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Will Policy Makers or Market Forces Lower GLP-1 Costs First?

A new economic analysis in JAMA Network Open brings unsurprising news: manufacturing costs for GLP-1 agonists are a tiny fraction of the price for these important medicines. This is always the case for innovative prescription drugs that must recover billions of dollars of development costs in order to be profitable.

The response from policy makers was equally unsurprising – a demand for lower prices.

Statement from Senator Bernie Sanders

Sanders issued his demand almost immediately after the paper in JAMA Network Open went public yesterday:

“As Chairman of the Senate Committee on Health, Education, Labor, and Pensions (HELP), I am calling on Novo Nordisk to lower the list price of Ozempic – and the related drug Wegovy – in America to no more than what they charge for this drug in Canada. The American people are sick and tired of paying, by far, the highest prices in the world for prescription drugs while the pharmaceutical industry enjoys huge profits.

“As a result of a major grassroots movement, Novo Nordisk did the right thing by recently reducing the price of its insulin products by some 75% in America. Novo Nordisk, a company that made nearly $15 billion in profits last year, must now do the right thing with respect to Ozempic and Wegovy.

“Ozempic has the potential to be a game changer in the diabetes and obesity epidemics in America. But, if we do not substantially reduce the price of this drug, millions who need it will be unable to afford it. Further, this outrageously high price has the potential to bankrupt Medicare, the American people and our entire health care system.

“We cannot allow that to happen. A prescription drug is not safe or effective for a patient who cannot afford it.”

The Intersection of Political and Market Pressure

Make no mistake, both political pressure and market pressures are building. Novo Nordisk no longer has the marketplace for obesity medicines all to itself. When Lilly brought Zepbound into the market that Novo had been dominating, it set a list price about 20% lower for its product than Wegovy. So a little bit of price competition is already in play.

And much more is coming with a growing number of drugs that will compete in this market. Other companies sense a big opportunity. But drug price competition has odd dynamics and PBMs tend to distort the effects of normal market pressures. On top of that, even at these high prices, both Lilly and Novo are having a hard time keeping up with explosive demand for their products.

So it may be a long wait for market forces to bring GLP-1 costs down.

More Pressure Coming

Meanwhile, you can be sure that political pressure will build from policy makers and advocates. The Kaiser Family Foundation issued a report late last week, saying that Medicare costs for GLP-1 medicines is “skyrocketing.”

As a result, CMS has suggested that semaglutide may be a candidate for Medicare price negotiations as early as next year.

Yes, pressure on GLP-1 pricing will continue to rise – from both policy makers and market forces. These are powerful, profitable drugs. With great power, comes great responsibility – in this case for equitable pricing. If you have any doubts, check with Spider-Man.

Click here for the new analysis in JAMA Network Open, here for Sanders’ statement, and here for the report from Kaiser Family Foundation. For additional reporting, click here.

Banknote Portrait Pattern, macrophotograph of a Hungarian banknote by Petar Milošević / Wikimedia Commons

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March 28, 2024