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Insulin and American Healthcare

photograph of blood sugar recording paraphanelia

On March 31st the Affordable Insulin Now Act was passed by the House and is now being considered by the Senate. The House bill only applies to people who already have insurance, and caps the out-of-pocket costs for insulin to 35 dollars per-month. It does not address the uninsured, nor does it directly address the retail price of the drug. For advocates, it stands as a limited but hopefully effective response to the surging cost of life-saving insulin in the U.S., the crucial medicine for the management of diabetes.

Sponsoring congresswoman Angie Craig (D) of Minnesota stated:

Certainly our work to lower drug costs and expand access to healthcare across this nation is not done, but this is a major step forward in the right direction and a chance to make good on our promises to the American people.

It is also true to the original promise of insulin.

Isolated in 1921, the firsts patents for insulin were sold to the University of Toronto for the price of one dollar as part of a defensive maneuver to ensure insulin could be produced widely and affordably. Nonetheless, insulin became a goldmine. Cheap to manufacture and widely used, it could bring home a tidy profit even at low prices. Since the early days, three pharmaceutical companies, American Eli Lilly, French Sanofi, and Danish Novo Nordisk, have produced the vast majority of global insulin and captured almost the entire U.S. market. Low production costs continue, but insulin is no longer sold at low prices. At least not in the U.S. Eli Lilly’s popular Humalog insulin is sold to wholesalers at 274.70 per vial, compared to 21 dollars when first introduced in 1996. Further costs accrue as insulin makes its way through the thicket of wholesalers, pharmacy benefits managers, and pharmacies before reaching customers.

One question that emerges from the whole mess is: Who is to blame for this development? Here, blame needs to be understood in two senses. The first concerns all those actors who are partly causally responsible such that if they had behaved differently, the price of insulin would not be so high. American healthcare economics is ludicrously complex, and a discussion of the price of insulin quickly blossoms into biologics and biosimilars, generics, pricing power, patents, insurance, the FDA, pharmaceutical benefit managers, and prescription practices. What idiosyncrasies of the American healthcare systems allow a drug price to increase 1000% without being undercut by competition or stopped by the government? Insulin is not the only example.

But there is a second sense of blame, and that is which actors most directly chose to increase the costs of a life-saving medicine and thus are potentially deserving of moral opprobrium.

The big three manufacturers, with their overwhelming market share and aggressive pricing strategies are clear targets. However, when investigated by the Senate in 2019, they pointed fingers at pharmacy benefit managers. These companies serve as intermediaries between manufacturers and health insurance companies. Like insulin manufacturers, the pharmacy benefit manager market is highly consolidated, with only three major players: CVS Caremark, Express Scripts, OptumRX. They can benefit directly from higher manufacturer prices by raking in fees or rebates. While noting that only Eli Lilly and CVS Caremark fully responded to requests for documents, the Senate investigation found problematic tactics on the part of both pharmacy benefit managers and manufacturers, such as leveraging market power and raising prices in lockstep.

The bill, it should be noted, is most directly targeted at insurance companies, rather than these other actors. This leads to both an economic and an ethical objection. The economic objection is that by forcing insurance companies to cap prices and absorb the cost of insulin, the insurance companies may simply turn around and raise premiums to recoup profit. The ethical objection is that it is unfair for the government to intercede and force costs of say, aggressive pricing by the manufacturer, onto some other party. The caveat to the ethical objection is that each of the three major pharmaceutical benefits managers have merged with major insurance companies.

What are the business ethics of this all? One approach would be stakeholder theory, which holds that corporate responsibility needs to balance the interests of multiple stakeholders including employees, shareholders, and customers. Pricing a medically-necessary drug out of the range of some customers would presumably be a non-starter from a stakeholder perspective, or at least extremely contentious.

The more permissive approach would be the Friedman doctrine. Developed by the economist Milton Friedman, it argues that the only ethical responsibility of companies is to act in the interest of their shareholders within the rules of the game. This is, unsurprisingly, controversial. Friedman took it as all but axiomatic that the shareholder’s interest is to make as much money as possible as quickly as possible, but the choice is rarely put bluntly: “Would you, as a shareholder, be okay with slighter lower profit margins, if it meant more diabetics would have access to their insulin?” (For Friedman this moral conundrum is not supposed to occur, as his operating assumption is that the best way to achieve collective welfare is through individuals or firms chasing their own interests in the free market.)

Separate from questions of blame and business ethics are the grounds for government intervention in insulin prices. Two approaches stand as most interesting and come at the problem from very different directions. The first is a right to healthcare. Healthcare is what is sometimes referred to as a positive right, which consists of an entitlement to certain resources. There is as yet no formal legal right to healthcare in the United States, but Democratic lawmakers increasingly speak in this framework. Obama contended, “healthcare is not a privilege to the fortunate few, it is a right.” Different ethicists justify the right to healthcare in different ways. For example, Norman Daniels has influentially argued that a right to healthcare serves to preserve meaningful equality of opportunity by shielding us from the caprice of illness. A slightly narrower position would be that the government has a compelling interest in promoting healthcare, even if it does not reach the level of a right.

A completely different ground for intervention would be maintaining fair markets. This gets us to a fascinating split in reactions to insulin prices. Either there is too much free market, or not enough. Advocates of free markets criticize the regulatory landscape that makes it difficult for generic competitors to enter the market, or the use of incremental changes to insulin of contested clinical relevance to maintain drug patents in a practice called “evergreening.”

The “free market” is central to the modern American discussion of healthcare, as it allows considerations of healthcare to not be discussed in terms of rights – that everyone deserves a right to healthcare – but in terms of economics. Republican politicians do not argue that people do not deserve healthcare, but rather that programs like Medicare for All are not good ways to provide it.

At the center of this debate, however, is an ambiguity in the term free market. On the one hand, a free market describes an idealized economic system with certain features such as low barriers to entry, voluntary trade, and prices responding in accordance to supply and demand. This is the use of free markets found in introductory textbooks like Gregory Mankiw’s Principles of Macroeconomics. This understanding of a free market is at best a regulative ideal, in that we can aim at it but we can never actually achieve it and all actual markets will depart from the theoretical free market to some degree or another.

On the other hand, the free market is used to refer to a market free from regulations and interference, especially government regulations, although this understanding does not follow from the theoretical conceptualization of the free market. Oftentimes government interference – such as breaking up an oligopoly – is precisely what is needed to move an actual market towards a theoretical free market. Even for advocates of free market economics, interventions and regulations should be evaluated based on their effect, not based on their status as interventions. From this perspective, the current insulin price represents not an ethical failure but a market failure and justifies intervention on those grounds.

The current bill, however, does not try to correct the market, but instead represents a more direct attempt to secure insulin prices (for people with insurance). This is an encouraging development for those who believe essential goods like insulin should not be subject to the whims of the market. More discouragingly, the bill is likely dead in the Senate.

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The Pandemic and the Threat of Income Inequality

photograph of Sao Paulo favelabutting up against expensive buildings in background

In years past, the concept of national security has primarily been understood militarily. Recently, however, the effects that the disparity between the very rich and the poor has on national security have been hypothesized as a potential cause of social unrest, increased crime, or as a threat to economic growth. With the COVID-19 epidemic, the potential for wealth inequality to act as a threat to national security is even more obvious; poorer people are disproportionately affected by the epidemic and this makes it more difficult to manage. Recognizing that income inequality is a national security issue highlights a new aspect of its moral significance for societies everywhere.

The United States has one of the highest levels of wealth inequality in the developed world. It is not new information to most people that the top 1% of income earners make 30 times the income of those in the middle. The top 10% of families held 76% of the wealth in the United States in 2013. Over the past ten years many have tied this information to national security. An article from 2013 notes that this disparity, along with a lack of employment, could lead to an increase in youth gangs, property crime, and higher prison populations. Another from 2018 similarly points to the potential for higher crime. Despite these concerns, others have argued that we should not see income inequality as a problem. In 2013, the Cato Institute argued that the threat of civil unrest owing to income inequality is negligible and has no relationship to the concept of national security, noting “it is difficult to credit the view that inequality poses a security threat unless ‘security’ is completely redefined.” In 2017, the Heritage Foundation published a report arguing that there is little evidence that the very rich and the very poor have significantly divergent interests or influence over policy.

Yet, one event that the articles I have cited did not seem to see coming was an existential threat like a viral pandemic. It is well known from past cases that viral outbreaks can be particularly harsh on the poor. During the 1918 Spanish flu epidemic, the poor were significantly affected by the first wave. During the current COVID-19 epidemic we see this pattern repeating. Given that many people are now staying and home and not working, income is falling. Half of the nation would not have $400 if needed for an emergency which means that they are going to have a difficult time paying their rent and other living expenses. The result is going to be that millions will not be able to pay and could face evictions. While some politicians and governments are working to prevent this, that hasn’t stopped the calls for rent strikes during the pandemic. This means that during a time when social distancing is necessary, evictions and increases in the number of homeless will make the spread of the virus more difficult to contain.

In addition, wealth inequality is having a direct effect on healthcare. Roughly 10% of Americans did not have health insurance before the pandemic and most of these are likely to live in poverty. Without insurance, people are more likely to want to treat themselves at home or to avoid seeing a doctor. Now, millions of Americans who rely on employment benefits for coverage may now lose it. As many as 14 million may lose their jobs by summer. Those most vulnerable for losing their jobs are likely to work in the service and retail industries and are more likely to be low-wage workers. The cost of treatment for COVID-19 can be up to $35,000. This means that millions of Americans who could already not afford to pay rent can definitely not afford the potential cost of treatment. Indeed, there are already reports of potential deaths owing to lack of insurance.

What this means is that you now have large numbers of people who, despite the risk of increasing the spread of COVID-19, now still need to work in order to prevent losing their homes and their coverage. You have people who have now lost their jobs and their healthcare coverage less likely to seek medical care if they need it or to follow health protocols prescribed by governments to prevent the spread of the virus. This means that less will come forward for testing and less treatment of those who may have contracted COVID-19. As Joseph Eisenberg, chair of epidemiology at the University of Michigan notes, “People will go a lot longer since they don’t have access to healthcare…that both means they’ve been in the community more and been transmitting more, and when they get to the hospital their prognosis is going to be a lot worse.” So, in addition to a health crisis, there will also likely be an insurance crisis and a housing crisis owing to the economic situation of those worse off.

In addition, many of the jobs now deemed essential to keep supply chains going are those filled by the working poor. These include those who work in the food industry, custodial staff, many others including grocery stores staff. These people, in addition to staff employed in Amazon warehouses, are worried about a lack of protection against the virus. Amazon workers are calling for a strike to demand protection. Grocery store staff are worried about a lack of protective equipment as well. Despite efforts to protect these employees, several of them have now contracted the virus. At first many of these employers were not even offering paid sick leave and now that they are, there is still confusion. While many of these employers are now offering pay raises in response to the crisis, this still means that we are in a situation where most of us are now depending on low income workers to keep deliveries coming and to ensure that there is still food on the store shelves. These individuals are the very same who are now at a higher risk of contracting the virus and simultaneously less likely to seek treatment for it.

How does all of this relate to national security? Income inequality has exacerbated the healthcare crisis, will contribute to the eventual economic and financial crises, and has resulted in a situation where society is now counting on many of the poorest people to continue to risk their health in order to ensure supply lines continue to function, all while being more likely to be hurt by the pandemic. Now only does this increase the risk of social unrest, it makes handling the pandemic more difficult. Income inequality is now an existential threat to national security. While it may be easy to think that once the pandemic ends this threat will pass, a warming climate means the range of disease-carrying animals is increasing; this may not be the last major pandemic we will face. While it is cynical to think that we should only deal with a problem like income inequality because of this, the fact that the disparity between the rich and poor is a national security threat reminds us that there is a moral significance for everyone to do something about it.

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U-Haul’s Anti-Smoking Workplace Wellness

photograph of overcrowded UHaul rental lot

This article has a set of discussion questions tailored for classroom use. Click here to download them. To see a full list of articles with discussion questions and other resources, visit our “Educational Resources” page.

U-Haul International recently announced that, beginning next month, the company will not hire anyone who uses nicotine products (including smoking cessation products like nicotine gum or patches). The new rule will take effect in the 21 states that do not have smoker protection laws. The terms of employment will require new hires to submit to nicotine screenings, placing limits on employees’ lawful, off-duty conduct.

The truck and trailer rental company has defended the new policy as nothing more than a wellness initiative. U-Haul executive Jessica Lopez has described the new policy as “a responsible step in fostering a culture of wellness at U-Haul, with the goal of helping our Team Members on their health journey.” But as the LA Times points out, “Simply barring people from working at the company doesn’t actually improve anyone’s health.”

U-Haul, however, is not alone, and employer bans on smoking are not new. Alaska Airlines has had a similar policy since 1985, and many hospitals have had nicotine-free hiring policies for over a decade. But there are important distinctions between these past policies and U-Haul’s new policy. Alaska Airlines’ ban was, at least in part, justified by the risk and difficulty of smoking on planes and in places surrounding airports; smoking simply isn’t conducive to that particular work environment. Meanwhile, hospitals’ change in hiring process was meant to support the healthy image they were trying to promote, and to demonstrate their commitment to patient health.

Interestingly (and importantly), U-Haul has not defended its new policy as a measure to improve customer experience or improve employees’ job performance. The (expressed) motivation has centered on corporate paternalism – U-Haul’s policy intends to protect their (prospective) employees’ best interests against their employees’ expressed preferences – and this has significant implications. This isn’t like screening for illicit drugs or forbidding drinking on the job. As Professor Harris Freeman notes, it “makes sense to make sure people are not intoxicated while working … there can be problems with safety, problems with productivity.” But in prohibiting nicotine use, U-Haul “seems like they’re making a decision that doesn’t directly affect someone’s work performance.” Unlike Alaska Airlines or Cleveland Clinic,

“This is employers exercising a wide latitude of discretion and control over workers’ lives that have nothing to do with their own business interests. Absent some kind of rationale by the employer that certain kind of drug use impacts job performance, the idea of telling people that they can’t take a job because they use nicotine is unduly intrusive into the personal affairs of workers.”

Similarly, the ACLU has argued that hiring policies like these amount to “lifestyle discrimination” and represent an invasion of privacy whereby “employers are using the power of the paycheck to tell their employees what they can and cannot do in the privacy of their own homes.” This worry is further compounded by the fact that,

“Virtually every lifestyle choice we make has some health-related consequence. Where do we draw the line as to what an employer can regulate? Should an employer be able to forbid an employee from going skiing? or riding a bicycle? or sunbathing on a Saturday afternoon? All of these activities entail a health risk. The real issue here is the right of individuals to lead the lives they choose. It is very important that we preserve the distinction between company time and the sanctity of an employee’s private life. Employers should not be permitted to regulate our lives 24 hours a day, seven days a week.”

Nicotine-free hiring policies or practices that levy surcharges on employees who smoke tend to rely heavily on the notion of individual responsibility: employees should be held accountable for the financial burden that their personal choices and behaviors place on their employers and fellow employees. But these convictions seem to ignore the fact that smoking is highly addictive, and 88% of smokers formed these habits before they were 18. Given this, the issue of accountability cannot be concluded so cleanly.

Apart from concerns of privacy or questions about individual responsibility, smoking bans on employment present a problem for equality of opportunity. According to the CDC, about 14 percent of adults in the U.S. smoke cigarettes. But smokers are not evenly distributed across socioeconomic and racial groups. For instance, half of unemployed people smoke; 42% of American Indian or Alaska Native adults smoke, 32% of adults with less than a high school education smoke; and 36% of of Americans living below the federal poverty line are smokers. It’s not hard to see that nicotine-free hiring practices disproportionately burden vulnerable populations who are already greatly disadvantaged. U-Haul’s low-wage, physical labor jobs, from maintenance workers to truck drivers to janitors, are restricted from those who may need them most (on grounds that have nothing to do with a candidate’s ability to perform job-related tasks).

This is no small thing; the Phoenix-based moving-equipment and storage-unit company employs roughly 4,000 people in Arizona and 30,000 across the U.S. and Canada. Lopez has claimed that “Taking care of our team members is the primary focus and goal” and that decreasing healthcare costs is merely “a bonus,” but it’s hard to separate the two. A recent study by Ohio State University estimated the cost employees who smoke pose to employers. Added insurance costs as well as the productivity lost to smoke breaks and increased sick time amounted to nearly $6,000 annually. Clearly, employee health, insurance costs, and worker output are all linked, and all contribute directly to a company’s profitability. The question is who should have to pay the cost for the most preventable cause of cancer and lung disease: employers or employees?

It may be that the real villain here is employer-sponsored insurance. By decoupling one’s employment from one’s healthcare, companies like U-Haul might be less invested in meddling with their employees’ off-duty choices. They have much less skin in the game if their employees’ behaviors aren’t so intimately tied to the company’s bottom line. Unless healthcare in the US changes, we may be destined to constantly police the line separating our private lives from our day jobs.

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Employee Wellness vs. Privacy in Houston

As Americans continue to top the charts of obesity and unhealthy lifestyle choices, employers around the country are beginning to look for ways to improve the work environment by promoting exercise and other activities that promote employees’ overall health. Many companies are encouraging employees to sign up for online programs that are able to track a person’s exercise and diet, as well as monitor any health changes that may occur in a person’s life. These programs, although beneficial in many ways, have also raised suspicions about the amount of privacy and protection employees who share their information have. Are these online programs and mobile applications able to share personal information about the people using the resources?

An article from Friday, October 2nd by Jay Hancock, discusses the city of Houston and the encouragement of employees to use one of these online wellness companies as a way to track health changes. The privacy agreement that accompanied this partnership was frustrating to many employees who were wary about sharing their person information, as it was unclear as to how much and what information could have been shared with other companies and potentially the public. Although employees were able to opt out of the program, they were then forced to pay an extra $300 per year for medical coverage. This lack of communication about the privacy and protection of information shared with this company sparked concern from several employees and therefore was not widely accepted among the residents of Houston.

The implementation of these wellness-tracking programs argue that it is an efficient and effective way to hold employees accountable for staying healthy. A healthy employee arguably performs to the best of his/her ability because his/her body is being taken care of properly. These programs also help companies interpret the data collected and make changes to the work environment based on the information gathered. As the U.S. continues to become one of the unhealthiest countries in the world, these wellness programs could be the answer to holding people accountable and making Americans healthier people.

Should employees be forced to sign up for wellness programs in order to promote their own health? How much privacy is acceptable for wellness programs to provide to the people who subscribe to their services? Is the implementation of wellness programs in the work place an efficient and ethically sound decision for companies to make based on the unhealthy state of our country?