Anticompetitive Pricing for Diabetes and Obesity Drugs

We have much to learn from a recent crisis of escalating insulin prices. This is the bottom line of a new paper in Diabetes Care. In short, multifaceted public policy action eased that crisis. So it has important implications for issues with anticompetitive pricing of diabetes and obesity medicines broadly.

Anticompetitive Pricing Practices

Authors Kathryn Nagel, Reshma Ramachandran, and Kasia Lipska offer a blunt assessment of pharmaceutical industry practices:

“Given the impact that competition can have, manufacturers engage in a variety of anticompetitive practices to prolong exclusivity on the market and to make it more difficult for generic or biosimilar competitors to enter the market.

“The insulin pricing crisis has exposed multiple shortcomings in the way that drug prices are regulated in the U.S. To guarantee affordable and equitable access to medications for diabetes and obesity, the current system needs to be reformed and further regulated. The story of insulin has demonstrated that greater competition in the market is unlikely to occur simply as a matter of time and progress. Ensuring healthy competition requires a careful alignment of incentives and a closing of loopholes that have allowed anticompetitive practices and unchecked pricing to persist.”

It is hard to miss the widespread distress about the budget impact of advanced obesity medicines. So clearly, anticompetitive pricing for these drugs is an issue that no one can ignore.

Confidence That Change Will Come – But When?

Speaking to Nyah Phengsitthy for Bloomberg Law, ConscienHealth founder Ted Kyle expressed confidence that these prices will, eventually, come down:

“The combination of political pressure and market forces will sooner or later, without a doubt, lead to adjustments in the prices. The timing on that, though, is unpredictable.”

Health economist Anna Kaltenboeck describes this as a lost opportunity:

“The real lost opportunity is that in this particular market, prices are higher than they need to be for manufacturers to profit more than handsomely. This is a really big market, so by volume alone the revenue opportunity is enormous. But it’s also a market with a broken pricing mechanism, in which the supply chain actually really likes high-priced drugs.

“High prices are nice for everyone but the end user.”

A Market Failure

In sum, the emergence of a mass market for advanced obesity medicines has revealed an extreme case of a market failure. Even in the convoluted environment of American healthcare, this should be fixable.

Click here for the new paper in Diabetes Care and here for the reporting from Bloomberg Law.

Monopoly Game Board, photograph by David Stewart / homegets.com, licensed under CC BY 2.0

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April 4, 2024