The Economic Burdens of Life: Trade Secrecy and the Insulin Pricing Crisis in the United States

• Jurisdiction: United States,Federal
• Citation: Vol. 27 No. 2
• Publication year: 2020

The Economic Burdens of Life: Trade Secrecy and the Insulin Pricing Crisis in the United States

Emily Hanson
University of Georgia School of Law

The Economic Burdens of Life: Trade Secrecy and the Insulin Pricing Crisis in the United States

Cover Page Footnote

J.D. Candidate, 2021, University of Georgia School of Law. I wish to thank Dean Elizabeth Weeks for her invaluable advice and comments throughout the process. Thank you also to Konstantin Toropin for proofreading, as well as endless support and encouragement.

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THE ECONOMIC BURDENS OF LIFE: TRADE SECRECY AND THE INSULIN PRICING CRISIS IN THE UNITED STATES

Emily Hanson^*

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TABLE OF CONTENTS

I. Introduction............................................................................................253

II. Background..............................................................................................254

A. DIABETES......................................................................................................................254
B. INSULIN.........................................................................................................................256

1. How Insulin Works in the Body.................................................256
2. Development of the Manufacturing Process for Pharmaceutical Insulin..................................................................257

III. Intellectual Property Protection for Pharmaceuticals ... 259

A. PATENT..........................................................................................................................260
B. REGULATORY EXCLUSIVITY...............................................................................261
C. TRADE SECRET..........................................................................................................261

IV. Regulatory Framework for Insulin and Beyond....................262

A. BIOLOGICS UNDER THE FEDERAL FOOD, DRUG, AND COSMETIC ACT (1938) AND THE PUBLIC HEALTH SERVICE ACT (1944)...................................................................................................263
B. CREATION OF THE FOLLOW-ON PHARMACEUTICAL MARKET........264

1. The Hatch-Waxman Act (1984)..................................................266
2. The Biosrmilars Act (2009)...........................................................268

C. THE PROBLEM WITH ABBREVIATED APPROVAL AND TRADE SECRECY........................................................................................................................270

V. Finding a Solution to the Insulin Pricing Problem...............271

VI. Conclusion................................................................................................275

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I. Introduction

In 1923, the Nobel Prize in Physiology or Medicine was awarded to Frederick Banting and James Macleod "for the discovery of insulin."¹ In his Nobel lecture in 1925, Banting delivered a technical description of the discovery and its applications, concluding with the observation that insulin would not cure diabetes, but would provide diabetics with the ability to cope with "the economic burdens of life."² Having sold his patent on the discovery to the University of Toronto for only a dollar in the interest of public health,³ Banting could not have fathomed how ironic his concluding remark would become.

The economic burdens of life with diabetes have ballooned, with patients in the United States experiencing a 700% increase in the price of insulin in the past two decades.⁴ For those who rely on insulin, the individual health consequences of skyrocketing prices can be disastrous. Insufficient insulin can lead to critical health problems, including renal failure, amputation, heart disease, blindness, and even death.⁵

Currently, ninety percent of the world's supply of insulin, and one hundred percent of the U.S.'s supply, come from just three drug manufacturers: Eli Lilly, Novo Nordisk, and Sanofi.⁶ Although these manufacturers have attempted to reduce their prices in response to recent public and congressional outrage,⁷ more could still be done. Policy changes to the intellectual property protections surrounding biologic drugs would help to ensure continued access to insulin for the millions of Americans who rely on the drug.

The intellectual property protections available to manufacturers of pharmaceuticals in the United States include patent, regulatory exclusivity, and trade

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secrecy.⁸ Makers of insulin rely heavily on trade secrecy, a protection that can theoretically last forever, to prevent their manufacturing processes from falling into competitors' hands.⁹ The complexity and difficulty of manufacturing insulin and similar drugs¹⁰ means that trade secret protections around manufacturing processes effectively stymie new entrants to the insulin market.¹¹ The relative lack of competition keeps prices high to the detriment of those who rely on insulin to survive.¹² A reduction in trade secret protections for the processes these three companies use to manufacture insulin would facilitate the entry of new competitors into the insulin market, thus reducing prices.

This Note serves to: (1) provide background on insulin and its uses for treating diabetes; (2) describe the current intellectual property environment around pharmaceuticals; (3) lay foundation for the current regulatory framework governing insulin specifically; (4) describe how the Hatch-Waxman Act of 1984 and the Biosimilars Act of 2010 create the opportunity for less expensive follow-on forms of insulin; and (5) argue that relaxing the trade secret protections around the insulin manufacturing process is likely to be successful in increasing competition and lowering prices in the insulin market.

II. Background

The following sections provide background information on insulin and its clinical application for managing diabetes. To facilitate the reader's understanding of the particular policy challenges insulin pricing poses, this section goes into detail about how the prevalence of diabetes raises the level of urgency surrounding this issue. This section also discusses how insulin differs from chemical medications and the problems that arise as a result of the differences between the two.

A. DIABETES

The primary application of commercial insulin is to manage diabetes mellitus, a chronic condition commonly referred to simply as diabetes.¹³ Diabetes is caused by the body's inability to properly regulate the level of glucose, a type of

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sugar, in the blood.¹⁴ Cells throughout the body require glucose for energy, and the pancreas produces insulin to prevent glucose levels from rising too high.¹⁵

There are two types of diabetes.¹⁶ Though the exact cause is unknown, type one diabetes results when the body's immune system destroys the cells in the pancreas that produce insulin.¹⁷ Type two diabetes, which is far more common in the U.S.,¹⁸ is thought to be influenced by lifestyle factors such as diet and exercise.¹⁹ Cells in the body of a patient with type two diabetes become resistant to insulin such that the body cannot produce enough to regulate blood glucose levels effectively.²⁰

Diabetes, particularly type two, is extremely common in the U.S.²¹ According to estimates by the Centers for Disease Control and Prevention (CDC), over thirty million Americans, or slightly less than one in every ten, suffer from dia-betes.²² Worse still, the CDC estimates that nearly seven million of those thirty million people have not been formally diagnosed.²³ The issue with diabetes, however, is not just in the number of people affected with the disease. Diabetes also affects some regions and ethnicities more than others. The highest concentrations of people with diabetes are in the southeastern U.S.,²⁴ and the condition disproportionately affects African-Americans, Hispanic Americans, and Native Americans.²⁵

Diabetes takes an enormous toll on public health in the United States, both in terms of loss of life and productivity, and in terms of the financial burden it places on both those with the disease and the healthcare industry more gener-ally.²⁶ In 2013, the CDC estimates that diabetes caused roughly 75,000 deaths among people aged fifteen and older, and that diabetes-linked conditions such as renal failure and heart disease caused an additional 293,000 deaths in the same

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age group.²⁷ The CDC further estimates that in 2013, diabetes and diabetes-linked conditions cost the United States over $300 billion in healthcare costs.²⁸

Without an adequate supply of insulin, a diabetic patient can quickly experience severe medical issues, including renal failure, amputation, heart disease, blindness, and even death.²⁹ The urgency surrounding the issue of access to insulin reflects the often devastating health effects individuals with diabetes suffer when they do not get the required dose. A Yale Diabetes Center survey conducted in 2017 found that one quarter of respondents reported undercompliance with their prescribed dose of insulin because of the cost.³⁰ Of those patients reporting cost-related underuse, one third reported that they had not discussed the cost issue with their doctor,³¹ which suggests that the problem of underuse of insulin by diabetics is perhaps even worse than we realize. The fundraising website Go Fund Me lists hundreds of fundraisers for individual diabetics in need of help paying for insulin, with fundraising goals ranging from a few hundred dollars to several thousand.³²

The following section discusses insulin in greater depth and explains how its discovery and evolution over the past century have contributed to the current pricing crisis.

B. INSULIN

1. How Insulin Works in the Body

As mentioned previously, insulin is a hormone that occurs naturally in the body.³³ As such, pharmaceutical insulin is what is known as a biologic drug, or simply a biologic. Biologics are substances derived from a living organism and are distinct from chemical...