DOWNEY, Calif. — The state of California and a generic drug maker announced a 10-year partnership Saturday to produce affordable state-brand insulin that they hope will compete with long-standing producers and drive down prices for a drug used by millions of Americans.
The product is not expected to be on store shelves until at least next year, and it was hard to predict what effect it would have on a market already shaken by change. Earlier this week, another major insulin maker promised steep price cuts as pressure mounts on drugmakers and insurers to cut the cost of the drug.
Democratic Gov. Gavin Newsom said he expected California’s rise as an insulin maker to cause prices to collapse. Research has shown that drug prices have more than tripled in the last two decades.
“We intend to do this about market disruption,” Newsom said at a ceremony announcing the deal at a pharmaceutical 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 Civica, have yet to locate a manufacturing plant in California. Regulatory approvals will be needed. Newsom said a 10-milliliter vial of state-brand insulin would sell for $30, but competitors may lower their prices and undercut the state-owned product.
“Is this perfect? We don’t know yet,” Newsom acknowledged at one point.
Just a few days ago, President Joe Biden said his administration is “intensely” focused on lowering health care costs, including pushing drug companies to cut insulin costs. Legislation enacted last year limited insulin copays to $35 per month for Medicare beneficiaries. Biden has proposed extending that limit to all Americans.
Novo Nordisk said Tuesday it will cut some of its US insulin prices by as much as 75% starting next year. The announcement comes less than two weeks after rival Eli Lilly said it will cut some of its prices by 70% or more by the end of this year.
Anthony Wright, executive director of Health Access California, a statewide consumer healthcare advocacy group, welcomed Newsom’s announcement, saying efforts by California and others to develop a competitive generic are likely a factor. to get insulin manufacturers to lower their prices.
Still, there are obstacles.
“The work to develop a generic, get FDA approval and set up manufacturing will take real time,” Wright said in an email. “There may even be more time in the effort to get doctors to prescribe the drug, insurers and (pharmacy benefit managers) to put it on their formularies, and patients and the public to accept and demand it.”
There could be other risks. State analysts warned that California’s entry into the market could prompt other manufacturers to reduce the availability of their drugs, a possible unintended consequence.
State lawmakers approved $100 million for the project last year, with $50 million dedicated to developing three types of insulin and the rest set aside to invest in a manufacturing plant.
Even with the challenges of entering an established, competitive market, Newsom said taxpayers would have “very broad protections.”
If for some reason the deal doesn’t work out to the benefit of the state, “there are all sorts 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 a year. Also, the lower costs could result in substantial savings because the state buys the product every year for the millions of people in its publicly funded health plans.
The state is also exploring the possibility of marketing other drugs, including the overdose drug naloxone. The drug, available as a nasal spray and injectable form, is seen as a key tool in the battle against a nationwide overdose crisis.
“We will not stop here,” Newsom said.