The typical drugmaker response to drug-price criticism is becoming obsolete.
No longer are firms merely blaming others for price hikes and hoping the critics go away. Some are taking action to curb prices on their own terms. Both Novo Nordisk A/S and Allergan plc have recently pledged to moderate price increases. And now Eli Lilly & Co. is trying something new -- offering a 40 percent discount on its best-selling insulin Humalog to patients who must pay full list prices for drugs, because they lack insurance or for other reasons.
This approach targets one of the least-fair aspects of the U.S. drug-pricing system and could pressure other companies to follow suit.
Eli Lilly's pledge comes as Humalog is struggling. Third-quarter sales missed analyst expectations by 13 percent due to U.S. price pressure. Analysts expected $738 million in sales, while Lilly delivered $641 million.
As these medicines age, pharmacy benefit managers (PBMs) have gotten increasingly adept at playing competing diabetes drugmakers against each other to get the biggest possible rebates.
As pharma loves to point out, many patients don't feel the impact of rising list prices because their insurer or PBM takes most of the higher price back in rebates. As a result, list prices must keep rising merely to keep sales growth above water in maturing markets, but those price hikes don't do much for drugmakers' bottom lines.
But people who are forced to pay cash at the pharmacy often must pay full price for drugs. Eli Lilly's new offer acknowledges, refreshingly, that this pricing mess has a disproportionate negative effect on certain patients.
The plight of such patients, who need insulin to live, has drawn heavy criticism of insulin pricing by politicians such as Bernie Sanders. That prompted Novo to pledge to avoid double-digit annual price hikes. Lilly's plan is more directly targeted at patients who suffer most from price hikes.
These discounts may become even more important if Donald Trump blows up Obamacare and dramatically increases the number of uninsured Americans.
Eli Lilly's move probably won't satisfy all critics, given that the wholesale acquisition cost of Humalog pens has risen substantially more than 40 percent than since 2011, according to pharmaceutical information publisher First DataBank. But it's a start.
About 10 percent of Eli Lilly's insulin-buying patients will be affected by this discount, according to the company. If this move insulates the company from further drug-pricing criticism while letting it maintain the status quo for insured patients, expect other firms to follow its example and for laggards to be prodded into it.
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