The cost of manufacturing GLP-1 anti-obesity drugs is low

April 10, 2024

Source: Barber, MJ et al JAMA Network Open March 27, 2024 LINK (Calculated from the Appendix eTable 1 and eFigure 1, assuming the highest cost pens ($2.50 each) and doubling cost of API to account for wastage)

New information about the potential medical benefits of GLP-1 medications tantalizes us. These drugs are very effective at treating obesity and diabetes, and also reduce risk of heart disease and progression of kidney disease. But GLP-1 drugs are very expensive, especially in the United States. Pharmaceutical companies do not sell these drugs branded for obesity in lower income countries and sell these obesity drugs in only a small number of higher income countries.

Researchers in JAMA Network Open reviewed the total cost of producing GLP-1 medications (as well as insulin and another classes of medicines used for diabetes) with an eye toward establishing a resource-based price so that these medications could be used to treat obesity and diabetes in low and middle income countries, where noncommunicable diseases such as heart disease and diabetes take a larger toll each year.

The researchers found that the ingredient and manufacturing costs were a tiny fraction of the total price for all the drugs they investigated. For semaglutide (Ozempic and Wegovy), the manufacturing costs represented under 1% of current price. For injectable drugs, the cost of the “pens” used for self-injection was higher than the cost of the pharmaceutical ingredient.

The researchers estimated manufacturing costs from publicly available information. In fairness, pharmaceutical companies bear additional costs, including research and development, testing, regulatory compliance, storage, and transportation costs. The researchers were focused on diabetes (not obesity) treatment, and I have not included their calculations of the cost of gaining approval for biosimilars. Manufacturers rightly point out that the “list” price for these drugs does not consider costs of distribution, discounts, and rebates. Since these drugs have been ins short supply, the manufacturers have little incentive to negotiate lower net prices.

Implications for employers:

• This study provides evidence that pharmaceutical manufacturers could make substantial profits selling these drugs at much lower costs in the US.

• As more drugs of this class are approved, hopefully by additional manufacturers, we are likely to see some decrease in unit price.

• The full clinical potential of the GLP-1 drugs will not be available for members of employer sponsored health plans until unit prices come down considerably.

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Thursday: Insulin use did not increase with insulin cost caps