The debate over drug pricing has featured complicated arguments over profit, innovation, and fairness. At the end of the day, it’s all about patients being able to afford medicine – and Monday brought one of the biggest victories yet on that front.
Eli Lilly & Co. announced that it’s launching an authorized generic version of its best-selling insulin Humalog and that the list price of the drug – the pre-discount sticker price of the medicine – will be 50% lower than the current prescription brand. A vial of the new cheaper product will cost $137.35.
Humalog has been one of the prime examples of how America’s opaque drug pricing can hurt patients, and policymakers and the public at large appear to be fed up. While Lilly CEO David Ricks wasn’t among the seven executives dragged in front of the Senate last week for a scolding on pricing policies, scrutiny has zeroed in on high insulin prices in particular, and his company is clearly feeling the heat. Lilly isn’t the first drugmaker to cut list prices on a best-seller, but it is the first to do so for a product as widely used as Humalog, and the move could have ramifications for the entire market. For patients, it’s good news.
(Related: Lilly Offers Half-Price Insulin)
Humalog has been on the U.S. market for more than 20 years; in that time, its price has nudged higher and higher, a side effect of an arcane pricing system that has driven up the cost of American health care.
In order to secure market share in crowded treatment areas, drugmakers offer discounts to pharmacy benefit managers – middlemen who negotiate drug prices for health plans. Bigger rebates make PBMs happier, so firms have an incentive to boost prices. The result is an inflated list price for medicines like Humalog that’s far higher than what’s actually paid in practice. The problem is, people who lack coverage, have high deductibles, or pay co-insurance don’t benefit from those discounts. They’re exposed to the list price and face bruising costs at the pharmacy counter. That’s clearly unfair, which is why the Trump administration is trying to reform the rebate system in Medicare.