Lilly rejects subsidised listing for diabetes drug amid pricing dispute

Eli Lilly has declined to list its diabetes treatment Mounjaro on Australia’s Pharmaceutical Benefits Scheme (PBS), despite a recommendation from the country’s medicines regulator, citing what it described as an unacceptably low pricing proposal from the federal government.

The decision marks the latest flashpoint in a protracted negotiation between the US drugmaker and Australia’s Pharmaceutical Benefits Scheme Advisory Committee (PBAC), which advises on the inclusion of subsidised medicines. It also underscores broader tensions between Washington and Canberra over the PBS, a programme long criticised by American pharmaceutical groups for exerting downward pressure on drug prices.

According to Lilly, the price offered by the Australian government would have set a global low for reimbursed rates of Mounjaro. The company said it had engaged in four separate submissions and years of discussions before walking away from the process.

“After extensive engagement over three years, we were left with no other option,” said Manny Simons, head of Lilly’s operations in Australia and New Zealand. He acknowledged the decision would disappoint as many as 450,000 Australians living with type 2 diabetes who might otherwise have benefited from subsidised access.

The PBS, a cornerstone of Australia’s healthcare system, negotiates bulk purchasing agreements to cap out-of-pocket costs for patients at A$25 per prescription, or A$7.70 for concession holders. Inclusion on the scheme can dramatically expand access but often requires manufacturers to accept lower prices in exchange for higher volumes.

Mounjaro, part of a new generation of GLP-1 therapies, currently retails privately at between A$279 and A$689 depending on dosage. By contrast, Novo Nordisk’s rival drug Ozempic has been listed on the PBS since 2020 for diabetes treatment.

Negotiations between the government and drugmakers typically hinge on projected patient uptake, with risk-sharing agreements used to shield public finances if demand exceeds expectations. Lilly, however, argued that Canberra had sought to benchmark Mounjaro against a significantly older therapy no longer available domestically.

The dispute unfolds against a backdrop of mounting geopolitical friction. The administration of former US president Donald Trump had previously threatened tariffs on Australian pharmaceutical exports, reflecting longstanding industry concerns that PBS pricing undermines global profitability.

Meanwhile, Novo Nordisk is engaged in separate talks with Australian authorities to secure PBS listing for Wegovy, a higher-dose formulation aimed at chronic weight management. The Danish group and Lilly are competing aggressively for dominance in the fast-growing GLP-1 market, driven by surging demand for both diabetes and weight-loss treatments.

Roughly 500,000 Australians are estimated to be using GLP-1 drugs, with about half purchasing them privately — often for off-label weight loss — at full commercial prices.

Both companies are also seeking approval in Australia for oral versions of their therapies, already cleared in the US, which analysts expect will further expand the market by offering a less invasive alternative to injections.