The drugmaker Eli Lilly will begin selling a cheaper version of its most popular insulin, Humalog, in an effort to head off criticism about the rising costs of prescription drugs, the company said Monday.
Lilly will begin selling an “authorized generic” of Humalog 100 for $137.35 per vial, a 50 percent discount off the list price. An authorized generic means that, except for the label, it is identical to the brand-name drug and manufactured in the same facilities. The new product, which the company said would be made available as quickly as possible, will be called Insulin Lispro and will be sold through a Lilly subsidiary, ImClone Systems.
“There are clearly patients who, despite many best efforts, are struggling to afford their insulin,” David Ricks, the chief executive of Lilly, said in an interview Friday. “This is a step we can take to close part of that remaining gap.”
The move offers a compromise to critics who have called on drugmakers to lower their list prices. Lilly will continue selling Humalog at its regular price to the insurers and employers who want to keep pocketing the large discounts, or rebates, they receive for purchasing brand-name drugs, while also making available a cheaper version to patients who pay for their insulin out of pocket.
As a result, people without health insurance should benefit most from the generic insulin, while those with drug coverage will either experience no change or see some decrease in their costs.
“This announcement is a great step forward to make insulin more affordable,” said Derek Rapp, the chief executive of JDRF, a diabetes advocacy group that receives funding from Eli Lilly. He called on “all other insulin manufacturers to follow Eli Lilly in finding ways to bring down the price of this lifesaving drug.”
Pharmaceutical companies have been under pressure to show they are doing something about the rising list price of their products, which consumers have increasingly been exposed to as insurers scale back on coverage. Multiple congressional inquiries have focused on insulin, and last week executives for seven major drugmakers testified on drug prices in a hearing before the Senate Finance Committee. President Trump has also made the issue a priority.
Critics have singled out insulin manufacturers because versions of the lifesaving diabetes treatment have been around since the 1920s, yet the three companies that control the market — Lilly, Novo Nordisk and Sanofi — have consistently raised list prices over the past decade.
Outrage over the cost of insulin has driven much of the political conversation about high drug prices, with reports of patients dying because they could not afford it. In February, the Senate Finance Committee sent Lilly a letter asking for more information about how it sets prices for its insulin products, including Humalog. The letter noted that taxpayers spend more than $1 billion a year for Humalog through Medicare and Medicaid and said, “When one insulin product costs the taxpayer more than $1 billion in one year, the American people ought to know how the company prices its product.”
The story of insulin, many say, is a salient example of how the drug pricing system is broken. Over the years, industry intermediaries known as pharmacy benefit managers have negotiated ever-deeper discounts for insulin, yielding savings for the insurers and employers that pay the bulk of drug costs. Insulin manufacturers have responded by raising their list prices in an effort, they say, to please the benefit managers, who keep a percentage of the discounts they pass along.
The list price of insulin has gone from about $20 per vial in 1996, when Humalog entered the market, to about $275 per vial today. Humalog patients typically use about two vials a month, Lilly said.
The result is a yawning gap between the list price of insulin — which people who are uninsured must pay — and the net price that insurers and employers pay.
Enrique A. Conterno, the president of Lilly’s diabetes division, said Friday that the list price of the authorized generic will be comparable to the net price the company regularly offered to insurers in exchange for standard placement on their formulary, or the list of covered drugs, although he did not specify a dollar amount. But he said the company provided deeper discounts to insurers that give Humalog preferred treatment, which typically means lower out-of-pocket costs for patients.
Mr. Ricks, Lilly’s chief executive, said the net price of Humalog — the amount the company keeps — has dropped by 8 percent over the past five years.
By releasing an authorized generic of Humalog, Lilly will permit its existing contracts with insurers to continue, while offering a more affordable alternative to people who pay out of pocket. The company said about 95 percent of Humalog patients pay less than $100 per month.
Other drug companies have made similar moves while facing heat for their prices. In 2016, Mylan began selling an authorized generic of the EpiPen in response to outrage over the price of the allergy treatment. Last fall, Gilead announced it would do the same for two of its pricey hepatitis C drugs.
Offering an authorized generic for an expensive drug is “a really great solution for patients who don’t have health insurance, or who are paying a deductible or coinsurance,” or a percentage of a drug’s list price, said Stacie B. Dusetzina, who studies drug pricing at the Vanderbilt University Medical Center.
Lilly has offered a discount program since 2016 that allows consumers to buy Humalog at a significant discount, but Medicare beneficiaries and other people insured by government health care plans were not allowed to use it. The authorized generic will not carry those restrictions, and pharmacists will be able to automatically substitute it for Humalog without asking a doctor to write a new prescription.
Humalog 100 is the most common variety of Lilly’s short-acting insulin. The company said about 80 percent of patients taking Humalog use the vial or the KwikPen, which will both become available as authorized generics. (The list price of a five-pack of the generic equivalent of KwikPens will be $265.20.)
Humalog brought in nearly $3 billion in revenue in 2018 and is the company’s second-best-selling product, behind the diabetes drug Trulicity.
Mr. Conterno said the company was considering releasing authorized generics for other insulin products. However, “we also want to see how this works,” he said. “I’ll be honest, we are entering unusual territory.”