Eli Lilly’s decision to lower the list price of its most popular insulin product by 70 percent in the final months of 2023 will save the company millions of dollars it would have paid in rebates to state Medicaid programs starting in 2024, POLITICO’s David Lim reports.
State Medicaid programs would have generated about $150 in revenue for every vial of Humalog they purchased had Lilly not capped its prices — about $140 million in revenue nationally — based on calculations by Sean Dickson, a drug-pricing expert at the nonprofit West Health Policy Center. That number is a fraction of Lilly’s $28.5 billion in revenue last year and doesn’t amount to a large proportion of Medicaid funding.
The Medicaid Drug Rebate Program, established in 1990 to help offset the cost of providing outpatient prescription drugs to low-income patients, requires drugmakers to pay a rebate to state and federal governments.
The rebate has historically been capped at 100 percent of the average manufacturer price, but the cap will be eliminated in 2024 under a provision tucked into the 2021 American Rescue Plan. When that provision takes effect in January, manufacturers might be forced to pay rebates for drugs that are greater than what states pay to purchase them.
What Lilly says: Lilly has worked for “a long time” toward its price-cut announcement and cap on out-of-pocket costs at $35 or less a month, said Antoinette Forbes, Lilly associate vice president of public affairs.
“A variety of factors, including a changing marketplace and legislative environment, contributed to the decision and timing of reducing list prices,” Forbes said in a statement.