If anything, the draconian constraints demonstrate just how diligently market competition brings down prices and how hamstrung and hogtied competition must be before it stops performing its essential functions.
When studying markets, economists like to imagine hypothetical “perfect competition,” the economic equivalent of physics’ frictionless plane. In perfect competition, many suppliers and demanders exchange the same product, buyers and sellers can find each other and switch products without added cost, and no barriers prevent new suppliers from entering the market to offer equivalent goods. If a perfect competition market is the hypothetical free-market heaven, the American insulin market is literal hell.
Step 1: Limit the Number of Suppliers
Even though insulin treatment itself can’t be patented, improvements in delivery mechanisms can be. These incremental improvements, no matter how small, can be used to extend the 20-year patent on a drug, a process called “patent evergreening.” Sanofi has filed 74 patent applications on its long-acting insulin Lantus—nearly all of them after the drug was on the market—and boxed out generics for decades. Drug makers seek extensions to their exclusivity when they add pill coatings and alter inactive ingredients, extending their monopoly but offering no marginal advantage to patients.
Regulators and pharma CEOs aren’t opposing forces; they’re the same people—sometimes literally. Nearly half of staff reviewers at the US Food and Drug Administration (FDA) will go on to take jobs in the industries they’re tasked with regulating, often as advisors in navigating regulatory policy.
Step 2: Exclude Competing Products
Even when cheaper analogs have been approved by regulators in Canada or Europe, and outcomes are clinically indistinguishable for most patients, the FDA drags its feet for years. Innovators and biomedical researchers faced with insurmountable costs are likely to drop a new project or sell it to an existing giant with the legal staff to carry the load. That legal team, remember, includes several former FDA staffers more than capable of burying a potential competitor in a decade of official busywork.
Step 3: Hide and Distort Prices so No One Can Shop Around
Patients, and indeed prescribers, have only the foggiest idea of what products are available and their real per-unit cost. Manufacturers like to boast that no one pays “list price”: Patients rely on a patchwork of health insurance, pharmacy discounts, and manufacturer rebates to bring the cost within reach. Such a complicated framework provides a wide scope for manipulation…[ ]