Summary: The Type 1 Diabetes Defense Foundation is deeply concerned by the nomination of Alex Azar to lead the Department of Health and Human Services. Azar once advocated for healthcare consumer empowerment and price transparency. But during his 2012–17 tenure as president of Lilly USA, LLC, he evolved into an aggressive enabler of the opaque drug pricing system that as former Deputy Secretary of HHS he had once pledged to reform.
As we watch a Janus-faced longtime drug industry executive poised at the revolving door between industry and government, we are skeptical that Mr. Azar will deliver the most meaningful solution to today’s diabetes drug pricing crisis: downward pressure on list price via regulatory enforcement of point-of-sale consumer protections, including transparency on net drug cost to insurance plans.
November 15, 2017 – Eugene, OR. On Monday, President Donald Trump nominated ex–Eli Lilly executive Alex Azar to head the Department of Health and Human Services, promising that at HHS he would be “a star for better healthcare and lower drug prices.”
Over the years Azar has cultivated a public persona as an advocate of efficient market solutions and consumer empowerment. Yet as president of Lilly USA, he also demonstrated a willingness to sacrifice patient welfare in order to claim and retain for Lilly market domination in diabetes drugs. We are skeptical that a former drug industry executive whose company directly benefited from an opaque reimbursement system that drove insulin list prices rapidly upward will suddenly commit to the drug-channel pricing transparency and consumer protections needed to bring those list prices back down to current net price levels.
“[A] significant number of people who already paid premiums for their health insurance then end up paying more than their insurer does for a medicine.”
— Alex Azar, former president of Lilly USA, now HHS nominee
T1DF agrees with Azar’s conclusion—“[t]hat system needs to be retired and replaced“—but doubts an Azar HHS would lead the way towards greater market efficiency and price transparency. If Mr. Azar is confirmed, his “transparency” face will confront at HHS a drug-pricing crisis his Lilly USA “opaque reimbursement contracting” face helped to create. It remains to be seen which face will prevail.
T1DF president Julia Boss notes that, in this unpredictable political and regulatory environment, “T1DF’s drug pricing impact litigation remains the best way for insulin users to ‘retire’ the current system. We will sustain our undivided commitment to diabetes drug pricing transparency and point-of-sale affordability for all people with diabetes, both insured and uninsured.” T1DF hopes to see Mr. Azar—or Secretary Azar, should he be confirmed—deposed on these critical issues in connection with our 2017 putative class action lawsuits on insulin and glucagon, in which Eli Lilly and Co. is a named defendant.
Since the 1980s, confidential dual-pricing reimbursement contracts have profoundly impacted the U.S. drug market, leading to price discrimination, information asymmetry and wealth transfer to administrative intermediaries—Pharmacy Benefit Managers (PBMs) and insurers, who receive large reimbursements but base consumers’ cost-sharing on unrebated list or acquisition prices and fail to inform insureds of their drugs’ true net cost. Industry actors’ use of dual pricing has directly contributed to increases in pharmaceutical list prices and as a result harmed the most vulnerable patients: the uninsured, those with high deductibles or pharmacy cost-sharing requirements, those covered by Medicare Part D. Without these opaque pricing schemes and warped incentives that distort markets and harm consumers, manufacturers of insulin and other diabetes drugs would compete directly on innovation, effectiveness, and price to consumers at the point of sale.
T1DF can support the Alex Azar who believes patients are entitled to health care pricing transparency, who in a 2006 public statement argued, “All consumers deserve to know the cost and quality of what they are purchasing.” Nearly ten years later, Mr. Azar was still talking about the need for price transparency: “What sets healthcare apart from the rest of our economy is that as consumers, we almost never see the final retail price that has been negotiated on our behalf.” T1DF also agrees with Mr. Azar’s recent condemnation of an “outdated system for paying for prescription drugs [that] is threatening to squelch patient access . . . by shifting a crushing burden directly onto individuals.“
T1DF cannot, however, support the Alex Azar who, during his tenure at Lilly, showed himself unable or unwilling to rein in reimbursement contracting that was spiraling out of control. Under his direct supervision, list prices soared as the company aggressively pursued contracts delivering massive confidential reimbursements to PBMs and insurers, with patients increasingly priced out of insulin at the pharmacy counter. The U.S. list price of Lilly’s Humalog insulin has now increased by over 1,000% since Lilly first brought it to market in the late 1990s. Lilly now returns an estimated 75% or greater of Humalog’s list price to PBMs and insurers.
Azar has made it clear that Lilly signed reimbursement contracts in full awareness that, at the other end of those contracts, people with diabetes are paying more for their insulin than it costs their insurer. In November 2016 remarks at the Manhattan Institute, he acknowledged: “[A] significant number of people who already paid premiums for their health insurance then end up paying more than their insurer does for a medicine.” He is aware that patients suffer financial and medical harm as a result—and even that forced overpayment for medicines like insulin allows insurers to “implicitly discriminate against beneficiaries with certain health conditions.” Yet he reportedly continues to argue against disclosing net prices and cutting list prices at the point of sale.
Other expressed views and actions in the diabetes space during his time at Lilly lead T1DF to question further whether Alex Azar would lead HHS for the benefit of all Americans, including those with chronic conditions:
- As an outspoken critic of the ACA and supporter of Medicaid block grants to states, Azar would likely favor regulatory changes that will reduce insurance access and increase costs for people with diabetes.
- During Azar’s tenure at Lilly, list price for emergency injectable glucagon kits also escalated dramatically (over 100% in the past 5 years). High list prices for glucagon kits deter insulin users from buying and carrying these kits—which are designed to treat severe hypoglycemia, a potentially life-threatening side effect of Lilly’s own insulin products. Departments of Health in Washington, Utah, and several other states have decided, citing cost, not to stock their ambulances with glucagon.
- Possibly bowing to insurer pressure to keep highly rebated injectable glucagon kits on the market, Lilly in 2015 acquired rights from Locemia to nasal glucagon—then in Phase III development—but has since failed to progress to commercialization (open ended delay to filing an ANDA application). Similarly, in 2015, Lilly and its sole U.S. glucagon competitor Novo Nordisk both pulled financial support from Zosano Pharma, just as Zosano announced positive Phase 2 results for their ZP-Glucagon patch delivery system—a simple device with an expected price under $150, as compared to today’s $310 price (and associated potential for large rebates) for injectable glucagon kits.
Alex Azar’s controversial actions do little to support President Trump’s claim that he will be “a star for better healthcare and lower drug prices.” He can obviously talk the talk: he understands how and why individual patients are overpaying for insulin and other drugs. The question is whether as Secretary of HHS he would walk the walk—holding accountable the manufacturers, PBMs, and insurers who together are making patients overpay.
About T1DF:
The Type 1 Diabetes Defense Foundation is a nonpartisan Oregon-based 501(c)(3) nonprofit dedicated to advancing equal rights and opportunities for Americans with type 1 and other forms of insulin dependent diabetes. T1DF accepts no funding from the pharmaceutical, medical device, pharmacy benefit management, or insurance industries or from any organization they fund. We support regulatory frameworks in which manufacturers compete directly on innovation and price to consumers and where drug channel actors can engage in open and efficient price arbitraging, without price discrimination and asymmetries of information.
T1DF is currently a plaintiff in two cases that name Eli Lilly as a defendant: Boss, et al. v. CVS Health Corporation, et al. (United States District Court, District of New Jersey, No. 3:17-cv-01823-BRM-LHG — insulin pricing), and Bewley, et al. v. CVS Health Corporation, et al. (United States District Court, Western District of Washington, No. 2:17-cv-00802-RAJ — glucagon pricing).
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