With all of the innovation and money involved in the pharmaceutical industry, it can be difficult to live with or watch loved ones suffer from diabetes, and easy to wonder why a cure hasn’t been found.
Some even believe that Big Pharma already has a cure, but is sitting on it because diabetes is too profitable a disease for them to want to cure.
Some of you may remember Prometheon Pharma from the #NoPricks campaign to raise awareness about our needle-free insulin patches. As a recent entrant to the industry, though still in many ways an outsider as we try to be quite different from and more patient-centric than established companies, I thought I would give my perspective.
So, do I think Big Pharma is sitting on a cure? The short answer is no, and there are 3 reasons why- People, Productivity, and Profit.
First, Big Pharma is run by people. People like a lot of us, people who want to do the right thing, and people who are attracted to the industry because they get to help people. It is very true that since many of these companies are publicly traded, they have a huge responsibility to the shareholders (which is a whole different post I could make!). Still, even with this duty to shareholders, these companies started from the desire to help people and that continues. Diabetes is too common for tons of people in the company to not be personally affected and want to help their loved ones.
The second reason is productivity. Though the machine of these companies is sophisticated, it is also quite complicated. In engaging with these companies, we have found that there are some really great people in a complex and layered organization. Somewhere, at some point, a decision and direction is given, and the people in the organization have to evaluate every opportunity in this framework. Good, bad, or ugly, the company makes priorities and has to stick to them. We have found that departments don’t always communicate well or even know what the others are doing, and this layering and insulation explains a lot of why things don’t move as quickly as with smaller companies. Add in the frequent acquisition of new companies and trying to integrate those employees and priorities, and you can see why things can get pretty complicated and take a while. It would kind of be like accusing the post office of conspiring to waste your time. There are often great people working the counter, with noble intentions- they just work in a system that hasn’t adapted to the most modern way of doing business yet. Still, there are great people in the post office and in pharma that have wonderful hearts and are trying hard to make things better for everyone.
The third and most compelling reason is profit. Though many think pharma is hiding a cure because people with diabetes are too profitable currently, the opposite argument can be made. Before I get into a bit of the business case for it, let me first point out that while the 30 million people with diabetes is a huge source of revenue right now, the 90 million with prediabetes (both figures are US only and growing rapidly) provide plenty of additional market even if they cured all current patients. Add in the fact that many of the big companies are facing the expiration of their patents for diabetes-related products soon and increasing price controls from insurance companies, the government, and pharmacy companies, and trust me- they aren’t just sitting back counting their profits.
Now, the numbers around how much it costs to treat someone with diabetes for a year vary widely, but are always staggering. For the sake of simplicity, let’s say that the direct cost of insulin products to treat diabetes is $5,000 per patient, per year. Then, additional costs from complications, hospital stays, lost productivity, etc., are another $5,000- not far off from ADA-reported figures. Now, big pharma for the most part only sees the first $5,000, not really the $5,000 from complications- that part goes mostly to hospitals.
People with diabetes have told us they feel like profit centers, not patients- so let’s explore the business side of that. There is a concept in business called customer lifetime value, or LTV. Again, to be simple, let’s say that the $5,000 big pharma makes on each patient is pure profit (ignores the cost of making and selling those products), and that the average lifetime of that customer is 50 years. This is a bit pessimistic, but not far off from the shortened life expectancy that diabetes causes- especially assuming people are mostly diagnosed after their first decade or two.
So here we have a “customer” who is expected to generate $5,000 in profit every year for 50 years, or approximately $250,000. Ignoring many other complicating factors, it could be said that you are in essence worth a quarter of a million dollars to an insulin manufacturer.
However, there is an equal amount of money- that other $5,000 from complications and such- that goes mostly to hospitals and other care providers. That represents another quarter of a million dollars.
All told, in this simple model, you are worth $250,000 to pharma companies, and $250,000 to hospitals. The other side of this equation is that someone has to pay for it, and these “payers” are usually insurers or government programs like Medicare and Medicaid. Those payers are paying for the profits that both the pharma companies and hospitals are seeing from you. So while you are making $250k for pharma and $250k for hospitals, you are costing your insurer or the government $500k (ignoring any premiums you pay). I promise they would love to get that number down.
Let’s now imagine this scenario: pharma has a cure that costs basically nothing to manufacture (unlikely). They could potentially go to the payers- insurers and government- and charge $400,000 for this cure. This makes them even more than the $250,000 for the insulin products they currently make, and actually saves the government or insurance company $100,000 compared to the half a million the payers are currently paying for treatment and hospitalizations combined. Now, hospitals wouldn't be happy here, but that’s ok because you will be cured and won’t need the hospital.
Rest assured, with a growing population of people with diabetes and rising costs of healthcare, these companies are looking for a cure- if for no other reason than they could make even more money than they do off of insulin products.
We would love to hear your thoughts and welcome your feedback. Stay strong! We are working hard to make less painful and less expensive products available for you as soon as we can.
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