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Blog: Jim Harenberg, VP Strategic Solutions
As a Lilly alumnus, I will disclose I hold the company in high regard for many reasons: its relentless pursuit of innovative medicines; its intelligent and passionate employees striving to cure disease and provide life-altering care; and the tremendous career and development opportunities the company offers its employees.
Recently, it seems Lilly wants to lead change in the economics of drug pricing and create positive change in the world of pharmacy benefits. But do they?
I am no longer employed in the pharmaceutical industry. I now work at Apex Benefits and focus my expertise helping employers better navigate the economics and affordability of pharmacy benefits for their employees, retirees and those who depend on them.
Lilly has promoted two seemingly favorable new positions recently that may demonstrate the company is moving toward making pharmacy benefits more affordable for employers and individuals. But I can’t help exploring these positions with a fair amount of skepticism – at least regarding the potential impact on commercially insured patients.
As one example, Lilly announced an authorized generic for Humalog priced at about half its current cost. On the surface this seems great. And, if Lilly follows this action by advancing more of their brand medicines to the generic stage quickly, I will applaud. I will also applaud the potential benefit of this change for uninsured patients.
This could be a gamechanger as an authorized generic effectively removes rebates from the pharmacy cost equation. This eradicates one murky element of today’s pharmacy benefit market as well as the warped incentives that rebates can create for pharmacy benefits managers (PBMs), health plans and other intermediaries in drug distribution.
BUT, is Lilly being altruistic and have they truly lowered the cost of Humalog for the commercial patient? Nope. Not really.
Lilly and many PhRMA manufacturers have publicly decried the gross-to-net degradation caused by the demand for higher and higher discounts, rebates and other value transfers by PBMs in particular. Lilly has projected that its 2017 net sales were discounted by about 51 percent of gross sales. Wait. Think about it. Lilly just announced it cut Humalog by 50 percent through its authorized generic. So, if Lilly did average a 51 percent discount in 2017, aren’t they giving themselves a one percent price increase now?
Please don’t misunderstand. I applaud all stakeholders in the drug, drug distribution and pharmacy benefits systems working together and trying to affect positive change. Whether it is through authorized generics or tearing down the “rebate wall” (referring to another recent position by Lilly), I look forward to seeing what efforts can sustainably change the system to increase access to lowest cost medicines without sacrificing investment in innovation.
Most importantly, I hope this creates a positive shift toward patients and their employers having greater peace of mind that they’ll be able to afford the medicines they need without worry of financial devastation.