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In an attempt to tackle the root causes of inflated insulin prices, the state of California filed a lawsuit last week accusing drug manufacturers and pharmacy benefit managers of artificially and illegally jacking up the price of insulin.

The sausage-making of how insulin is priced is not for the faint of heart. It’s a complex tangle of drug manufacturers who’ve been resisting generics, health insurance companies trying to keep up impressive profits, plus the wholesalers who distribute medicines to pharmacies and the pharmacies that provide them to patients. Slithered into this midst are the pharmacy benefit managers, companies that negotiate the prices for medications on behalf of insurance companies and administer the prescription drug aspect of individuals’ health insurance.


The cost of insulin begins with the list price, which is set by the companies that make it. Three manufacturers dominate the global insulin market: U.S.-based Eli Lilly, Denmark-based Novo Nordisk, and France-based Sanofi. Insulin falls into the category of biologics — medicines produced from living organisms like yeast and bacteria, or derived from living cells and tissues. These are more complex and expensive to produce than so-called small-molecule medicines like aspirin and furosemide that are synthesized via standard chemistry protocols.

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