Novo Nordisk goes “on the offensive” following Trump deal that also included rival Eli Lilly, putting an exclamation point on rapidly declining GLP-1 drug prices. Experts say the unusual situation makes it hard to predict what’s next.
The prices of GLP-1 medications are dropping like a Black Friday sale, driven by a burgeoning consumer market, political pressures and good old-fashioned competition.
Industry heavyweights Eli Lilly and Novo Nordisk were already offering their obesity medicines at discounted prices through direct-to-consumer platforms when the two pharmas struck a deal with the White House last week to offer Wegovy and Zepbound for around $350 per month on TrumpRx. Then Novo went even further on Monday, saying it would temporarily drop the self-pay price of Wegovy to match TrumpRx’s $350. The company will also offer its GLP-1 products for an introductory price of $199 for the first two doses.
“Novo on the offensive this morning,” BMO Capital Markets Evan Seigerman and colleagues wrote of the announcement in a note to investors. “Today’s pricing move likely reflects a reaction to Novo’s softening market share as the company looks to regain its footing.”
Novo and Lilly have even pledged to offer their upcoming oral GLP-1 medications at rock-bottom pricing, drawing a line in the sand before the market even kicks off.
“I don’t know if I’ve seen a market that is evolving this dynamically before. It really does kind of keep you on your toes trying to keep up with this,” Morningstar analyst Karen Andersen told BioSpace in an interview.
Sarah Emond, CEO of drug pricing watchdog the Institute for Clinical and Economic Review (ICER), which evaluates the cost effectiveness of drugs, agreed. “This disease area has such unbelievable consumer interest that I don’t know that those of us who’ve been health policy wonks all this time exactly know how to predict the impact of consumer attention on price here.”
Price Is One Possible Differentiator
The GLP-1 drugs are likely approaching their floor priced at about $350 but could drop to $250 or so in the next 10 years as generics get closer to reality, Andersen said.
“The reductions that were announced last week mean that we can expect more patients getting access in a more affordable way,” Emond said, but “it doesn’t solve the problem completely for the entire population of eligible patients.” She suspects that more obesity drugs getting to market could help push those prices even lower.
These pricing dynamics—driven by compounding pharmacies and policy pressures in addition to consumer demand—will affect the many, many biopharmas in pursuit of Novo and Lilly. The market for GLP-1 and other weight loss drugs is massive and there’s plenty of room for new entrants. To chisel off a bit of the cash up for grabs, though, companies are going to have to find niche differentiators—and price might be just the ticket.
“An executive with an effective medicine for obesity could be doing the math now to say, what is the price that I can charge where I’m still making money,” Emond said.
“There’s an opportunity for disruption that we’ve never seen before, given the infrastructure that’s being built right now,” she added. The ICER chief explained that a company that has its manufacturing situation locked down could consider a volume play, with bottom-dollar prices that appeal to a mass audience.
To be able to offer rock bottom prices, companies should be mindful of the type of product they choose to develop. Peptides are much more expensive to produce than small molecules, so when prices drop, so do margins. Novo has made its fortune with peptides. Lilly, meanwhile, has stuck to its wheelhouse in small molecules.
An alternative strategy to making cheaper weight loss drugs is to produce better options. For example, if Lilly’s hotly anticipated Phase III readout of triple agonist retatrutide achieves stronger weight loss than the incumbents, the pharma could argue to insurance companies that the drug could treat severe cases of obesity.
“Maybe that’s something that could have a better shot at getting insurance coverage,” Andersen said. “Maybe you could preserve higher pricing that way and not offer that direct to consumer.” Seeking out complimentary indications like metabolic dysfunction-associated steatohepatitis (MASH) could also help garner insurance coverage.
Novo earned an approval for Wegovy in MASH earlier this year, but Andersen said it’s not a perfect fit for the condition, as it does not address the liver fibrosis that patients experience. This leaves a market gap for anyone willing to pursue it. Novo, which just acquired MASH-focused Akero Therapeutics for $5.2 billion, will likely try to develop a combination approach or release a new product with a higher price and insurance coverage, Andersen said.
How Much Are GLP-1s Worth?
ICER has long considered what a drug manufacturer should be able to charge given the value of the medicine. But that calculation has had to change because the patient population is so huge for weight loss drugs, Emond said. Somewhere around 100 million adults in the U.S. have obesity, and around 35–40 million people have type II diabetes.
ICER has previously deemed GLP-1 drugs cost-effective, but Emond explained: “Now we’re not really talking about the most they should be able to charge. We’re talking about prices that reflect the market dynamics . . . and the prices that reflect the ability to get them to more people without causing an affordability crisis.”
ICER still doubts that the U.S. government can serve the entire market without breaching $880 million annually, which is the line the watchdog considers affordable. Put more bluntly, Sen. Bernie Sanders (I-Vt.) has said that obesity medications would push prescription drug costs in the U.S. up to $1 trillion per year.
Despite the challenging questions raised by the rapidly expanding weight loss market, Emond welcomed the pricing innovation that’s happening in real time.
“How lucky we would be as a society if this isn’t the last time we have this problem, if we get a wildly effective therapy for Alzheimer’s disease, it might come with a value-based price that’s high,” Emond explained. “How are we managing the budget impact in order to give that in an affordable way to everyone who’s eligible? So what I want us to be doing as a policy community is documenting what’s working.”
