If you’ve been preoccupied with Trump’s latest cabinet appointments, you may have missed the news about a new program sponsored by Eli Lilly and Express Scripts. With great fanfare, the two entities reported that beginning on January 1, 2017, they’ll provide a 40% discount on three Lilly diabetes drugs: Humalog, Humulin and Basaglar. They’ll do so through a free third party App called Blink Health that offers drug discounts to Blink Health users.
According to Lilly and Express Scripts, their innovative new program will help Express Scripts’ beneficiaries cover the costs of the three medications, particularly while plan beneficiaries are trying to satisfy their plan deductibles.
But is this program all that it purports to be? How does the program actually work? And what are the benefits of the program for its sponsors – Lilly and Express Scripts – and for those impacted by the program – plan beneficiaries and plans? Lastly, if the program is not all that it’s cracked up to be, what action should your plan take?
We examine all these questions below. As a Spoiler Alert, we provide the following warning: The impact of Lilly’s and Express Scripts’ new program is contrary to what both entities claim. In fact, the program may actually harm your plan beneficiaries and your plan, not help them.
How does the Lilly Program Actually Work?
If you compare Lilly’s and Express Scripts’ press releases with Blink Health’s press release, the first thing you’ll notice is that Blink Health states that “everyone” has access to the new program: All anyone needs to do is sign onto Blink’s App, purchase and pay for any of Lilly’s three diabetes drugs based on a 40% discount, and thereafter pick up the discounted drugs at any of 67,000 pharmacies.
If you call Blink Health (which we did), you can verify that Lilly’s program is not just for Express Scripts’ members, but everyone else too, including (i) the uninsured; (ii) those with coverage through PBMs other than Express Scripts; and (iii) even those with insurance through government programs like Medicare. Since Blink users will pay for Lilly’s three drugs “outside of insurance,” anyone can take advantage of Lilly’s 40% discount.
Thus, Lilly has decided to subsidize everyone who might have steep out-of-pocket costs for these three drugs, as long as these people obtain the drugs “outside of insurance.”
What Motivated The Program’s Development?
In recent months, a firestorm erupted over ever-increasing drug prices. Mylan took an immense beating for raising the price of its EpiPens from $60 to $600. PBMs – including Express Scripts – were suddenly under attack for their rebate practices. As a result, every manufacturer – and PBM – has undoubtedly become worried about the next major firestorm.
Diabetes treatments appear headed toward Center Stage. There are approximately 30 million diabetics in this country, with about 6 million using insulin. According to Express Scripts’ 2015 Drug Trend Report, of all non-specialty drug therapeutic categories, diabetes medications are the most expensive. Meanwhile, the costs of diabetes treatments have soared in recent years, as reflected in this Wall Street Journal story. And diabetics face increasing difficulties paying for their treatments, as described in a recent Washington Post expose.
That’s especially true, because in the past few years, far more people have plans with deductibles, and deductible amounts have dramatically increased. According to a recent Health Affairs article, almost a quarter of all people obtaining insurance through employers are now enrolled in high-deductible-health plans (HDHPs), up from 4% in 2006. The average deductible amount has increased 67% since 2010. And almost half of workers are covered by insurance with annual deductibles of at least $1,000 for individual coverage.
Accordingly, it makes sense for Lilly and Express Scripts to create an appearance that they are trying to help diabetics confronted with high deductibles.
How Will Lilly & Express Scripts Benefit From The Program?
As could be expected, when Lilly and Express Scripts announced Lilly’s new program, both entities obtained great PR from multiple media sources, including the Wall Street Journal, Bloomberg and Reuters.
When the program begins on January 1st, Lilly will also derive two other significant benefits – one obvious, the other less so. Clearly, Lilly has positioned itself to obtain increased sales in a fiercely competitive diabetes marketplace. Less obviously, Lilly’s sales through Blink will likely result in higher “net prices” for Lilly than its sales through PBMs. Without burdening you with the math, for sales through Blink, Lilly’s net cost will be based on retail pharmacies’ walk-in pharmacy prices (known as U&C), which are far higher than Lilly’s wholesale acquisition costs (WACs) that Lilly uses to sell to PBMs. Moreover, when selling to PBMs, Lilly must provide large rebates, as well as other secret payments that PBMs retain and don’t pass through to clients.
Lilly also benefits from partnering with Express Scripts, since Express Scripts – the largest marketplace PBM – favors Lilly’s diabetes products on Express Scripts formularies and excludes the diabetes drugs of Lilly’s competitors. And Lilly wants to ensure that Express Scripts continues to do so.
Turning to Express Scripts, it also scored a coup. It announced and took credit for (what it pretends is) an innovative program, even though everyone will be able to obtain Lilly’s 40% discount (including those covered by other PBMs). Express Scripts may have also arranged to handle the funding of the 40% discount for Lilly, and thus generated additional fees for Express Scripts. Finally, Express Scripts distracted the marketplace from continuing to focus on Express Scripts’ rebate practices.
So Lilly and Express Scripts both obtained benefits from Lilly’s program. The question is: Will diabetics – and plans – similarly benefit?
The Program’s Impact on Diabetics and Plans
At first glance, those who use insulin products will benefit from the new Lilly program. The uninsured will get lower prices, as will the insured who are satisfying their deductibles.
However, since all Blink purchases are made “outside of insurance,” the insured won’t be able to apply their Blink purchases toward satisfying their out-of-pocket (OOP) ceilings, which act as a stop-loss on total liability. That means that while Lilly’s program may reduce costs for individuals who won’t “hit” their annual OOP ceilings, all diabetics who will hit their OOP ceilings will end up incurring greater costs. All such individuals will:
- Absorb all costs of all drugs purchased “outside of their insurance coverage” through Blink
- Therefore hit their OOP limits later than they otherwise would
- And therefore be forced to absorb other drug and medical costs that they would have avoided, had their OOP stop-loss taken effect earlier
Since most diabetics spend immense sums annually on their healthcare, most diabetics likely exceed their annual OOP ceilings. According to a large study commissioned by the American Diabetes Association, the average annual medical expenditures for a diabetic are about $13,700. Thus, many – if not most – diabetics who use Lilly’s new program will be financially harmed, not helped, by the program.
There’s another potential harm caused by Lilly’s new program. The program may increase the possibility that program users will experience adverse drug-to-drug interactions. When buying drugs through Blink, diabetics’ purchases won’t be recorded in Express Scripts’ – or other PBMs’ – computer systems. Therefore, to the extent that PBMs’ drug-to-drug interaction programs – and other medication management therapy programs – prevent adverse drug impacts, people purchasing through Blink won’t be protected.
Notably, a recent Chicago Tribune story warned that tens of thousands of Americans are being hospitalized each year due to dangerous drug-to-drug interactions. The Tribune found that across 255 pharmacies that it examined, 52% failed to alert customers that their drug combinations posed serious dangers, with many pharmacies ignoring PBMs’ computer messages on such matters. How many more people will be hospitalized if pharmacists don’t receive any PBM messages for customers buying diabetes drugs through Blink?
It’s particularly difficult to understand how Express Scripts could ignore the dangers of dispensing diabetes drugs outside of coverage. As recently as August 2016, Dr. Glen Stettin boasted that another purportedly innovative Express Scripts’ program – the Diabetes Care Value Program – “surrounds each person with the specialized knowledge and support needed to manage increasingly complex therapies that treat diabetes and related conditions.” Why would such services be necessary when Express Scripts is dispensing diabetes drugs, but not of any value when people are satisfying their deductibles outside of coverage? (1)
As for the program’s effect on Plans, our view is Lilly’s program is a mixed bag. A plan’s costs will be slightly lower, because all drugs purchased through Blink won’t be absorbed by the Plan’s insurance. Also, all such costs won’t be accumulated in determining when beneficiaries have satisfied their OOP limits.
But to the extent that beneficiaries would otherwise have protested Lilly’s costs – and those beneficiaries are now appeased – their protests will disappear. And plans will have fewer allies to decry Lilly’s ever-increasing costs. Moreover, if individuals suffer drug-to-drug interactions that might otherwise have been avoided, plans will be the ones paying for most of those costs.
All of which raises the following questions: If diabetes treatment costs rose 14% in 2015 and another 18% in 2016, how much will Lilly increase its drugs’ costs in the coming years? And is that why Lilly and Express Scripts conjured up this program – to decrease the likelihood of an uproar if Lilly’s prices continue to increase?
Equally important, if other brand manufacturers replicate Lilly’s program with Blink, what will be the impact? We think the answer is clear: Those brand manufacturers may successfully reduce the volume of consumer protests. Plans may lose beneficiary allies they might otherwise have had. More beneficiaries may suffer from drug-to-drug interactions. And more brand manufacturers may be free to increase their prices, without anyone noticing what they’ve done.
How Should Plans – and the Media – Respond?
Recent developments make clear that high deductibles are a powerful tool in sensitizing plan beneficiaries to drug prices. Any plan that does not have a deductible in place should consider implementing one, while being mindful of employees’ salaries to ensure employees and their families have access to healthcare.
Plans should also educate their beneficiaries about Lilly’s new program and warn them about its financial and clinical hazards.
For those plans with coverage through Express Scripts – and for our media friends reading this article – we urge you to contact Express Scripts and ask a series of questions:
- Why did Express Scripts take “credit” for this program, if everyone has access to the program through Blink Health?
- What is the financial point of the program, since many – if not most – diabetics who use it will likely incur financial harm?
- And what about the clinical harm that likely will result from the program, particularly given Express Scripts’ recent claim that it’s critically important to provide clinical oversight for diabetes treatment?
As important, we urge all plans – and the media – to challenge all PBMs (including Express Scripts) and all manufacturers (including Lilly) to “come clean” about the impact of their current practices. Ask questions like the following:
- Why doesn’t Express Scripts – and every other PBM – require manufacturers to disclose and sell based on drugs’ “net prices” (factoring in all rebates and all other discounts), which would force manufacturers to compete on price and undoubtedly lower drugs’ costs?
- If Express Scripts – and every other PBM – stopped making secret deals with manufacturers – and instead sold based on “net prices” – wouldn’t plan beneficiaries obtain as good – or even better – price reductions than the discounts off of U&C obtained through entities like Blink?
- Also, wouldn’t PBMs’ new “net prices” be better for plan beneficiaries, because all plan beneficiaries who are trying to satisfy deductibles (not just those beneficiaries using Blink) would have access to reduced prices?
- If manufacturers stopped paying – and PBMs stopped accepting – secret monies that PBMs retain for their own accounts, wouldn’t plans be better off since plans might get the benefit of these manufacturers’ payments?
The Lilly and Express Scripts insulin program differs substantially from what both claim. Lilly and Express Scripts definitely benefit from the program, but plan beneficiaries and plans may incur significant harm.
As is typically the case, if you want to protect your plan beneficiaries – and control your Plan costs – you need to determine what’s actually occurring, and then respond.
We urge every plan – and our media friends – to take the steps we’ve outlined to challenge Eli Lilly’s and Express Scripts’ new program.
You’ll protect your beneficiaries, better control your costs, and help change the marketplace if you do.
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(1) Notably, when Express Scripts announced its new Diabetes Care Value Program in August 2016, its Sr. V.P. Dr. Glen Stettin stated that individuals would be required to get their prescriptions filled at a “novel quality-based pharmacy network” consisting of Express Scripts mail order pharmacy and certain other pharmacies making up a limited network of 10,000 pharmacies (not the broad network of over 67,000 pharmacies sponsored by Blink). It’s hard to reconcile Express Scripts’ position in August with its position six months later when it boasted about Lilly’s program, unless the August program was simply designed to drive more scripts through Express Scripts mail order pharmacy.