Source: Ippolito, et al American Enterprise Institute September, 2023 LINK
The New York Times reported this week that the net price obtained by pharmaceutical companies for anti-obesity drugs is a lot less than the list price. The article is based on a report from the American Enterprise Institute, which uses rolling quarter averages of “net” price received by the pharmaceutical company. The net price in the chart above does not include dollars that might be retained by the pharmacy benefit manager or the wholesaler or the local pharmacy - so the actual cost to employer-sponsored health insurance (even after rebates) remains higher than the authors’ estimates. The NY Times article optimistically stated:
Relief should be coming soon, health economists predict, with companies rushing to develop their own drugs. Competition may lead to lower prices.
I’m not so sure. New entrants to this market could drive prices down, but I worry that if a few companies continue to represent virtually all of the market, they will maintain their price discipline and the costs of these medications will leave them out of reach for many who could benefit from them. Financial Times reported this week that Lilly and Novo, the manufacturers of all four GLP-1 drugs commonly used for obesity therapy, are spending $3.5 billion this year to purchase smaller companies with promising anti-obesity therapies.
Implications for employers:
- Rebates and discounts are large for GLP-1 drugs for diabetes and obesity, and employers need to consider this when planning management programs and building future pharmacy budgets. For instance, limiting coverage to those with higher BMI levels could mean forfeiting rebates and increasing cost per person treated.
- Government antitrust enforcement can help make it more likely that prices will come down sooner for this valuable set of medications.
- Out of pocket cost paid by members is typically based on the drug’s list price (before discounts and rebates) unless rebates are passed through to members up front, which is uncommon. Manufacturer copay coupons to lower out of pocket costs are generally $225/month for those with insurance, and available for a limited number of months.
Coming Thursday: How cancer patients view prior authorization
Thanks for reading. You can find previous posts in the Employer Coverage archive
Please “like” and suggest this newsletter to friends and colleagues. Thanks!