Lilly takes a leaf out of Mylan’s book to defuse insulin price complaints

Lilly's authorised Humalog generic price undercuts Sanofi’s copycat attack, but will cut into branded sales.

Pricing

Lilly's chief executive, David Ricks, was not one of the seven biopharma heads who testified on high drug prices before a US Senate committee last week, but it appears that he is getting the message. The group announced the launch of a half-priced authorised generic version of its insulin analogue Humalog in an apparent response to negative news about diabetic patients rationing their use of a crucial medication.

Lilly is taking a cue from Mylan, which authorised a generic version of Epipen after negative publicity over price hikes for that life-saving treatment. Three separate Capitol Hill hearings on drug prices are scheduled this week, and insulin prices are sure to be a hot topic, so it is a good time for Lilly to make its move.

Back, Admelog

Insulin lispro, as the Lilly authorised generic will be called, will have a list price of $265.20 for a five pack of prefilled pens, compared with around $530 for Humalog and $450 for Sanofi’s generic lispro, Admelog. As usual, the actual price paid by insurers after discounts and rebates is known only to them and their big pharma vendors, and it should be noted that with branded Humalog Lilly managed to squeeze Admelog off of the 2019 Express Scripts national formulary, suggesting that Lilly has been competing on price.

Diabetes formulary inclusions and exclusions, 2019
  CVS Caremark Cigna Express Scripts
Class Included Excluded Included Excluded
Insulin  Fiasp, Novolog Apidra, Humalog Humalog Admelog, Apidra, Novolog, Fiasp
Long-acting insulin Basaglar,  Levemir Tresiba Lantus, Toujeo Tresiba, Lantus None
GLP-1 Ozempic, Trulicity, Victoza Bydureon, Byetta, Tanzeum Bydureon, Byetta, Ozempic, Trulicity Adlyxin, Tanzeum, Victoza
SGLT-2 Farxiga, Jardiance Invokana Farxiga, Invokana, Jardiance None
DPP-IV Januvia Nesina, Onglyza, Tradjenta Januvia, Tradjenta Nesina, Onglyza
Source: CVS and Express Scripts annual formulary report

Insulin prices have become a flashpoint in the drug pricing debate this year, driven in part by the story of a Minnesota type 1 diabetic who died after rationing his medicine when he struggled to afford it through his insurance plan.

Insulin products like the Humalog Kwikpen U-100, on which Medicare spent $1bn in 2016, and Sanofi's Lantus Solostar, a $2.5bn expenditure, saw double-digit annual price increases between 2012 and 2016 in Part D plans, according to the Center for Medicare and Medicaid Services.

During last week’s Senate Finance Committee hearing, Sanofi's chief executive, Olivier Brandicourt, did not receive as much criticism as expected, but the insulin makers will no doubt be in the spotlight when the Senate Aging Committee and House Ways and Means Committee’s health panel convene hearings this week (Big pharma execs decry rebates, but how big might list price cuts be?, February 27, 2019).

Anticipating

In deploying the latest pricing strategy, Mr Ricks owes some gratitude to Mylan's chief executive, Heather Bresch. When Epipen pricing bore the brunt of the outrage in summer 2016 Mylan said it would launch an authorised generic version of its blockbuster. This did not prevent Ms Bresch from being summoned to the House Oversight Committee a month later, but it did give her something to tell lawmakers.

Perhaps Mr Ricks can see himself being put in a similar situation. Such a strategy might make for good politics and public relations, but not necessarily good business: Epipen sales have collapsed 78% since 2016, thanks also in part to competition from Teva and Endo, falling to $245m in 2018.

The sales dynamics of insulin differ from those of Epipen, since insulin is a drug used daily, and prescriptions are filled frequently, while Epipen is an emergency-use injection that is purchased once and refilled only after use or expiry. Some patients stable on Humalog might wish to pay more to stay on the branded version. Lilly also could use several pricing levers to keep Humalog on formulary, enabling the drug to retain a greater share of sales than Epipen did.

But the entrance of a Humalog authorised generic makes it hard to see the current consensus sales forecast for branded Humalog, currently at $1.8bn in 2024, being sustained. Humalog sold $3bn in 2018.

Lilly has the advantage of Humalog being only 15% of its total sales, and it also has five products expected to gain at least $1bn in sales between now and 2024. Epipen, by contrast, was Mylan’s only blockbuster and accounted for 23% of sales when the group made the decision to cannibalise sales with a generic.

It is never easy to write off a flagship brand like Humalog, but at least in this case other products can take up the slack.

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