Ozempic, Novo Nordisk A/S’s popular diabetes drug that’s also used for weight loss, could be one of the next drugs to have its price slashed in bargaining with the US government.
(Bloomberg) — Ozempic, Novo Nordisk A/S’s popular diabetes drug that’s also used for weight loss, could be one of the next drugs to have its price slashed in bargaining with the US government.
The Biden administration on Tuesday released the names of the first 10 prescription drugs that will be subject to price negotiations with Medicare, the government health program for roughly 65 million seniors. It’s one among a sweeping set of policies set forth in President Joe Biden’s Inflation Reduction Act, signed into law last year. The law allows the US government to haggle over drug prices, as many other nations around the world already do, and Ozempic could be among the next wave to face price cuts.
Drugs made by pharmaceutical giants including Bristol-Myers Squibb Co., Eli Lilly & Co. and Johnson & Johnson were among the first targets. The government expects prices will be slashed by half on average, with the first cuts taking effect in 2026. Another 15 Medicare Part D drugs will be selected in February 2025 based on spending. Analysts say Ozempic, which cost Medicare over $5,700 per beneficiary in 2021, is a top contender. Negotiated prices for those drugs will go into effect in 2027.
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Ozempic has a list price of $936 a month in the US, but its covered by most Medicare Part D plans for patients with type 2 diabetes to manage blood sugar levels. Novo’s Rybelsus, a diabetes drug taken orally, could also be on the list because it contains the same active ingredient as Ozempic. However, Novo’s Wegovy, a similar drug approved for patients with obesity, likely won’t be targeted for negotiations in the near-term because Medicare doesn’t currently cover weight-loss medications.
“We will explore all options that allow us to drive change for people that need it and strive to continue to bring innovative medicines to the market while helping increase access for those that need them,” a spokesperson for Novo said in a statement.
About 28% of Medicare beneficiaries are diabetic, and the program spent $2.62 billion on Ozempic in 2021. Outlays are only expected to increase amid fervent demand for GLP-1 drugs like Ozempic and Wegovy combined with a rising incidence of diabetes and obesity.
If the price of Ozempic was reduced by 40%, Medicare would save an estimated $1.3 billion, according to research from Leerink Partners, while Rybelsus price cuts would save just $342 million. Medicare accounts for roughly 30% of sales both for Ozempic and Rybelsus. The drugs that ultimately wind up on the list in 2025 will depend on which are likely to save the government the most money.
Four of the ten drugs targeted by CMS in the first round of negotiations are diabetes drugs that cost Medicare more than $17 billion a year before rebates. Savings on those drugs could help pave the way to cover popular GLP-1 drugs like Wegovy, Wells Fargo analysts said in a note.
An estimated 20 million Americans with obesity are on Medicare. The program’s spending on Wegovy could top $13 billion if just 10% of beneficiaries with obesity were prescribed it, analysts say. That would account for 12% of projected Medicare spending for all Part D drugs in 2023.
Weight-loss medications currently aren’t covered by the program, but a bill called the Treat and Reduce Obesity Act is trying to change that. Some analysts have said its chances of getting through Congress are slim.
“While there’s bipartisan support for the policy,” Bloomberg Intelligence analyst Duane Wright said in a note, “prior proposals haven’t advanced given concerns over cost implications for the Medicare program.”
–With assistance from John Tozzi.
(Updates with statement from Novo Nordisk in fifth paragraph.)
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