GENG8000: Engineering Technical Communications

GENG 8000 56 R 2021W

Winter-2021

INDIVIDUAL ANALYSIS REPORT ON MAKING INSULIN

AFFORDABLE FOR ALL THROUGH BUSINESS LENS

Team 2
Name Student ID
Ramkumar Haridoss 110026943

Instructor:
Dr. Victoria Abboud
INTRODUCTION

Insulin is a hormone produced in the pancreas. This hormone helps the body to function
normally by controlling the blood glucose level. If this hormone is not generated by the
pancreas consistently, this medical condition is called diabetes [1]. For most of the patients
with diabetes, the treatment is to inject insulin. In 2017, 10 million people in the United
States were prescribed to take insulin [2]. Today Insulin became the 65th most commonly
prescribed drug [3] and third leading cause of death [4]. Currently, it is on the essential
medicines list published by World Health Organization [5]. Our project goal is to analyze the
causes behind the exponential raise of insulin price in U.S and propose a solution, which will
make the insulin ninety percent less than the current market price and also helps us work
towards the United Nation’s SDG 3 (Ensure good health and well-being) and SDG 13
(Climate Action) [6].

ANALYSIS OF INSULIN PRICE THROUGH BUSINESS LENS

According to Business Insider and BMJ Global Health, “the estimated cost of production for
a vial of human insulin is between USD 2.28 and USD 3.42, while the production cost for a
vial of most analog insulins is between USD 3.69 and USD 6.16” [7] [8]. And according to
singlecare.com, on average, a diabetic person will be consuming three vials/month [9].

With the above data and adding the additional administrative fee, sales, research for
improving medicine, transportation, storage, commissions, and any miscellaneous expenses,
the drug can easily reach the patient for the retail price of USD 580/year. Table 1 below
shows the actual average cost of insulin/per month. From this, the cheapest drug costs USD
483/month, which is ten times expensive than our lavishly estimated price.

Drug Name Average Price/Package Average Price/Month*

Novolog (insulin aspart) $333.99/vial $1,001.97
Novolog Flex Pen $123.99/pen $1,239.90
Humalog (lispro) $316.22/vial $948.66
Lantus (insulin glargine) $314.99/vial $944.97
Lantus Solostar (pen) $101.73/pen $1,017.30
Humulin N (insulin isophane) $122.67/pen $1,226.70
Novolin N (insulin isophane) $166.99/vial $500.97
Levemir (detemir) $446.99/vial $1340.97
Levemir Flextouch (pen) $112.98/pen $1129.80
Novolin R (insulin regular) $161.00/vial $483.00
Toujeo Solostar (insulin glargine) $115.18/pen $1151.80
Tresiba (insulin degludec) $351.38/vial $1054.14
Tresiba Flextouch (pen) $123.18/pen $1231.80
* Based on three vials or 10 pens

Table 1. Average monthly cost of Insulin. [9]

The National Diabetes Statistics Report, a periodic publication of the Centers for Disease
Control and Prevention (CDC), states that 34.2 million people have diabetes, which is 10.5%
of the US population [10]. This number has been growing at a faster pace than ever.

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BUSINESS REASONS BEHIND INSULIN PRICE INCREASE

The two major causes for this price increase are highly profiting Pharmacy Benefit Managers
(PBM) and limited number of manufacturers i.e. only three manufacturers control the entire
supply, which means no competitors in the market.

The figure 1, shows that PBMs are receiving rebates/discounts from drug manufacturers to
list their drug in the health plan covered medication list. Also inflated income from
Healthcare plans. The 100% profit being distributed as 20% to manufacturers, 35% to
pharmacies and wholesalers and the remaining 45% to PBMs, who are actually bringing no
physical value to the product [11].

Fig.1 Existing Business Model [11]

THE SOLUTION

Though there has been unprecedented numbers of deaths and incidents being happening due
to unaffordable insulin, there has been no impact on the highly incentivized PBMs. As there
is no alternative to insulin and modified insulin effectiveness is not up to the mark. Our
solution through business lens is to allow generic medicine manufacturers enter the market to
compete the existing players and restructure the existing business model in parallel to
monitor and control all parties involved in the supply chain.

Our Proposed business model shown in Figure 2, has two key changes from the existing
model. The introduction of governmental/non-profit authority called as “Drug Price
Regulation Authority” and the cost-effective eco-friendly supply chain for Insulin from
manufacturer to Consumer.

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 Food and Drug Drug Price Regulation
Administration (FDA) Authority

Manufacturers

Pharmacy Benefit Drug

Managers Wholesale Managers

Health Care Plans Pharmacies

Legends

Price or Product Proposal & approval

Consumer
Eco-friendly Insulin supply at regulated cost

Regulated rebates & Heath Care payments

Fig. 2 Proposed Business Model

EVALUATING PROPOSED MODEL THROUGH BUSINESS LENS

By introducing a non-profit/government authority for price regulation, we can improve the

transparency to the consumer, this in return will help manufacturers claim any reasonable
costs for production of the drugs. At the same time, this avoids unjust prices on consumer
drugs. The operational cost of this regulatory authority will be much cheaper than the unjust
price spent on PBMs by healthcare plans.
The primary role of this regulatory authority is to:

1. Receive proposals from manufacturers with maximum retail price, rebate percentages
to PBMs, wholesale price, and the cost incurred to manufacture the drug.
2. Review the planned costs and prices proposed with historical/global data and
thorough analysis by inspections.
3. Approve to proceed or comment on the proposal to revise the price.
4. Prepare periodical reports for the public and press.

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As the projections of the diabetic population are growing exponentially, to meet the demand
more manufacturers are required in the market. This is not only for production improvement
but also to create a competitive marketplace for the suppliers to provide their best product at
the cheapest price possible.

Our eco-friendly transportation system reduces the packaging cost of the manufacturer. In
place of that, the drug will be transported to the distribution centers in bulk safe containers. In
the already stringently regulated drug distribution centers, the consumers can refill their
insulin prescriptions in minimal plastic/bio-degradable glass containers. With this reduced
plastic usage, the cost of those plastics on consumers as well as the toll on the environment
shall be saved.

CONCLUSION

Millions of people are being identified with diabetes every year and almost all of them are
prescribed to take insulin. With the existing scenario, this life saving drug will become a
luxury and create an unprecedented impact. In business perspective, the price increase in this
pace, could probably crash the insulin market. This not only will bring down the
manufacturers but also damage the society with the developing insulin black market. Though
there are challenges in implementing this project, the outcome would save millions of lives
and pave way for sustainable development in the pharmaceutical businesses.

REFERENCES

[1] The madehow.com website. “Insulin Background.” [Online]. Available:

http://www.madehow.com/Volume-7/Insulin.html
[Accessed: 29-Mar-21]

[2] The ClinCalc.com website. “Drug Usage Statistics, United States, 2008 - 2018.” [Online].
Available: https://clincalc.com/DrugStats/Drugs/InsulinHuman
[Accessed: 29-Mar-21]

[3] The ClinCalc.com website. “The Top 300 of 2021” [Online]. Available:
https://clincalc.com/DrugStats/Top300Drugs.aspx
[Accessed: 29-Mar-21]

[4] The advisory.com website. “Diabetes is the 3rd—not 7th—Leading Cause of Death, Study
Suggests.” [Online]. Available: https://www.advisory.com/daily-
briefing/2017/01/30/diabetes-2
[Accessed: 29-Mar-21]

[5] The World Health Organization website. “World Health Organization Model List of
Essential Medicines: 21st List 2019.” [Online]. Available:
https://apps.who.int/iris/handle/10665/325771
[Accessed: 29-Mar-21]

[6] The United Nations website. “The 17 Goals.” [Online]. Available: https://sdgs.un.org/goals
[Accessed: 29-Mar-21]

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[7] E. Silverman, “Insulin prices could be much lower and drug makers would still make
healthy profits.” 2018. [Online]. Available: https://www.businessinsider.com/insulin-
prices-could-be-much-lower-and-drug-makers-would-still-make-healthy-profits-2018-9
[Accessed: 29-Mar-21]

[8] D. Gotham, M. J. Barber, A. Hill, “Production Costs and Potential Prices for Biosimilars
of Human Insulin and Insulin Analogues.” [Online]. Available:
https://gh.bmj.com/content/3/5/e000850
[Accessed: 29-Mar-21]

[9] K.C. Torres, The Singlecare.com website, “Insulin Prices: How much does Insulin Cost?”
[Online]. Available: https://www.singlecare.com/blog/insulin-prices/#:~:text=A
%202018%20study%20estimated%20that,%243.69%2D%246.16%20to%20produce.
[Accessed: 29-Mar-21]

[10] The center for disease control and prevention website. “National Diabetes Statistics
Report, 2020.” [Online]. Available: https://www.cdc.gov/diabetes/data/statistics-
report/index.html
[Accessed: 29-Mar-21]

[11] M. Hoskins, The health line website. “Following the Money Trail on Insulin Prices,”
2018. [Online]. Available: https://www.healthline.com/diabetesmine/following-insulin-
price-money-trail
[Accessed: 29-Mar-21]

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