Insulin's Inventors Sold the Patent for a Dollar, and Then Prices Soared

In January 1923, three men in Toronto signed away a patent for one Canadian dollar apiece. Frederick Banting, a surgeon who had come up with the experimental idea; Charles Best, the student who had worked beside him through the summer of 1921; and James Collip, the biochemist who had figured out how to purify their extract well enough to inject into a human being, assigned their rights to insulin to the University of Toronto. Banting had at first been uneasy about putting his name on a patent at all; medical ethics of the era frowned on doctors profiting from discoveries. The token sale was a way to protect the medicine from being patented by someone else while keeping it, in spirit, a gift. A year earlier, a fourteen-year-old boy named Leonard Thompson, wasting away from type 1 diabetes at Toronto General Hospital, had become the first person to receive the treatment. Children who had been expected to die within months began to live. Nearly a century later, in a different country, young adults with the same disease were dying because they could not afford the same hormone.

In short: The discoverers of insulin gave the patent away for a symbolic dollar so the medicine would reach everyone who needed it. Over the next hundred years, a small number of manufacturers came to dominate the market, prices for newer insulins climbed steeply in the United States, and people rationed doses. The 2022 law capped Medicare copays at $35 a month, and manufacturers later cut list prices, but the story shows how a cheap medicine became an expensive one without changing much at all.

The summer that changed a death sentence

Before insulin, a diagnosis of type 1 diabetes was, for most children, fatal. The pancreas stops making the hormone that lets cells take in sugar, and without it the body starves amid plenty. Doctors could slow the decline with near-starvation diets, which bought months or a year or two at the cost of turning children into skeletons.

Researchers had suspected for decades that the pancreas held the key. In 1921, Banting persuaded John Macleod, a professor of physiology at the University of Toronto, to give him lab space and a student assistant for the summer. The student was Best. Working with dogs whose pancreases had been removed, they produced extracts that lowered blood sugar. Collip, brought in to refine the material, produced an extract pure enough for human use. The first injection given to Leonard Thompson, in January 1922, caused a reaction; a purer extract given days later worked.

The team's relationships were famously sour. Banting resented Macleod and distrusted Collip. When the Nobel Prize in Physiology or Medicine was awarded in 1923 to Banting and Macleod, Banting announced he would share his half of the money with Best, and Macleod split his with Collip. The quarrels lasted for years. The patent decision was one of the few things the team managed to settle together.

Why a free patent did not mean free insulin

The University of Toronto did not try to make insulin itself at scale. It licensed production, and an American company, Eli Lilly and Company of Indianapolis, became the key partner, working out how to manufacture insulin from animal pancreases in quantity. Other licensees followed in Europe, including the Danish firms that would later merge into Novo Nordisk. The university used its patent to set quality standards and to share improvements among manufacturers rather than to charge high royalties.

That arrangement worked for a long time. Insulin made from pigs and cattle was affordable for most patients through much of the twentieth century. The important point for what came later is this: the patent was given away, but the know-how, the factories and the regulatory approvals that make a drug real belonged to the companies. Over the decades a market that began with many licensees narrowed. By the twenty-first century, three companies, Eli Lilly, Novo Nordisk and Sanofi, made nearly all the insulin sold in the United States.

New insulins, old molecule, rising prices

Insulin changed shape twice in ways that mattered for price.

The first change was recombinant human insulin. In 1982 the FDA approved Humulin, made by Lilly using technology developed by Genentech, in which genetically engineered bacteria produce insulin identical to the human hormone. It was a scientific landmark and freed manufacturers from dependence on animal pancreases.

The second change was the analog. In the 1990s and 2000s, companies modified the insulin molecule slightly to change how fast or slowly it acts. Rapid-acting analogs such as Lilly's Humalog, approved in 1996, and long-acting analogs such as Sanofi's Lantus made blood-sugar control more flexible and, for many patients, safer. Doctors moved patients onto them, and analogs became the standard of care.

Then the prices rose. Over roughly two decades, list prices for the leading analog insulins in the United States rose many times over. A vial of Humalog that had a list price around $21 when it launched was listed at roughly $275 two decades later. The insulin had not become dramatically more expensive to make. Researchers who have estimated manufacturing costs have generally put them at a few dollars per vial.

The rises tended to move in step. When one maker raised its list price, its rival often followed within days or weeks. Economists call this kind of parallel movement in a concentrated market shadow pricing. It is not necessarily illegal collusion; it is what happens when a few firms watch one another and none has a reason to start a price war.

The middlemen in the story

List prices are not the whole story, and fairness requires saying so. Manufacturers argued that the prices most insurers actually paid were far lower than list, because of large rebates paid to pharmacy benefit managers, the companies that run drug benefits for insurers and employers. As list prices rose, rebates rose too, and the net price manufacturers received for some insulins actually fell in later years.

That defense is partly true and still not much comfort. The people who paid list price, or close to it, were the ones least able to: the uninsured, and insured people with high-deductible plans or coinsurance calculated as a percentage of list price. A system in which the official price climbs while the real price for the powerful buyers falls is a system that sends the bill to the weakest buyer in the room. The PBMs' role in that system is a story of its own, covered elsewhere on this blog.

Why copies were so slow to arrive

For most drugs, the cure for a high price is a cheap copy. Once patents expire, generic makers move in and prices fall. Insulin did not follow that script, and the reasons are mostly about chemistry and regulation.

Insulin is a protein, not a simple chemical compound. Making a copy is closer to brewing than to mixing: it is produced by living cells, and small differences in the process can affect the product. For decades, insulin was regulated under the same law as ordinary drugs, but its complexity meant that the easy generic pathway created by the 1984 Hatch-Waxman Act did not really work for it. Would-be competitors faced a long, expensive road.

In 2010 Congress created a separate approval pathway for biosimilars, copies of biologic medicines. Insulin was moved under that framework in March 2020. The following year, in July 2021, the FDA approved Semglee, a version of long-acting insulin glargine, as the first interchangeable biosimilar, meaning a pharmacist could substitute it for the brand without a new prescription, subject to state law. That was a milestone, but it came almost a century after the first injection in Toronto.

The incumbents also learned to compete in their own way. In 2019, under heavy public pressure, Lilly began selling an "authorized generic" of Humalog, the same insulin under a plain label, at half the brand's list price. Supporters welcomed it; skeptics noted that a company cutting its own price by half was confirming how much room there had been to cut. Patents on new pens and delivery devices, and on small changes to formulations, kept some products protected long after the underlying molecules were old.

The lesson is not that competition failed. It is that competition for complex medicines needs deliberate help: a working approval pathway, rules that keep minor patents from blocking copies, and buyers willing to switch.

Alec Smith and the people who rationed

The cost stopped being an abstraction for many Americans through the stories of people who died. One of the best known was Alec Smith, a young man in Minnesota who aged out of his mother's insurance at 26. Faced with paying for insulin and supplies on his own, he tried to stretch his doses until payday. He died in 2017, less than a month after leaving his parents' plan. His mother, Nicole Smith-Holt, became one of the most visible advocates for affordable insulin, and in 2020 Minnesota passed an emergency insulin program that bears his name.

He was not alone. A study by researchers at Yale, published in 2019, found that about a quarter of patients surveyed at a diabetes clinic reported using less insulin than prescribed because of cost. Diabetics organized caravans to Canada, where the same insulins cost a fraction of the American price. Online communities traded spare vials. The cheaper, older human insulins sold at big-box pharmacies helped some patients, but they are harder to manage and not right for everyone.

The law and the price cuts

Congress acted in August 2022. The Inflation Reduction Act capped what people on Medicare pay for a month's supply of each covered insulin at $35, starting in 2023, and it eliminated the deductible for insulin under Medicare's drug benefit. Democrats tried to extend the $35 cap to private insurance in the same bill. That provision needed 60 votes in the Senate because of the chamber's budget rules; it got 57, with some Republican support, and fell out of the law.

Pressure kept building. In March 2023, Eli Lilly announced it would cut the list price of its most common insulins by 70 percent and cap out-of-pocket costs at $35 a month for many patients. Novo Nordisk and Sanofi announced similar cuts within weeks. The timing was not a coincidence. Besides public anger, a change in Medicaid rebate rules that took effect in 2024 would have made high list prices very costly for manufacturers, by removing a cap on how much they owed Medicaid in rebates when prices rose faster than inflation.

List-price cuts did not end the story, because the price a patient sees still depends on the plan. Someone with a high deductible, or with coverage that has not adopted a cap, can still face a large bill in the first months of the year, and pharmacies sometimes stock a different brand than the one a plan prefers. The cuts moved the official numbers; they did not make the system simple.

Several states also passed their own copay caps for state-regulated insurance plans, and California has pursued making its own insulin through a state generic-drug program. Those efforts cover different groups of people under different rules, which is why patients still report confusion about what they will pay.

What the story teaches

It would be easy to tell this as a morality tale: noble scientists, greedy companies. The truth is more useful than that.

The scientists did a generous thing, but a patent waiver alone could not guarantee affordability, because the market that grew up around insulin had only a few sellers and opaque prices. Companies did invest in real improvements, recombinant production and analogs, that helped patients. Then those improvements became the basis for prices far above cost, protected by a mix of patents on new formulations and delivery devices, the difficulty of bringing competing biologic products through regulators, and a payment system that rewarded high list prices with high rebates.

Here is the argument I take from it. Medicines that a person needs to stay alive should not have prices set mainly by how much a desperate buyer can be made to pay. Caps on what patients owe, public bargaining over what programs pay, real competition from biosimilars, and transparency about rebates each address a piece of the problem. None of them alone would have saved Alec Smith. Together they make his story less likely to happen again.

What you can do

If you or someone you know uses insulin, check the current rules for your type of coverage. Medicare's $35 cap applies to covered insulins; some state laws cap costs for certain private plans; manufacturers run their own savings programs. This is general information, not medical or financial advice; your pharmacist, your plan and Medicare's official site are the places to confirm your costs. Never ration insulin; if you cannot afford it, contact your doctor or a local health center right away.

Push for the cap to reach everyone. The $35 limit still does not cover all private insurance nationally. Find your members of Congress and ask whether they support extending it, and check how they have voted.

Support the groups that help. Diabetes advocacy groups, free clinics and community health centers help people get insulin and supplies, and you can find health organizations near you in our directory.

Keep reading on the bigger fight. Our topic page on corporate power follows how concentrated industries set prices, and health care for all collects the reporting on coverage and costs.

Banting's dollar did not buy what he hoped. The cap, the price cuts and the activism of families like the Smiths have started to buy some of it back.