A lot of my family is concerned about a future insulin shortage and it's reported that this shortage is growing. When I read articles from Harvard about it, they imply it's pure greed:

There are no generic insulins. Over the past twenty years, prices for the most commonly prescribed “analog” insulins have risen from about $20 per vial to well over \$250 per 10 mL vial, an over 700% increase after accounting for inflation. In contrast, insulin today costs roughly five dollars per vial to produce. With deductibles far outpacing wages, insulin has become unaffordable even for well-off Americans.

If it costs us 5 dollars to produce, why don't we all start insulin companies and sell it for $15, attracting all the business (as well as popularity since we have better prices). Is greed really the issue, or is there another economic explanation, like the resources involved in insulin-making are in a shortage? Or the regulation of producers? Or the possible lawsuits producers face if they make a mistake?

It sounds like anyone could compete against these greedy companies and put them out of business. What am I missing?


1 Answer 1


You are missing patents.

I recommend reading the paper "Why Is There No Generic Insulin? Historical Origins of a Modern Problem" by doctors Greene and Riggs.

...high costs of pharmaceutical research and development are often invoked to justify the high price tags of new medications. Although the price point of effective new drugs — from hepatitis cures to new agents for heart failure — may initially be out of reach for many patients, market laws predict that drugs with strong demand should become more accessible after market exclusivity ends and generic competition begins. Since 1984, when the Drug Price Competition and Patent Term Restoration Act was passed, pharmaceutical innovation and access have been balanced on that premise: innovative drugs are rewarded with high prices during their window of patent protection, and generic competition reduces prices thereafter.

[...] incremental innovation has repeatedly precluded the formation of a generic insulin industry in North America when earlier patents expired. The history of insulin hasn’t followed the standard chronology of pharmaceutical innovation, in which patent monopolies predictably give way to generic competition.
Viewed in historical perspective, insulin is not a single entity but a family of related products that has evolved through incremental improvements. Subsequent iterations of insulin represented actual innovations, each one being safer, more effective, or more convenient than its predecessor. And yet after generations of incremental innovation, insulin may be no more affordable than it was when the original patent holders sold their stake for $1 to ensure access to this essential medicine.
Pharmaceutical-industry analysts have described a repatenting tactic called evergreening, in which a series of related patents — often on metabolites or optical isomers — extend the life of a product after initial patent expiration.


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