“In January 2024, the pharmaceutical company Eli Lilly launched LillyDirect, a service that includes a direct-to-consumer pharmacy and a referral network of in-person and telehealth clinicians. These tools are intended to add new options for patients to access the company’s drugs, including its newly approved antiobesity drug tirzepatide (Zepbound). [..]
LillyDirect is similar to several pharmacies that cut out insurers and PBMs [pharmacy benefit managers] and allow patients to purchase drugs at discounted cash prices. These include pharmacies introduced by major retail companies like Walmart, Costco, and Amazon, and independent pharmacies like the one named for its billionaire cofounder Mark Cuban. Although these pharmacies can benefit patients without insurance, most insured patients are better off paying out-of-pocket costs charged by their insurer rather than purchasing drugs at discounted cash prices. For example, one study compared Costco pharmacy’s cash prices with Medicare spending on prescriptions for 200 common generic drugs in 2018; Costco prices were lower than Medicare spending for 43% of prescriptions but only lower than patient out-of-pocket costs for 11% of prescriptions. [..]
If [..] LillyDirect smooths the administrative and cost hurdles imposed by PBMs and health plans, this direct-to-consumer model may be popular among patients and clinicians. However, expanded use of manufacturer coupons will shield patients from the formulary tools used by health plans and PBMs to steer patients toward less costly drugs. For example, Lilly’s drug tirzepatide is in the same class as semaglutide, made by Novo Nordisk, which is also approved to treat diabetes (Ozempic) and obesity (Wegovy). Health plans and PBMs will likely leverage competition between tirzepatide and semaglutide, offering preferred formulary status to whichever manufacturer provides the highest rebates. But if patients can use manufacturer co-pay cards to access either drug, PBMs and health plans will have less leverage to negotiate, resulting in smaller rebates and higher spending. If this strategy does give Lilly greater leverage to negotiate with PBMs, it seems inevitable that other drug companies will follow suit. [..]
If the goal is to make it easier and less costly for patients to access their medications, direct-to-consumer marketing by drug companies is almost certainly not the right answer. But there are several steps that policymakers should take to address many of the challenges highlighted by the introduction of LillyDirect.
Although formulary tools like prior authorization are critical for health plans and PBMs to control spending, in practice these tools can be confusing for patients and are almost universally disliked by clinicians. Policymakers should require insurers to streamline these tools, make them more transparent, and integrate them with electronic health records to provide real-time coverage decisions. Similarly, prescribers and patients should be informed about coverage and cost at the time a prescription is sent. Real-time benefit tools that display this information are increasingly being integrated within electronic health records, but these tools remain unreliable due to incomplete and inaccurate data.
Another opportunity for reform is improved communication channels between prescribers and pharmacies. To prevent unnecessary delays in access, pharmacists need a standardized approach to notify prescribers when patients are unable to fill medications due to cost or administrative barriers. States should also grant pharmacists the authority to substitute therapeutically similar drugs, such as those in the same pharmacologic class. This would allow patients to work directly with their pharmacist to choose least costly alternatives, although it will be critical to notify prescribers of any such substitutions.
Ultimately, the greatest barrier to patients affording medications in the US is high drug prices. Recently, the Inflation Reduction Act began allowing the federal government to negotiate prices for some drugs in the Medicare program. Congress allocated part of the billions of dollars in expected savings from these negotiations to cap annual out-of-pocket costs at $2000 for those with Medicare prescription drug coverage starting in 2025. Congress could expand drug price negotiations to include more drugs or make negotiated prices available for those with private insurance, passing the resulting savings along to patients in the form of lower premiums and out-of-pocket costs. The new class of antiobesity medications is a prime opportunity. Currently, Medicare excludes coverage for antiobesity drugs. Congress could allow Medicare plans to cover these drugs, contingent on companies agreeing to negotiate their prices.”
Full editorial, BN Rome, JAMA, 2024.2.27