In a highly competitive and multi-billion dollar weight loss drug market, Eli Lilly’s innovative strategy focuses on direct-to-consumer initiatives. On January 4th, 2023, Eli Lilly unveiled LillyDirect, a direct-to-consumer website tailored to connect U.S. patients grappling with migraine, diabetes, or obesity with telehealth providers. This platform facilitates the delivery of select Lilly medications directly to patients’ homes through third-party pharmacies.
Eli Lilly’s Chief Executive, David Ricks, highlighted the challenges imposed by the intricate U.S. healthcare system on patients managing chronic diseases. Ricks expressed, “With LillyDirect, our aim is to alleviate some of these challenges by simplifying the patient experience, ultimately enhancing health outcomes.” He emphasized that the platform’s introduction will streamline access to medications, eliminating the conventional process of visiting a doctor for a prescription and subsequently going to a pharmacy to fill it.
Notably, LillyDirect does not directly offer telehealth services. Instead, it serves as a connecting link to the telehealth provider Form Health. Form Health’s doctors will collaborate with patients to assess the appropriateness of a prescription. The physicians at Form Health retain complete autonomy in deciding whether a particular medication is suitable for a patient’s needs or not.
But why do this, and why now? For that we will have to understand how the current system works.
Understanding Pharmacy Benefits Managers (PBMs) and Their Influence
What are Pharmacy Benefits Managers (PBMs)?
PBMs represent third-party administrators contracted by health plans, major employers, unions, and government entities to oversee prescription drug benefits programs. The three largest PBMs—CVS Caremark, Express Scripts, and OptumRx (a division of United Healthcare)—currently dominate almost 80% of the prescription benefits market in the United States.
Why do PBMs exist?
Initially established to process claims within a specified fee structure, PBMs have evolved to handle various aspects beyond claim adjudication. They manage pharmacy networks, determine drug formularies, establish co-pays, and set criteria for prior authorizations, all while acting as intermediaries between the patient’s insurance company and the dispensing pharmacy.
How do PBMs operate?
PBMs function as the “invisible middleman” in the prescription drug transaction process. They work on behalf of the patient’s insurance company, setting the patient’s copay and determining how much to reimburse pharmacies for each covered medication. PBMs also pre-determine the cost for each drug covered under the plan, reimbursing all pharmacies (except their own) based on this predetermined amount.
Why do PBMs have a negative impression?
PBMs face criticism due to their lack of regulation and non-disclosure of cost-determining formulas, considering this information proprietary. They operate under the guise of a “trade secret.” This lack of transparency has led to concerns about the substantial revenue—reportedly exceeding $315 billion annually—generated by PBMs. They add their operational costs to the end cost of prescriptions, impacting insurance plans, taxpayer funds, and patient copays at the pharmacy counter.
In essence, while PBMs were initially designed to streamline prescription drug benefit processes, their evolving roles, lack of transparency in determining costs, and the substantial revenue they generate have contributed to skepticism and negative perceptions within the healthcare landscape.