Weight Loss Drugs Are Crushing Public Health Budgets—But Pharmaceutical Companies Are Playing Hardball
"All the states, all the private, all the public health plans—including the federal government—are going to be under siege because of the cost."
By Eric Gardner, More Perfect Union
A new class of highly effective but expensive diabetes and weight loss drugs are threatening state public health budgets—but drug manufacturers are thwarting officials’ efforts to reduce costs.
North Carolina Treasurer Dale Folwell outlined the stakes in a recent interview. “All the states, all the private, all the public health plans—including the federal government—are going to be under siege because of the cost,” North Carolina state Treasurer Dale Folwell, a Republican, told Bloomberg last week.
The drugs in question are known as GLP-1 drugs, named after the hormone they mimic that lowers a person’s blood sugar and decreases their appetite. Most patients know the drugs by their brand names: Ozempic, Wegovy, and Mounjaro. Studies have shown that in addition to managing diabetes, the drugs help some people lose 20 percent of their body weight. The drugs are considered a pharmaceutical breakthrough, so it’s not surprising they come at a high price—upwards of $1,000 a month.
There’s a massive market in the U.S. More than 10 percent of Americans have type 2 diabetes, and over 100 million are considered medically obese. These problems are more common in the nearly one-fifth of Americans on Medicaid, a government health insurance that makes up more than a quarter of state budgets. Last year, federal spending on GLP-1 drugs reached $7.9 billion, a 139 percent increase in just two years and more than 8 percent of the federal government’s drug bill. Bloomberg reported that states are already restricting access to the treatment due to the high cost.
The state health plan in North Carolina, which Folwell administers in his role as treasurer, covers nearly 740,000 teachers, firefighters, state employees, and their dependents. Last fall, the Treasurer's office recommended that the plan no longer cover the drugs for weight loss prescriptions due to the high cost. In 2023, around 20,000 members used the drug at a cost of nearly $170 million for the state.
For Ozempic, the most famous of the GLP-1 drugs, the state previously negotiated a price of about $800 a month for the medication. The Dutch conglomerate Novo Nordisk, which sells the groundbreaking drug, allegedly threatened to remove the state’s discounts if care was restricted, catapulting the price to $1,349, Folwell told Bloomberg.
The state backed down. Moving forward, North Carolina will continue to cover existing prescriptions but will not cover additional ones. That’s good news for the current patients because studies have shown that patients often regain weight after stopping treatment.
For the first nine months of 2023, Novo Nordisk posted a profit of over $9 billion, an increase of almost 50 percent from last year. The company attributes most of the growth to U.S. sales.
The potential threat that the treatments pose to the viability of America’s health system has been an open secret in the pharmaceutical industry for some time. Unlike other developed countries, the U.S. allows corporations to set the price of most drugs. This contrasts with others who use a government board that sets allowable prices after considering the drugs' effectiveness and the interests of businesses, patients, and society.
In investor earnings calls, analysts have asked executives about the inherent tension between corporate profits and public finances. In an April 2023 call, an analyst asked executives at Eli Lilly about balancing “commercial potential with potential stress to the system.” This can roughly be translated to: “How do you make as much profit as possible without destroying America’s already limping health care system?”
The answer these executives give typically boils down to some version of this: America is already spending around $1 trillion on obesity-related complications. This includes ailments like cardiovascular disease, type-2 diabetes, and joint issues. If we give the manufacturers of GLP-1 a significant portion of that, they will reduce the overall cost to the system by preventing those complications in the first place.
Novo Nordisk told Bloomberg in a statement that the drugs “can ultimately save the health-care system and the economy billions of dollars.” David Ricks, the CEO of Eli Lilly, whose Mounjaro treatment boasts an annual list price of over $12,000, echoed the sentiment to investors in April 2023. “It's hard to imagine by the end of this decade that everyone doesn't just accept that pharmacologic treatment for overweight and obesity should be the standard of care, and it will save this health care system trillions of dollars over time,” Ricks said.
Outside analysis does not yet back up this view. Before deciding to restrict care, the North Carolina Treasurer hired an outside consultancy to analyze the drug’s impact on the state’s healthcare system. They found that by 2030, the state could be on track to spend nearly $1.5 billion on anti-obesity drugs, generating an overall cost savings of under 100 million dollars to the state’s system.
“At the end of the day,” Folwell told Bloomberg TV, “what we desire is to pay the same price for this drug as the people in their home country pay.”
The price for Ozempic in the Netherlands, Novo Nordisk’s homeland? $103 a month. That’s 88 percent less than the U.S.
Watch our full video report on GLP-1 drugs here: