Tuesday, April 2, 2019

Eli Lilly: Insulin Prices Rise and Consumer Crisis (2017)

Prior to the early 1920's, diabetes, especially type one diabetes, would have been a death sentence. However,  insulin was discover by a team of scientists from the University of Toronto in 1921.
Dr. Fredrick Banting,
Head of University of Toronto scientific team 
that discovered insulin in 1921
The team patented their discovery, and sold the patent to the university for only a few dollars in hopes that when the patent expired the formula would be available to everyone and there could be no profitable monopoly from manufacturing and selling insulin. The university quickly realized that they were not properly equipped to mass produce the life-saving drug. So in 1923, the University of Toronto and the scientific team joined forces with Eli Lilly. This collaboration worked well since the university was only able to get roughly half a vial of insulin from a pound of pancreas, while Eli Lilly was able to get about 1,600 vials of insulin from one pound of insulin. Since part of what the team scientists wanted when they sold their patent to the university was to ensure that there could be no monopoly, the university also licensed the rights to produce insulin to several other companies world wide.

In 2015, about 30.3 million Americans or 9.4% of the population had some form of diabetes, according to the American Diabetes Association. Out of those 30.3 million Americans or 9.4% of the population, 1.25 million Americans or 0.39% of the population had type one diabetes. Those 1.25 million Americans would be the most affected by a rise in insulin price, since type one diabetics are insulin dependent. According to a 2016 PBS article that discusses how much the price of insulin has increased in recent years, the price of insulin has more than tripled between the years 2002 and 2013, going from $231 to $736 a year per patient. Since there is an extreme rise in the price of insulin, so many people are affected by it, and there has been no explanation of why this is happening, the United States government has launched an investigation. However, some states have tried to remedy this situation themselves. The state of Nevada passed legislation requiring transparency in diabetes drug pricing, however drug manufacturers sued the state to stop the law from being implemented. A federal court has recently stopped a Maryland law that would allow the attorney general to sue generic drug makers if the prices were spiked too much.

We noticed a significant spike in the price of insulin about ten years ago, at the same time there was a shift in power at Eli Lilly.
John Lechleiter, 
Eli Lilly CEO (2008-2017)
In 2008, a man named John Lechleiter became the CEO of Eli Lilly. While Lechleiter was CEO, four patents were due to expire (between 2011 and 2014). These patents were on drugs that accounted for 40% of Eli Lilly’s revenue in 2004. During this time, the company also experienced some late stage product failures. Between the years of 2009 and 2011, 5,000 employees were laid off from Eli Lilly. In a speech given by Lechleiter in 2015 discussing how Eli Lilly was able to make it through the loss of the four patents and the recession, Lechleiter says, “… But most significantly, we didn’t shy away from making the necessary investments in our internal R&D … and we actually increased R&D spending in each year leading up to 2014. During these years, Lilly’s R&D investments … as a percentage of sales… have grown to some of the highest levels in an industry already known for massive research spending. You can see here that Lilly spent about five billion dollars per year on R&D since 2010…” (IndyStar, 2015).
As of 2016, Eli Lilly was planning on rolling out 20 new products between 2014 and 2024.

In the ethical case of Eli Lilly and the rise in the price of insulin, there are three major stakeholders. The first major stakeholder is Eli Lilly, including their former CEO John Lechleiter. This company is a stakeholder because a further rise in price could cost the company customers, which would decrease profits. As for the former CEO John Lechleiter, and current CEO David Ricks, their reputations and moral philosophies are in question. The second major stakeholder is type one diabetics since they need insulin to survive. The third and final major stakeholder is the families of type one diabetics since they would be impacted by the rise in prices if their type one diabetic is under the age of 26, and the worry they feel if the type one diabetic is over the age of 26.

The most general interpretation of individualism is to maximize profits within the law. In the ethical case of Eli Lilly raising the price of insulin, an individualist may have mixed feelings about this ethical case. One point of view is that the company raised the price of insulin to help save it from financial collapse. Eli Lilly began raising prices during a time when they say 40% of their revenue walking out the door in the form of patent expiration, in addition to late stage failures of new drugs and the financial recession of 2008. It can be argued that the company raised the price of insulin to help fund the research and development of new drugs that would greatly benefit the company. Since the raising of the prices of goods is not illegal, Eli Lilly did act ethically in the eyes of an individualist when looked at from this point of view. However, a single company raising their price on a product, would not have caused this issue alone. Since there is competition in the market that is supposed to keep the prices of goods and services at fair level, it has been speculated that Eli Lilly is not the sole cause of the rise in insulin prices. As Eli Lilly only makes up about 22% of the global market for insulin, the company and its competitors would have had to work together to raise prices so high so quickly. Although raising prices is not illegal, working together with your competitors to raise prices is. Therefore, an individualist could also view the actions of Eli Lilly to be unethical since they are illegal. 
Nicole Smith-Holt holds a picture of her son, Alec Raeshawn Smith,
who died in June of 2017 due to insulin rationing.
The main concept of utilitarianism is to maximize happiness for all moral beings. Moral beings include one’s self, other humans, and animals. To analyze a case from the prospective of an utilitarianist, one needs to analyze the current and future happiness of all stakeholders. Eli Lilly would be happy with the decision to increase the price of insulin. This would increase profits for the company, those profits can be used to create new products, get new patents, and make more profits.
Type one diabetics would be unhappy with Eli Lilly raising the prices of insulin. There are about 1.25 million Americans who have type one diabetes, and with the large increases in price, these people may be unable to pay for the insulin they need. This inability to pay, causes people to ration their insulin. Rationing is very dangerous because a person with type one diabetes will die without enough insulin. This would also decrease future happiness because a person won’t be happy if they aren’t alive. The families of type one diabetics will also be unhappy with Eli Lilly raising the prices of insulin. For people who are under the age of 26, their parents/guardians would be paying for the insurance and insulin. This increase also causes parents/guardians to worry about their grown children. Future happiness would be decreased because their child could die if they can’t afford the life-saving drug. From the view of a utilitarianist, Eli Lilly raising the prices of insulin is unethical. There are millions of people who suffer due to the increases in insulin prices, and only a few thousand that gain. Although the profits may be going towards research and development, which could save a lot of lives in the future, you can not trade lives. Type one diabetics are dying because they can not afford to buy the insulin they need, and that is not okay because all lives matter to a utilitarianist.

There are four basic principles of Kantianism, and the first is to act rationally. To act rationally is to be consistent in one’s actions and not to consider oneself exempt from rules. The second basic principle is to allow and help others to make rational decisions. The third is to respect people, their freedom to make their choices, and their individual needs and differences. The fourth and final basic principle of Kantianism is be motivated by Good Will, which is to do the right thing simply because it is the right thing to do. To analyze the case of Eli Lilly raising the price of insulin using Kantian ethics, one need to use the formula of humanity. The formula says that all people should be treated as a means to an end and never as a mere means. In this idea, a means is something that is valuable as a way to get to something else, and end is something that is valuable in itself. In the case of Eli Lilly raising the price of insulin, they are using type one diabetics as a mere means and not an end. Since they are raising the price of insulin to increase the amount of money they have to invest in research and development, they are using type one diabetics as a source of money, not trying to help them live. Eli Lilly is not motivated by Good Will because the company is taking advantage of type one diabetics and their need for insulin. Eli Lilly’s motivation is self-interest because they care about increasing profits, not the lives of type one diabetics. Henceforth, Eli Lilly has acted unethically in the way of Kantian ethics.

Virtue theory is an ethical theory that is based on Aristotelian functionalism, which says that something is good if it fulfills is function well, and it is happy when it fulfills that function. Attributes that allow something to function well are called virtues. There are four major virtues in business, the first is courage. Courage is the willingness to stand up for the right ideas and actions, and taking risks. The second virtue is honesty, this is shown in agreements, and the hiring and treatment of employees, customers, and other companies. The third virtue is temperance or self-control, to have temperance is to have reasonable expectations and desires. The fourth and final virtue that is important for business is justice or fairness. Justice is when a company works hard, produces quality products, has good ideas, and uses fair practices. In this case, Eli Lilly has none of these virtues. The company does not have the courage to release the explicit reason why it has raised the prices of insulin so much. Eli Lilly has not been honest with its customers by not explaining why there has been such a steep price increase. The company has not shown temperance because it does not have reasonable expectations of type one diabetics. It is not reasonable to expect someone to pay three hundred plus dollars a month of a drug they need to stay alive. Lastly, Eli Lilly has not shown justice because it is not fair practice to raise the price of a necessity while lowering the cost of other less essential drugs. Therefore, the actions of Eli Lilly in this case are unethical according to virtue theory.

I believe that the actions of Eli Lilly in the ethical case of the rise in insulin prices, were unethical. Based on the law of supply and demand, I believe that Eli Lilly could not have acted alone to raise the price of insulin, and working together with your competition and other companies to raise prices like this is borderline illegal. I find it maddening that it has taken the company until March of 2019 to address this issue It feels to me like the only reason they have addressed it is because they are being sued, not because they realize that what they are doing is wrong. Especially since there are cases dating back to June of 2017, where type one diabetics have died due to their inability to afford the insulin they needed.

On March 4th, 2019, The New York Times ran an article discussing Eli Lilly's plan to release an authorized generic version of their top selling insulin, at 50% of the price of the name brand. I do commend the company for making this attempt at remedying the rising insulin prices, however it still leaves one wondering how they landed at 50% of the list price of the name brand. Especially since this discounted price is still roughly $140 per vial. 
I believe that if Eli Lilly reiterated their mission statement, as well as their core values of integrity, excellence, and respect for people, they could better understand how they have not followed the standards they set for themselves. I also believe that being the first drug manufacturer to release why they raised the price of insulin would also help with their public image because although I appreciate their attempt at making things better, I still want to know why it happened in the first place and I'm sure others do as well. 
S. Shaw 

“Statistics About Diabetes.” American Diabetes Association, www.diabetes.org/diabetes-basics/statistics/.

Editor. “How Insulin Became So Expensive - A History.” Insulin Nation, Insulin Nation, 29 June 2017, insulinnation.com/treatment/how-insulin-became-so-expensive-a-history/.

Lechleiter, John C. “Eli Lilly CEO: 'We Are Stepping up Our Engagement'.” Indianapolis Star, 11 Sept. 2015, www.indystar.com/story/opinion/2015/09/11/lilly-ceo-stepping-engagement/72059198/.

Sable-Smith, Bram. “Insulin's High Cost Leads To Lethal Rationing.” NPR, NPR, 1 Sept. 2018, www.npr.org/sections/health-shots/2018/09/01/641615877/insulins-high-cost-leads-to-lethal-rationing.

Thomas, Katie. “Eli Lilly Will Sell Half-Price Version of Humalog, Its Popular Insulin.” The New York Times, The New York Times, 4 Mar. 2019, www.nytimes.com/2019/03/04/health/insulin-price-humalog-generic.html.

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