressure came on Wednesday, with Eli Lilly’s announcement: its $35 cap would be effective immediately.

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