Lilly Takes a Stab at Pricing Transparency, But Is It Enough of the Right Data?

Lilly Takes a Stab at Pricing Transparency, But Is It Enough of the Right Data?
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Hoping to deflect criticism of its pricing, Eli Lilly released data showing that rebates and discounts paid to middlemen are increasingly reducing the list prices charged for its drugs.

The drug maker issued a report indicating list prices for its medicines rose a hefty 14 percent last year, but less than the 16.5 percent increase in 2015. However, the average discounts off US list prices rose to 50 percent from 28 percent over the past five years. As a result, Lilly maintained increases in net prices — after paying rebates and discounts — fell to 2.4 percent from 9.4 percent in 2015 (see page 15).

“Our discounts are now larger than ever,” Lilly chief executive David Ricks wrote in a blog post to announce the report. “… We hope this greater level of transparency makes it easier for patients, physicians, policymakers, and others to understand our pricing and our efforts to help make our medicines affordable for everyone.”

The disclosure is the latest attempt by a major drug maker to push back against rising controversy over the increasing cost of medicines. Numerous polls have indicated that Americans want the federal government to take action and President Trump has accused drug makers of “getting away with murder,” although his administration has not yet issued any concrete proposal.

In response, a few drug makers — Allergan and Novo Nordisk, for instance — have committed to limiting most annual price hikes to single-digit increases or have released select pricing data, as Merck and Johnson & Johnson recently did. An increasingly favorite tactic, however, is to argue that discounts and rebates eat up much of the higher prices, as Lilly has done in its report.

Drug makers are pointing fingers at pharmacy benefit managers, which negotiate rebates and discounts in exchange for placing drugs on formulary lists for insurance coverage. The pharmaceutical industry maintains that pharmacy benefit managers boost rebates in order to bolster their own profit margins. The pharmacy benefit mangers deny this and counter that their negotiations lower prices for health plans

Lilly is under added pressure after lawmakers asked federal authorities to investigate the company and two rivals — Sanofi and Novo Nordisk — for alleged price collusion over insulin. Consumer lawsuits followed.

However, the argument offered by Lilly may fall short of its goal.

For one thing, the report only offers so-called top-line information — there is no data about pricing for specific medicines. As a result, there is no way to actually know the extent to which Lilly raised prices on some of its most widely used or expensive medications, for instance, and how rebates and discounts may have affected what health plans ultimately paid.

Another point worth noting is that Lilly also subtracted “channel costs,” along with rebates and discounts given to pharmacy benefit managers and insurers in order to calculate net prices. A company spokesman defined these costs as payments to wholesalers.

“There are discounts that reduce the price of a drug for everyone and there are rebates that do not reduce prices for everyone. But if a wholesaler does not pass along discounts, then these may not be reducing the overall cost of the medicine, and that’s confusing.” said Dr. Walid Gellad, an associate professor of medicine and the co-director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.

“What they’re doing is trying to make the point that the amount they’re getting for their drugs is not going up 15 to 20 percent every year,” he continued. “I think that the main purpose they’re trying to demonstrate is the amount they get for drugs is not as much as everyone thinks. So it’s not so much about transparency but about defending their position.”

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