Eli Lilly Stock Climbs After Diabetes Giant Unveils 70% Insulin Price Cut
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Eli Lilly Stock Climbs After Diabetes Giant Unveils 70% Insulin Price Cut

Dec 10, 2023

Eli Lilly (LLY) announced a steep 70% price cut for most of its insulin brands Wednesday in a move Chief Executive David Ricks described as "aggressive." In response, Eli Lilly stock jumped.

The news elicited mixed reactions from patients online. President Joe Biden applauded Lilly's move in a tweet, noting Medicare Part D changes last year capped monthly insulin prices to $35 per month for seniors. But as Ricks noted, that change hasn't extended to the commercial market.

In a conference call with reporters, Ricks said Lilly has been working to lower insulin prices since 2016. That year, the company launched an insulin biosimilar, competing with its own branded version. The following year, Eli Lilly stopped raising list prices for insulin. Still, generics and biosimilars haven't gone after the insulin segment, he said. Without competition, list prices have remained high.

"We have long maintained that as products are innovative, they should be rewarded — to both fund the (research and development), but also to create an incentive for companies to create new and innovative products," he said. "But that post patent, products should become cheap. I think that's the understanding that policymakers and Americans have about how our industry should work."

But that hasn't occurred for the insulin industry, he said. So, Lilly is voluntarily lowering its own prices.

In response, Eli Lilly stock rose 1% to close at 314.17 on today's stock market.

The pricing decision impacts the lion's share of Lilly's insulin labels. Insulin Lispro will now cost $25 per vial, down from $82.41. Insulin Lispro is the off-brand name for Humalog. Lilly also plans to slash the price of Humalog and Humulin by 70% in the fourth quarter. Humalog is its most commonly prescribed insulin.

Further, Lilly plans to launch a biosimilar to Lantus at a 78% discount to the branded version.

The company also announced a plan to cap out-of-pocket costs to $35 a month or lower. This should be an automatic move for most people with commercial insurance. For others, they can register for a card to provide pharmacies at InsulinAffordability.com.

On average, patients pay $21 per month for insulin, said Michael Mason, president of Lilly's diabetes division, on the call. That comes out to $8-$9 per vial of insulin or $2-$3 per pen of insulin. But there are gaps in the health care system. Some people pay far more. Lilly wants to change that.

Though Eli Lilly stock advanced on the news, some observers online questioned why Lilly hadn't lowered prices to this level earlier.

"I don't know whether to applaud Eli Lilly for lowering insulin prices 70% or curse them because it proves they've been price gouging diabetes just because they could," one person said in a tweet.

CEO Ricks said Lilly had expected earlier patient supports, including price cuts, to have a bigger impact than they ultimately did. But the price that goes into the system isn't the same price patients pay due to complexities in the health care system, including rebates and discounts.

"We're the manufacturer of insulin; we can control that list price," he said. "But the list price sometimes doesn't bear a lot of resemblance to what people pay at the pharmacy counter. So, we're changing that piece — which we can — without disrupting the good access that most people have to Lilly insulin."

It's also important to note that the move impacts Lilly's older insulins.

Humulin and Humalog gained Food and Drug Administration approval in 1982 and 1996, respectively. Lantus was approved in 2000. The news release doesn't include any price changes for Basaglar, a long-acting insulin injection approved in 2015.

Further, seven out of 10 Americans with diabetes are not using Lilly's insulins. That could change with the lower prices, however. Importantly, the price cuts are already baked into the company's full-year outlook for adjusted earnings of $8.35 to $8.55 per share and $30.3 billion to $30.8 billion in sales.

Ricks also challenged policymakers, insurance companies and middlemen known as pharmacy benefit managers, or PBMs, to follow suit.

"We're calling on partners across the system to step up and do more," he said.

Eli Lilly stock has dropped off recently and shares are below their 200-day moving average, according to MarketSmith.com. Last year, shares took off on an impressive run on enthusiasm for a new diabetes med called Mounjaro. The company also is testing Mounjaro as a weight-loss treatment.

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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