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Eli Lilly shakes up the pharmaceutical industry with a new website offering telehealth prescriptions and direct home delivery of certain drugs, including the weight loss treatment Zepbound, to expand patient access.
The company’s direct-to-consumer push announced Thursday, the first of its kind for a major pharmaceutical company, won’t necessarily upend the pharmaceutical industry and the prescription drug supply chain alone, according to some analysts.
But other drugmakers could follow suit with their own direct-to-consumer models, according to some analysts. This could add more pressure to what many critics call a complex system for the distribution, pricing and prescribing of drugs in the US — a structure they say has led to higher prices and fewer choices for patients.
“There’s always a possibility of 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’s necessarily going to happen tomorrow, but I think you should never assume that things can’t change.”
Lilly’s new platform comes as other companies move to disrupt the drug system in some way, in part as they face more political pressure to lower consumer costs and increase price transparency.
These actions come as lawmakers target middlemen in the drug supply chain new legislation and as the Biden administration takes its own steps to rein in drug prices, such as giving Medicare the power to negotiate lower drug prices for the first time in its six-decade history.
Eli Lilly said its new effort — dubbed LillyDirect — aims to increase access to medicines for chronic diseases, including wildly popular weight-loss drugs.
These treatments, which have grown in demand over the past year as they help patients shed unwanted pounds, are plagued by supply constraints and concerns about potentially harmful discards. Patients also face long waiting lists to see obesity specialists who can prescribe the drugs, a problem Eli Lilly hopes to address, according to Seigerman.
Eli Lilly’s Zepbound won Food and Drug Administration approval just two months ago, but some analysts say it could generate more than $1 billion in sales in its first year on the market.
LillyDirect will not significantly disrupt the industry
Eli Lilly’s website eliminates the need for a patient to visit a doctor’s office to pick up a prescription and, in some cases, have a pharmacy fill it.
But some analysts said Eli Lilly’s website alone will not significantly threaten the traditional drug distribution system, which includes a multi-layered network of manufacturers, drug wholesalers, pharmacies and pharmacy benefit managers, or PBMs.
“I don’t think PBMs and the whole infrastructure that we have is going to go anywhere,” Segerman told CNBC. “I think what [Eli Lilly] indeed identified some friction points in acquiring these products [weight loss drugs] to the patients and find a way to solve it.”
“From my understanding, there is simply no retail pharmacy where a patient has to go hunting for this [drug] dose, it’s sent directly to them,” he said of Eli Lilly’s services.
Eli Lilly’s website connects patients to an independent telehealth provider who can prescribe any FDA-approved weight loss drug or other medications for diabetes and migraines. If the prescription is from Eli Lilly, the patient can have a third-party online pharmacy deliver it to their door.
Patients will also receive Eli Lilly’s drug discounts if they qualify for the company’s savings card programs, the company noted 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 may be able to pay up to $550.
Some experts see transparent pricing as a shot at PBMs, the largest of which are owned by CVS, UnitedHealth Group and Cigna.
Pharmacists have long complained that they give PBMs steep drug discounts in exchange for higher placement on a formulary — an insurance plan’s list of preferred drugs — only for those middlemen not to pass the savings on to patients.
But Eli Lilly’s savings card program and new website won’t take PBMs out of the equation.
“If you are still using your insurance to get these drugs [Eli Lilly’s] website, it’s still going to be processed by a PBM,” Gabelli Funds portfolio manager Jeff Jonas told CNBC.
Patients who get drugs like Zepbound from Eli Lilly’s website can choose to pay with cash to avoid PBMs altogether. But Bernstein analysts said in a note Thursday that they expect the “vast majority” of potential users of weight-loss drugs will get drugs through insurance.
More pharmaceutical companies could adopt a similar approach to Eli Lilly’s.
Cantor Fitzgerald analyst Louise Chen said pharmacists could benefit more from using a direct-to-consumer pharmacy model for high-selling drugs.
“Because of the scale of your effort, that [would] probably makes sense for larger drugs,” Chen wrote in an email to CNBC.
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 drugs require specialized training for administration, such as injecting or infusing a treatment into a patient’s vein through an IV.
Pharmacists taking a direct-to-consumer approach could put even more pressure on the country’s traditional drug supply chain after other companies moved to simplify the system in recent months.
That includes CVS Healthwhich 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 the Cuban venture.
Cost Plus Drugs aims to lower the price of drugs across the board by selling them at a set mark-up of 15% on their cost, plus pharmacy fees.
That company is already shaking up the broader health care industry: CVS suffered a blow over the summer when a major California health insurer, Blue Shield of California, announced it would no longer use the company as its PBM and instead will partner with several other businesses, including the Cuban company and Amazon Pharmacy.