(Bloomberg) – The drug price war for obesity is finally beginning.
After being publicly criticized by the high cost of their weight loss injections, two of the world’s largest pharmaceuticals – Eli Lilly and Novo Nordisk () – are running to close agreements with pharmaceutical benefit managers (called PBM) who control which many Americans receive, as well as telemedicine companies that sell directly to consumers. Investors are concerned about how low prices can go.
This is not the first time companies have faced in the complex world of medicines economy, where table prices often do not reflect what the consumer pays or even how much the manufacturer earns.
The new starts at a higher price. His obesity medicine, Wegovy, costs $ 1,349 for a month of supply, while Lilly’s Zepbound costs $ 1,086. Contrary to the typical consumer economy, this higher price helps new to compete, giving you more margin to offer discounts. Known as “Rebetes”, these are the payments that drugs manufacturers offer pharmaceutical benefits managers in exchange for wider – or even exclusive – coverage by health plans.
This QUID PRO QOO appeared on Thursday morning (1), when CVS Health withdrew Lilly’s Zepbound from its preferential drug list in exchange for the new price concessions not disclosed to its competing medicine, which will make it more widely available. It was a measure that the new one took to increase sales of her drug, which hit the market first, but was quickly losing participation. What is unclear is the extension of the renovates and their final impact on the last lines of the balance sheets.
“A number of investors is worried,” Bernstein analyst Courtney Breen told Lilly executives during the company’s quarterly teleconference on Thursday morning, where most questions focused on whether the company would be behind. Lilly’s shares fell up to 12%, while the new ones closed up 2.1% in Denmark.
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The movements show the continuous power of drug plans, such as CVS’s caremark, to direct market share in highly disputed drug categories, ensuring huge rejects in exchange for a wider distribution. The exclusive nature of the agreement with the pharmaceutical benefit manager is what worries investors so much.
“There are clearly some concerns from investors about the dynamics of PBMs in obesity, given what we have seen in other major health markets in the past, where PBMs put two companies against each other,” said Goldman Sachs analyst Asad Haider during Lilly’s call.
Rebates I have left
Company management said it is trying to move away from setting high table prices and paying higher renovations to medicines plans to obtain preferred coverage. Instead, it is trying to define table prices closer than expects plans to pay for their medications.
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“In the past, it was really about very high table prices and relatively deep discounts to leverage PBMs access, and we have been very vocal to try to get away from it,” said Lilly CEO David Ricks on the call.
Pharmaceutical benefit managers were initially limited with regard to weight loss drugs, as the scarcity meant that both companies could sell their entire production at premium prices. As bottlenecks have decreased in recent months, new Lilly Zepbound US prescriptions have begun to eclipse the New Wegovy, according to data from Symphony Health.
The new agreement with CVS aims to increase its market share. JPMorgan analysts estimated in a note to customers that CVs change could affect up to 26 million people.
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“Novo needs this more,” said Jeff Jonas, portfolio manager of Gelli Funds, who has actions by both pharmacists and CVS. “They know they are losing participation, they know they are becoming the smaller player,” he said. “They were more aggressive.”
It is impossible to know the exact value of the renovations that CVS will receive in its agreement with the new. Both companies refused to provide this information. Prices may fall even more as pharmaceutical companies compete for access to patients.
Rival Redux
Lilly and the new are longtime rivals in the diabetes sector, where they have faced themselves in insulin pricing for decades. For years, they have charged increasingly high table prices to be able to offer higher discounts to pharmaceutical benefit managers such as CVS, ensuring broader distribution agreements in return. But the tactic became toxic because patients with poor coverage or significant co -participation were overloaded at high costs.
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This is not preventing CVS. Now that drug manufacturers have corrected the scarcity, the CVS Caremark unit is putting each other to get the best prices for its members.
“Caremark has managed to do what PBMs do best: to compete clinically similar to each other and choose the option that offers the lowest liquid cost to our customers,” CVS CEO David Joyner told Bloomberg News. “I am proud that we could be the first to launch a solution that promotes greater accessibility.”
The cost of weight loss drugs is one of the “biggest critical points” for companies that pay for prescribed medicines, he said.
When brand drugs were missing, telemedicine companies sold cheaper versions of medicines at a disposal of the law. When the scarcity ends, US regulators hardened the siege of practice and composite versions became harder to obtain.
Lilly and Novo are now taking advantage of the popularity of the telemedicine approach to sell brand medicines.
Earlier this week, the new one signed an agreement with Hims & Hers Health Inc., along with two other telemedicine providers, to sell a monthly supply of Wegovy from $ 499 before subscription rates. Lilly has announced an expanded partnership with Weightwatchers on April 29 to reach customers in search of lower cost treatment options.
Fixed rate
Now, consumers who want to go to a pharmacy to get the medicine can also do this. Through its agreement with Novo, CVS is offering customers who pay a fixed price of $ 499 from Wegovy, a sign that benefit managers may have learned from insulin prices controversies that also need to offer discounts to people who have no insurance coverage.
CVS was a pioneer in the use of exclusive drug distribution agreements for over a decade to obtain higher renovation of pharmaceutical companies, said Troyen Brennan, who was CVS medical director until 2022. Insulin was one of the first drugs subject to exclusivity, which were initially controversial and then widely adopted, he said.
“It was a great movement with many affected patients, and it was really successful,” said Brennan. “The whole reason was to get higher renovations that were then passed on to customers.”
Pharmaceutical companies have long argued that high drug prices are the fault of intermediaries such as CVS, saying that the renovation system increases costs. Even the president is aware of the dispute.
“Every time I talk to him about drug prices, he praises me,” said President Donald Trump, referring to Lilly’s Ricks during an event at the White House that both participated this week. “He tells me about the intermediaries. When I leave the meetings, I say: wow, he’s giving us a great deal.”
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