A Danwatch investigation

Novo is exploiting the sweet tooth of Tehran

Nearly one out of ten Iranians have developed diabetes so far, making Iran a huge market for Novo Nordisk  Foto: Deposit Photos

Mahtab Dehgan

Journalist / Zamaneh Media

Mahtab Dehgan

Journalist / Zamaneh Media

Editor: Jesper Hyhne

In cooperation with Zamaneh Media
17. September 2020
Novo is charging Iran twice as much as the UK for its advanced insulin products according to studies – and more than five times the production cost. International organisations and experts are accusing Novo of unethical profiteering in a country marred by sanctions and widespread poverty. Iran as well as patients are under increasing pressure.
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  • For months Danwatch and the Iranian exile media Zamaneh have conducted a joint investigation into Novos business in Iran.
  • This report is based on an extensive research into thousands of Persian, English and Danish language media reports, annual reports, local and international business registries, statistics, research reports, social media sites, satellite imagery as well as interviews with dozens of experts inside and outside Iran, present and former employees at Novo Nordisk, local diabetes organisations, international NGO’s, diabetes patients in Iran and of course Novo Nordisk.

If you have additional information that could help qualify this report please do not hesitate to contact us at caa@danwatch.dk or through our secure tip service

Novo Nordisk is the first Danish company to establish production in Iran and with more than eight million Iranians diagnosed with diabetes business is booming. 

Novo already earns half of the total profit made on insulin sales in Iran and more will come.   

But the respected Danish company is charging the Iranian state nearly twice as much for its advanced insulin products as the far wealthier UK, selling its insulin at price five times higher than the estimated production cost. 

Researchers, former Novo employees and international NGO´s defending access to medicine think that a different business conduct would be appropriate when dealing with a country like Iran marred by economic sanctions, hyperinflation and increasing poverty rates.  

One of them is Health Action International.

“It is not acceptable for pharmaceutical companies to make such massive profits, especially on essential medicines like insulin,” Margaret Ewen, senior projects manager at the global non-profit organisation says, advocating that Novo reduces its profit in Iran. 

Another critic is Dzintars Gotham, a british researcher, who has published a study on insulin pricing world wide. 

“Our study shows that insulin from Novo and other producers could be sold at a much lower price still allowing the companies a profit,” Gotham says.  

Novo Nordisk denies overpricing but refuses to disclose any information about the prices paid by the Iranian health authorities.

“We cannot disclose the prices as they are the outcome of a direct negotiation between Novo Nordisk and the Iranian government,” Novo’s head of communication Charlotte Zarp-Andersson says in an email. 

“Prices in Iran are set in negotiation with authorities and in line with the current international reference price mechanisms set by the Iranian agencies. Pharma pricing in Iran is fully regulated and set independently from single pharmaceutical companies’ influence,” she says.   

Second highest price in the world

The procurement prices of insulin vary a lot according to type, demand and purchasing  power of the country importing it, the study done by Gotham Dzintars and a team of researchers show.

The British research team has compared procurement prices to the estimated production cost of different types of insulin and the conclusion is clear. In spite of relatively cheap production costs, pharmaceuticals tend to sell their insulin products at a high price making huge profits on essential medicines.

FACTS

Second highest price in the world

A british study shows that Iran is paying a very high price for Novo products compared to other richer countries.

In Iran Novo is mainly selling its NovoMix and NovoRapid insulin pens containing socalled aspart insulin. In 2018 Novo already earned half of the total profit made on insulin sales in Iran.    

The production cost of 10 ml Insulin Aspart is estimated to be between 4,51-6,16 (US dollars)  

According to the researchers a reasonable price would be between 6,5 and 8,86 dollars.

Procurement price of 10 ml Aspart insulin (US dollars):
Kyrgyz Republic 35,78
Iran 34,20
Finland 27,00
New Zealand 25,19
US 21,01
UK 18,35

Not surprisingly high income countries like the US, New Zealand, Finland and the UK are among the top payers. But so is Iran, the study shows.

According to the british researchers Iran is paying 34,2 dollars for ten milliliters of so called aspart insulin, which is the category covering Novo’s two main products in Iran; NovoMix and NovoRapid.

This is the second highest price in the world. 

In comparison Finland is paying 27 dollars for the same amount and type of insulin, New Zealand also 27 dollars, the US 21 and the UK 18 dollars.

With an estimated production cost of only 4,51-6,16 dollars for ten milliliters, the study indicates that Novo is making at least a  400 percent profit on the sale of aspart insulin to Iran.  

Business is booming

According to sources with key knowledge of Novo’s business in Iran, the Danish company is doing very well there.

Each year since 2015 Novo’s Iranian subsidiary NN Pars has doubled its profit, they say, and statistics from the Iranian Food and Drug Administration confirm the picture showing that Novo earned half of the total profit made on insulin sales in Iran in 2018.

The exact profit of Novo’s business in Iran is however a well kept secret, that the company is  refusing to unveil. 

A company statement to the New York Stock Exchange states that Novo’s profit in Iran did not exceed one billion Danish kroner in 2019. This equals around 160 million dollars. 

And export numbers from the Danish National Bureau of Statistics seem to confirm this.

In 2019 Iran bought pharmaceutical products from Denmark for 808 million DKR equalling around 128 million dollars with Novo insulin being practically the only commodity, according to industrial sources in Denmark. 

FACTS

Novo products sold in Iran

NovoMix

This is a modern type of mixed insulin pen containing one kind of insulin that works very quickly and another kind that has a long lasting effect.

NovoRapid

This is a modern type of insulin pen with immediate effect. It is for instance used just before meals.

Levamir

This is a modern type of basic insulin supplied in pens and often used in combination with NovoRapid. Has very little market share in Iran.

Lansulin

This is a cheaper old fashion type of human insulin. It is produced by the Iranian company Exir based on raw materials from Novo.

Unethical conduct 

Dzintars Gotham, now an independent consultant working for the World Health Organisation (WHO) among others, is worried about the high profits of pharmaceuticals like Novo.

He believes that demanding prices for insulin that are far beyond the costs of production is unethical. 

“Like everyone else, pharmaceuticals are in the market to make money. But where a pharmaceutical company holds a monopoly or a near monopoly they have certain ethical obligations,” Dzintars Gotham says. 

Margaret Ewen, senior project manager for medicines prices at the ngo Health Action International is equally concerned. 

“It is not acceptable for pharmaceutical companies to make massive profits, especially on essential medicines,” she says.

Why Iran has ended up paying such a high price for Novo’s insulin is unclear. But according to Gotham Iran’s negotiation position is not a strong one.

“Novo is likely selling its insulin at such high prices in Iran, because Iran does not have a lot of negotiating power. One can wonder why Iran accepts prices like that, but it is probably because there are not a lot of alternatives to Novo’s products on the Iranian market,” he says. 

Burden on the taxpayer

The burden of the high prices that Novo demands is usually carried by the Iranian health system and taxpayers as a national Iranian insurance system covers 90 percent of the price paid by the patients. 

But this is no longer the case, patients, experts and local diabetes organisations in Iran say  to Danwatch and Zamaneh.

Because of the economic sanctions imposed on Iran by the US and a growing budget deficit the Iranian state is no longer able to cover the full cost insulin.

As a result a growing number of Iranian patients are forced to buy Novo’s insulin pens on the so called free market at the unsubsidized price of 35.000-40.000 toman for an insulin pen (around 8.3 dollars according to the official Iranian exchange rate). 

It might not sound like a lot but for many Iranians who are unemployed or otherwise without insurance or steady income it is different. 

As the average need of a diabetes patient is four insulin pens a month the cost will be around 150.000 toman (around 33 dollars according to the official exchange rate) But some patients might need nine or ten pens amounting to 350.000-400.000 toman a month.

In a country with a minimum wage of 1.900.000 toman a month having to spend around 10-20 percent of your income on insulin is a considerable expense.  

Testimonials

"I have to buy Novo's insulin pens at ten times the usual price.."

Zamaneh Media and Danwatch have asked Iranian diabetics via social media about accessibility and affordability of Novo products in Iran. These are some of the answers:

Too expensive for the uninsured

Amir Kamran Nikousokhan, who is  president of the Iranian Diabetes Society confirms that a growing number of diabetes patients cannot afford to use Novo products.

“Novo products are affordable if you can buy them with government insurance. But there are quite a number of Iranians who do not have insurance these days. If you are employed it is usually part of your contract but if you are unemployed you might not be insured”, he says.

According to the deputy manager of Sazman Salamat Iran, a public insurance organization, at least ten percent of Iranians have no kind of insurance. Another well informed source in one of Iran’s diabetes associations estimates that only seven or eight out of ten diabetes patients are insured. 

The percentage of the non-insured patients could be even higher due to 2,5 million of Afghan refugees and migrants residing in Iran without insurance.

Margaret Ewen from the Amsterdam based ngo Health Action International confirms that high prices on essential drugs like insulin is a serious problem.

“High prices put an added burden on both health systems and people who have to pay out-of-pocket. The situation is worse for essential medicines such as insulin that require life-long treatment,” the senior project manager for medicines prices says. 

Novo products in short supply

According to diabetes patients reached via social media Novo’s insulin products are also in short supply at the moment. 

Testimonies from several patients confirm that pharmacies often supply only two or three insulin pens or vials a month at the insured price though some patients might be in need of seven or nine vials or glasses a month.

Patients therefore have to buy the rest of their prescribed insulin at the unsubsidized free market price which is at least ten times higher according to pharmacists and diabetes patients.

Mohsen S., a diabetes patient in Mashhad who uses seven pens of Novomix and Novorapid a month, tells Danwatch and Zamaneh about the difficulties of obtaining subsidized insulin.

“Drugstores used to provide all the insulin for patients at the subsidiced price, if you had prescriptions. But these days drugstores only provide three insulin pens every two months at that price”, he says.

Mohsen S. therefore has to buy nine insulin pens at the ten times higher, unsubsidized price every two months.

Other diabetes patients that Danwatch and Zamaneh have been in touch with on social media confirm the problems of accessing subsidized insulin. 

“Recently I got a written prescription (for insulin), but in the pharmacy they tell me that I can only get some of it. Therefore I am forced to buy the rest on the free market. This puts me under a lot of economic pressure,” a patient who does not want her name out says via Instagram. 

Another patient says:

 “I have a problem finding NovoMix and have to go to several drugstores before I find it. Then they don’t give me the number of pens that the doctor has prescribed, which creates a lot of stress when my insulin is finishing. That in itself is a reason for increasing blood sugar”, the Instagram user writes. 

Akbar Abdollahiasl is a professor of medicine at Tehran University and was the lead researcher on a 2016 study of accessibility and affordability of insulin in Iran. He confirms the prices and shortages of Novo’s insulins.

“These days Novo Insulins are in short supply and Iranian pharmacies are often not dispensing the prescription completely. If patients are used to Novo insulin, they might then procure it from the black market”, he says.

According to diabetes experts in Iran and Denmark patients cannot just substitute their expensive Novo products with cheaper versions of insulin, for example human insulin or cheaper biosimilar products imported from let’s say China.

Switching to new products might cause serious health problems as the treatment of diabetes should be carefully designed by a physician often combining several kinds of medicine, Amir Kamran Nikousokhan, president of the Iranian Diabetes Society explains. 

Iran’s economy under pressure

One reason for the lack of Novo insulin in Iran at the moment could be the Iranian state lacking hard currency to pay for imported products, economists say. 

The Iranian minister of Health Saeid Namaki said last summer that Iran spends 1.3 billion dollars on imported drugs a year. This amount covers only three percent of drug consumption in Iran, as 97 percent is produced inside the country at a price of only 550 million dollars, he said. 

One of the drugs that Iran has to pay for is Novo’s insulin. 

Head of the Iranian Diabetes Society Amir Kamran Nikousokhan confirms that Iran has increasing problems paying for Novo’s insulin products as a result of the economic crisis. 

“The cost of importing insulin is a huge burden for Iran. During these last months the Iranian government has not been able to pay all the money they were supposed to pay to Novo, due to the huge budget deficit,” he says, citing Novo sources in Iran. 

The Iranian Institute for International Finance reported in january 2020 that Iran’s currency reserves are shrinking and a contraction of 7,2 percent of the economy is expected for the current fiscal year. 

And the International Monetary Fund predicted that Iran’s foreign currency reserves will decrease to 85 billion dollar this year, showing a 19,4 billion dollar decline. 

Pledging access to Insulin

With an increasing number of Iranians depending on unsubsidized Novo insulin the international NGO, Access to Medicine Foundation, is concerned.

According to Novo’s website, Novo pledges to provide insulin at a maximum cost of three dollars a vial for low income countries and some middle income countries. 

The Amsterdam based Access to Medicine Foundation thinks Iran should be included in the pledge.

“There is reason for concern when it comes to affordability and accessibility to insulin in Iran”,  says Danny Edwards, research programme manager at Access to Medicine.

“The World Bank might rank Iran as a middle income country, but Iran is marred by inequality and therefore there is reason to be concerned that the poorer part of the population may not have ready access to insulin,” he says.

Edwards is especially concerned because almost half of all health expenditure in Iran in 2017 was financed privately by patients and “sanctions may have made things even worse.”

“The economic situation for the poorer part of the population is clearly not very good,” as he puts it. 

With inflation soaring, numbers quickly become misleading and obsolete in Iran but according to UNDPs Human Development Report 2020, the average income in Iran was 19,098 dollars last year which equals around 125.000 danish kroner. 

A 2018 report from the Iranian Majlis (parliament) painted an even gloomier picture, estimating that 40 percent of Iranian households live under the poverty line. 

Novo denies criticism 

Danwatch and Zamaneh Media have contacted Novo Nordisk HQ in Denmark for an interview on the company’s pricing policy in Iran.

But neither CEO Lars Fruergaard Jørgensen nor Ali Naser Mostofi, general manager & corporate vice president of Novo Nordisk Pars has been willing to answer our questions. 

In a written response, head of communication Charlotte Zarp-Andersson confirms that Novo’s Access to Insulin Commitment does not apply to Iran.

“Our Access to Insulin Commitment applies to the poorest countries in the world and to lower middle-income countries where large low-income populations lack sufficient health coverage”, she writes.

“Countries with national health systems providing essential health coverage or where Novo Nordisk has other local agreements are not in scope for this commitment, which is why Iran is not covered by the Access to Insulin Commitment.”  

Novo also denies that Iranian patients are paying too much for Novo products.

“Prices in Iran are in the lower range of the prices applied in the world, and not different from prices for that generation of products and on that device for other developing countries”, the head of communication states without producing any concrete numbers. 

Novo confirms the shortage of Novo products in Iran at present but is partly blaming patients for stockpiling its products.

“Due to the macroeconomic situation of Iran and increased stockpiling by patients due to COVID-19, we have seen occasional situations of stock-out in the pharmacy level,” Charlotte Zarp-Andersson says.

“Whenever this has occurred, we have liaised with the Ministry of Health to avoid stock-out at the patient level. Nevertheless, as there are other suppliers in the market, patients are also able to purchase competing products.”

The Iranian Diabetes Society however denies that stockpiling is the reason for the shortage.. 

“The shortage is not due to people stockpiling insulin. This is simply not possible because you need a prescription to buy the insulin and a document from the government to confirm that you need four or five pens a month in order to buy them at all,” Amir Kamran Nikousokhan says.

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