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Eli Lilly is shaking up the pharmaceutical industry with a latest website offering telehealth prescriptions and direct home delivery of certain drugs, including its red-hot weight reduction treatment Zepbound, to expand patient access.
The corporate’s direct-to-consumer push announced Thursday, the primary of its kind for an enormous drugmaker, won’t necessarily upend the pharmaceutical industry and the prescription drug supply chain alone, based on some analysts.
But other drugmakers could follow suit with their very own direct-to-consumer models, based on some analysts. That would add more pressure on what many critics call a complex system for distributing, pricing and prescribing drugs within the U.S. — a structure they are saying has led to higher prices and fewer decisions for patients.
“There’s all the time a possibility for disruption. I believe you need to never rule out any kind of disruption,” BMO Capital Markets analyst Evan Seigerman told CNBC. “I do not think that’s necessarily happening tomorrow, but I believe that you need to never assume that things cannot change.”
Lilly’s latest platform comes as other corporations move to disrupt the drug system ultimately, partially as they face more political pressure to chop consumer costs and increase pricing transparency.
Those actions come as lawmakers goal drug supply chain middlemen in latest laws and because the Biden administration takes its own steps to rein in prices of medicines, reminiscent of by giving Medicare the ability to barter down drug prices for the primary time in its six-decade history.
Eli Lilly said its latest effort — dubbed LillyDirect — goals to extend access to medicines for chronic diseases, including the highly popular weight reduction drugs.
Those treatments, which have soared in demand over the past 12 months as they assist patients shed unwanted kilos, are stricken by supply constraints and concerns about potentially harmful knockoffs. Patients also face long waitlists to fulfill with obesity medicine specialists who can prescribe the drugs to them, an issue Eli Lilly hopes to deal with, based on Seigerman.
Eli Lilly’s Zepbound won Food and Drug Administration approval just two months ago, but some analysts say it could garner greater than $1 billion in sales in its first 12 months available on the market.
LillyDirect won’t significantly disrupt the industry
Eli Lilly’s site eliminates the necessity for a patient to go to the doctor’s office to get a prescription and, in some cases, for a pharmacy to fill it.
But some analysts said Eli Lilly’s site alone is not going to significantly threaten the normal drug distribution system, which involves a multitiered network of manufacturers, drug wholesalers, pharmacies and pharmacy profit managers, or PBMs.
“I do not think PBMs and the entire infrastructure that we’ve got are going anywhere,” Seigerman told CNBC. “I believe what [Eli Lilly] really did was discover some friction points in getting these products [weight loss drugs] to patients, they usually’re coming up with a technique to solve for that.”
“From my understanding, it’s just that there is not any retail pharmacy where a patient is having to go hunt for that individual [drug] dose, it’s being shipped right to them,” he said of Eli Lilly’s services.
Eli Lilly’s site connects patients with an independent telehealth provider who can prescribe any FDA-approved weight reduction drug or other medications for diabetes and migraines. If the prescribed treatment is Eli Lilly’s, the patient can have a third-party online pharmacy deliver it to their door.
Patients will even receive Eli Lilly’s discounts for drugs in the event that they qualify for the corporate’s savings-card programs, the corporate noted in a release. One program allows individuals with insurance coverage for Zepbound, which costs greater than $1,000 per 30 days, to pay as little as $25 out-of-pocket. Meanwhile, those whose insurance doesn’t cover the drug may have the opportunity to pay as little as $550.
Some experts view that transparent pricing as a shot across the bow to PBMs, the most important of that are owned by CVS, UnitedHealth Group and Cigna.
Drugmakers have long complained that they provide PBMs steep drug discounts in exchange for higher placement on a formulary — an insurance plan’s list of preferred medications — just for those middlemen to not pass along savings to patients.
But Eli Lilly’s savings-card program and latest site won’t cut PBMs out of the equation.
“In case you still use your medical health insurance to get these drugs through [Eli Lilly’s] website, it’s still going to get processed by a PBM,” Jeff Jonas, a Gabelli Funds portfolio manager, told CNBC.
Patients who get drugs reminiscent of Zepbound from Eli Lilly’s site can decide to pay with money to avoid PBMs altogether. But Bernstein analysts said in a Thursday note that they expect the “overwhelming majority” of potential weight reduction drug users to get medications through insurance.
Other drugmakers could follow Eli Lilly
More pharmaceutical corporations could adopt the same approach to Eli Lilly’s.
Cantor Fitzgerald analyst Louise Chen said drugmakers may benefit probably the most from using a direct-to-consumer pharmacy model for high-selling drugs.
“Reason for the dimensions of your effort, it [would] probably make sense for greater drugs,” Chen wrote in an email to CNBC. “You get more bang for the buck and you might be reaching more people.”
But Chen said it might be harder for a drugmaker to pursue a direct-to-consumer model with smaller, more specialized drugs, reminiscent of treatments for complex, chronic, or rare medical conditions. For instance, some drugs require specialized training for administration, reminiscent of injecting or infusing a therapy right into a patient’s vein through an IV.
Drugmakers that do adopt a direct-to-consumer approach could add much more pressure on the nation’s traditional drug supply chain after other corporations moved to simplify the system in recent months.
That features CVS Health, which announced plans to overhaul its business model for pricing prescribed drugs in December, adopting a model just like billionaire Mark Cuban’s direct-to-consumer pharmacy, Cost Plus Drugs. Health-care giant Cigna also announced in November that its PBM will offer a pricing model similar to Cuban’s enterprise.
Cost Plus Drugs goals to drive down the worth of medicines broadly by selling them at a set 15% markup over their cost, plus pharmacy fees.
That company is already shaking up the broader health-care industry: CVS suffered a blow over the summer when a serious California health insurer, Blue Shield of California, announced it should now not use the corporate as its PBM and as a substitute will partner with several other businesses, including Cuban’s firm and Amazon Pharmacy.