WEIGHT LOSS MEDICATIONS AND THEIR COSTS
Prof. Dr. F. Cankat Tulunay
The cost of obesity medications represents a complex and continuously evolving issue with significant financial implications for governments, particularly for public health programs like Medicare and Medicaid. Medications such as Ozempic or Wegovy may be covered if they are also approved and prescribed for other conditions such as Type 2 diabetes or cardiovascular disease. Expenditures on GLP-1 medications, a class of drugs commonly used for both diabetes and weight loss, have significantly increased for both Medicare and Medicaid in the United States in recent years. This increase is attributed to higher utilization rates and the high list prices of these medications. In 2022, Medicare spent $5.7 billion on GLP-1-related medications, which is a tenfold increase compared to 2018. Medicaid's total spending on GLP-1 medications rose from $577.3 million in 2019 to $3.9 billion in 2023. The average annual cost per patient for a GLP-1 medication is approximately $12,000. The Congressional Budget Office (CBO) estimates that expanding Medicare coverage for these drugs could increase federal spending by about $35 billion over the next decade. The Penn Wharton Budget Model estimates that covering obesity-preventive medications under Medicare and Medicaid could cost the federal government $140 billion over ten years. If half of Medicare and Medicaid patients use GLP-1 weight loss medications, it could cost the federal health system $166 billion annually. Some argue that although the initial costs of these medications are high, they could lead to long-term savings by preventing or managing obesity-related health conditions such as diabetes, heart disease, and some cancers. However, some research suggests that these savings may not fully offset the high drug costs.
The prices of GLP-1 medications and similar products are raising national concerns in the U.S. because their widespread use for weight loss will impose unprecedented financial burdens on patients and insurers. According to a recent report from the Senate Health, Education, Labor, and Pensions Committee, if only half of the eligible population's Wegovy treatment is covered, it could cost $411 billion annually, exceeding the total spending on all retail prescription drugs (which was $406 billion) in 2022. The report also indicates that coverage for Wegovy treatments could reach one trillion dollars by 2031, or even two trillion dollars depending on demand for the medication. Covering GLP-1 medications for obesity treatment (such as semaglutide and tirzepatide) could increase net spending by $47.7 billion over ten years. There would be a new cost of $65.9 billion for the drugs, which could result in $18.2 billion in savings due to weight loss and better health outcomes (reduced utilization of other healthcare services). Thus, these medications do not reduce medical-economic losses related to obesity. Additionally, the real-world effectiveness (whether individuals will benefit as much as they do in clinical trials) is still unknown. (This study was published in the JAMA Health Forum and conducted by researchers from the Congressional Budget Office (CBO) and RAND Corporation.)
The monthly treatment cost for Ozempic and Wegovy exceeds $1,000 in the United States (Novo Nordisk sells these medications to Americans at nearly 15 times the price charged in Europe). In Denmark (where Novo Nordisk is headquartered), the monthly cost of Wegovy is only $186; in Germany, it is $140; and in the United Kingdom, it is $92, while the list price for the same medication in the U.S. is astonishingly $1,349 per month. In Turkey, 1 mg of Ozempic costs 7,922 TL ($220), making the monthly treatment $880.
What are the discovery costs of these medications? Pharmaceutical companies claim that high research costs justify their exorbitant prices, using various calculation methods to support this claim. Novo Nordisk, which owns these drugs, asserts that it has spent $10 billion on GLP-1 medications over the past 30 years. This cost includes opportunity costs (the potential returns from alternative investments or projects forgone when resources are allocated to developing a new drug) and the expenses of drugs that did not reach the market. Information about the production costs of Wegovy was presented in a study conducted by Yale University, King's College Hospital (London), and Doctors Without Borders, published in JAMA Network Open in 2024. This study estimated that the production cost of a monthly treatment dose of weekly injection medications containing semaglutide (such as Ozempic and Wegovy) ranges from $0.89 to $4.73. These calculations include active ingredients, excipients, injection pens, packaging, logistics, taxes, and a reasonable profit margin.
The typical cost of developing a new drug is significantly inflated by a small number of high-cost medications (RAND, January 7, 2025). A study of 38 drugs approved by the FDA in 2019 analyzed clinical trial and cost data using SEC filings and the Citeline Trialtrove database (2014–2019). Costs were calculated based on patient-days in clinical trials. Twenty large companies accounted for 81% of total patient-days, and the average and median costs per patient-day for these companies were found to be 27% lower compared to other companies. The average (arithmetic mean) cost of developing a new drug is significantly skewed due to several exceedingly high-cost medications. The median cost provides a more typical picture.
The typical cost of developing a new drug is significantly distorted by a small number of high-cost medications (RAND, January 7, 2025). In 2019, a study examined 38 drugs approved by the FDA, analyzing clinical trial and cost data using SEC filings and the Citeline Trialtrove database (2014-2019). Costs were calculated based on patient-days in clinical trials. Twenty large companies accounted for 81% of total patient-days, and the average and median costs per patient-day for these companies were found to be 27% lower compared to others.
The average (arithmetic mean) cost of developing a new drug is severely inflated due to a few exceedingly high-cost drugs. The median cost provides a more typical picture.
Median direct R&D cost: $150 million (median: the value that falls exactly in the middle when all values in a dataset are arranged from smallest to largest)
Average direct R&D cost: $369 million
After adjustments (for opportunity costs and drugs that did not reach the market):
Median: $708 million, Average: $1.3 billion
When only two extremely costly drugs are excluded, the average cost drops to $950 million (26% lower).
In conclusion, the billions of dollars claimed by pharmaceutical companies or academics affiliated with these companies for the discovery of a drug do not reflect reality. Moreover, a significant portion of the basic research for drugs claimed to be discovered by pharmaceutical companies is conducted by academics at universities and research centers, with the industry reaping the benefits. The support provided by the pharmaceutical industry for basic research is minimal. In Turkey, apart from conducting inexpensive Phase I (human trials) studies (excluding very limited support from the Eczacıbaşı fund), they do not provide any support to universities. Even if there were support, is there enough capacity left to conduct research? Every day, there are news reports from some universities about “discoveries”! However, a limited number of capable academics who can conduct serious research are not given adequate support. If serious R&D is to be conducted in Turkey, TÜBİTAK needs to be restructured. By consolidating the R&D budgets of various institutions into one, "centers of excellence" should be established in various fields to enable talented scientists to conduct research according to the country's priorities.
Note: The medications mentioned in the article, OZEMPIC and WEGOVY (semaglutide), are GLP-1 (Glucagon-Like Peptide-1) receptor agonists. Both have the same active ingredient. The company markets Wegovy as a weight loss drug and Ozempic as a diabetes drug; both are administered via injection. The oral form of the same company’s drug, RYEBELSUS, is also available for the treatment of Type I diabetes.
The GLP-1 hormone was discovered by multiple research groups in the early 1980s. One of the most significant studies was conducted by J. Habener from Harvard University. The existence of GLP-1 was introduced to the scientific community through studies conducted between 1981–1983. Researchers demonstrated that a group of hormones secreted from the intestines, particularly GLP-1 (Glucagon-Like Peptide-1), increases insulin secretion in the pancreas and plays a crucial role in blood sugar regulation. These medications reduce insulin secretion, suppress glucagon secretion, slow gastric emptying, and send signals to the brain's appetite center. After this information was obtained, Novo Nordisk produced a synthetic version of this hormone; thus, the original discovery belongs to the academics.
References
https://jamanetwork.com/journals/jama-health-forum/fullarticle/2833038
https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2816824
https://medicine.yale.edu/news-article/prices-of-expensive-diabetes-medicines-and-weight-loss-drugs-are-drastically-higher-than-production-costs/
https://www.cbo.gov/publication/57126
Habener J et al., Biology of the Incretins: GLP-1 and GIP, Endocrine Reviews, 1995, 16(5): 677–693