So far both LLY and NOVO claim they will make more money after dropping their Diabetes drugs by 75% simply by eliminating the rebate structure.
The world’s biggest makers of insulin are likely to make more money, not less, even after slashing prices by as much as 75% due to US government pressure.
That’s because Novo Nordisk A/S and Eli Lilly & Co. — both of which announced price cuts to their insulin products this month — could avoid paying out multimillion-dollar rebates to the government’s Medicaid health-care program.
A 2021 law incentivized the companies to lower prices by removing a cap on the rebate payment, a change that kicks in next year. Federal and state governments claim the rebates from drugmakers to help offset the cost of covering prescription drugs under government programs.
By dropping the cost of its Humalog and Humulin insulins, Lilly could sidestep $430 million per year in new Medicaid rebates and make more than $85 million in new annual profit, according to an analysis by Spencer Perlman, the director of health-care research at Veda Partners. Novo, meanwhile, could avoid about $350 million in new 2024 rebates on NovoLog and Levemir and add earnings of nearly $210 million, Perlman said. He estimated that both companies currently earn nothing on Medicaid sales.
So if the Politicians want to complain about drug pricing maybe they should look at themselves. Next they can figure out how to replace a billion dollar hole in their medical budget.
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