Eli Lilly (LLY) has made a bold move in the competitive world of weight-loss treatments, directly challenging Novo Nordisk with its newly-approved drug, Zepbound. In the commercial showdown, Lilly emphasizes that Zepbound’s list price is approximately 20% lower than Novo’s Wegovy.
A Battle of Titans in the Anti-Obesity Drug Race
Lilly’s announcement of Zepbound’s Food and Drug Approval highlights its determination to take on Novo, which holds the edge with its already-established weight-loss drugs. In the first three quarters of 2023, Novo’s Wegovy generated $3.1 billion in sales, and its popularity is predicted to soar in the coming years.
Comparing Price Tags
While Zepbound’s price is indeed lower than Wegovy’s, it is important to note that it still remains relatively expensive. In fact, Zepbound’s list price of nearly $13,000 a year surpasses that of Lilly’s Mounjaro, a similar drug marketed as a Type 2 diabetes treatment. Additionally, the list price of Novo’s Ozempic, the Type 2 diabetes version of Wegovy, is around $11,000 per year.
Supply Constraints Present a More Pressing Issue
Given the limited supply of these drugs from both companies, availability may have a greater impact on prescribing decisions than price. Patients may find themselves relying on their pharmacists to secure whichever drug is in stock, rather than having a preference for one over the other.
Targeting Employers and Insurance Coverage
Lilly has made a strategic move by considering employers when setting the price for Zepbound. By positioning their drug as a more affordable option, Lilly hopes to persuade more employers to cover its weight-loss treatment. Many insurers have been hesitant to pay for anti-obesity drugs, often viewing obesity as a lifestyle choice. However, Novo executives recently announced that 50 million Americans now have access to Wegovy through their commercial insurance plans.
Potential Economic Impact
The high cost of Wegovy and Zepbound raises concerns about the strain on healthcare budgets and insurance premiums. As previously reported, the significant demand for these drugs combined with their expensive price could potentially cause a spending crisis and put pressure on Medicaid budgets as well as increase costs for employers and workers.
Rethinking Drug Pricing in the U.S.
The ongoing debate surrounding drug pricing in the United States often centers on the role of pharmacy-benefit managers (PBMs) as intermediaries in negotiations between drugmakers and insurers. Interestingly, PBMs sometimes favor drugs with higher list prices due to the sizeable rebates they receive from drugmakers.
However, pharmaceutical company Lilly announced that their lower list price for Zepbound was primarily aimed at employers who would decide whether to cover the drug for their employees, rather than targeting PBMs. During a recent media call, Michael Mason, Lilly Diabetes president, explained that employers considered the list price a significant factor in their decision-making process.
To secure coverage of obesity drugs on insurance plans, both employers and PBMs must agree to include them. Lilly believes that employers, who may not be aware of the net prices negotiated by PBMs, might be inclined to choose the lower-list-price drug.
Securing employer coverage for Zepbound is crucial for Lilly since Medicare currently cannot cover weight-loss drugs due to legal restrictions. However, Lilly CEO David Ricks mentioned that the company is exploring other potential applications for Zepbound, such as sleep apnea, which could open up opportunities for Medicare coverage in related conditions.
Following the approval of Zepbound, Lilly’s shares experienced a 3.6% decrease.