The high cost of medicine is killing Americans. More than a quarter struggle to pay their medical bills, making health care costs the leading cause cited when declaring personal bankruptcy—yet the current administration would like to see the rest of the world pay more for drugs.
On 7th May, a grieving mother attempted to highlight the issue of America's soaring insulin prices at the annual shareholder meeting of pharmaceutical giant Eli Lilly. In June 2017, Nicole Smith-Holt's 26-year-old son Alec, who had type 1 diabetes, was found dead as a result of trying to ration insulin. Having aged out of his mother’s health insurance the month before, he could no longer afford the cost of the medicine that was keeping him alive.
Insulin appears on the Model List of Essential Medicines compiled by the World Health Organisation (WHO), which details the medications deemed most effective, safe and important in any health system. Without access to insulin, people with type 1 diabetes will die, most likely in a matter of days.
Alec's story is far from unique. A recent survey found one in four American respondents with type 1 diabetes had resorted to skipping insulin doses due to the cost. A quick search of GoFundMe will throw up thousands of fundraisers for insulin in America, and with an over the counter cost of around $1,300 for a month's supply for an American without health insurance, it's easy to see why.
It is straightforward to understand why people might struggle to access affordable medicine in a developing nation—but why is such a humanitarian tragedy unfolding in one of the world's richest countries? The short answer is that America's dysfunctional healthcare provision, with its opaque system of health insurance and drug pricing, is a goldmine for many of the key players.
The worldwide market for pharmaceuticals is expected to reach $1.12 trillion by 2022 and most pharma companies operate on a profit margin of around 20 per cent; a level comparable to banking. Some make much more—Pfizer, the largest US pharma company, made a staggering 42 per cent profit margin in 2013. With such huge sums of money being made, it seems reasonable to question how the industry is working for the public good. The WHO has highlighted “an inherent conflict of interest between the legitimate business goals of manufacturers and the social, medical and economic needs of providers and the public.”
Insulin provides a textbook case-study in how to maximise drug profitability. Ordinarily, a new therapeutic drug enjoys patent protection for 20 years after its discovery (and thus is sold at a higher price, due to the lack of competition). Insulin was discovered in 1921, by Canadian researchers who refused to profit from this life-saving drug. Yet minor incremental improvements and subtle variations to its formulations have afforded three large companies—Eli Lilly, Sanofi and Novo Nordisk—continued patent protection for almost 100 years now. Today, these three manufacturers control nearly 90 per cent of the world's insulin market.
The price of insulin in the USA has been subject to staggering increases. Eli Lilly's Humalog cost $25 a vial in 1996. In 2018 that same vial costs $275. The price of insulin from all three companies has increased by comparable amounts. A class action lawsuit alleging price-fixing was launched against the three major insulin manufacturers by a group of patients in 2017 and is progressing through the courts. As Elizabeth Rowley, director of charity T1International, which works to champion the rights of people with type 1 diabetes, points out: insulin manufacturers “know they can charge whatever price they want because people with type 1 diabetes must pay or die.” And yet, incredibly, the US would like the rest of the world to pay higher prices for drugs.
Last Friday President Trump spoke on drug pricing, unveiling a raft of measures aimed at combatting the escalating price of prescription drugs in America. Most troubling for the rest of the world was his assertion that one reason drugs are so expensive in America is that the country is unfairly bearing the burden of funding pharmaceutical innovation through the price its citizens pay for drugs. The theory is that much of the rest of the developed world is “free-riding,” benefitting from this innovation without paying for it. The price controls employed by countries such as the UK, Germany, Italy and France mean that pharmaceutical companies make much more profit in the US than they do elsewhere.
The Trump administration feels that the solution is for “free-riding” countries to pay more for drugs in order to redress the balance. The theory is flawed; forcing the rest of the world to pay more for drugs will not result in lower prices for Americans and will harm many vulnerable people worldwide. Prices are high in the US because successive administrations have failed to act to control the for-profit healthcare industry, not because the pharmaceutical industry needs such eye-watering profits in order to innovate.
The US will now reportedly seek to address the issue of worldwide drug pricing via “enhanced trade policy.” For a country desperate to conclude a post-Brexit trade deal with the US, alarm bells should be ringing. The UK may find itself in a vulnerable position and we should fear the consequences of a political sell-out. Trade policies that enshrine and protect pharmaceutical company monopolies will benefit shareholders, not ordinary people who can't afford their medicine.
