Analysts say market forces will drive down the cost of obesity drugs

The CEO of Novo Nordisk is to appear before a Senate panel on Tuesday to be discussed about the high cost of Ozempic and Wegovy, popular drugs used to treat diabetes and obesity.

But health economists say congressional pressure is unlikely to be the driving force to lower prices.

Sen. Bernie Sanders, I-Vt., who chairs the Senate Health, Education, Labor and Pensions Committee, has established himself as a perennial critic of pharmaceutical companies during his time leading the committee. He had initially threatened to subpoena Novo Nordisk chairman Doug Langa to testify before the committee. Finally, the company agreed to send CEO Lars Fruergaard Jørgensen to answer questions about the price.

Sanders repeatedly attempted a simple question: Why does Novo Nordisk charge so much in the United States but so much less in countries like Canada and Germany?

This week, Jørgensen will likely tell the committee that it’s a bit more complicated than that. In a statement to CQ Roll Call on Friday, a spokesperson for Novo Nordisk outlined the actions the company has taken to make Ozempic and Wegovy, both GLP-1s, more affordable.

Novo currently sells the diabetes version of Ozempic for $968.52 a month. It sells Wegovy for treating obesity for $1,349.02 a month, according to its website. By comparison, Ozempic has a list price of $59 per month in Germany, $122 per month in Denmark and $155 per month in Canada, according to the NAVLIN database of global drug prices and market access.

The spokesperson said more than 80 percent of Americans with insurance pay $25 or less per month for Ozempic.

“Unfortunately, even when we lower our prices, too often patients in the United States don’t get the savings — that’s a problem,” the spokesperson said. “We appreciate that it is frustrating that each country has its own health system, but making isolated and limited comparisons ignores this fundamental fact. What remains constant is the undeniable value and cost savings that Novo Nordisk’s medicines bring to patients, healthcare systems and society.”

Sanders’ longstanding fight with the pharmaceutical industry goes beyond individual drug prices, however.

“The pharmaceutical industry’s business model is unsustainable, from a human perspective and from a financial perspective,” Sanders said last week during a roundtable discussion with drug pricing experts.

Market forces

Health economists and industry watchers say lower drug prices are inevitable, but Congress won’t necessarily make it happen.

At the roundtable, Sanders announced that he had spoken to generic drug companies who told him they could make a version of Ozempic that could sell for $100 a month.

Brian Reid, who runs health consulting firm Reid Strategic, said that while that may be true, he thinks Sanders is missing the point. He said almost all brand-name drugs could be sold as generics at that price, but that would leave no room for innovation.

“Indeed, the force that will drive prices down to $100 is not government intervention, but competition,” he wrote in a newsletter Wednesday. “There could be 16 new obesity drugs on the market within five years. Prices go in one direction.”

Lindsay Allen, a health economist at Northwestern University, said that while the hearing could lead to renewed calls from lawmakers for price controls, the market is already moving toward lower costs. She pointed to Eli Lilly’s direct-to-consumer platform, launched last month, LillyDirect, where it will sell its obesity drug Zepbound for $399 a month.

“What’s going to be the most effective leverage in the short term is the market dynamics of what’s happening with competitors,” she said.

Allen said Novo charges such a high price in the United States because consumers are largely willing to pay that price.

“It’s the most basic example of supply and demand,” she said. “We already can’t keep up with the supply of GLP-1; so many people are buying them that there are shortages.”

One solution to lower costs, she said, is for the Centers for Medicare and Medicaid Services to add them to the list of drugs whose prices they will negotiate under the budget reconciliation bill of 2022. In her view, she said it is likely for drugs to be added to line negotiations.

“Until now, no one has pressured the manufacturers or the federal government to use these mechanisms with regard to GLP-1,” she said.

During the hearing, she said she expected lawmakers to ask pointed questions to get Jørgensen to justify high drug prices.

“What I hope will come out in the hearing is that it actually costs very little to make these drugs,” she said.

Melissa Barber, a health economist at Yale University, said during Sanders’ roundtable discussion last week that her research has shown that companies can produce GLP-1 at prices as low as $5 a month. She came to this conclusion by examining the cost of the active pharmaceutical ingredient, the cost of the injection device, overhead costs, taxes and mark-ups.

“Novo Nordisk and Eli Lilly will be fine,” Barber said. “I would still anticipate that they would have the highest profits of any drug company in the world even if the prices were reduced to ($50 to $100).”

Getting Medicare to widely cover obesity drugs has been an uphill battle.

Lawmakers tried to get coverage through a bill known as the Obesity Treatment and Reduction Act, which is sponsored by Reps. Brad Wenstrup, R-Ohio, and Raul Ruiz, D-Calif. A condensed version of the bill was approved by the House Ways and Means Committee earlier this year. Under the amended version, Medicare could cover the drugs for people with similar conditions whose insurance previously covered the drugs.

Allen said getting the drugs covered by Medicare could also depend on how well the drugs save Medicare on other health care costs for obesity-related conditions, such as cardiovascular problems.

“If CMS were paying the prices they’re paying now for the patients they’re scheduled to pay, it would be cheaper for CMS to buy Novo Nordisk than it would be to pay what we’re paying for the next two years,” Barber said.