Sanders’ Pressure on Novo Nordisk Fuels Ozempic Pricing Debate

The blockbuster drug Ozempic from Novo Nordisk A/S is the latest target in Sen. Bernie Sanders’ quest to lower drug costs, but it’s unlikely the political pressure campaign will make a dent on the manufacturer to slash prices, some drug pricing observers say.

Novo Nordisk Chief Executive Officer Lars Fruergaard Jørgensen has yet to publicly respond to Sanders’ (I-Vt.) request to meet this week after the Senate Health, Education, Labor, and Pensions Committee chairman called on the Danish drug company to lower the list price of its drug Ozempic, a weekly injectable used to treat diabetes.

The demand was prompted by a study published in JAMA Network Open, which found that a month’s supply of Ozempic could be profitably made for less than $5. The list price in the US for the drug is nearly $1,000 for a month’s supply of weekly injections.

While Sanders has been notorious for calling out pharmaceutical giants on their drug prices and inviting them to Capitol Hill to testify before his committee, his political pressure campaign targeted at Novo Nordisk’s diabetes and obesity drugs may not immediately crack the manufacturer to lower costs.

“It’s just a piece of the pricing pressure that is building,” said Ted Kyle, principal and founder of ConscienHealth, a group that works to advance approaches to health and obesity.

“The combination of political pressure and market forces will sooner or later, without a doubt, lead to adjustments in the prices. The timing on that, though, is unpredictable,” Kyle said.

Not Insulin, Inhalers

Sanders’ goal to lower the out-of-pocket costs for Ozempic mirrors his previous probes on major pharmaceutical companies to slash costs on certain products. He’s touted past successful public pressure campaigns and investigations on insulin and inhaler prices.

Sanders last month flexed his progress on his probe for inhaler prices after announcing that three major drug manufacturers committed to capping patient copay costs for their brand named inhalers in less than three months of his investigation.

But obesity drugs pose a different case, said Benedic Ippolito, a senior fellow in economic policy studies at the American Enterprise Institute.

“This conversation is about relatively new branded pharmaceuticals,” Ippolito said. “Insulin has always been a politically charged and salient topic because it’s an unusual drug, which did not have generic competition for a long time.”

Previous factors such as the generics coming to market or the Medicaid Drug Rebate Program could have played a role in the manufacturers placing price caps on insulin and inhalers. But for drugs like Ozempic and Wegovy, a Novo Nordisk medication approved to treat chronic weight management, the high costs are backed by the demand for the drugs.

“It’s not even an issue that they’re priced inappropriately,” Ippolito said. “The issue when it comes to the diabetes and obesity products is simply the size of the demand.”

In 2022, 1 in 8 people, or 890 million, in the world were living with obesity, according to a March study by the World Health Organization. The 2023 National Diabetes Report found that in 2021, 38.4 million people in the US had diabetes.

Novo Nordisk’s combined sales of Ozempic and Wegovy topped $18 billion in 2023. The company plans to expand its production in 2024 and invest $6.5 billion in production, compared to investments of approximately $3.6 billion last year.

Novo Nordisk’s high costs for Ozempic could also be backed by the fact that its prices align with how the US drug pricing market operates, said Anna Kaltenboeck, practice director for prescription drug reimbursement at ATI Advisory.

“The real lost opportunity is that in this particular market, prices are higher than they need to be for manufacturers to profit more than handsomely. This is a really big market, so by volume alone the revenue opportunity is enormous. But it’s also a market with a broken pricing mechanism, in which the supply chain actually really likes high-priced drugs,” Kaltenboeck said.

“High prices are nice for everyone but the end user. The supply chain can mark those prices up and make a lot of money. They can discount them and make a lot of money, or they can get rebates and make a lot of money,” she said.

Prices are also set high because historically, obesity medicines have been used as if they were specialty medicines, suitable only for a small number of patients, according to Kyle.

“These drugs that come into the marketplace are priced as if they were specialty pharmaceuticals. It’s becoming apparent that these are going to evolve from being used like specialty pharmaceuticals to being used more like mass market pharmaceuticals,” Kyle said.

Authors of the JAMA study found that the biggest cost in producing Ozempic is not the active ingredient in its medicine, semaglutide, but rather the disposable pens used to inject it, which can be produced for $2.83 per month’s supply.

“Even in a world where we spent much less on pharmaceuticals than we currently do, we would still pay much more than on costs to simply manufacturer a product,” Ippolito said. “You still need the manufacturer to want to make this product in the first place, and there all of these fixed costs that occur before you ever sell a pill or a vial.”

Heightened Pressure

Pressure to lower the costs for obesity drugs was already ramping up prior to Sanders’ request.

At least 16 state Medicaid programs cover one or more weight-loss medications, but the prices have been straining state health plans and Medicaid offices. North Carolina’s State Health Plan voted in January to stop covering GLP-1 medications due to rising prices from drugmakers.

Major health insurers in the US recently agreed to start covering Wegovy for certain Medicare beneficiaries with heart-related conditions after the Centers for Medicare & Medicaid Services instructed prescription drug benefit plans that it can be covered for cardiovascular disease.

The hefty prices on the drugs have also signaled that they could be selected for a future round of the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, according to a March 20 report by the Congressional Budget Office.

Any moves to lower drug prices would likely have to have more weight than Sanders’ current campaign, said Gerard Anderson, a health policy professor at the Johns Hopkins University Bloomberg School of Public Health and member of the Maryland Prescription Drug Affordability Board.

“It’s got to be something that Medicare does—something that the state PDABs do or some other mandatory reduction in price will be required,” Anderson said. “Any drug company can lower their prices, but I don’t understand why any drug company would voluntarily lower their prices unless there was some external factor.”

The Maryland Prescription Drug Affordability Board recently announced it’s looking at whether to set health plan payment limits for the obesity drug.

“We looked at about 60 different factors. But the critical one, is the out-of-pocket spending by an individual patient and out-of-pocket spending by all patients. Ozempic has a very high level of out-of-pocket spending,” Anderson said.

“It’s important to keep the public’s attention on the prices, but I’m not expecting any actual price reduction,” Anderson added.

The Johns Hopkins Bloomberg School of Public Health is supported by Michael Bloomberg, the majority owner of Bloomberg Law’s parent company.