DOWNEY, Calif. (AP) — The state of California and a generic drug maker on Saturday announced a 10-year partnership to produce affordable state-brand insulin that they hope will compete with longtime manufacturers and drive prices down for a drug used by millions of American people.
The product isn’t expected to hit store shelves until at least next year, and it was hard to predict what effect it would have on a market already shaken by the change. Earlier this week another major insulin maker promised steep price cuts as pressure mounts on drug makers and insurers to cut the cost of the drug.
Democratic Gov. Gavin Newsom said he hoped California’s emergence as a producer of insulin would cause prices to crash. Research has shown that prices of the drug have more than tripled in the past two decades.
“We intend to do this to disrupt the market,” Newsom said at a pact announcement ceremony at a drug warehouse near Los Angeles. He called it “a game changer” for the 8 million Americans who use insulin to treat diabetes.
Many questions remain. The state and its partner, the nonprofit Civic, have yet to locate a California-based manufacturing facility. Regulatory approvals will be required. Newsom said a 10-milliliter vial of the state-brand insulin would retail for $30, but it’s possible competitors could slash their prices and lower the state’s product’s price.
“It’s perfect? We don’t know yet,” Newsom acknowledged at one point.
A few days ago, President Joe Biden said his administration is “intensely” focused on bringing down health care costs, including putting pressure on drug companies to reduce insulin costs. Legislation enacted last year capped insulin payments to $35 a month for Medicare beneficiaries. Biden has proposed extending that limit to all Americans.
Novo Nordisk said on Tuesday it would cut some of its U.S. insulin prices by up to 75% starting next year. The announcement comes less than two weeks after rival Eli Lilly said it would cut some of its prices by 70% or more by the end of the year.
Anthony Wright, executive director of Health Access California, a statewide consumer health advocacy group, welcomed Newsom’s announcement, saying efforts by California and others to develop a generic competitor are likely a factor in persuading insulin makers to cut their prices.
However, there are hurdles.
“The work to develop a generic, get FDA approval, and start production will take real time,” Wright said in an email. “There may also be more time in the effort to get doctors to prescribe the drug, insurers and (pharmaceutical benefit managers) to include it in their formularies, and patients and the public to accept it and ask for it.”
There may be other risks. State analysts have warned that California’s entry into the market could prompt other manufacturers to reduce the availability of their drugs, a potentially unintended consequence.
State lawmakers approved $100 million for the project last year, with $50 million dedicated to the development of three types of insulin and the rest set aside to invest in a manufacturing facility.
Even with the challenges of entering an established, competitive market, Newsom said taxpayers would have “very broad protections.”
If for whatever reason the deal didn’t work to the state’s advantage, “there are all kinds of provisions that would allow us to… withdraw,” he said.
According to state documents, the proposed program could save many patients between $2,000 and $4,000 annually. Additionally, lower costs could result in substantial savings because the state buys the product each year for millions of people on its publicly funded health plans.
The state is also exploring the possibility of bringing other drugs to market, including the overdose drug Naloxone. The drug, available as a nasal spray and in injectable form, is seen as a key tool in the battle against a nationwide overdose crisis.
“We don’t stop there,” Newsom said.