Friday, September 30, 2016

Novo's Ills Are Indicative of Something Other Than A Free Market for Insulin

As I've already addressed, a few weeks ago (see my post at for more), Novo Nordisk's CEO Lars Rebien Sorensen rather unceremoniously announced he was retiring early (see for more) which was kind of an acknowledgement that the era of easy price increases for its products in the U.S. is over.  Already, CVS Caremark and United Health announced that they are dropping Sanofi's Lantus in favor of biosimilar versions from Lilly/Boehringer or Merck/Samsung, and there's reason to presume that biosimilars will pressure Novo's products even more.  This week, Novo also announced it was taking the very rare step of laying off approximately 1,000 employees, something the Danish company has almost never done, including about 500 people in its R&D department.

When a reporter asked him if that meant the company was cutting into the bone of the company, rather than the fat, the response he gave was rather interesting:

"The next line of products have to have an even greater height of innovation, which means those that do not have that height of innovation will have to be culled," Soerensen said. "Otherwise, it's going to be difficult for us to get reimbursement for our drugs. Me-too or me-better drugs will not be good enough in the future and hence we need to prioritize."

That kind of sounds like an acknowledgement (to me, anyway) that some of its newer products, most notably Tresiba (U-100 insulin degludec rDNA origin) is acknowledged even by the current leadership to be a "me-better" product, rather than anything really truly innovative.

Indeed, Jeremy Greene, an associate professor at the Johns Hopkins University School of Medicine said "If any drug should be available generically, it should be insulin." adding the new insulins are "not so much better that it justifies the presence of people who can't afford any drug."

In August, the $#!t hit the fan over EpiPen price increases.  In effect, the price of the EpiPen, which treats emergency allergic reactions and things like bee stings, but is not really a drug that must be taken daily, had climbed sixfold over the last several years. At drug price-comparison website GoodRx, the cheapest price at the time was $614 for a package containing two, or more than $300 per EpiPen, up from about $100 for two EpiPens not too long ago.

The story was an all-too-familiar one: a company buys an old drug that no one else makes anymore, raises prices and impedes patient access to life-saving treatment in the process.  We saw a similar situation when "Pharma Bro" Martin Shkreli made news a few weeks earlier.  As the then-CEO of Turing Pharmaceuticals, he acquired an old anti-parasite medication called Daraprim and immediately increased the price from roughly $13.50 to $750.  He seemed to relish in giving his middle finger to people impacted by the decision.

In the case of the EpiPen, the target of that tired narrative was a medical device with an unusual amount of brand name recognition, no real alternatives and a growing patient population — Mylan Inc.'s EpiPen.  Epinephrine is a generic medicine, and is widely available but the delivery device (in this case, a pen) was unique and made it easy for people who aren't medical professionals to administer.

People with diabetes kind of looked at all the news and thought to ourselves "So what? Welcome to the club, EpiPen folks ... have you seen the insane prices of insulin lately?"  Of course, we didn't have much data to back it up, and since most people really have no clue what the real prices are for medicines we rely on, its a pretty tough claim to substantiate.

But earlier this year, Bloomberg had an interesting article entitled "Hot Drugs Show Sharp Price Hikes in Shadow Market" [] which interestingly enough, looked at insulin prices.

On May 30, 2015, the price for a vial of the blockbuster diabetes medication Lantus (U-100 insulin glargine rDNA origin) went up by 16.1%. On the very next day, Lantus's only direct competitor, Levemir (U-100 insulin detemir rDNA origin), also registered a price increase -- of precisely 16.1%.

The pattern repeated itself six months later when Lantus, from French drugmaker Sanofi, was marked up 11.9% percent, and Levemir, made by Novo Nordisk A/S, matched the price increase again exactly.

Clearly, this is not how competitive, free markets are supposed to work.

I should acknowledge that insulin was definitely not the only type of medicine to exhibit this type of price inflation.  But it is indicative of a market that is definitely not a competitive one, not exactly a free market.

Some of this comes directly from Bloomberg, but its worth sharing with the diabetes community.

Is this price-matching a coincidence?  I think not.

Bloomberg's analysis revealed that in 13 instances since 2009, prices of Lantus and Levemir -- which dominate the global market for basal insulin with approximately $11 billion in combined sales -- had gone up in tandem in the U.S., according to SSR.

The article also discusses the shady world of "shadow pricing", and rebates given to big payers and how prices outside the United States, which arguably subsidizes the rest of the world with the prices paid.  Ironically, the drug and biotech industry lobbied very hard to prevent one of the biggest payers in existence, Medicare, from negotiating drug prices under the Medicare drug benefit signed into law by President George W. Bush.  Most other countries have price controls, or at least are able to negotiate based on how much they are buying.

For example, in Germany, almost every German belongs to one of some 160 nonprofit "sickness funds," or nonprofit insurance collectives. The sickness funds cover both medical visits and prescription drugs. Drug prices there are already lower than in the U.S. because sickness funds negotiate with both physician groups and drug manufacturers to set costs of all treatments across the board. But in the U.S., Medicare isn't even allowed to negotiate lower drug prices.

As for prices, Sanofi and Novo "are taking the same price increase down to the decimal point within a few days of each other," said Richard Evans, an analyst with SSR. "That is pretty much a clear signal that your competitor doesn't intend to price-compete with you."

A pattern of insulin makers matching each others price increases “certainly indicates a market that isn’t competitively healthy,” said David Balto, an antitrust lawyer and former Federal Trade Commission policy director. However, if two companies act independently to follow each other’s price increases, it’s not an antitrust violation, he said.

But Lilly, which once dominated the U.S. insulin market with an estimated market share of 85% for insulin sold in the U.S. back in 1985, basically ignored the diabetes business as it pursued neuroscience with drugs like Prozac and Zyprexa.  Lilly had to partner with the German drug company Boehringer Ingelheim for most of its newer diabetes medicines, but since bringing in Enrique A. Conterno to run the diabetes business a few years ago, has suddenly started appearing on more drug formularies than it has in years.  But Lilly's willingness to compete on price, at least with some big payers like United Healthcare and Kaiser Permanente, doesn't mean retail prices are likely to show any decreases.

For their part, drug manufacturers like to keep prices as secret as possible.

"How much a patient pays is based on a negotiation between the payer and the pharmacy," said Ken Inchausti, a Novo Nordisk spokesman. He said the company couldn't comment fully without knowing details of a patient's health plan.

Have a look at this video (see below, or by visting for the link).

Author P.S., October 8, 2016:  The Wall Street Journal acknowledged big price increases for insulin but seems to lay responsibility for the increases on drug wholesalers like McKesson and AmerisourceBergen for the price increases, not the manufacturers who offer PBMs big "rebates" which reduces the end prices paid for by insurance companies.  For details, refer to the article at: "Insulin Prices Soar While Drugmakers' Share Stays Flat"

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