Matthias Helble, Research Economist, Asian Development Bank Institute, examines ways countries can bring down the cost of insulin in an environment which has seen a dramatic upsurge in diabetes cases worldwide.
Treating Diabetes: How to Keep Insulin Costs Down
Description: Matthias Helble, Research Economist, Asian Development Bank Institute, examines ways countries can bring down the cost of insulin in an environment which has seen a dramatic upsurge in diabetes cases worldwide.
Diabetes has become a major public health problem worldwide in particular in Asia. The World Health Organization estimates that currently 422 million people suffer from diabetes worldwide and about half of them live in Asia. WHO also estimates that this number will increase rapidly in the near future. Diabetes is a chronic disease which is very difficult to cure. Patients are typically treated for decades which is expensive to them but also health systems. Insulin is a major drug to control diabetes and insulin is produced by three major pharmaceutical companies. However more and more developing countries have started to produce an export insulin, such as in the PRC in India and also the Russian Federation.
In a new ADBI working paper we try to better understand the international trade of insulin. Exploiting very detailed trade data we find that trade in insulin has literally exploded since 2000 with annual growth rates exceeding forty percent, both in developed and developing countries. We also find that the price of insulin differs substantially across countries.
So what are the main determinants of this price differential across countries? We find four main reasons. First of all, drug companies charge higher prices in markets with high income. Second, OECD manufacturers also charge a higher price for their insulin. Third, in countries with a large number of competitors and also with a larger market, the price of insulin tends to be lower, and fourth, in countries where people have to pay a large amount of their own pocket to pay for insulin, the price of insulin tends to be higher.
So what are the actions that governments can undertake to keep the price of insulin at bay? We think that there are three low cost actions to take by governments. First of all, they can try to increase the number of competitors in their market which will stimulate competition and therefore lower the price of insulin. Second, they can try to coordinate the purchase of insulin nationally which will increase their purchasing power towards the seller of insulin, and third, they should try to build up solid health financing models which would reduce out-of-pocket payments of patients.
Millions of people worldwide suffer from diabetes and need access to affordable insulin. In our research we show several ways how governments can take low cost action to achieve this objective.