California wants to lower insulin prices by becoming a drug manufacturer. Can it succeed?

“Insulin has long epitomized the market failures that plague the pharmaceutical industry, which has kept insulin prices high,” Wishaal Pegani, assistant secretary of the Health and Human Services Agency, told lawmakers in May. He argued that high prices had “directly harmed Californians.”

In early May, Newsom said state intervention was required to undermine monopoly drug prices and that California could handle it because the state of 40 million “has bargaining power.”

But the nonpartisan department of the legislative analyst wondered if California could make its own drugs and push for lower insulin prices. Luke Cushmaro, the office’s senior financial and policy analyst, warned at a legislative hearing in May that “significant uncertainty” could hamper the effort, a view shared by some Democratic lawmakers.

Newsom’s administration believes government-manufactured insulin could cut some insurance companies’ costs of the drug by as much as 70%—savings it hopes will pass to consumers. But “there is no guarantee” that the administration’s predictions of sharp cuts or widespread adoption of insulin will come true, Assemblywoman Blanca Rubio (D-Baldwin Park) said at the hearing. “Who will write prescriptions for this magical insulin?” she asked. “Hope is not a strategy. I don’t hear any strategies on how this will become available.”

In recent years, insulin prices have skyrocketed. 2021 US Senate investigation found that the price of Novo Nordisk’s long-acting insulin pen jumped 52% from 2014 to 2019, while the price of Sanofi’s quick-acting insulin pen jumped about 70%. The investigation involved drug manufacturers and pharmacy benefit managers in an increase, saying they have perpetuated artificially high insulin prices.

“Insulin manufacturers have lit the fuse of skyrocketing prices by stepping up each other’s prices rather than competing to lower them, while PBMs, acting as intermediaries for insurers, fanned the flames to get a large share of secret discounts and hidden fees, who they negotiate”, US Senator Ron Wyden (D-Ore.) said when the report was released.

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KHN, trade associations representing well-known drug manufacturers, pharmacy operators, and California insurance companies have been contacted for comment. blamed each other for the rise in prices.

Under Newsom’s plan, generic forms of insulin, known as “biosimilars” because they are made from living cells and mimic known drugs on the market, will be widely available to insured and uninsured Californians.

If Newsom’s $100 million initiative is approved by lawmakers this summer, the state will use the money to contract a well-known drug manufacturer to start supplying CalRx insulin, while the state builds its own manufacturing facility, also in partnership with the drug manufacturer.

The administration is currently negotiating with pharmaceutical companies that can produce a reliable supply of contracted insulin without bidding, but no formal partnership has been formalized. Insulin will be labeled with state-related images such as “California golden bear“. And according to Pegani, the package boasts that the lower-priced insulin was delivered to patients by the state government.

“There is a short list of people who could even compete for this,” Ghali told KHN in May. “We’re going to create competition and find a partner that we think will not only do it soon, but also do something that we think is sustainable.”

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