(Bloomberg) -- Novo Nordisk A/S Chief Executive Officer Lars Fruergaard Jorgensen will use a familiar argument to defend the US prices of blockbuster drugs Ozempic and Wegovy when he appears Tuesday before a congressional committee led by Senator Bernie Sanders: It’s the middlemen.
Novo retains only a fraction of its drugs’ list prices, with the rest paid to companies that manage pharmacy benefits for insurers and employers, according to Jorgensen’s written testimony that was viewed by Bloomberg ahead of a hearing in Washington. While patients may not see it at the pharmacy counter, the drugs’ prices have decreased, according to the comments, while Novo has spent decades and billions of dollars up front to develop them.
“The ‘net’ price Novo Nordisk ultimately receives for the medicines it sells is far below the published ‘list’ price,” Jorgensen said in his testimony. Cutting the list price “may in fact create harmful unintended consequences,” he said, such as preventing some people from getting the medications.
The Danish company faces increasing pressure to make its medicines more affordable as demand skyrockets. Many patients pay out-of-pocket to use them for weight loss, which some insurers don’t cover. Sanders, who chairs the Senate Health, Education, Labor and Pensions committee, has repeatedly assailed Novo for charging more for its drugs in the US than other countries after a study found Ozempic could be profitably produced for less than $5 a month.
Novo representatives didn’t immediately respond to a request for comment.
Novo’s sales of the popular treatments have made it one of the world’s most valuable drugmakers. A Bloomberg analysis found that cumulative sales of Ozempic and Wegovy will soon surpass Novo’s entire research budget for the past three decades, undercutting a key argument for their unusually high prices.
Lawmakers are increasingly focused on the role of pharmacy benefit managers in US drug prices, which are among the highest in the world. On Friday, the Federal Trade Commission sued units of CVS Health Corp., Cigna Group and UnitedHealth Group Inc., accusing them of engaging in illegal rebate programs that drove up the price of insulin. Both Republicans and Democrats have sharply questioned PBMs’ practices, calling for more transparency in the amounts of rebates and whether those discounts go to companies or patients.
The company said in May that it retains about 60% of the list price of Ozempic and Wegovy after rebates and fees paid to middlemen — and it expects these behind-the-scenes discounts to increase.
Novo charges $968.52 a month for Ozempic and $1,349.02 for Wegovy in the US. While the medicines are far from the most expensive on the market, it’s unusual for drugs targeting such a large populations to cost so much. More than 40% of US adults have obesity, but only a tiny portion of them are taking the medicines, in part due to insurance restrictions and cost.
On Monday, lawmakers led by Representative Lloyd Doggett of Texas and Senator Elizabeth Warren of Massachusetts called on Health and Human Services Secretary Xavier Becerra to bring down costs of the drugs by using existing legal authority to issue generic licenses for semaglutide, the active ingredient in Ozempic and Wegovy.
Within a year, Ozempic will be eligible for price negotiations that could substantially reduce how much the Medicare health program for the elderly pays for the drug, Jorgensen said. The negotiations may also affect prices paid by private insurers, he added. Similar products made by rival Eli Lilly & Co. will not face government price negotiations for another decade, Jorgensen noted.
High prices and insufficient supplies of the drugs have prompted some patients to seek out cheaper versions made by compounding pharmacies. These drugs don’t go through the same rigorous approval process as brand-name or generic drugs and are only allowed to be made when medications are in shortage.
Lilly and Novo have both mounted a number of legal actions against businesses selling copycats of their drugs, but its done little to stop their proliferation. Data from the Food and Drug Administration shows there have been over 500 reports of adverse events associated with compounded weight-loss drugs, including more than 300 deemed serious. There have been 100 hospitalizations and 10 deaths linked to the drugs, Jorgensen said.
“We hope Congress will look into the risks from these companies that are deceiving the public and putting patient safety at risk,” he said.
Meanwhile, FDA data show over 25,000 adverse events for Ozempic and Wegovy, with at least 11,000 of those deemed serious and over 100 involving a death.
--With assistance from Naomi Kresge, Robert Langreth and Gerry Smith.
©2024 Bloomberg L.P.