California wants to cut insulin prices by becoming a drugmaker – can it pull it off?

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California is diving into the prescription drug business, trying to do what no other state has done: produce its own brand of generic insulin and sell it at below-market prices to people with diabetes like Sabrina Caudillo.

Caudillo said she felt like a “prisoner” of the three major pharmaceutical companies who control the price of insulin, which ranges from $300 to $400 per vial without insurance. The price Caudillo paid in 2017, when she was diagnosed, is etched in her memory: $274.

“I remember crying at CVS and realizing it was going to be like this for the rest of my life,” said Caudillo, 24, a college student who lives in La Puente, Southern California. She now has insurance that covers the full cost of the drug that saved her life, but she still struggles to get insulin and pay the monthly premium for her plan.

“This disease is really expensive, and I barely win it every month,” Caudillo said.

Governor Gavin Newsom’s administration said about 4 million Californians have been diagnosed with diabetes, a disease that can destroy organs, steal sight and lead to amputations if left unchecked. One in four people who have diabetes and are dependent on insulin cannot afford it, forcing many to ration or forego the drug, the administration added.

Newsom is asking state lawmakers to inject $100 million into an ambitious initiative to launch California’s generic drug label, CalRx, and start producing insulin within the next few years, said Alex Stack, a spokesperson for Newsom. The state is also working to identify other generic drugs it could bring to market, targeting those that are expensive or in short supply.

For starters, the goal is to drastically reduce insulin prices and make it accessible to “millions of Californians” through pharmacies, retail stores and mail order, said Dr. Mark Ghaly, Secretary from the California Health and Human Services Agency.

But state health officials are still negotiating a contract with a drugmaker to manufacture and distribute insulin and haven’t answered key questions like how to produce insulin at lower cost and what patients would pay. To succeed, California – and the company it partners with – must navigate a complex pharmaceutical distribution system that relies not only on drugmakers, but also on intermediary companies that work hand-in-hand with drugmakers. health insurers. These companies, known as pharmacy benefit managersnegotiate with manufacturers on behalf of insurers for discounts and rebates on drugs, but insurers do not always pass these savings on to consumers.

“Insulin has long epitomized the market failures that plague the pharmaceutical industry, which has resulted in insulin prices staying high,” Vishaal Pegany, deputy secretary of Health and Human, told lawmakers. Services Agency, in May. He argued that the high prices “directly hurt Californians.”

Newsom said in early May that disrupting monopoly drug prices requires state intervention, and California can do this because the state — with 40 million people — “has market power.”

But the nonpartisan Legislative Analyst’s Office questioned whether California could produce its own drugs and lower insulin prices. Luke Koushmaro, senior tax and policy analyst at the office, warned during a legislative hearing in May that the effort could be hampered by “considerable uncertainties” – a sentiment echoed by some Democratic lawmakers.

The Newsom administration believes state-made insulin could cut some insurers’ spending on the drug by up to 70% – savings it hopes will be passed on to consumers. But “there is no guarantee” that the administration’s predictions of dramatic cost savings or wide insulin distribution will materialize, said state Assemblywoman Blanca Rubio (D- Baldwin Park) during the hearing. “Who is going to write the prescriptions for this magic insulin? she asked. “Hope is not a strategy. I don’t hear any strategy on how this will become available.

The price of insulin has exploded in recent years. A US Senate investigation in 2021 found that the price of a long-acting insulin pen made by Novo Nordisk jumped 52% from 2014 to 2019, and the price of a fast-acting pen from Sanofi jumped about 70%. The investigation involved drug manufacturers and pharmacy benefit managers in the increases, saying they have perpetuated artificially high insulin prices.

“Insulin makers have lit the fuse against soaring prices by matching price increases to each other rather than competing to reduce them, while PBMs, acting as intermediaries for insurers, have fanned the flames to take a bigger cut of the secret discounts and hidden fees they negotiate,” said U.S. Sen. Ron Wyden (D-Ore.) said when the report was published.

Contacted by KHN for comment, trade associations that represent brand name drug manufacturers, pharmacy benefit managers, and California health insurers blamed each other for the price hike.

Under Newsom’s plan, generic forms of insulin — called “biosimilars” because they’re made with live cells and mimic brand-name drugs on the market — would be widely available to insured and uninsured Californians.

If Newsom’s $100 million initiative is approved by lawmakers this summer, the state would use that money to contract with an established drugmaker to begin supplying CalRx insulin while the state built its own manufacturing plant, also in partnership with a drug manufacturer.

The administration is currently negotiating with pharmaceutical companies capable of producing a reliable supply of insulin under a no-bid contract, but no partnership has been formalized. Insulin would be marked with images associated with the condition, such as the “California Golden Bear.” And, Pegany said, the packaging could boast that the low-cost insulin was brought to patients by the state government.

“There’s a short list of people who would even compete for this,” Ghaly told KHN in May. “We’re going to organize the competition and find a partner that we believe is going to deliver not just as soon as possible, but something that we believe will be sustainable.”

On the short list is Civic Rx, a Utah-based nonprofit drugmaker. Civica independently announced in March that it was prepares to produce biosimilar insulin – exactly what California is looking for. Last year, the FDA approved the first interchangeable biosimilar insulinand Civica plans to make three types of generic insulin to compete with branded versions made by Eli Lilly and Co., Sanofi and Novo Nordisk.

Allan Coukell, Civica’s senior vice president of public policy, told KHN the drugmaker has had discussions with the Newsom administration and is in talks with other states.

Civica aims to market insulin at a price close to its manufacturing cost, rather than charging markups and making a profit, he said. Coukell said the company plans to market biosimilar insulin for about $30 per vial and $55 for a box of five pen cartridges.

Coukell acknowledged that Civica may have to work with pharmacy benefit managers, who also help health insurers determine which drugs they will cover, to distribute the drug, but does not expect that to lead to a large increase in drug benefits. price. “Our goal is to make these insulins available to every American who needs them,” Coukell said. “Our goal is to have market impact, not market share.”

The state has had discussions with other companies, including famed investor Mark Cuban’s for-profit pharmaceutical company, the Mark Cuban Cost Plus Drug Company. He’s building his own manufacturing facility, like Civica, but currently sells drugs online to anyone at wholesale prices plus a 15% markup. Founder Dr. Alex Oshmyansky said the company’s talks with California broke down early on, but he would be open to further talks. Cuban is the company’s lead investor, Oshmyansky said.

“America is the richest country in the history of human civilization, so for our citizens to not be able to afford drugs, including insulin, due to market manipulation is terrible,” said Oshmyansky.

For people with diabetes like Caudillo, relief can’t come fast enough. She stores insulin in case she can no longer afford health insurance and makes additional donations to others in need.

“I know how expensive it is when you’re not covered, and if you don’t pay that money you’re going to be in the hospital fighting for your life,” she said. . “Your body is breaking down and your organs are slowly shutting down. It is very painful. No diabetic should have to go through this.

KHN senior correspondent Samantha Young contributed to this report.

This story was produced by KHN, which publishes California Healthline, an independent editorial service of the California Health Care Foundation.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Along with policy analysis and polling, KHN is one of the three main operating programs of KFF (Kaiser Family Foundation). KFF is an endowed non-profit organization providing information on health issues to the nation.

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