US Rep. Gaetz’s diagnosis of what’s driving insulin costs misses the root cause

At the end of March, after the House passed a bill that would cap the cost of insulin at $35 per month for insured consumers, Rep. Matt Gaetz (R-Fla.) tweeted about why he voted against the legislation.

"Insulin price increases have more to do with increased consumer demand than the bad behavior of Big Pharma, which I am quick to condemn," Gaetz wrote.

He continued, in a 10-part Twitter thread, to offer weight loss as a potential solution to insulin costs rather than capping prices: "90-95% of people with diabetes have type 2 diabetes, which 'can be prevented or delayed with healthy lifestyle changes, such as losing weight, eating healthy food, and being active.' Arbitrary price controls are no substitute for individual weight control. Since 2000, the number of diabetes cases in the U.S. has nearly doubled. The demand for insulin has increased and the requisite price increase has followed suit. In other words, the price of insulin increases as waistlines increase."

The tweet picked up attention on social media and from news outlets, but we wondered whether there was any connection between demand for insulin and the rising cost of the drug. One economic principle states that, for some products, if demand increases, prices will follow.

Does that hold true for insulin, a drug that millions of Americans need to survive?

We reached out to Gaetz's office to ask for the evidence to back up his claim but received no response.

So we asked the experts to explain what's going on with insulin prices.

Types of diabetes and treatment

Insulin was first discovered in 1921 and patented two years later. The hormone is essential for people with Type 1 diabetes because their pancreas no longer makes natural insulin, needed to regulate blood sugar. An extremely high blood sugar level can be deadly. These patients make up about a tenth of the total number of people with diabetes in the country.

Some patients need to inject insulin often, at least twice a day.

The majority of people with diabetes, however, have Type 2, which has been linked to weight gain. Excess weight may interfere with the body's ability to effectively use insulin, leading to high blood sugar levels.

"As obesity increases, diabetes increases as well," said Dr. Paresh Dandona, a professor at the University at Buffalo's medical school who studies diabetes.

But many of these patients are not prescribed insulin as a treatment. Around 30% of people with Type 2 diabetes use insulin when other drug options are not successful in treating the disease, Dandona said. For some Type 2 patients, exercising and a healthier diet "may help reduce the insulin dose, but it doesn’t eliminate its use."

How insulin drug pricing works

Drug pricing experts said there's no question that insulin's list price (the amount charged to consumers and their health plans) has risen over the past decade. A 2020 study found that the list price of insulin products increased by 262% from 2007 to 2018, while a 2021 study found that from 2014 to 2018 the list price of insulin products increased by 40%.

Is there a reason the price has ballooned?

Not really, said the experts, except that the manufacturers and other stakeholders benefit from higher list prices. For example, pharmacy benefit managers — which manage prescription drug benefits on behalf of health plans — are paid based on the rebate amount they get from insulin manufacturers. If they can negotiate a more favorable spot for a manufacturer's insulin on a drug formulary list (a plan's list of covered drugs), they receive a bigger rebate. Insurance companies also benefit from higher prices, because they collect a higher amount from a patient's portion of cost sharing and can also reap rebates from the pharmacy benefit managers. In addition, consumers have little bargaining power because insulin is typically an essential purchase.

"The insulin manufacturers set prices based on whatever the market will bear, not based on demand for their products," said Dr. Jing Luo, an assistant professor of medicine at the University of Pittsburgh whose research focuses on drug pricing and use.

However, the pharmaceutical industry disagrees with this assessment. PhRMA, the trade industry group representing pharmaceutical companies, told KHN that while it acknowledges drug manufacturers are responsible for raising the list price of insulin, the manufacturers aren't reaping the benefits of the price increase. Instead, manufacturers are forced to raise the list prices to provide bigger discounts and rebates to the insurers and pharmacy benefit managers. But PhRMA argues that manufacturers are not receiving higher profits because of higher list prices.

"Rebates lower what health plans pay for insulins by roughly 84% and these savings should be shared with patients at the pharmacy," said Brian Newell, a spokesperson for PhRMA. "Until we fix this broken system, patients will continue to face high costs for insulin."

Although high demand, according to economic principles, can cause prices to rise because it is difficult to push out enough of a product, production isn't an issue with insulin because it's easy to ramp up supplies and there's not a set amount of insulin that can be made, said Matthew Fiedler, a fellow at the USC-Brookings Schaeffer Initiative for Health Policy. So demand for insulin shouldn’t affect prices.

"Production costs are unlikely to change very much when more people buy insulin since production can be scaled up fairly easily, at least in the long run," Fiedler wrote in an email. "In fact, production costs could conceivably fall when more people buy insulin if manufacturers respond by developing more efficient production techniques."

At the end of the day, the list price for insulin is set by the manufacturers, and they along with every player in the drug pricing system benefit from higher prices, except for the consumers who have to purchase it to survive, said the experts.

"As we are all aware, increased demand does indeed drive up prices," said Luo. "This is especially true for commodities. Unfortunately, brand-name prescription drugs like insulin are priced far differently than simple commodities."

Would Weight loss help reduce insulin costs?

In his Twitter thread, Gaetz said that diabetes cases have almost doubled since 2000. That is true.

According to data from the Centers for Disease Control and Prevention, about 12 million Americans were diagnosed with diabetes in 2000. In 2018, the annual number of new diagnoses had risen to about 27 million.

But a diabetes diagnosis is not always related to a person's weight or overall health, especially for those with Type 1 diabetes, who are dependent on insulin treatment for life.

"In fact, those with Type 1 diabetes are usually very thin," said Dr. Eron Manusov, a professor in the medical school at the University of Texas-Rio Grande Valley.

In addition, most people with diabetes have Type 2, which is linked to weight gain but not always treated with insulin.

Other factors can play a role in the risk of developing Type 2 diabetes, such as genetics, lifestyle, and age, Manusov said.

Alleviating and treating diabetes is not as simple as eating healthier and exercising more, Dandona said. Those factors may "help control diabetes and it may reduce the insulin dose, but it doesn't eliminate its use," he said.

If everyone ate the same healthy diet and exercised the same amount, some people would still become diabetic because a person's genes and the environment they grew up in matter, he added.

"To expect that somehow magically insulin requirements will vanish if patients lose weight is really talking in cuckoo land," Dandona said.

The experts concluded that while both insulin list prices and diabetes cases have risen along the relatively same timeline, they're not related.

"While higher obesity rates have likely increased diabetes prevalence, it is doubtful that this has had much effect on insulin prices," said Fiedler, the health economist. "Also, obviously none of this is to say that reducing obesity or reducing diabetes is a bad thing. It just does not have much to do with insulin prices one way or the other."

How is Congress addressing insulin prices?

The House bill would cap the cost of insulin at $35 per month for individuals who have private insurance or for those on Medicare. However, the bill does nothing to help the uninsured who need insulin.

Democrats unanimously supported the legislation, as did 12 Republicans. But there was significant opposition, with 193 Republicans voting against it, including Gaetz.

The bill now goes to the Senate, where members are considering other strategies to control insulin prices. Details are in the works.

Our ruling

Gaetz said the reason for the rising cost of insulin was because more people were being diagnosed with diabetes, thus increasing demand for the products. And he pegged that rise in diabetes cases to the increase in the number of people who are overweight in the U.S.

Health economists and diabetes experts told us that though Gaetz is right that diabetes cases are on the rise, his overall point is not accurate. His statement is based on a cause-and-effect argument that doesn't exist.

They said the increase in insulin prices is not tied to great demand for insulin or to any production problems that pressure creates.

In addition, although the rising prices come as more cases of obesity are reported, medical experts said they are not necessarily related. Many people who are overweight and develop Type 2 diabetes are not treated with insulin and the experts point out that many other factors help determine whether an individual will develop diabetes.

We rate this statement False.

This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.