Soaring Diabetes Drug Costs and Implications for Digital Health Startups

The advancement of the pharmaceutical industry is reflected in reduced adverse drug reactions, improved quality of life for patients, and extended life expectancy; however, if patients cannot afford these medications, all such progress is ultimately futile.

Diabetes is a common disease, with its incidence rate showing a year-on-year upward trend. In recent years, the cost of diabetes has been rising at an inexplicable rate. What exactly is causing this phenomenon, and what is the essence behind it? VCBeat has excerpted an analytical article from foreign media for our readers’ benefit.

In response to the rising costs, pharmaceutical companies may argue that the high expenditure on drugs with proven efficacy, such as Sovaldi, is justified given their substantial development costs. However, the increasing spending on diabetes medications cannot be simply attributed to this factor: patients are using the same drugs, yet the costs continue to rise.

From the infographic produced by the Alliance of Community Health Plans (ACHP), we can observe some notable trends:

• Expenditure on Six Popular Brand-Name Diabetes Drugs Rose 150% Over the Past Five Years, with Price Increases for Two Drugs Exceeding 250%.




• In 2012, the total cost of treating diabetes was $245 billion.




• Over the next three years, the cost of insulin and other diabetes medications is projected to rise by 18.34%, a full 60 times the increase in household income (0.3%).

Infographics highlighting rising drug costs are ubiquitous online, typically focusing on areas such as infections, rare diseases, and cancer. With the proliferation of many price-oriented infographics, increasing attention is being drawn to the rise in pharmaceutical expenditures, as insurers inevitably bear the brunt of these escalating costs.

However, the ACHP infographic also highlights one key point: the growth in these costs is unsustainable. Below are some other statistics emphasized in the ACHP infographic:

An article in the May issue of Bloomberg Businessweek offered an explanation, attributing one of the causes to price matching among competing pharmaceutical companies. Citing the two major diabetes drugs, Lantus and Levemir, as examples, it pointed out that their price increases were coordinated:

According to data from market research firm SSR Health, the prices of Lantus and Levemir have risen alternately as many as 13 times since 2009. Both are dominant products in the long-acting injectable insulin segment, with combined global sales reaching $11 billion.

If the drug itself has not changed at all, why do costs rise? This is what is known as “shadow pricing,” a practice prevalent across the entire pharmaceutical industry and highlighted in the simplified infographic from ACHP. Bloomberg states:

The continuous rise in drug prices has exacerbated the burden on patients with diabetes and left physicians increasingly at a loss. Many of the best-selling medications are primarily composed of insulin, which has been used in the treatment of diabetes for nearly a century, and no low-cost alternative is currently available.

ACHP points out that rising drug costs place immense pressure on the following groups:

Compiled by Chen Xin | Edited by Mo Renying