Lilly follows Gilead, Mylan lead with authorized generic play
Eli Lilly's plan to sell a discounted copy of its top-selling insulin illustrates the motivations behind a branded drugmaker strategy to launch generics to their own blockbuster therapies.
The pharma's decision follows similar moves from Mylan and Gilead Sciences to produce cheaper copies of their own drugs. All three did so amid political and public criticism over pricing and access to their products.
Perhaps the biggest motivator for pharma to take this unorthodox approach is to protect market share from looming competition, Rita Numerof, president of the consulting firm, Numerof & Associates, said in an interview.
Holding onto customers via a lower list price is preferable, even if authorized generics essentially "cannibalize your own products before your competition does," said Numerof, who has advised companies across the healthcare system for more than two decades.
Launching a branded generic at a reduced price also can help to fend off criticism around drug pricing. Numerof said both factors were at play in Lilly's decision, and the low-cost version of Humalog could serve to blunt some criticism of the company on that front.
The rationale behind authorized generics, which are produced identically to the approved branded drug, can be seen in how company execs describe such launches.
In public statements, drugmaker execs have emphasized the impact on lowering out-of-pocket patient costs and addressing pricing scrutiny. But the financial drivers still play a role and are a component of how the companies sell the strategy to investors.
Lilly CEO David Ricks wrote in a blog post he hopes the company's authorized generic will be a "catalyst for positive change across the U.S. health care system," adding in common industry arguments around the rise of high-deductible health plans and a rebate system that doesn't fully benefit patients.
But with a March 2020 deadline approaching for a regulatory opening to biosimilar versions of insulin, Lilly also stands to gain an early-mover advantage in the copycat space. Lilly's Humalog already faces competition from a follow-on biologic developed by Sanofi, which launched the drug last year.
Holding onto market share was also a goal in other recent examples of authorized generic introductions.
Gilead Sciences launched its own set of authorized generics at the beginning of 2019 for its hepatitis C drugs, Harvoni and Epclusa. And while then CEO John Milligan played up the plan when announced last September as a lower-priced alternative for patients, the market dynamics suggest other reasons for the company, too.
On the biotech's fourth quarter earnings call last month, chief financial officer Robin Washington called the authorized generics part of the plan to maximize the company's opportunity in the hepatitis C market, adding the launches "should keep us very competitive in a durable long-term market."
Sales of those two drugs has fallen in recent quarters as fewer untreated patients begin antiviral treatment, and competition cuts into pricing. The cheaper generic could help Gilead reach Medicaid and Medicare patients that previously didn't see as much of a benefit from rebates that the company gives insurers on its list prices.
In another example, Mylan announced in December 2016 an authorized generic for its blockbuster EpiPen treatment. The copy of the auto-injector launched at a wholesale acquisition cost of roughly half the branded drug-device combination.
Again, company CEO Heather Bresch then called it "decisive action" to give Americans a solution to the problem of rising drug prices, while eliding Mylan's direct role in raising EpiPen's wholesale cost.
A few months before that launch, Congress grilled Bresch over a recent set of hikes to the allergy treatment's list price.
In Lilly's case, Sen. Chuck Grassley, R-Iowa, called the decision "good news" in a Monday tweet, but added it's only one piece of the puzzle on insulin, with more to be done. The Finance Committee chairman also reiterated his expectation for thorough responses to a recent inquiry sent by him and Ron Wyden, D-Ore., to insulin drugmakers.
Looking forward, Numerof predicted the industry will see more authorized generic launches as part of an industry response to pricing scrutiny.
Follow Andrew Dunn on Twitter