Weight Loss Drug Prices
Is there More than Meets the Eye?
Obesity, defined as BMI over 30 (or over 40 for severe obesity) is an unfortunately serious and expensive chronic condition that is highly prevalent — afflicting more than 40% of Americans and 650 million people globally. In most cases, it is really the highway to many severe health conditions, including heart disease, type 2 diabetes, asthma, sleep apnea, and many others. Weight loss is known to significantly reduce these risks, including even the risk of cancer. Various studies put the cost in the US alone at about $179 billion-$260 billion each year. Americans with obesity and related conditions typically spend $1,890 more each year than the typical person without obesity. The journey to obesity starts with being overweight. Until recently, the non-surgical clinical treatment for overweight/obesity has been lifestyle changes, including diet, exercise, and coaching. Bariatric surgery, which costs approximately $15,00-$20,000, is the recommended treatment for patients with severe obesity.
Drugs to treat obesity have been around since 2012 when the FDA approved the treatment combination of phentermine and topiramate, followed by the combination of Naltrexone plus bupropion in 2014. These have been shown to be largely effective, defined as resulting in at least 5% reduction in body weight. The game changed recently with the approval of two drugs: Wegovy in 2021, the first since 2014 (semaglutide) by Novo Nordisk, and Mounjaro (tirzepatide) by Eli Lily. The interesting thing about these drugs is that they were previously diabetes drugs that have been shown to be effective in reducing weight.
Efficacy and Adherence
Most of these drugs must be taken over a long time, ranging from weeks to several months, if not longer. For example, Wegovy is a weekly injection, and it is often the case that once patients stop taking the drugs, they regain the weight. This is because these drugs work by “tricking” the brain to eat less food.
In June, Novo Nordisk, a Norwegian pharmaceutical giant, launched its blockbuster anti-obesity drug Wegovy in Germany (18% obesity and 52% overweight) for $130/month. In the US, they go for 10x as much. Even in the most extreme market segmentation, this really doesn’t make sense. Does the $130/month in Germany cover the unit cost of the product? How about $1,300/month in the US? I am very much against drug price controls and have argued quite forcefully against government mandated negotiations. I have raised some concerns in the past about other rich countries shortchanging the US when it comes to drug pricing. The pricing of Novo Nordisk is clearly an abuse of the willingness of the US to pay more for drugs. I and many others have argued in the past that pricing of drugs should really be informed by the portfolio of drugs by a pharmaceutical company rather than just a single drug. However, the large price differential between the US and other countries simply doesn’t make sense, especially for a European company.
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The problem with most of these drugs is that they must be taken for life. Now compare the price of weight loss drugs in the US (approximately $1,300/month) with treatment of diabetes with cheaper generics (I have argued in the past that we pay too little for generic drugs, and even the Biden administration agrees, ironically), insurance companies have every incentive to pay for diabetes (untreated obesity is more likely to lead to diabetes) instead of paying for a lifetime of weight loss drugs (at least until generic versions are available). In fact, having bariatric surgery will probably be cheaper. From a purely cost-effectiveness point of view, I doubt these drugs will be more cost effective than existing treatments.