If you’re looking for a poster child of the dysfunction in pharmaceutical markets, insulin would be a good candidate. Invented more than 100 years ago, the drug has been improved very little since then, yet remains unaffordable to many around the world. In the United States, prices have skyrocketed over the past decade, and insulin now costs much more here than what it costs in other wealthy countries. As a result, one in four patients surveyed in my hometown, New Haven, reported skipping or rationing doses. In fact, studies show that more than a million people in the US ration insulin each year, risking kidney failure, blindness, and death. Many of these people, in fact, are blamed by providers for not “complying” with treatments that they cannot afford.
With more than seven million people in the United States dependent on insulin, this is a disaster — and ought to be a prime candidate for a new politics of “abundance.” That, of course, is the title of the recent bestseller by Ezra Klein and Derek Thompson. The book urges progressives to think bigger about what government can do, with a focus on building and delivering the housing, transportation, energy, and healthcare infrastructures we need to thrive. A large part of the book’s appeal is that it suggests there is a fairly simple recipe for getting there: a progressive focus on the “supply side,” and a reduction in administrative burdens through things like zoning and permitting reform. The magic is supposed to be in a new kind of state action — bold, mission-driven, and liberated to aim high.
It’s exactly this kind of spirit that has led state lawmakers in the last few years to talk about solving problems like insulin access with public production. California is the furthest along: it has created a new program called “CalRx” to produce publicly branded medicines, to address failures like those in the insulin market. One published estimate suggests that the program will yield 90% price reductions from the market list price, and could save patients thousands of dollars a year.
In a new paper, Sahil Agrawal, Trudel Pare, Melissa Barber and I examine what it will take to make these initiatives a success. What we find is important, we think, for the conversation about public options and industrial policy. It is also important for identifying some of the blind spots in the current “abundance” agenda. Today, any attempt to produce abundance (in healthcare or elsewhere) will run up against powerful entrenched interests. Unless we see this as a key part of the problem, and develop the political will to address it, there’s little chance that proposals to increase production will succeed.
First things first: can states actually make high quality medicines? The neoliberal narrative would say no — but experience says yes. As we describe, during the Civil War, the Union Army made more than 100 medicines for use by the Army. During World War II, the US government figured out how to mass produce penicillin at scale and then built factories to make it — an example that Abundance in fact celebrates. Smaller scale efforts have succeeded more recently at the state level: labs in Michigan and Massachusetts have produced vaccines and biologics for decades. Add to that successful examples from countries like Brazil and India, and it’s clear this isn’t rocket science. (And if it were, remember NASA?).
CalRx insulin is not yet on the market, but it is reportedly in production in Virginia. It is behind schedule, and we should not expect miracles overnight from a program run by a handful of state officials, who are new to the enterprise. Experience and institutional knowledge take some time to build and require political commitment. But the barrier to insulin abundance, we think, is not technical or scientific. Nor is it red tape.
Fundamentally, there are two challenges. One the abundance story recognizes: it’s hard to get big investments in public production, given the history of neoliberalism and the short time horizons of our fractious politics. But a second one it ignores: there are significant private interests that will stand in the way of such efforts at every step. This means that we need to generate sufficient political will not only for investment, but also to challenge and overcome these obstacles.
In the US there is no “market” in medicines. Instead, there is a supply chain with a variety of chokepoints where private power predominates. The most obvious chokepoint is the system of patent rights that ringfence most lucrative new drugs. In fact, one of the reasons that CalRx focuses on insulin, rather than on still more expensive drugs like GLP-1 agonists (e.g. Ozempic), is that insulin is off-patent. Unless we are willing to confront private power in pharma, we’re leaving enormous possible gains on the table. Still, there are genuine gains to be made with old medicines like insulin. But as we show, even here there can be patent problems. While the drug is off patent, insulin companies have used a host of minor patents — for example, on drug-device combinations — to try to prevent competition. These kind of secondary patents are common, and can block access long after the primary drug is off patent. Public options must either choose different products, design around these patents (adding cost, time, and litigation risk), or directly challenge them using tools like government patent use. It’s fanciful, in other words, to think that we just need to cut red tape to build public projects. In many cases, it will also require navigating or challenging private property rights — whether for pharma, for high-speed rail, or for new electrical lines.
More surprisingly, as we discovered, a state like California can produce a high-quality, affordable insulin — something millions of its own citizens need — yet struggle to actually get it to people. That’s because, again, there’s no “market” in medicines. Meet the next chokepoint: “pharmaceutical benefit managers,” the intermediaries between insurance companies and drug suppliers. While these companies are invisible to patients, they negotiate prices and write the web of contracts that allow drugs to change hands at the pharmacy counter. As a recent House committee report describes, they often favor higher priced medicines on the formulary lists they design (which determine what insurance companies will cover), because it increases their profits.
The big players also often negotiate contracts that last for years, making it hard for rivals to enter and compete with existing suppliers. This is exacerbated in some instances by federal rules that mandate that insurance plans provide comprehensive coverage — which may lock out a small program that offers just a few kinds of insulin products, for example. Reaching people without PBMs, on the other hand, poses significant challenges: consumers would have to know about the option, and perhaps also pay out of pocket.
Reaching patients at scale for something like insulin — where there are private companies who enjoy their market power and want to keep it — will require either challenging PBM practices (for example, under antitrust law) or making contracts or laws that mandate coverage of public products. A final option would be to go directly to patients, which would require expanding public delivery systems. This is what the federal government effectively did in response to the COVID-19 pandemic — building the logistics and contractual deals that allowed products to actually reach people.
Here’s one lesson to draw from the challenges canvassed above: We tend to imagine markets as simply existing, appearing whenever needed to seamlessly connect willing buyers and sellers. But markets are instead made and remade constantly. They are, fundamentally, relationships, which we sometimes pare down to things we call contracts, among people. The enormous profits in pharma mean that these markets are constructed through a great many chokepoints. These serve to extract profits, rather than to deliver patients drugs in the most affordable and effective way possible.
As public production of medicines gets going, states are going to have to find ways to address these challenges. We think they can. Given the high start-up costs and returns to expertise, success requires a real level of commitment and scale. Eventually, this may mean that these initiatives should be brought to the national level, where investments can be larger, and expertise consolidated over time — and because each state may see only a small set of the gains available from bringing new affordable medicines into production.
But it’s critical that we recognize the challenge that private power represents here. What’s needed is not just the political will but the political fight to insist that ordinary people matter, and that government both sees the problem of entrenched corporate power and is willing to tackle it. Any talk of abundance that doesn’t put this front and center can’t help us much today.
