The Mendocino Beacon

State wants to slash insulin prices by becoming a drugmaker. Can it succeed?

- By Angela Hart ahart@kff.org

SACRAMENTO » California is diving into the prescripti­on drug business, attempting to achieve 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 feels like a “prisoner” to the three major pharmaceut­ical companies that 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 into her memory: $274.

“I remember crying my eyes out at CVS and realizing it’s going to be like this for the rest of my life,” said Caudillo, 24, a college student who lives in La Puente, in Southern California. She now has insurance that covers the entire cost of the lifesaving drug but still has trouble affording her insulin supplies and paying the monthly premium for her plan.

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

Gov. Gavin Newsom’s administra­tion said roughly 4 million California­ns have been diagnosed with diabetes, a disease that can destroy organs, steal eyesight, and lead to amputation­s if it’s not controlled. One in 4 people who have diabetes and rely on insulin cannot afford it, forcing many to ration or forgo the drug, the administra­tion added.

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

To start, the goal is to dramatical­ly slash insulin prices and make it available to “millions of California­ns” via pharmacies, retail stores, and mail order, said Dr. Mark Ghaly, secretary of the California Health and Human Services Agency.

But state health officials are still negotiatin­g a contract with a drug manufactur­er to make and distribute insulin and have not answered key questions such as how cheaply insulin could be produced and what patients would pay. To be successful, California — and the company it partners with — must navigate a complicate­d pharmaceut­ical distributi­on system that relies not only on drug manufactur­ers but also middleman companies that work hand in hand with health insurers. Those companies, known as pharmacy benefit managers, negotiate with manufactur­ers on behalf of insurers for rebates and discounts on drugs — but insurers don’t always pass those savings on to consumers.

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

Newsom said in early May that disrupting monopolist­ic drug prices requires state interventi­on and that California can pull it off because the state — with 40 million residents — “has market power.”

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

The Newsom administra­tion thinks state-made insulin could cut some insurers’ spending on the drug as much as 70% — savings it hopes would trickle down to consumers. But “there is no guarantee” that the administra­tion’s prediction­s of dramatic savings or wide distributi­on of insulin will materializ­e, state Assembly member Blanca Rubio (D-Baldwin Park) said at the hearing. “Who is going to write the prescripti­ons for this magic insulin?” she asked. “Hope is not a strategy. I’m not hearing any strategies as to how this is going to become available.”

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

“Insulin manufactur­ers lit the fuse on skyrocketi­ng prices by matching each other’s price increases step for step rather than competing to lower them, while PBMs, acting as middlemen for insurers, fanned the flames to take a bigger cut of the secret rebates and hidden fees they negotiate,”

U.S. Sen. Ron Wyden (DOre.) said when the report was released.

Contacted by KHN for comment, the trade associatio­ns that represent brandname drugmakers, pharmacy benefit managers, and California health insurers blamed one another for the increase in prices..

Under Newsom’s plan, generic forms of insulin — known as “biosimilar­s” because they are made with living 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 constructs its own manufactur­ing facility, also in partnershi­p with a drugmaker.

The administra­tion is currently negotiatin­g with drug companies that can produce a reliable supply of insulin under a nobid contract, but no partnershi­p has been formalized. The insulin would be branded with images associated with the state, such as the “California Golden Bear.” And, Pegany said, the packaging could boast that the lower-priced insulin was brought to patients by state government.

“There’s a short list of people who would even compete for this,” Ghaly told KHN in May. “We’re going to put together competitio­n and get a partner we think is going to deliver not just the soonest, but something that we think is sustainabl­e.”

On the short list is Civica Rx, a nonprofit drugmaker based in Utah. Civica announced independen­tly in March that it was preparing to produce biosimilar insulin — exactly what California is seeking. The FDA last year approved the first biosimilar, interchang­eable insulin product, and Civica plans to make three types of generic insulin to compete with the brand-name versions made by Eli Lilly

 ?? ILLUSTRATI­ON: ERIC HARKLEROAD/KHN; GETTY IMAGES; UNSPLASH ??
ILLUSTRATI­ON: ERIC HARKLEROAD/KHN; GETTY IMAGES; UNSPLASH

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