Lisa Jarvis: Who's really keeping Ozempic and Wegovy prices so high?

On Tuesday, congressional leaders spent two hours taking to task Novo Nordisk Chief Executive Officer Lars Fruergaard Jørgensen over the high price of the company’s diabetes and obesity drugs, Ozempic and Wegovy. Now the question is whether those prices will change.

Vermont Sen. Bernie Sanders, chair of the Senate health committee, focused his sights not only on Novo Nordisk, but on the broader forces that drive up U.S. health care costs. Even so, it’s hard to imagine any quick way to improve access and affordability for these drugs.

The hearings come amid new data from the Centers for Disease Control and Prevention illustrating the intractability of the obesity epidemic in the U.S. Despite widespread attention to the problem, rates of obesity haven’t significantly budged in the last several years, with over 40% of the population considered obese.

The prospect of 40% of the U.S. population taking obesity drugs has everyone worried about the costs for public and private insurers. Novo’s Wegovy carries a list price of $1,349 per month. The volume of demand is weighing on insurers, even with discounts — and even amid shortages that mean not every patient can fill his or her prescription. It has pushed desperate patients into the gray market for compounded versions of obesity drugs, which are cheaper and more plentiful, but lack any assurances of safety or efficacy.

That situation is what brought Jørgensen before the Senate committee this week. Yet Senate hearings on drug pricing haven’t always offered much relief for American health care consumers. Rather, they often serve to illuminate the convoluted nature of drug pricing in the U.S. Senators’ line of questioning habitually makes clear that even well-briefed congressional leaders struggle to grasp the flow of money in and out of various players’ pockets.

That opacity has been a useful shield for drug manufacturers (and for other players in the system, like insurers and pharmacies). When cornered over the high cost of essential treatments, all a CEO in congressional crosshairs needs to do is deflect the blame toward someone else.

And that was exactly what Jørgensen did. When repeatedly pressed by Sanders to explain why the cost of Novo’s GLP-1 therapies is orders of magnitude higher in the U.S. than in several European countries, Jørgensen kept pivoting the conversation to pharmacy benefit managers, or PBMs. They’re the middlemen between drug manufacturers, insurers and pharmacies.

The list price, he explained, is the starting point for negotiations with PBMs, not what anyone (with insurance at least) actually pays. Lowering that price might make semaglutide become less, not more accessible, he said. That’s because PBMs make money off the differences between what Novo charges for a drug, the negotiated price an insurer pays for it, and the amount a pharmacy actually receives from its sale. If those margins narrow, the PBM might remove the drug from its list of covered products.

If that sounds outrageous, it is. PBMs recently have become the favorite punching bag over high drug prices for good reason. In theory, their job is to haggle with drug companies to save insurers money. In practice, they have exploited a murky, convoluted system to maximize profits while adding to the rising costs of health care in the U.S. In fact, the Federal Trade Commission last week accused PBMs of keeping the price of insulin artificially high, despite manufacturers’ efforts to lower it.

Some members of Congress bought into Jørgensen’s narrative that PBMs are fully responsible for the high cost of health care in the U.S. Wyoming Sen. Roger Marshall went so far as to say that “Novo Nordisk is not the villain in this story. They’re a hero.”

And Novo certainly has developed a groundbreaking product (and to be fair, has put significant resources into developing and manufacturing it). But it also isn’t innocent in this mess. One need only look at its recent astronomical revenue and profit growth to see that Ozempic and Wegovy have been very good to the Danish company. The majority of the returns have come from the U.S. market, where both prices and demand are high.

That made it satisfying when Sanders punctured Jørgensen’s argument with a dramatic reveal: “I am delighted to announce today that I have received commitments in writing from all the major PBMs that if Novo Nordisk substantially reduces the list price for Ozempic and Wegovy, they would not limit coverage,” he said.

The question now is whether anything real comes of it. Jørgensen declined to commit to lower the list price on Ozempic and Wegovy, but indicated he’d be willing to talk with the PBMs.

Getting everyone at one table to hash out a solution sounds great, but I’m skeptical. It’s hard to imagine an industry that has profited from loopholes and a lack of transparency will suddenly feel compelled to do the right thing for patients.

Access could ease when Medicare is able to negotiate the price of these drugs. Ozempic and Wegovy are likely to be targeted in the next round of the government agency’s program. But the bargaining process is slow — lowered costs wouldn’t kick in until 2027.

That’s a shame. As Sanders noted, the question of access and affordability is about so much more than economics. “It is a profound moral issue,” he said, pointing to a recent study that suggests Ozempic and Wegovy could save more than 43,000 lives each year, while improving the quality of life for many more people.

That statement underscored one positive outcome of the hearings: the open acknowledgement that obesity drugs can truly help Americans live healthier lives. It wasn’t that long ago that instead of questioning the high price of these drugs, many were questioning their purpose. The perception that these are cosmetic drugs finally has shifted thanks to study after study showing the central role they might play in mitigating diseases like Type 2 diabetes, heart disease, kidney disease and potentially even Alzheimer’s and addiction.

Unfortunately, without fixing the broken system of drug pricing in the country — not one kink in the chain, but all of them — the potentially profound long-term impact on our nation’s health will remain out of reach.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, health care and the pharmaceutical industry. Previously, she was executive editor of Chemical & Engineering News.