A drugmaker just released a half-price version of a life-saving diabetes medication in a bet that a lower price tag will help it escape the political crosshairs

  • On Monday, diabetes drugmaker Eli Lilly said it plans to make an “authorised generic” version of its life-saving diabetes medication Humalog and sell it for half the price of the branded version.
  • Humalog is a type of short-acting insulin, which helps people with diabetes process the sugar in their blood. Its list price has risen more than 1200% since it was first approved in 1996 to $US274.70 a vial.
  • The authorised generic version of Humalog will cost $US137.35 a vial or $US265.20 for a box of five pens.
  • Price increases for insulin have put pressure on people living with diabetes who don’t have insurance, or whose insurance plans require them to pay the full price of the medication.

One of the most commonly used insulins just got a price cut.

Drugmaker Eli Lilly said on Monday that it will make an “authorised generic” version of the life-saving diabetes medication Humalog, and sell it for half the price of the branded drug. US lawmakers have launched investigations into the cost of insulin, and high prices for the medication have put pressure on people living with diabetes who don’t have insurance, or whose insurance plans require them to pay the full price of the medication.

“Solutions that lower the cost of insulin at the pharmacy have been introduced in recent months, but more people need help,” Lilly CEO David Ricks said in a statement Monday. “We’re eager to bring forward a low-priced rapid-acting insulin.”

The authorised generic version of Humalog will come in at a 50% discount to the list price of the branded version at $US137.35 a vial and $US265.20 for a box of five pens.

This isn’t the first time a drug company has used authorised generics as a way to alleviate scrutiny over high prices. In 2016, EpiPen-maker Mylan came out with a similar strategy, offering an authorised generic version of its emergency allergy medication at half the price of the branded version. Shortly after, Mylan’s EpiPen sales started taking a hit.

There are three companies that make insulin: Lilly, Novo Nordisk, and Sanofi. Over the past few decades, the prices of those medications have increased substantially, often in lock-step with one another.

For instance, between 1996 and 2017, the list price of Humalog has increased by more than 1200%. Lilly sold $US1.7 billion of Humalog in the US in 2018, making it the company’s second biggest revenue driver after type 2 diabetes medication Trulicity.

Last week, executives from seven pharmaceutical companies – including Sanofi – went in front of Congress to testify on the high price of prescription drugs. Over the course of a few hours, senators grilled the executives about the role they play in setting high prices for Americans as well as what they could do to fix it. Lilly wasn’t present at the hearing.

Read more: No one could explain why this college student saw the price of his life-saving diabetes medication more than double, and it reveals a disturbing problem with the US healthcare system

What are authorised generics?

Authorised generics are basically a drugmaker’s way of staying in the game after competition comes to the market. An authorised generic is identical to the original drug, but it will have different packaging or labelling.

Unlike chemical drugs, such as statins to lower cholesterol or pain medication like ibuprofen, insulin is made of living cells. The industry calls it a “biologic” product. It’s a lot more complicated and costly to manufacture, meaning competitors haven’t been rushing to the market.

Even though they have been increasing the prices of their drugs, insulin-makers have seen their net revenues for insulin fall over the past few years. That’s because middlemen have negotiated bigger discounts through rebates, though patients at the pharmacy counter often don’t benefit directly from those discounts.

Through the authorised generic, Lilly can get around the middlemen, potentially giving patients a lower price at the pharmacy counter, while keeping just as much revenue for itself.

Sanofi, which makes a long-acting form of insulin called Lantus has faced similar pricing pressure. While it has access programs aimed at lowering the price of the drug for patients facing high prices at the pharmacy counter, it has not offered an authorised generic version.

Sanofi, too, has blamed, middlemen for pushing up the cost of its drugs. Last week, CEO Olivier Brandicourt provided a rare look behind the curtain of drug prices, with a detailed breakdown of the company’s US sales last year. He released a chart showing that of Sanofi’s $US21.6 billion in gross sales in 2018, it kept less than half the revenue, or about $US8.4 billion.

“We want these rebates, which lower net prices, to benefit patients,” Brandicourt said. “Unfortunately, under the current system, savings from rebates are not consistently passed through to patients in the form of lower deductibles, co-payments or coinsurance amounts.”

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