Lilly Sees Insurers Pushing More Aggressively for Lower Prices

Health-coverage managers are becoming more aggressive in demanding discounts and exclusive deals from drugmakers to drive down the cost of medicine, Eli Lilly & Co.’s diabetes business chief said.

While a developing price war over hepatitis treatments provides the most recent example, the tactic is common with diabetes treatments and is expanding quickly into drugs for other diseases, said Enrique Conterno, senior vice president of Lilly’s diabetes business.

Express Scripts Holding Co., the biggest manager of drug benefits for insurers and corporations, has led the charge, pushing for price cuts on new hepatitis C medicines that can cost $1,000 a day. The trend has weighed on drug-company shares as investors grow concerned that it may cut into revenue.

“It’s not just Express Scripts,” Conterno said in an interview today at the JPMorgan Healthcare Conference in San Francisco. “We see more payers narrowing their formularies.”

Conterno declined to name the insurers or pharmacy-benefit managers that are adopting more assertive stances. Half of the companies that contract with Lilly for meal-time insulins either have an exclusive provider or put in strong incentives to favor one drug over others, he said.

Express Scripts sent shares of Gilead tumbling last month when it struck a deal to make AbbVie Inc.’s hepatitis C drug the preferred medicine for coverage in many cases. CVS Health Corp. and Anthem Inc. followed suit with exclusive agreements for Gilead’s drug.

And today, Prime Therapeutics, which manages benefits for about 25 million patients on Blue Cross and Blue Shield plans, said both drugs had become so heavily discounted that it didn’t need an exclusive deal for either.

Lilly has tried, when possible, to stay out of this kind of price fight by not pushing for deals that exclude competitors’ medicine from the coverage list, Conterno said.

“The second we exclude other products, they will have to respond,” he said. “Then we create this spiral, which we’ve seen in hepatitis most recently. I’m sure it’s not going to stop there, between AbbVie and Gilead.”

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