High U.S. Drug Prices, High Obesity Rates, Twisted Economics

Woman Weighing GoldThe intersection of high U.S. drug prices with its high obesity rates is creating some unusual economics. Kaiser Family Foundation (KFF) and the Peterson Center on Healthcare released an analysis this week that brings this into sharp focus.

The analysis tells us that published prices for GLP-1 medicines used for obesity and diabetes are the highest in the world. For example, the price for a month of Ozempic in the U.K. is $93. In the U.S., it’s $936. To state the obvious, this is a ten-fold difference and, honestly, it is more than a little shocking.

And if that’s not enough, consider this: the price of semaglutide under the Wegovy brand for obesity is even higher. It is $1,349 dollars per month – 44 percent higher for the same drug with a different label.

PBMs and List Prices

Of course, these comparisons are challenging  because of further peculiarities in U.S. drug pricing. You see, when health insurers pay for these drugs, they don’t pay that published price. Pharmacy benefit managers negotiate a discounted price that might be half of that, or less. The exact pricing is hard to know because those prices are hidden from public scrutiny.

The only ones who pay anything close to the list price are people who might least be able to afford it: patients who have no insurance or whose insurance won’t cover the medicine. Even people with insurance can be whacked by these whacky prices when they have to pay a copay, because their copay might be 20 percent of the list price – which is not the real price their insurance pays for the remainder of the cost.

These inflated prices bring us the truly twisted economics of obesity.

International Economic Distortions

But for wealthy and well-insured U.S. patients, none of this is a problem. They pay the high price or their gold-plated health insurance takes care of it. With high rates of obesity in the U.S., this is no problem for the manufacturer of Wegovy and Ozempic. They are selling all the Ozempic and Wegovy they can make at these high prices and, in fact, cannot keep up with the demand.

Outside the U.S., Novo Nordisk is dragging its feet on launching the Wegovy brand for obesity because they are reserving their limited supplies for the high-priced U.S. market. This is obesity care for the rich. Others will have to wait.

All this gives rise to other distortions. Business Insider reports that the billions of dollars coming from this windfall are gushing into the Danish economy to inflate the value of its currency and drive down its interest rates. The market value of Novo Nordisk has now surpassed Denmark’s GDP and rivals the valuation of Europe’s most valuable company – LVMH. Coincidentally, LVMH sells luxury brands like Louis Vuitton, Dior, and Bvlgari.

But here’s the question to ponder. Is obesity care a luxury?

Click here, here, and here for more on the analysis from KFF and Peterson. For more from Business Insider, click here. Finally, further background on U.S. drug pricing is available here.

Woman Weighing Gold, painting by Jan van Hemessen / WikiArt

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August 19, 2023