Over on Twitter, my post about the soaring price of insulin provoked an argument over the cost of producing the stuff. Let’s run through that. For comparison, the aspirin you buy at your local drug store is priced at about 5-10x the cost of the raw material, depending on whether you buy name brand or generic. Here’s how things pencil out for insulin:
- The cost of producing the raw active material for a fairly expensive type of analog insulin is $100,000 per kilogram.
- That’s $0.0001 per microgram.
- A typical daily dose is around 100 units, or 3,500 micrograms.
- That comes to a production cost of 35 cents for an average single-day supply.
- Or $10 per month.
- Or $126 per year.
For old-school RHI (regular human insulin) the production cost is about a quarter of that. Call it $30 per year. The total cost of creating the final product and distributing it is higher, of course, but no more than double or triple the cost of manufacturing the dry powder.
And how much do ordinary people pay for insulin? Thousands of dollars per year. This is for drugs that have been on the market for decades and have long since paid back their R&D costs.
Two or three decades ago, insulin was priced at about 5-10x the production cost of the raw material. This is about how aspirin is priced. Today, pharmaceutical companies charge at least 20-30x their production cost for insulin and more likely around 100x. Nevertheless, every year the price keeps going up. Why? Because there’s nobody to stop them.