Why $25 Insulin Costs $400

The largest cartel in American History

Your employee has diabetes. They fill a prescription for insulin. The bill is $400 a month.

The same drug costs $25 a month in Canada. Your employee could drive to Mexico, buy a month’s supply, and still come out ahead.

Yet they pay $400. In America. With insurance.

Where did that money go? Not to the scientist who discovered insulin. Not to the factory that makes it. Not to the pharmacy that dispensed it.

It got trapped in the middle. Siphoned off by three companies you have never heard of, even though they make healthcare decisions for 260 million Americans.

Their names are CVS Caremark, Express Scripts, and Optum.

Meet the Middlemen

These companies are called Pharmacy Benefit Managers. PBMs.

They sit between your insurance carrier, the drug manufacturers, and the pharmacies. They decide which drugs your plan covers. They set what your employees pay at the counter. They negotiate prices with manufacturers.

On paper, this sounds like a neutral referee. In practice, their incentives are inverted.

A traditional insurance carrier wants lower drug costs. Lower costs mean lower claims. Lower claims mean lower premiums. The carrier wins when your costs fall.

PBMs profit the opposite way.

PBMs earn money through rebates paid by drug manufacturers. The higher the drug price, the bigger the rebate. The bigger the rebate, the bigger their cut. When your employees pay more, PBMs make more.

The carrier wants affordable drugs. The PBM wants expensive drugs. The PBM sits between you and affordable care, collecting rebates to keep prices high.

This is not a conspiracy theory. This is the business model. It is written into their contracts.

How Rebates Became Extortion

In 1996, insulin cost the average patient about $1,200 a year. In the following 25 years, the list price increased 1,200 percent.

The drug did not change. The manufacturing process did not improve. Nothing happened that should have made insulin cost 12 times more.

Here is what happened instead.

The Rebate Scheme

A manufacturer like Novo Nordisk makes insulin and sells it through the supply chain. But before it reaches your employee, there is a hidden negotiation.

The PBM tells the manufacturer: “If you want us to cover your insulin, you have to pay us a rebate.”

The manufacturer agrees. They pay the PBM $15 per vial.

But the manufacturer does not lower the list price to absorb the rebate. They raise it. The list price climbs to $400. They pay the PBM its cut. They keep the rest.

The insurance carrier pays the full $400 and never sees the rebate. Your employee’s copay is calculated against that same number. The PBM pockets the $15.

Everyone in the chain profits. Everyone except your employee.

In the past 25 years, the insulin industry has paid PBMs over $29 billion in rebates. Prices climbed every year regardless.

The Formulary Trap

PBMs also control the formulary. That is the list of drugs your plan will cover. It sounds administrative. It is actually a weapon.

Say three insulin products exist. The PBM approaches the most expensive manufacturer: “Pay us the biggest rebate and your insulin gets the preferred tier. $5 copay. The cheaper insulin gets a $50 copay.”

Employees choose the $5 copay. They choose the expensive insulin. The PBM collects its rebate. The manufacturer raises prices to pay for it.

Sometimes the cheapest option is excluded from the formulary entirely. It simply does not appear as a choice. Patients who want it need special approval. Most give up.

The Spread Pricing Trap

Spread pricing adds another layer.

The insurance company negotiates with the PBM: $300 per vial. The PBM pays the pharmacy $200. It keeps the $100 difference.

The insurer thinks they got a deal. The pharmacy gets squeezed. The patient’s cost-sharing is based on the $300 rate. The PBM pockets the spread.

Three separate extraction mechanisms, running simultaneously, each pulling money toward the PBM and away from actual care.

80 Percent of the Market. Zero Competition.

CVS Caremark, Express Scripts, and Optum control 80 percent of the PBM market.

They are not competing on price. They are dividing the country and running the same playbook in every territory. Manufacturers cannot shop around. Employers cannot demand better terms. Patients have no leverage.

Insulin prices climbed 1,200 percent in 25 years because no one could stop them.

Until the government stepped in.

The Government Noticed

In 2024, the Federal Trade Commission filed an administrative complaint against all three.

The complaint read like an accusation of organized crime.

The FTC alleged that CVS Caremark, Express Scripts, and Optum “prioritized high rebates from manufacturers over patient affordability.” They “harmed competition by using their market power to exclude lower-cost, therapeutic alternatives.” They systematically excluded cheaper insulin options from formularies and shifted costs to vulnerable patients.

In plain English: three companies coordinated to keep insulin prices high so they could collect larger rebates.

The FTC estimated the scheme inflated insulin prices by billions of dollars. People who could not afford insulin rationed it. People died.

The Reckoning

On February 4, 2026, the FTC secured a settlement with Express Scripts.

Not a fine. A consent decree. ESI admitted to the playbook and agreed to stop.

The terms:

  1. Insulin copays cannot exceed $35 per month, regardless of list price.
  2. PBMs must pass at least 85 percent of rebates through to employers and patients. No more pocketing the spread.
  3. Formularies must be published publicly. No more hidden tier systems.
  4. Community pharmacies must be paid fairly. No more spread pricing.

The settlement is projected to save patients $7 billion in out-of-pocket costs over 10 years. That is $7 billion that was being taken from your employees and routed to PBM balance sheets.

The Pattern Is Bigger Than Insulin

The FTC case is the headline. The pattern is everywhere.

Oregon filed a $900 million lawsuit against Express Scripts, CVS Caremark, Optum, and three major insulin manufacturers simultaneously. Not one company. All of them. Because a scheme this coordinated does not happen by accident.

West Virginia sued Optum directly, alleging PBM formulary decisions worsened the opioid crisis. Manufacturers paid rebates to keep expensive opioids on preferred tiers while cheaper alternatives were buried.

Philadelphia sued all three, claiming PBM practices amplified the city’s opioid epidemic. The city is not accusing them of negligence. It is accusing them of deliberately choosing profit over public health.

State attorneys general are investigating. Congress is writing new transparency requirements. The architecture of hidden rebates is being dismantled piece by piece.

The PBM cartel built its business on opacity. Opacity is ending.

The Way Out Exists

Your employees are paying $400 for insulin because three companies decided that was good for their margins. Your premiums are climbing because drug costs are inflated by decades of hidden rebates.

There are ways to structure health benefits that do not route through PBM middlemen. Association plans. Cooperative models. Direct pharmaceutical programs that bypass the cartel entirely.

Groundwork connects organizations with plans built on transparent incentives. Where the money you spend on benefits actually goes to benefits.

You do not have to accept a system where the middleman profits by keeping your employees sick.

Groundwork Insurance Agency connects organizations with cooperative, nonprofit, and level-funded health plans. Get in touch to see the numbers for your team.

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