The Market is Working: Eli Lilly Moves to Cut Insulin Prices

Recently, drug maker Eli Lilly announced it would slash the price of some of its most commonly prescribed insulin products. The price of insulin has generated controversy for the last few years with activists calling for price caps due to rising out-of-pocket costs.

Insulin prices are high in part due to the rebate system insurers and pharmacy benefit managers (PBMs) utilize. For example, consider a drug with a list price of $1,000. If an insurer or PBM gets a 25% rebate, they are buying that drug for $750 (net price). Unfortunately, when patients get to the pharmacy counter to get that prescription, their copay or coinsurance is based on the list price of the drug, not the net price their insurer pays. In the above example, a patient with a coinsurance of 20% will pay $200 instead of $150.

To get their insulin on insurance company or PBM formularies, drug manufacturers are being forced to give increasingly high rebates, which in turn requires them to raise the list price to cover costs. However, new competitors have emerged in the insulin market which are looking at new low-cost ways to produce insulin and its biosimilars. Companies like Utah-based Civica and Mark Cuban’s Cost Plus Drug Co. have plans to bring products to patients that are a fraction of the cost.

This likely prompted Eli Lilly’s decision to cut the price of their most commonly prescribed insulin products. Sanofi and Novo Nordisk, the other two largest insulin manufacturers, are likely to follow. All of this happened without government intervention. New competition forced prices in the insulin market to come down on their own—no price caps necessary. This is a great example of the free market working the way it is supposed to and how competition can bring down the cost of prescription drugs.

To find out more about the dangers of price fixing on prescription drugs, check out these publications:

The Truth About Price Controls and Prescription Drug Spending

Price Fixing Prescription Drugs Will Cost Us In Cures

Why Price Fixing and the International Price Index are Bad for America

In Depth: Health

There has never been a time when both federal and state jurisdictions have been more in control of American’s healthcare than it is today. Implementation of the Affordable Care Act is well in motion, and each state has considered how to address provisions of the federal law as it has…

+ Health In Depth