And so it begins

And so it begins

Well it looks like Novo Nordisk (NYSE: NVO) has awoken to the fact that the insulin market will never be the same. This morning we learned Novo has begun trimming personal, according to a company issued press release;

“Novo Nordisk has today announced its intention to reduce its workforce by approximately 1,000 employees of the 42,300 positions in the company’s global organisation.

This is one of several actions taken to reduce operating costs as the company faces a challenging competitive environment in 2017, especially in its large US market.”

In the on deck circle next up for layoffs is our friends in France as they too face significant challenges in the insulin market. Lilly (NYSE: LLY) continues to smile all the way to the bank as payors are embracing Basaglar as a replacement for Lantus.  This exact scenario will play out again in just a few years when biosimilar short-acting insulins arrive.

Today’s announcement by Novo and coming announcements from Sanofi (NYSE: SNY) are the price people pay for coming out me with me-too copycat drugs. It is the price paid when the drugs designed to replace drugs which are good already are just incrementally better, that the “benefits” they bring are not worthy of premium reimbursement nor favourable formulary position. This is the price paid when the only weapon used is lower prices, bigger discounts and/or higher rebates. This is the price paid when the insulin companies themselves are responsible for the price war they say they never wanted.

But the insulin market is not the only diabetes drug market getting decimated by a price war. This is playing out in GLP-1’s, DPP4’s and SGLT2’s.

Now there are some glimmers of hope on the horizon and Novo has one of them, an oral version of their long-acting GLP-1 semaglutide. But even with FDA approval and the major potential of this product, no pharmaceutical company can afford the luxury of a huge and very expensive sales team. The simple fact is these sales teams no longer add value, thanks to structural changes and technology the role these people once played is changing.

While we feel for anyone who loses their job due to management incompetence, the reality is even if management had not screwed up these changes needed to be made. And let’s be honest here what was management supposed to do differently, should Novo and Lilly just let Sanofi own the long acting insulin market, was it not their responsibility to compete? Our problem with management is how they executed, how they played directly into the hands of payors.

The irony here is just as the insulin market is collapsing the furor over the rising out of pocket cost of insulin continues to gain momentum.  Yep here we are with the major insulin companies announcing layoffs and the diabetes blogging community is blaming these same companies for the rising out of pocket cost of insulin. That the rising “list” cost of insulin is hurting patients.  At the same time we hear they want new and better insulins.

It’s time for everyone to start accepting certain facts, yes those pesky facts again. First, the diabetes drug market HAS commoditized.  Second, this is just the beginning and more layoffs are coming. Third, the rising “list” price of insulin is NOT the reason patients are paying more out of pocket. Fourth, it is irresponsible to blame these insulin companies for the rising out of pocket cost of insulin on the one hand and then turn around and ask these same companies to spend billions to develop new and better insulins. Fifth and this is toughest one of all for most to accept, yes new and better drugs and devices, for that matter are always welcome but there is NOTHING wrong with the drugs and devices we have today, when they are used as designed.

So stay tuned now that Novo has pulled the trigger, Sanofi is on deck and yes even Lilly is in the hole. The sooner everyone starts accepting these new realities the better, WE ARE NOT GOING BACK TO THE WAY THINGS WERE. As Momma Kliff used say; “Get with the program and deal with it.”