Walmart's low-priced insulin shows what a rational drug market should look like

For years, advocates of health care reform have been saying the market for prescription drugs is rigged. Drug companies steadfastly denied that.

Thanks to Walmart, now we know for sure. The retailer has introduced a private-label insulin called ReliOn NovoLog. Walmart's insulin costs about $73 a vial.

Insulin manufactured by the three pharmaceutical companies that otherwise control the market — Eli Lilly, Novo Nordisk and Sanofi — typically sells for more than $300 a vial.

Walmart's version of the lifesaving drug is largely identical to insulins sold by the others. Which raises a few questions. Such as, if Walmart can profitably sell insulin at a fraction of current prices, why hasn't anyone else done so before now?

"Insulin has been the poster child for all that is wrong in the pharma industry," said Geoffrey Joyce, director of health policy at the University of Southern California.

I'm not an innocent bystander here. I was diagnosed in 2007 with Type 1 diabetes and have firsthand experience with the captive market for management of a chronic disease.

Mark V. Pauly, a professor of health care management at the University of Pennsylvania, told me Walmart's bargain-priced insulin "may be a PR or traffic-building exercise." But with a handful of companies now cornering the insulin market, he said, "it may take a chiseler like Walmart to break the gentleman's agreement."

Walmart's version of state-of-the-art insulin is being produced in conjunction with Novo Nordisk. Its NovoLog insulin was introduced in the United States in 2000 at a cost of less than $40 a vial. It now lists for about $350 a vial.

As a person who relied on NovoLog for years, I'm insulted that Novo has abused millions of people with diabetes for so long.

Lilly is even worse. It introduced Humalog in 1996 at a cost of about $20 a vial. Humalog now sells for roughly $334 a vial, according to GoodRX.

According to the Mayo Clinic, insulin in the United States costs about 10 times what it costs in other developed countries. "The No. 1 reason for the high cost of insulin is the presence of a vulnerable population that needs insulin to survive," the Mayo Clinic's Dr. S. Vincent Rajkumar wrote last year.

None of the experts I spoke with believed Walmart's unveiling of reasonably priced insulin will be followed by lower-priced alternatives to other drugs. But what Walmart has shown is that when legitimate competition is introduced into the drug market, downward pressure is placed on prices.

David Lazarus is a Los Angeles Times columnist.