Source: STAT News
Among the demands that President Trump has made to the pharmaceutical industry to lower drug prices, there’s been one that companies have enthusiastically supported: selling drugs directly to consumers.
Even before Trump began discussing the idea, Eli Lilly and Novo Nordisk had adopted this model for their blockbuster weight loss treatments — offering discounted cash prices to patients not using insurance.
More recently, Bristol Myers Squibb said it would start selling its popular blood thinner Eliquis this way, and Novo said it would do the same with Ozempic, its diabetes drug. Major companies including Pfizer, AstraZeneca, and Roche have also voiced their backing in recent earnings calls. The idea has been discussed so often that some in the industry have adopted a snappy turn of phrase to describe it: “pharm-to-table.”
The reality, though, is far more complicated. Selling drugs directly to consumers is unlikely to make most of them more affordable, even if doing so boxes out insurers and the “middlemen” known as pharmacy benefit managers, several health policy and drug pricing experts told STAT. The cash prices that pharma companies are willing to offer for their drugs (which currently stand at several hundred dollars per month) will never be as low as the prices patients can get through insurance. And if patients buy their drugs directly from pharma companies, none of their spending contributes to their deductibles or out-of-pocket maximums meant to limit costs over time.
That’s not to say the model wouldn’t benefit the drug industry, particularly in the case of medicines not widely covered by insurance. GLP-1 drugs for obesity, which are hugely in demand, have notably brought in substantial sales through direct-to-consumer online portals. But the adoption of that model for even those drugs hasn’t necessarily led to greater affordability or equity in access.
The price tag for Lilly’s Zepbound when offered at a cash price — several hundred dollars a month — is still unattainable for many patients. The company’s decision to sell the drug directly to consumers appeared to be driven more by a desire to capture market share than to increase affordability, some experts said.
“I just don’t want it to be seen as, like, ‘Well, now we’ve solved the problem because customers get to buy out of pocket,’” said Craig Garthwaite, director of health care at Northwestern University’s Kellogg School of Management. “For the vast majority of Americans, they just simply do not have the means to do that.”
Some experts see no harm in pharmaceutical companies selling drugs directly to consumers who have the means to pay more and can’t get access to certain drugs through their insurers. Others view the industry’s push for the new model as a way for it to shirk responsibility for addressing high drug prices in a meaningful way.
“I think the drug companies are trying to do things out of the optics of looking good, like they’re trying to make progress on drug prices without actually being willing to tackle some of the fundamental challenges of pricing in the system,” said Ben Rome, an instructor at Harvard Medical School who researches drug pricing.
The unique case of obesity drugs
Lilly’s decision to sell Zepbound through its portal LillyDirect appears to have paid off for the company. In its most recent earnings call, executives said that about one-fifth of total prescriptions for the weight loss drug are now from patients using cash pay.
The company now offers a subscription model: If consumers refill their Zepbound prescriptions on a monthly basis, they can get the drug for $499 per month, whereas if they purchase just a one-month supply, they have to pay up to $1,049 at the highest dose. (Zepbond has a list price of $1,086 a month, though payers typically negotiate lower prices.)
Mark Fendrick, a professor at the University of Michigan who researches insurance designs, said that ideally insurers would generously cover obesity drugs. Since they don’t, he said, the direct-to-consumer option “is something I’m happy to see.”
However, others viewed Lilly’s offering less generously.
They say the move was aimed at taking market share away from compounding pharmacies, which were permitted to make cheap copies of weight loss drugs when the branded treatments were in shortage. In this view, Lilly was simply providing a medicine that patients otherwise would have gotten from the pharmacies.
“I don’t know that it’s making medications more affordable for patients,” said Sean Sullivan, a professor at the University of Washington who researches health economics. “I think it’s a smart move on [Lilly’s] part, but does it expand access?”
People with obesity are used to paying out of pocket for meal plans and exercise regimens, but, even at $499 a month, Zepbound is still too expensive for many patients, doctors said.
In an interview, Ilya Yuffa, head of Lilly’s U.S. division, said that the idea behind selling Zepbound directly to consumers wasn’t to tackle compounding, but to address “frictions in the health care system,” like spotty insurance coverage.
In response to criticisms that the cash pay price is unaffordable, Yuffa said, “we understand that the self-pay option is not for everybody, but we’re working towards tackling different components of the health care system,” including trying to get more employers to cover Zepbound and urging lawmakers to allow Medicare cover weight loss treatments.
Still, Trump has homed in on the model as part of his goal to lower U.S. drug prices in line with what other wealthy countries pay. In letters he sent to major pharma companies last month, he demanded that they implement direct-to-consumer distribution models for “high-volume, high rebate” drugs.
Companies have started voicing support for the approach on earnings calls. Takeda suggested that its depression treatment Trintellix could be a candidate for the model, while GSK suggested there was potential in the case of Blujepa, its antibiotic for urinary tract infections, and Trelegy, its asthma medication.
Brian Reid, a consultant for pharma companies, said that outside of obesity drugs, there are many other examples of treatments that are not generously covered by insurers but that could benefit large populations of patients who would be willing to buy them directly. “I recognize that these things are not solutions for everyone. But at this point, we’ve got solutions for no one oftentimes,” he said.
Other experts, however, don’t see how such offerings will help make drugs more affordable at scale.
Cash pay prices, after all, are still relatively high. BMS said last month it will start selling its blood thinner Eliquis at $346 a month, though that’s a 43% discount off the list price of $606. Novo said it will start offering its diabetes treatment Ozempic at $499 a month, about half off the list price.
In a written statement, Adam Lenkowsky, BMS’ chief commercialization officer, said the offering “provides an opportunity for uninsured, underinsured and self-pay patients to significantly lower their out-of-pocket costs for this critical medicine.” He added, “we share the Administration’s goal that more can be done to improve affordability, increase transparency and cut out the middleman for Americans.”
Dave Moore, head of Novo’s U.S. operations, said in a statement, “We are continuously exploring innovative ways to make our authentic, FDA-approved medicines accessible to those who need access.” The company said its Ozempic offering is unrelated to Trump’s drug-pricing order.
Even though drugmakers appear to be offering big discounts when they sell directly to patients, cash prices are generally much higher than the copays or coinsurance that patients would pay through their health plans. And even if patients have high-deductible plans, they may still be better off paying for drugs at the original, undiscounted prices so that they can meet their deductibles and get closer to their out-of-pocket maximums, said Stacie Dusetzina, a health policy professor at Vanderbilt University Medical Center.
Besides, the people who can afford to pay the cash prices probably already have good health insurance, she added.
Trump has made other demands of the pharmaceutical industry as part of his so-called “most-favored nations” plan, including that companies cut prices that they offer to Medicaid, Medicare, and commercial payers. Yet the notion of implementing direct-to-consumer models is the only one with which the industry has publicly agreed.
“Is that an attempt to show the president that they are responding to his demands that they take some action on drug prices, and trying to shift the focus away from his more specific demands related to most-favored nation pricing?” said Juliette Cubanski, deputy director of the program on Medicare policy at KFF, a health policy research organization.
Pharma still benefits from the insurance system
The movement toward direct-to-consumer sales comes amid persistent frustration over high drug prices. But in the professed view of the pharmaceutical industry, the problem is the fault of pharmacy benefit managers, which negotiate prices on behalf of payers and which critics contend pocket much of the profits of sales by demanding rebates from drugmakers.
“We know that PBMs in the United States take more than 50% of the profitability,” Thomas Schinecker, chief executive of Roche, said on a recent earnings call. And so, he added, a direct-to-consumer model “would be one of the easiest ways to impact pricing for the patient without destroying innovation.” (Although PBMs do take cuts of drug rebates, most money is directed back toward the employers and government programs that hire them to negotiate.)
At the same time, drugmakers also contribute to high drug prices and also benefit from the current insurance system, said Rome of Harvard. That’s why pharma companies likely won’t broadly commit to a direct-to-consumer model with significantly lower cash prices, he said.
Look no further, Rome said, than the prices currently set for direct-to-consumer — they’re likely about the same as the net prices negotiated by payers after rebates and discounts. If pharma companies were to substantially lower cash prices, he added, then payers would either try to negotiate net prices down even further, or decide to stop paying for the drugs altogether and have patients buy the medications directly.
That would be a bad outcome for patients, Rome said, because then they would be on the hook for paying for drugs on their own — without any limits on cost that insurance plans offer. It would also be a bad outcome for the pharma companies, because they would be much more vulnerable to patients’ price sensitivities.
“If you’re a pharmaceutical company, your ideal situation is that a drug is covered by insurance with zero cost-sharing for patients,” so that there are no financial barriers getting in the way of patients taking the medicine, Rome said. But, “if everything goes direct-to-consumer, that’s the exact opposite. People are fully cost sensitive to the medicine at whatever price you’re setting, and so now you’re on the hook for the access problem.”
“Right now, the industry can blame insurance companies for the out-of-pocket cost problem,” he added, “but once it’s direct-to-consumer, they can’t blame insurance companies anymore.”
