Novo Nordisk releases position statement to address diabetes drug affordability in America – December 6, 2016

Executive Highlights

  • Novo Nordisk recently published a position on affordability as a first step toward addressing the high cost of diabetes drugs in the US.
  • We were very glad to hear this call for collaboration. The statement emphasizes three tenets that pharmaceutical companies, payers, PBMs, insurance companies, and policymakers can collaborate on to improve affordability: (i) transforming the complex pricing system; (ii) creating more pricing predictability; and (iii) reducing the burden of out of pocket costs.
  • We hope that patients have a role in the collaboration, as we think they could help add insight, know-how, and real-world experience on what is needed for a combination of better outcomes and a more efficient and affordable system.

Novo Nordisk recently published a position on affordability as a first step toward addressing the high cost of diabetes drugs in the US. The statement acknowledges that many Americans struggle to afford Novo Nordisk’s drugs and emphasizes the need for collaboration between pharmaceutical companies, payers, pharmacy benefits managers (PBMs), insurance companies, employers, patient organizations, and policymakers in addressing this problem. Novo Nordisk’s position statement identifies three specific tenets to improve affordability: (i) transforming the complex pricing system; (ii) creating more pricing predictability; and (iii) reducing the burden of out of pocket costs. To complement this, Mr. Jakob Riis, Novo Nordisk’s executive VP of North America Operations, published his own perspectives on drug pricing, offering more details on the company’s stance. In particular, he shared that – effective immediately – Novo is limiting any potential list price increases for its drugs to no more than single-digit percentages annually. Given the growing public and political frustration with the cost of diabetes medication (particularly insulin) over the last several years, we are encouraged to see an official position from a manufacturer acknowledging the issue of pricing and expressing a commitment to address it. We have recently learned that average discounts to PBMs have been published annually by Novo Nordisk and will be coming back with more on this (this is what is driving any price increases, presumably). We would love to see similar sentiments from other players in the healthcare landscape to provide additional leadership.

  • “Transforming the complex pricing system.” We couldn’t agree more that the US drug pricing system is in dire need of restructuring, and we so look forward to learning specific suggestions on how this can be achieved. In particular, we do not understand exactly what value PBMs deliver relative to their profits, and we point out that discounts have increased substantially in recent years. Notably, these have been published by Novo Nordisk annually.
    • In our view, transparency should be a major goal of any pricing system reforms. The public understanding of the pricing environment is very limited insofar as rebates, discounts, and price concessions negotiated by PBMs are not publicly released by the PBMs.  We had previously reported that  some rebates have been in the 50% range and we understand that 2016 numbers for Novo Nordisk will be even higher. Greater transparency in the negotiations between pharmaceutical companies, PBMs, CMS, and insurance companies would enable better understanding of the drug pricing landscape and where room exists for cost saving, and we salute Novo Nordisk for publishing these figures for the last three years. As discussed in Jakob Riis’ statement, although list prices for many drugs have soared, their net price (the company’s profit) has remained essentially flat given PBM demand for rebates in exchange for formulary status. (For example, the net price of NovoLog has increased 3% since 2003, whereas the list price has skyrocketed 270%.) We are specifically interested in learning more about the role of PBMs: Where does the money from these rebates go? What value does PBM negotiation add to the healthcare system? How have the PBMs’ profit margins have evolved, and does this differ by therapeutic area?
    • We are mindful that this transformation of the pricing system is poised to take place in a rapidly changing healthcare landscape in the US. In the aftermath of the 2016 US election results, we questioned what President-elect Trump truly meant by his statements about dismantling the Affordable Care Act. The resumes of his HHS and CMS appointments Dr. Tom Price and Ms. Seema Verma seem to answer this question, spelling trouble for the future of ACA. Indeed, Trump has characterized these new appointments as a “dream team” to repeal and replace the ACA. It’s unclear at this point what a repeal of the ACA may mean for affordability of drugs, and President-elect Trump has been fairly vague regarding his take on drug pricing. We hope that pharmaceutical companies and other stakeholders will continue to work toward affordability and reforming current drug pricing systems. It seems there has been greater transparency on discounts than we had previously understood and we will be expanding this piece shortly to discuss this in greater depth.
  • “Creating more pricing predictability.” Novo Nordisk’s commitment to single digit list price increases is a positive relative to potential double digit increases driven by PBMs – how could even more be saved? How can manufacturers, providers, and patients help reduce waste? How can R&D be made more efficient? How can we reduce systemic inefficiencies (such as unnecessary cardiac and GI procedures) that are also driving healthcare costs up? What private/public partnerships could be established to help pay for insulin in the poorest fields so that the burden of finding ways to reduce cost doesn’t fall entirely on manufacturers?
  • “Reducing the burden of out of pocket costs.” This is excellent to hear, especially since US employers have shifted so many costs onto patients in recent years. Specifically, Novo Nordisk cited that it will continue to invest in co-pay assistance programs, ensure that lower-priced human insulin treatments are always accessible, and engaging in policy discussions to improve healthcare coverage for people living with diabetes. To date, we have no understanding of the scope of the investment of patient assistance programs, but we are studying this in greater depth.
    • Hopefully this mindset will help more patients gain access to the innovative and effective but highly expensive newer medicines on the market. Two GLP-1 agonist/basal insulin coformulations – Novo’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) – are about to hit the US market, but despite excellent results in clinical trials, the costs of these medicines (for Xultophy and Soliqua) will be too steep for many payers. Soliqua will be less expensive, reflecting Lantus rather than Toujeo in the combination – it will be interesting to watch the rollout of both, given the extremely promising data to date for this new GLP-1/basal insulin combination class. While we imagine a head to head would favor Xultophy, given the Tresiba vs. Lantus insulin used, we think both combinations in the class will be better than single agents for a meaningful number of patients.

-- by Abigail Dove, Helen Gao, and Kelly Close