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Eli Lilly is revolutionizing the pharmaceutical industry with a new website that offers telehealth prescriptions and direct home delivery of certain medications, including its hot Zepbound weight loss treatment, to expand patient access.
The company’s direct-to-consumer push announced Thursday, the first of its kind for a major drugmaker, won’t necessarily impact the pharmaceutical industry and the prescription drug supply chain on its own, according to some analysts.
But other drugmakers could follow suit with their own direct-to-consumer models, according to some analysts. That could add more pressure to what many critics call a complex system for distributing, pricing and prescribing drugs in the United States, a structure they say has led to higher prices and fewer options for patients.
“There’s always a chance for disruption. I think you should never rule out any kind of disruption,” BMO Capital Markets analyst Evan Seigerman told CNBC. “I don’t think that will necessarily happen tomorrow, but I think you should never take it for granted that things can’t change.”
Lilly’s new platform comes as other companies try to disrupt the pharmaceutical system in some ways, in part because they face increased political pressure to reduce consumer costs and increase price transparency.
Those actions come as lawmakers target drug supply chain middlemen in new legislation and as the Biden administration takes its own steps to rein in drug prices, such as giving Medicare the power to negotiate reductions in costs. drug prices for the first time in its six decades. history.
Eli Lilly said its new effort, called LillyDirect, aims to increase access to medications for chronic diseases, including the wildly popular weight-loss drugs.
Those treatments, which have skyrocketed in demand over the past year because they help patients lose unwanted weight, are plagued by supply constraints and concerns about potentially harmful imitations. Patients also face long wait lists to meet with obesity medicine specialists who can prescribe the drugs, a problem Eli Lilly hopes to address, according to Seigerman.
Eli Lilly’s Zepbound won approval from the Food and Drug Administration just two months ago, but some analysts say it could achieve more than $1 billion in sales in its first year on the market.
LillyDirect will not significantly disrupt the industry
Eli Lilly’s site eliminates the need for a patient to visit the doctor’s office to obtain a prescription and, in some cases, a pharmacy to fill it.
But some analysts said the Eli Lilly site alone will not significantly threaten the traditional drug distribution system, which involves a multi-tiered network of drug manufacturers, drug wholesalers, pharmacies and pharmacy benefit managers, or PBMs.
“I don’t think PBMs and all the infrastructure we have are going anywhere,” Seigerman told CNBC. “I think that [Eli Lilly] What I really did was identify some friction points when sourcing these products. [weight loss drugs] to patients and are figuring out a way to fix it.
“As I understand it, what happens is that there is no retail pharmacy where a patient has to go to get that particular product.” [drug] doses, they are sending it directly 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 loss medication or other diabetes and migraine medications. If the prescribed treatment is from Eli Lilly, the patient can request that a third-party online pharmacy deliver it to their doorstep.
Patients will also receive Eli Lilly discounts on medications if they qualify for the company’s savings card programs, the company said in a statement. One program allows people with insurance coverage for Zepbound, which costs more than $1,000 a month, to pay as little as $25 out of pocket. Meanwhile, those whose insurance doesn’t cover the drug can pay as little as $550.
Some experts consider transparent pricing a blow to PBMs, the largest of which are owned by CVS, UnitedHealth Group and Cigna.
Drug manufacturers have long complained that they offer PBMs deep discounts on drugs in exchange for higher placement on a formulary (an insurance plan’s list of preferred drugs) only to keep those middlemen from passing on the savings to patients.
But Eli Lilly’s savings card program and new site won’t eliminate PBMs from the equation.
“If you are still using your health insurance to obtain these medications through [Eli Lilly’s] website, it will still be processed by a PBM,” Jeff Jonas, portfolio manager at Gabelli Funds, told CNBC.
Patients who get medications like Zepbound on Eli Lilly’s site can choose to pay cash to avoid PBMs altogether. But Bernstein analysts said in a Thursday note that they expect the “vast majority” of potential weight-loss drug users to obtain medications through insurance.
Other drugmakers could follow Eli Lilly
More pharmaceutical companies could take an approach similar to Eli Lilly’s.
Cantor Fitzgerald analyst Louise Chen said drugmakers could benefit most from using a direct-to-consumer pharmacy model for top-selling drugs.
“Due to the scale of their effort, [would] “It probably makes sense for larger drugs,” Chen wrote in an email to CNBC. “You get more for the money and you reach more people.”
But Chen said it may be more difficult for a drugmaker to pursue a direct-to-consumer model with smaller, more specialized drugs, such as treatments for complex, chronic or rare medical conditions. For example, some medications require specialized training to administer, such as injecting or infusing a therapy into a patient’s vein through an intravenous line.
Drugmakers taking a direct-to-consumer approach could add even more pressure to the country’s traditional drug supply chain after other companies took steps to simplify the system in recent months.
That includes CVS Health, which announced plans to overhaul its business model for pricing prescription drugs in December, adopting a model similar to billionaire Mark Cuban’s direct-to-consumer pharmacy, Cost Plus Drugs. Healthcare giant Cigna also announced in November that its PBM will offer a pricing model similar to Cuban’s.
Cost Plus Drugs aims to reduce the price of medications overall by selling them at a fixed 15% markup on their cost, plus pharmacy fees.
That company is already disrupting the broader healthcare industry: CVS suffered a blow over the summer when a major California health insurer, Blue Shield of California, announced it will no longer use the company as its PBM and instead will be associated with several others. companies, including the Cuban firm and Amazon Pharmacy.
