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Profits, Innovation and Financialization in the Insulin Industry

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  • Rosie Collington

    (University of Copenhagen)

Abstract

The list prices of analogue insulin medicines in the United States have soared during the past decade. In the wake of high-profile cases of prescription medicine “price-gouging”, such as Mylan’s EpiPen and Turing-acquired Daraprim, actors across the insulin supply chain are today facing growing scrutiny from US lawmakers and the wider public. For the most part, however, the role of shareholders in the insulin supply chain has been overlooked. This paper considers the relationship between profits realized from higher insulin list prices, pharmaceutical innovation, and the financial structures of the three dominant insulin manufacturing companies, which set list prices. It shows that despite claims to the contrary, insulin manufacturers extracted vast profits from the sale of insulin products in the period 2009-2018, as insulin list prices rose. Distributions to the company shareholders in the form of cash dividends and share repurchases totaled $122 billion over this period. The paper also considers the role of other actors in the insulin supply chain, such as pharmacy benefits managers (PBMs), in the determination of list prices. The data and analysis presented in the paper indicates that financialization could be considered in tension with not only the development of new drugs that will be available to patients in the future, but also the affordability of products that already exist today.

Suggested Citation

  • Rosie Collington, 2020. "Profits, Innovation and Financialization in the Insulin Industry," Working Papers Series inetwp120, Institute for New Economic Thinking.
  • Handle: RePEc:thk:wpaper:inetwp120
    DOI: 10.36687/inetwp120
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    File URL: https://doi.org/10.36687/inetwp120
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    More about this item

    Keywords

    innovation; financialization; pharmaceutical industry; insulin; corporate governance; share buybacks.;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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