Essential Medications and Market Power: Insulin Through an Antitrust Lens

by Katie Bunch, Associate Member, University of Cincinnati Law Review Vol. 94

I. Introduction

Insulin is a widely prescribed pharmaceutical product that plays a key role in the treatment of type 1 diabetes in the United States.¹ Despite its long history and essential role in public health, insulin has experienced significant and sustained price increases over the past several decades, a pattern that warrants closer antitrust scrutiny.² These increases are not a result of normal market forces but the complex relationships between insurers, pharmacy benefit managers, and patent protections.³ The combination of high prices and limited competition makes insulin an obvious example of how pharmaceutical markets can raise significant antitrust concerns.

This Article will discuss the structure of the U.S. insulin market, the factors contributing to elevated drug prices, and the role of antitrust law in addressing these issues. Part II provides background on type 1 diabetes diagnosis, the development of insulin, and the evolution of the insulin market. It also outlines the relationships among manufacturers and intermediaries, as well as the relevant regulatory and legal framework. This Article argues that the unique structure of the insulin market and the pricing practices it enables raise serious concerns under federal antitrust law. Part III explores potential legal responses, including the application of the Sherman Act, the Clayton Act, and the Federal Trade Commission Act (“FTC”). Part IV concludes by summarizing the analysis and discussing the implications for future antitrust enforcement in pharmaceutical markets.

II. Background

A. Antitrust Law

Antitrust law is the body of U.S. law designed to promote competition and prevent anticompetitive conduct in the marketplace.⁴ Its core goals include preventing the improper acquisition or maintenance of monopoly power and protecting the competitive process itself.⁵ Antitrust enforcement in the United States is rooted primarily in three federal statutes: the Sherman Act, the Clayton Act, and the FTC Act.⁶ Together, these laws address practices such as price fixing, market division, monopolization, price discrimination, and other practices.⁷ As discussed in this article, each statute targets a different form of conduct that may distort competitive markets.

The Sherman Act contains two principal provisions that form the foundation of modern antitrust law.⁸ The first provision provides that, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”⁹ Although the language is broad, U.S. Supreme Court decisions narrowed this language to prohibit only “unreasonable” restraints of trade.¹⁰ By contrast, Section 2 of the Sherman Act provides that any person who monopolizes, attempts to monopolize, or conspires to monopolize interstate or foreign trade commits a felony.¹¹ In the healthcare industry, Section 1 claims may examine agreements among manufacturers and insurers, while Section 2 claims target exclusionary strategies by individual manufacturers that prevent competitors from entering the market.¹² Together, these provisions allow antitrust law to target both collaborative and single-firm conduct that can distort competitive markets, including critical healthcare sectors.¹³

While the Sherman Act focuses on restraints and monopolization, the Clayton Act targets specific business practices that may threaten competition before monopolies fully form.¹⁴ Section 3 of the Clayton Act prohibits tying and exclusive dealing arrangements that may substantially lessen competition or tend to create a monopoly, while Section 7 bars mergers and acquisitions with similar anticompetitive effects.¹⁵ In addition to allowing the government to enforce antitrust laws to prevent violations that harm competition and public interest,¹⁶ the Clayton Act also authorizes private parties to bring actions for violations of antitrust laws.¹⁷ These provisions reflect Congress’s intent to prevent competitive harm at an early stage.

Finally, the FTC Act supplements the Sherman and Clayton Acts by granting the FTC the authority to prevent unfair methods of competition and deceptive practices in commerce.¹⁸ Congress granted the FTC the power to ban all “unfair methods of competition” under section 5 of the FTC Act, allowing the FTC to address a wide range of anticompetitive conduct that may fall outside the scope of other statutes.¹⁹ Under Section 5 of the FTC Act, the FTC can investigate and challenge practices that harm competition but do not fit into traditional antitrust violations, such as complex rebate schemes or other contracts.²⁰ By filling gaps in traditional antitrust doctrine, the FTC Act provides an additional mechanism for regulating conduct that threatens competition.²¹ Together, these statutes form the framework through which antitrust law evaluates competitive harm in complex and highly regulated markets.

B. Insulin History

Before the 1920’s, people with type 1 diabetes did not survive for more than a few weeks or months with the disease.²² With this condition, the pancreas makes little or no insulin, a hormone the body uses to allow glucose to enter cells and produce energy.²³ Typically, the pancreas deposits insulin into the bloodstream, and then insulin travels through the body, lowering the amount of sugar in the bloodstream.²⁴ However, a person with type 1 diabetes has no naturally occurring insulin to let glucose into the cells.²⁵ This results in a buildup of glucose in the bloodstream and causes complications without manual injections of synthetic insulin.²⁶ Without synthetic insulin injections, those with type 1 diabetes may suffer from hyperglycemia, lifelong complications, and even death.²⁷ Unmanaged diabetes is the number one cause of blindness, kidney disease, and amputations, as well as a significant contributor to heart disease and stroke.²⁸ Insulin is vital to every individual, but serves as a lifeline for a type 1 diabetic.²⁹

Synthetic insulin was discovered and developed in 1922 by researchers Frederick Banting and Charles Best at the University of Toronto.³⁰ These researchers viewed it as a life-saving medical breakthrough and sold the patent to the University of Toronto for a nominal sum, reflecting the belief that insulin was a public good meant to serve suffering patients.³¹ Following the patent sale, Eli Lilly (“Lilly”) and Company of Indianapolis were brought on to help with large-scale insulin production.³²

Today, the global insulin market is heavily dominated by three main manufacturers: Lilly, Novo Nordisk, and Sanofi.³³ These three manufacturers control approximately 99% of the world’s insulin market.³⁴ Although the original patent was sold for a nominal amount, studies estimate that a vial of insulin can be produced for roughly $3.50-$6 per vial³⁵ but is sold at $275-$350 or more.³⁶ The high cost of insulin persists despite its relatively low production cost, raising concerns about accessibility and market fairness.

A key driver of high insulin prices in the United States is the role of pharmacy benefit managers (“PBM”) and the rebate system that they administer. PBM negotiate with manufacturers to obtain rebates in exchange for favorable placement of drugs on insurance formularies.³⁷ Rebates are partial refunds that are calculated as a percentage of the list price, and this significantly can influence the demand for insulin.³⁸ Manufacturers may raise list prices to offer larger rebates.³⁹ PBM profits from the size of those rebates, and insurers may pass the resulting costs onto patients through higher co-pays and deductibles.⁴⁰ As a result the mechanisms created to control costs instead inflate out of pocket expenses for patients, while PBM obtain financial benefits without improving patient access.⁴¹

Over the past decade, the average price of insulin in the United States has nearly tripled.⁴² The high price has become a barrier to treatment and is financially out of reach for approximately one-third of people with type 1 diabetes.⁴³ In 2018, expenditures for prescription drugs in the United States were $476.2 billion, and the second leading drug by total expenditures was insulin glargine at $9.34 billion.⁴⁴ Six additional diabetes medications were also among the fifteen drugs with the highest total U.S. spending.⁴⁵ Because of this, approximately 25-30% of Americans with type 1 diabetes report rationing or skipping their insulin due to its high cost.⁴⁶ Insulin is not a negotiable item for those living with type 1 diabetes; it is a lifeline, yet its soaring price can make access a matter of life or death.

C. Relevant Case Law

In In re Lantus Direct Purchaser Antitrust Litigation, the plaintiff brought a punitive class action against Sanofi, a manufacturer of insulin products. The class action alleged that Sanofi was engaged in anticompetitive conduct and had an overall scheme to prevent competitors from entering the insulin market.⁴⁷ Plaintiffs sought to hold Sanofi liable for monopolization under Section 2 of the Sherman Act, claiming that Sanofi’s actions had resulted in inflated prices for insulin products and deprivation of the opportunity to purchase lower priced alternatives.⁴⁸ The court held that the plaintiffs had alleged sufficient facts to establish standing to pursue their claims.⁴⁹

In Mississippi v. Eli Lilly & Co., the court addressed claims brought by the State of Mississippi against insulin manufacturers and PBM for allegedly conspiring to inflate the price of insulin and other diabetes medications.⁵⁰ The court found that the State had adequately pled claims under the Mississippi Consumer Protection Act and rejected the defendants’ argument that the State was not entitled to damages.⁵¹ Further, In In the Matter of Caremark Rx, LLC, et al.,the FTC alleged that PBM engaged in unfair methods of competition and unfair practices by favoring high price insulin products with high rebates while excluding lower-priced alternatives.⁵² The complaint alleged that the PBM used manufacturer rebates tied to the wholesale acquisition cost of insulin to influence its formulary placement, thereby resulting in higher profits for PBM and increased costs for consumers.⁵³ No final resolution of the substantive claims in this case has been reached, however, the issues presented in both cases display a developing area of law that may give rise to future disputes.⁵⁴

III. Discussion

The increasing prices of insulin in the United States pose not only a public health problem, but also structural market failures that fall within the scope of antitrust law. Three primary factors drive these problems: exclusionary practices by manufacturers that delay lower-cost insulin products, rebate and exclusivity arrangements by PBM and insurers that limit patient access, and market concentration among the three dominant manufacturers. By applying antitrust doctrines such as Section 2 of the Sherman Act against exclusionary conduct, Section 1 and Section 3 of the Clayton Act against tying and exclusive arrangements, and FTC oversight of unfair competitive practices, courts and regulators can reduce barriers to entry, promote competition, and improve affordability and access to insulin.

A. Addressing Market Concentration Under the Sherman Act

By prohibiting monopolization and exclusionary practices, the Sherman Act offers a framework to address the concentrated control of insulin and protect patient access.⁵⁵ While monopoly power alone is not unlawful, conduct that excludes or prevents meaningful market entry may violate the Act.⁵⁶ The insulin market is highly concentrated with three manufacturers controlling nearly the entire market.⁵⁷ Certain practices, such as exclusionary patent strategies and strategic delays of biosimilar entry, may prevent competitors from offering lower-cost alternatives.⁵⁸

Additionally, Section 1 of the Sherman Act may apply where manufacturers, PBM, and insurers engage in coordinated practices that restrain trade.⁵⁹ For example, rebate agreements conditioned on exclusivity from other competing insulins may prevent lower-cost alternatives from reaching patients. Coordinate pricing across other similar manufacturers can likewise constitute unreasonable restraints of trade when they restrict competition. Section 1 enforcement could target these rebate agreements tied to exclusivity, preventing these contracts from blocking affordable insulin options. Under Section 2, regulators could challenge manufacturers’ exclusionary practices, including intentional delay of biosimilar products, to increase patient access to affordable insulin. By targeting these practices, antitrust enforcement under the Sherman Act can directly address the structural barriers that sustain high insulin prices and limit patient access. Ultimately, a robust application of Sherman Act enforcement can work to ensure that competition, rather than strategic market manipulation, determines the availability and affordability of insulin.

B. Merger Control and Structural Remedies Under the Clayton Act

The Clayton Act, particularly Section 7, provides another important tool in antitrust law by allowing regulators to block mergers and acquisitions that may substantially lessen competition.⁶⁰ In the highly concentrated insulin market, any merger involving the three dominant manufacturers risks further consolidating market power and enabling coordinated pricing strategies. Although no merger among the three dominant insulin manufacturers is currently pending, future acquisitions and further consolidation should be closely reviewed to protect competition, reduce the likelihood of anticompetitive price increases, and ensure patients have access to multiple insulin options.

Section 3 of the Clayton Act further targets exclusive dealing and tying arrangements that foreclose competitors from accessing different distribution channels.⁶¹ Where manufacturers or intermediaries require rebates, contracts, or preferred formulary placement in exchange for exclusivity, they can effectively shut rivals out of much of the market. These practices strengthen the dominant companies’ control, prevent lower-cost insulin from reaching patients, and contribute directly to high prices and limited access. Regulators could enforce Section 3 to prohibit or limit rebate contracts or exclusivity agreements that block lower-cost insulin from reaching patients. When enforced strategically, the Clayton Act gives regulators a way to break down these barriers, promote competition, and protect both consumers and public health in the insulin market.

C. The FTC Act and Oversight of Intermediaries

Finally, the FTC Act complements these statutory tools by granting broad authority to address unfair methods of competition that may not fit neatly under the Sherman or Clayton Acts.⁶² This flexibility is especially important in the insulin market, where intermediaries such as PBM and insurers play a significant role in determining which products are accessible and at what cost. Under Section 5 of the FTC Act, regulators could require increased transparency in these contracts to detect these anticompetitive practices early and prevent them from happening. For example, rebate schemes or exclusivity arrangements may not be per se illegal under Sherman or Clayton law, but can still suppress competition and limit patient access. The FTC could use Section 5 to challenge PBM practices like those alleged in In the Matter of Caremark Rx, LLC, where rebates tied to high-priced insulin influenced its formulary placement and limited lower-cost alternatives. By enforcing transparency and investigating arrangements within the insulin market, the FTC can prevent these high prices and improve patient access to insulin.

IV. Conclusion

The high cost and limited availability of insulin illustrates how anticompetitive practices, such as exclusionary patents, market concentration, and restrictive rebate schemes harm not only consumers’ wallets, but also their health, leading to preventable complications and even death when insulin cannot be acquired. By strategically applying existing antitrust tools, regulators and courts can address these barriers: Sections 1 and 2 of the Sherman Act can challenge monopolistic and collaborative conduct, Sections 3 and 7 of the Clayton Act can prevent further consolidation and limit anticompetitive mergers, and Section 5 of the FTC Act can target unfair practices by intermediaries. Together, these statutes demonstrate that existing antitrust law can work to promote competition, lower prices, and expand patient access. Thoughtful antitrust enforcement could potentially transform the insulin market, ensuring that insulin prices and availability are guided by fair competition, not by the decisions of three dominant manufacturers.

Cover Photo by Etactics Inc on Unsplash

Katie Bunch

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