Michael Hiltzik: Eli Lilly is slashing insulin prices, but hold your applause

Michael Hiltzik, Los Angeles Times on

Published in Business News

Eli Lilly & Co. played the altruism card like a champ on Mar. 1, when it announced steep price cuts on its insulin products of as much as 70%.

The big drug company said its action was all about helping diabetes patients, its goal being to "help Americans who may have difficulty navigating a complex healthcare system that may keep them from getting affordable insulin."

According to Lilly Chairman and Chief Executive David Ricks, America's healthcare system "still does not provide affordable insulin for everyone, and that needs to change."

Lilly basked in public praise after the announcement. President Biden observed that Lilly's cuts would force its two principal competitors, Novo Nordisk and Sanofi, to follow suit.

If you're inclined to think better of Lilly for taking this dramatic step, here's our advice: Hold your applause.

The truth is that Lilly's price cuts won't cost it a thin dime in profits; it may even collect higher profits. Wall Street recognized that instantaneously: The price of Lilly shares rose on the day of the announcement and has continued to move higher ever since, gaining nearly 6% through Thursday's trading.


Moreover, the price rollback still doesn't bring Lilly insulin back to where it should be on an inflation-adjusted basis compared with the price of its key product, Humalog, upon its launch in 1996.

Back then, Humalog cost $21 per vial, which would be about $40 in today's money; the rollback will reduce the price of a vial from $274.70 to $66.40, according to calculations by the Washington consulting firm Veda Partners. So it's still higher by two-thirds than it should be, accounting for inflation.

Another factor driving Lilly's announcement is the intense public scrutiny on insulin's inflated price. The Inflation Reduction Act passed last August including a provision capping the out-of-pocket cost of insulin for Medicare prescription drug enrollees at $35 a month. That benefit has been widely and loudly touted by President Biden as evidence of his commitment to pro-consumer policy-making.

In line with that legislation, one element of Lilly's price-cut announcement is a cap of $35 per month on out-of-pocket charges for insured customers. As I've reported before, these patient-assistance programs only camouflage for consumers the true costs of their prescriptions — insurers still pay the drugmakers' high prices, which end up in higher premiums for everyone.


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