Reminder: The Curve is off the rest of the week (probably), plus Labor Day. Keep a lid on things, pls.
Lilly is making its Zepbound obesity med available in vials (as opposed to pens) for as little as $399 a month for self-pay customers through its LillyDirect platform.
There are a lot of threads to pull on here. It’s a reminder that list prices are not good proxies for what customers pay (or are supposed to pay). It’s a sign that Lilly is working overtime to find workarounds to the fact that insurance companies won’t reimburse what are cost-effective meds. It’s clearly an attempt to address concerns about counterfeit medicines.
It’s also an expansion of the LillyDirect experiment in direct interaction between drugmakers and consumers … a concept that Pfizer is also dabbling with, per today’s announcement on PfizerForAll. STAT has a thoughtful review of the phenomenon, and Mark Cuban also has his antennae up: “I see this as a direct shot at the big PBMs,” he said on LinkedIn.
I don’t know where this experiment goes, except to note that both Lilly and Pfizer have taken pains to emphasize that their programs are designed to make the system easier for patients. That sets up an interesting contrast with health insurers, who to seem be shooting to do the opposite.
AThe argument that Medicare price controls will harm innovation rests on two simple questions.
First, will price controls reduce the amount of revenue flowing to industry?
Second, does reducing revenue reduce R&D spending?
The answer to the first question is fairly simple: yup, price controls are going to suck billions out of the system. That’s the whole point. That money is mostly coming directly from drug companies. This is not a particularly controversial statement.
The answer to the second question is also clearly “yes,” though there is some debate among economists about how strong that connection — economists like to use the term “elasticity” — is.
The upshot, then, is the — absolutely — price controls will lead to less R&D. There is a fierce debate about the degree of that impact. You can argue that, eh, the IRA won’t lead to much revenue reduction. Or you can make an elasticity-based argument. But the underlying truth is that industry will take a hit.
I’m being dull and pedantic about the economics here because of the Vox piece that I mentioned yesterday. That article is best summed up by its subhed: “The case against Medicare drug price negotiations doesn’t add up.”** And it goes on to essentially ignore the two factors I just talked about in favor of cherry-picking papers that make more magical claims.
I find this sort of journalism frustrating because it has the feel of an effort to justify a pre-existing conclusion.
That doesn’t mean that we can’t talk about the impact of the IRA on innovation. If you want to argue that the law, because of changes in benefit design and the way it targets late-in-lifecycle, won’t have that big an impact on revenues, that’s probably fair game. And if you want to get into the weeds on elasticity, that’s actually a lot of fun***.
And if you want to make the point that, sure, we’ll lose innovation, but it’s worth it to drive down costs, that’s intellectually defensible.
But to just hand-wave away the basic economics is not particularly useful.
** The piece also goes into ways of reducing drug costs by reducing R&D costs, with a lot of attention paid to the potential of AI. All of that is a little problematic but outside the scope of today’s rant.
*** “Fun” relative to a lot of other topics economics in economics. Like the discount rate, lol
First off, I want to offer a correction (or, at least, a clarification). In talking yesterday about the 340Brouhaha kicked off by J&J on Friday, I implied a distinction between “discounts” and “rebates.” And a reader gently corrected me: rebates are discounts, they’re just discounts paid differently. Traditionally, 340B discounts are applied at the point of sale, a rebate model just changes when and how the discount is realized. Because we are — or may soon be! — in lawsuit territory, the semantic matter. Please continue to keep me honest.
There’s been more 340B coverage over the past 24 hours — Endpoints, Dive, Fierce — though those stories didn’t necessarily advance the story. There are rumors of a 340B Report piece due to drop today, too, which might further illuminate what happens next.
A new JAMA “Perspective” by the Harvard PORTAL folks takes aim at patient assistance programs. It is, unsurprisingly, tilted against drugmakers, but it’s worth reading to see how the issue is being presented to doctors. (The line that convinced me that the piece was not necessarily a sober recitation of the facts was this innocent description of alternative funding programs, perhaps the most twisted idea in health care: “third parties manage coverage for expensive drugs by seeking out and using patient assistance programs on patients’ behalf.”)
Express Scripts is booting brand-name Humira off of its preferred formulary, following CVS’ lead. But the media coverage largely misses the real trend here: the PBM is going to be pushing its own white-labeled biosimilar (also following CVS’ lead). PBMs getting into the drug business should be the second-biggest** health care story in the country right now, yet the word “Quallent” hardly shows up in my newsfeed.
** The death of retail pharmacy — across the board — should be the biggest story in the country. That, too, is woefully undercovered.
Header image via Flickr user Kevin Dooley.
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