Auf Wiedersehen Humalog, Hello Regular

Back in June, Eli Lilly & Company announced a deal with Wal-Mart stores (and with unusual fanfare for the company, I might add) that its Humulin insulin would be replacing Novo Nordisk's Novolin in a co-branding deal that makes it the exclusive insulin supplier for the giant retailer's ReliOn brand of diabetes care products.

Rival Novo Nordisk had been the ReliOn insulin supplier for nearly a decade, since a deal was signed with the Danish insulin manufacturer in the summer of 2000 (see HERE for some background on that).

Dow Jones Newswires reported that the move did not appear to be tied to Wal-Mart's stepped-up "rollback" strategy in which the retailer is vigorously cutting prices on many items. Lilly spokesman J. Scott Macgregor told Dow Jones that Wal-Mart would actually be setting the price but hadn't done so yet, although he indicated that Lilly believes the cost will be comparable to the current ReliOn insulin offering. But today, 90-95% of all drugs are paid for by Pharmacy benefit manager (PBM) companies, and increasingly, PBMs are pushing clients to use mail-order pharmacies they actually run, not retail pharmacies, so one might legitimately question just how much in sales the the Wal-Mart deal will actually deliver for Lilly.

Although many companies might regard an exclusivity deal with the nation's (and the world's) largest retailer as a business coup d'état, closer examination suggests that the move is probably more indicative of just far Lilly's fortunes in the U.S. insulin market have fallen. Presumably, the company is making a small margin on Humulin that will be sold under the ReliOn brand, but in order to unseat Novo, it likely meant that Lilly had to give a more generous pricing discount and/or some other incentives to lure the Walmart business from its global insulin rival.

It's almost a quaint memory that back in the 1980's, Lilly commanded as much as 85% of the U.S. insulin market. Enormous changes in how insulin is marketed have taken place since Lilly's former insulin glory days. In fact, the Lilly diabetes care business (aside from the healthy Byetta marketing deal with Amylin Pharmaceuticals) had fallen so precipitously that last September, Lilly CEO John Lechleiter reorganized the company and finally made diabetes care a line of business that reports directly to him as CEO. The man named to the role of President of the Lilly Diabetes business was Enrique Conterno, who also remains a Senior Vice President with the corporation. Mr. Conterno is not a scientist, but a businessman, which is unusual in a company full of chemists, biologists, doctors, pharmacists and lawyers. At the same time, Lilly eliminated it's neuroscience business unit altogether, the same business unit that created Prozac, which is now widely prescribed as a generic drug. To say this was a radical shift in company strategy (and fortunes) is indeed an understatement. Mr. Conterno has his work cut out for him.

How Lilly Lost It's Leadership In U.S. Insulin Market

Historically, the U.S. pharmaceutical distribution system consisted primarily of two parties involved in decision-making: the doctor and the pharmaceutical drug manufacturer (drug companies also relied on retail outlets that sold and distributed the drugs). But decisions about drug purchases (including insulin) were usually made by doctors, whose biggest concern was to prescribe the most effective and safe medicine for their patients. Also, few diabetes patients were eager to alter a treatment protocol that already works well for them, and really, who could blame them?

But by the 1990's, managed care organizations had radically altered the U.S. pharmaceutical procurement business model. Today, preferred provider organizations (PPO), health maintenance organizations (HMO), other managed care providers and in some cases, the few remaining traditional health indemnity insurance plans -- in other words, the payers -- now routinely steer patients towards certain formulary drugs which helps to control one element of healthcare costs. PBMs (notably, Medco Health, CVS Caremark and Express Scripts), who manage the pharmaceutical benefits for large customers and/or payers typically encourage the use of less expensive alternatives to branded drugs whenever available, and use various pricing mechanisms (including tiered co-payments favoring fomulary drugs, or in some cases, complete elimination of co-payments on generics) to steer patients to use "preferred" brands of many different therapeutics. In fact, increasingly, non-formulary brands may not even be covered by healthcare plans under any circumstances.

Novo Nordisk has always been quite adept at negotiating prices for national insurance plans in most of Europe, and took that ability to identify key decision-makers among healthcare providers in the U.S. By 2005, Novo Nordisk had managed to unseat longtime rival Lilly (see HERE for details) and stated it's aspirations to increase it's share of the U.S. market even further.

According to sales statistics compiled by IMS Health, around 2005, all three of the primary insulin suppliers in the U.S. (Lilly, Novo Nordisk and Sanofi Aventis) each had roughly the same share of the insulin analogue market, each with with about one-third of the market. In the past 5 years, while Sanofi Aventis' share has been pretty much unchanged, Lilly's share has fallen to approximately 22%. The beneficiary of Lilly's market share loss: Novo Nordisk, since Sanofi's share hasn't moved.



While there are a number of different reasons behind this shift, a key factor has been a rationalization by healthcare providers of the number of suppliers they wish to work with. If a single supplier can provide a number of different treatments for a number of conditions, chances are the collective price for all of these will be lower with the added benefit of not having to negotiate contracts with multiple suppliers. But when it comes to insulin, Lilly is resting on innovations the company created decades ago and no longer even sells a basal insulin, effectively forcing patient to buy those products from its rivals. Today, unlike Novo Nordisk and Sanofi Aventis, Lilly doesn't even offer a full portfolio of insulin analogues, although it now tells investors it is developing one, that's unlikely to emerge for years to come.

An Encore Performance?

As I've noted, in the last 5 years, my employer has switched insurance companies 3 times. Perhaps insurance companies have adopted a practice used by banks and credit card companies with special "introductory pricing" followed by dramatic price increases. Whatever the reason, I have been with United Healthcare, WellPoint/Anthem and most recently, a comparatively small New York-based insurance provider named EmblemHealth. Based on my experience, I found United Healthcare to be my favorite, but without the buying power of a large corporation, many smaller employers like mine must struggle to deal with runaway healthcare costs. Until healthcare reform facilitates state-based American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges to be administered by a governmental agency or non-profit organization through which individuals and small businesses with up to 100 employees can purchase qualified coverage in 2014, short of changing employers, there is a risk that the healthcare insurer shell-game could happen again because smaller buyers simply cannot get the same kinds of deals on insurance that larger companies can. That's a reality.

I switched endos when my previous endo wasn't on WellPoint's PPO list, but I drew the line on switching again a year later when my employer then switched to EmblemHealth. Instead, I utilized the out-of-network coverage benefit in the plan, which enabled me to stick with the first endo I've had in a number of years that I actually like. He's great, and was the winner of the American Diabetes Association's 2009 "Outstanding Physician Clinician in Diabetes" award: Dr. Daniel Lorber (see HERE for the press release on his award, which now graces the lobby of his office). But he's well aware of the B.S. insurance companies put patients through, and in a previous conversation with him, he lamented how medical doctors' recommendations are too frequently disintermediated by bean-counters at insurance companies who have no training in medicine, but we both acknowledged that things could be worse. In some parts of the world, they are much worse, and patients die from lack of access to life-saving medicines like insulin. I cannot help but wonder if in their afterlives, they end up in the U.S. healthcare system and then have a new set of frustrations that ends up killing them? Karma can be strange that way.

Dear Patient: We're Changing Our Fomulary Based Upon A Careful Review ... Of Our Bottom Line!

Prior to my last appointment with Dr. Lorber, I received a letter from my healthcare insurance provider that looked eerily familiar (I had seen almost the exact same letter from United Healthcare a few years ago, and also from WellPoint ) -- in fact, most of the letter's contents was probably the same regardless of which company sent it. Have a look at the letter HERE:




I find this form-letter a tad amusing when it describes what EmblemHealth calls it's plan to begin using a "step-protocol". Obviously, the bean-counters who drafted this letter are clueless because when it says that doctors must prescribe a GENERIC (hello ... I've been asking where biosimilar generics are for like 5 years now, see HERE and HERE for some background -- the fact is that today, there is no such thing as generic insulin -- @$$#0le bean-counters) or first-line medicine before a second-line medicine can or will be approved. Hello, there are no f'ing generic insulins; they should have known this!

We all know what's going on here.

The insurance company can use flowery language to say they're changing the formulary based upon a careful review of a drug's effectiveness by doctors and pharmacists ... blah blah blah, but who the hell do they thing they're kidding? Novo cut them a deal, and it's now a lot cheaper for them to buy Novo insulins than it is for them to buy Lilly insulins. One need not be an MIT Economics Professor to figure that much out. But I've already tried Novo insulin when United Healthcare switched to Novo. Novolog, based on my personal experience, deserves to be called "Slow-Mo-Log" (meaning it works in slow-motion, or if you prefer, "No-Go-Log") -- it can NOT even be called rapid by any stretch of the imagination, no matter how the company is spinning it's PR web. My experience was that Novolin R was just as fast, plus had the added benefit of not requiring a doctor's prescription and to top things off, it sells for less than half the price!

The irony here is that although EmblemHealth is not removing Humalog from the formulary altogether, the company does not have an alternative the way both United Healthcare and WellPoint did. When United Healthcare did this, if you couldn't use Slow-Mo-Log, you had the option to switch to Sanofi Aventis' Apidra instead. But EmblemHealth does not have an alternative, so I cannot help but wonder how many calls their Clinical Pharmacy Services department will be getting come October 1, 2010? I suspect that if Apidra were available, they'd only get a few calls, but since it's not, it's really anyone's guess.

In the meantime, this also tells me that Lilly and its salesmen/women aren't doing their jobs. In addition to losing huge accounts, they are now losing smaller accounts like EmblemHealth as well. But I cannot fix Lilly's problems, Mr. Conterno has to do that, and he needs to start by getting his insulins on many, many, many formularies that have dumped Lilly insulins during the past few years (and there are many who have, I've been insured by 3 of them). Doing so is going to cost them (and giving up it's fat margins has been something Lilly has so far been unwilling to do) but as Wall Street analysts are fond of pointing out, the company is about to fall off a patent cliff, so something needs to be done soon.

In the interim, I would suggest Lilly start deploying staff who can prepare responses to insurance company denial letters for patients, because that seems to be an all-too-common occurence these days. At least that might help patients continue with Lilly insulin if they prefer to do so.

In may last appointment, I told my endo that under no circumstances would I be switching to Slow-Mo-Log, and that my preference was to switch to Regular for the reasons I already mentioned. Many endos would flip out if a patient said that, but not mine. In a manner that has made him my favorite endo in a long time, his response was: "You know this disease better than anyone (including me). If you need me to try and appeal this for or with you, just leave me a copy of the letter and at your next appointment (in September), we'll see what we can do."

All I can say is thanks, Dr. Lorber ... the world needs more endos like you!!