Unraveling the Causes of US Insulin Shortage: A Deep Dive into Business and Economic Factors

What is behind the insulin shortage in the US? | Business and Economy

Understanding the Insulin Shortage in the US

As the United States grapples with an insulin shortage, 22-year-old Skye Murphy, a type 1 diabetic since the age of 14, finds herself in a precarious situation. The delay in her insulin medication, Humalog, produced by pharmaceutical giant Eli Lilly, is a stark reminder of the crisis affecting more than 38.4 million diabetic individuals in the US. This number, larger than the population of Tokyo, one of the world’s most populous cities, paints a grim picture of the crisis.

Eli Lilly and Novo Nordisk: Titans of the Insulin Market

Eli Lilly, an Indianapolis-based company is one of the three pharmaceutical titans that control the global insulin market. The other two are France’s Sanofi and Denmark’s Novo Nordisk. It is noteworthy that Eli Lilly and Novo Nordisk together control 75 percent of the global market, and both are currently experiencing insulin shortages, severely impacting individuals reliant on this life-saving medication.

With the insulin shortage, Murphy finds herself rationing her last vial of insulin, spending almost a day calling pharmacies across the Chicago metro area in search of a refill to no avail. She voices her concerns about switching to generic medications as suggested by her insurance provider, as it took years to find the right combination of medications that work for her.

Price Caps and Reduced Offerings Further Strain the Market

Novo Nordisk, which holds 54.8 percent of the global insulin market, recently exacerbated the shortage by slashing its product offerings. In November, the Danish pharmaceutical giant announced its plan to phase out its long-lasting insulin injection, Levemir, by the end of 2024. This decision, the company warned, would lead to supply-chain shortages.

Meanwhile, the White House’s plan to cap insulin costs for consumers at $35, as showcased by President Joe Biden in his recent State of the Union Address, led to a significant price drop. Prices plummeted by 70 percent for Eli Lilly, 75 percent for Novo Nordisk, and 78 percent for Sanofi. However, a study from Yale University revealed that these pharmaceutical giants have been charging significantly more than the production costs, even before the price cap was implemented.

Lucrative Alternatives and the Shift in Focus

Amid the insulin shortage, Novo Nordisk appears to be shifting its focus towards a more lucrative set of medications known as GLP-1 receptors. These regulate the gut hormone affecting hunger and are used not only for diabetes but also as a weight-loss medication. Other pharmaceutical companies, including Eli Lilly, are also making gains in the GLP-1 receptors market, despite their own insulin shortages.

As Novo Nordisk and Eli Lilly continue to compete on the corporate level, the patients, like Murphy, remain caught in the crosshairs. While Novo Nordisk ramps up production of its GLP-1 receptors, the market strain only increases, especially with the recent Medicare coverage for the weight-loss drug Wegovy, which contains the same active ingredient, semaglutide.

‘Outrageous’ Prices and Supply Shortages

Despite the surging demand for semaglutide injections, Novo Nordisk’s inability to catch up has led to active shortages since March 2022. The company’s decision to halt a contract with a manufacturer that filled Wegovy syringes, following a failed FDA inspection in December 2021, adds to the crisis. This shortage extends beyond insulin and semaglutide, affecting a range of medications from Adderall to Tylenol.

Recent weeks have seen increased scrutiny over the high price tag of Novo Nordisk’s weight-loss drugs. A study from Yale University revealed a significant markup on the cost of these drugs, leading to Vermont’s US Senator Bernie Sanders condemning Novo Nordisk for its “outrageous” pricing.

The Disproportionate Burden on Communities of Colour

While access to these medications is a universal issue, communities of colour bear the heaviest burden. The socioeconomic disadvantage of non-white communities, coupled with higher rates of obesity and diabetes, means the crisis hits them the hardest. Additionally, as of 2022, more than 19 percent of the American Indian/Alaska Natives population is uninsured, the highest rate of any demographic in the US.

Despite these challenges, Novo Nordisk’s financial health remains robust. The company became Europe’s most valuable company last year, surpassing LVMH, and in March, it became the 12th most valuable brand in the world. JP Morgan Healthcare estimates the weight loss drug market could be worth $100 billion by the end of the decade.

While long-term investments by companies like Novo Nordisk could potentially alleviate the situation, they provide little solace for patients like Murphy who need the medication today. As she succinctly puts it, “I shouldn’t be in a position to have to ration my medication, but that’s the reality I’m living in right now.”