Column: Eli Lilly is slashing insulin prices, but hold your applause

Key Facts

“Lilly is going to bank a lot of goodwill for this, without taking necessarily a big hit to their bottom line,” says Andrew Mulcahy, senior researcher at Rand Corp. and lead author of a 2020 Rand comparison of insulin prices in the U.S. and other countries.
Lilly’s price cuts won’t do anything to address the fundamental dysfunction of America’s drug-pricing system, which bristles with rent-seeking entities — not just drug manufacturers but pharmacy benefit managers, or PBMs, middlemen who offer to negotiate lower prices on behalf of health insurers by extracting rebates but keep a share of the purported savings for themselves.
These include the sheer scale of the run-up in prices, the vast markup over what it costs to produce — as little as $6 a vial — and the loopholes that insulin makers have exploited to preserve their marketing rights for a product for which the patents would normally have expired decades ago.
Coming back to Lilly’s initiative, among the company’s incentives to announce its insulin price cuts now are Medicaid rules kicking in next year that penalize drugmakers for raising prices faster than inflation.