Capping the cost of insulin: altruistic or strategic?

Market Access
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The rising price of insulin has become one of the most talked about issues across the pharma industry. Ben Hargreaves explains how Eli Lilly decided to cap its insulin price, why it has decided to pursue this action, and what its competitors plan to do in reaction.

Eli Lilly announced at the beginning of March that it would reduce the price of its most commonly prescribed insulins by 70% in the US. Further, the company stated that it would cap patient out-of-pocket costs at $35 or less per month. The changes will come into effect during 2023, but the out-of-pocket costs and pricing for those without insurance will be available immediately. The reaction from within the political sphere was immediate, with the White House and President Biden immediately releasing a statement welcoming the decision and calling on other manufacturers to follow suit.

In comments on the decision, Lilly’s CEO, David Ricks, stated that the move had been made because the US healthcare system “still does not provide affordable insulin for everyone and that needs to change.” The company outlined that it would launch a nationwide campaign in the country to ensure that the public and Lilly insulin users know how to access the affordability solutions on offer. 

Mounting pressure

Lilly’s decision to reduce prices is an unusual action, rarely taken across the pharma industry. More often, it is criticised for the slow creep of prices that occurs through the annual list price increases common across the industry. The insulin market, in particular, has been at the heart of one of the most dramatic price increases in recent years. According to research published in The Lancet, between the years 2007 and 2018, the price of some insulin products increased by more than 200%.

As a result of these increases and due to the numbers of US citizens living with diabetes, approximately 37.3 million, the price of insulin has become a major talking point in US politics. California recently launched a lawsuit against the three biggest producers of insulin, Novo Nordisk, Eli Lilly, and Sanofi, claiming that they had worked together to artificially inflate prices for their insulin products. In President Biden’s State of the Union address, the president pointed to the price of pharmaceutical products as being a target for action, particularly calling attention to insulin as an example of profiteering. 

Similarly, the issue of insulin rationing has been more often reported in the US, as costs to certain individuals had increased. Research conducted on how far rationing extended for diabetics found that approximately 1.3 million people had taken this action. Right Care Alliance states that rationing lead to four deaths in 2017, four deaths in 2018, and five deaths in 2019.

Why prices were driven up

A British Medical Journal article outlines that Lilly’s insulin prices in the US have risen by 1,000% over the past 30 years. However, though it is easy to point the finger at the companies behind the products, especially when only three companies dominate the market, the actual reasons for price increases may not be as simple as appears. A JAMA Network study found that, despite insulin product price increases, the manufacturers’ share of the list price actually decreased between the years 2014 and 2018, while the share for pharmacy benefit managers and pharmacies increased. As a result, the study concluded that policymakers should “consider entities through the insulin distribution system, instead of only manufacturers” when looking to limit insulin expenditure.

In terms of how much impact the price reduction will make on its earnings, Ricks stated that the investors he had spoken to were “not too concerned” about the impact it would make on the business – though he did note that it would contribute to ‘headwinds’, which the company had included in its financial guidance.

Getting ahead

It is unclear as to why Lilly chose this exact moment to reduce its prices. The fact that momentum has been pushing in this direction politically in recent years will have contributed. The recent ‘Inflation Reduction Act’, for example, had provided a guarantee to Medicare beneficiaries that insulin costs would be capped at $35. In California, the state had used $100 million from its own budget towards manufacturing its own low-cost insulin. 

As a result, clear action was being taken to address the cost of insulin. Perhaps just as importantly, the negative public relations emerging from being one among three insulin manufacturers in the headlights over the insulin pricing debate would not have been welcome. In November 2022, Lilly was hit by an embarrassing fake post on Twitter that suggested the company would make insulin free. Despite the false message, the company’s share price plunged by 11%, and Lilly found itself having to apologise to those that had been duped by the post.

Another significant reason that Lilly is able to take such action is that the products which will have their price cut, such as Humalog (insulin lispro), are already seeing their sales fall significantly. Humalog, for instance, saw sales fall 22%, year-on-year, in 2022 annual financials. Biosimilar insulin is also on its way, which could further erode potential sales. By comparison, a new product in Lilly’s diabetes portfolio, Mounjaro (tirzepatide), is expected to rapidly become a blockbuster product for the company – more than covering any losses made by the decision.

Over to you

Lilly's action raised a bigger question for the industry on how its rivals in the sector would react to the price cut decision. Due to the lower price, Ricks outlined that he expects volume in sales to increase rapidly, which could increase the company’s market share for its insulin products, even if it does not increase profit. As the decision by Lilly was welcomed by patient groups, attention quickly turned to the other major insulin manufacturers. The American Diabetes Association released a statement immediately after the announcement, reading, “We applaud Eli Lilly for taking the important step to limit cost-sharing for its insulin, and we encourage other insulin manufacturers to do the same.” In its release on the news, the White House also stated that it was now looking at other manufacturers to follow Lilly’s lead.

The reaction from Lilly's competitors arrived quickly. Novo Nordisk lowered the list price on various insulin products, including pre-filled insulin pens and vials. The company suggested that this would mean patients would pay $25-35 for their insulin. A spokesperson told pharmaphorum, "At Novo Nordisk we appreciate the importance of affordability and access for patients, and recognise that not all patient situations are the same. Importantly, Novo Nordisk will continue to listen and assess to help us understand emerging patient needs and focus on sustainable solutions in an evolving healthcare system.”

For its part, Sanofi released an announcement a day after Novo Nordisk, where it detailed how it would cut the list price of its Lantus product by 78%, as well as establishing a $35 cap on out-of-pocket costs for Lantus. A spokesperson for the company stated, “Sanofi believes that no one should struggle to pay for their insulin, regardless of their insurance status or income level, which is why we have a suite of innovative and patient-centric savings programs to help people reduce their prescription medicine costs.”

The companies involved will now be hoping that their actions are enough to take them out of the crosshairs of one of the most controversial pricing debates in the industry. The question now is whether the actions are enough, or whether the US will move onto targeting the price of other treatments. In the White House's statement, following Sanofi's action, it did not mention other points of attack for the administration, but did confirm that it still plans to push for legislation to ensure that insulin can be provided to patients at no more than $35 per month.