Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The drug-pricing debate focuses too much on President Donald Trump's Twitter account, and too little on the fact that price hikes don't work that well any more. 

Holding Up
Eli Lilly shares have managed to hold up in the face of increased price pressure
Source: Bloomberg

According to a report it released Monday, Eli Lilly & Co. had a 50-percent-off sale on its drugs in the U.S. in 2016, giving half the list price of its medicines back to insurers and pharmacy benefit managers, on average. It raised list prices by 14 percent, but only received 2.4 percent of that increase.

Especially in competitive drug classes, payers have gotten very good at squeezing discounts from drugmakers. Lilly's data back up an oft-repeated pharma complaint, that pricing talk focuses far too much on list prices, rather than what's actually paid.

But until very recently, pharma companies were loath to break out this kind of information in detail, and only a few have taken the plunge so far. 

The counter to this stance is that the uninsured -- and patients on some increasingly popular high-deductible health-care plans -- are exposed to list-price hikes. They are also more financially vulnerable.

Lilly has an answer for that, too: It has started a program that gives a 40 percent discount on its diabetes drugs directly to such patients. 

Diminishing Returns
Eli Lilly's price hikes have remained fairly consistent, but rising discounts negotiated by payers mean that they are far less profitable than they used to be
Source: Eli Lilly

Lilly's focus on the crowded diabetes market means its rebates are unusually high. Not every company's discounting is so extreme. Johnson & Johnson reported an average 35.2 percent U.S. drug discount in a similar report earlier this year. But ever-growing discounts and price-hike scrutiny are issues for the entire industry. 

Lilly's response shouldn't immunize it from criticism; one version of its best-selling insulin Humalog has nearly doubled in price since 2011, and that still puts a substantial burden on patients and the health-care system. 

But if companies want to make the point there's more to pricing than headline numbers, then Lilly's playbook -- of increased transparency and muting the impact for vulnerable populations -- is a good place to start.

Correction: An earlier version of this story misstated Eli Lilly's 2016 list-price increase and 2012 average drug discount.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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