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Ozempic Maker Charges $1,000, But Study Says It Can Be Made for Less Than $5

Ozempic Maker Charges $1,000, But Study Says It Can Be Made for Less Than $5
Injection pens at the Novo Nordisk A/S production facilities in Hillerod, Denmark, on Tuesday, Sept. 26, 2023. Novo's Ozempic and Wegovy injectable drugs, a class of medicines known as GLP-1s, have been causing ripple effects across the stock market, for the makers of everything from snacks to booze.

Ozempic could be profitably produced for less than $5 a month even as maker Novo Nordisk A/S charges almost $1,000 in the US, according to a study that revives questions about prices for top-selling treatments for diabetes and obesity.

The blockbuster drug could be manufactured for 89 cents to $4.73 for a month’s supply, figures that include a profit margin, researchers at Yale University, King’s College Hospital in London and the nonprofit Doctors Without Borders reported in the journal JAMA Network Open. That compares to the monthly US list price of $968.52 for Ozempic, a weekly injection.

Novo declined to provide production costs for Ozempic and Wegovy, its related drug for obesity. The company said it’s making significant investments to ensure that the public has access to its widely popular drugs. It’s making about $6 billion in capital expenditures and spending $11 billion to acquire production facilities from Catalent Inc. as part of those efforts, according to an emailed response to questions.

The study extends a line of research showing how steep the US markups are for GLP-1 drugs like Ozempic and Wegovy and underlines longstanding criticism of the prices for diabetes therapies, especially insulin. On a per-month basis, Ozempic generally can be produced for less than various forms of insulin, the study found.

“The profit margin is immense,” on drugs like Ozempic, said Melissa Barber, a public health economist at Yale and the study’s corresponding author. “There should be a conversation in policy about what is a fair price.”

Novo’s combined 2023 sales of Ozempic and Wegovy topped $18 billion. Patents linked to the drugs are likely to expire in June 2033, according to estimates from Bloomberg Law. Novo’s shares fell 0.8% in Copenhagen, and have gained 26% this year.

Transparency Goal

Drug production costs are often shrouded in secrecy with little clarity on how they relate to prices, if at all. Barber and her colleagues used updated estimates for raw ingredient costs and focuses on the costs of producing diabetes drugs, including GLP-1 drugs like Ozempic, as well as insulins and various diabetes pills.

“The goal of this research is to have receipts, to be as transparent as possible,” Barber said.

Novo and other drugmakers slashed US prices for some forms of insulin, a lifesaving diabetes drug, by as much as 75% last year under pressure from the Biden administration. By some estimates, however, the reductions made those products more profitable for drugmakers because they eliminated rebates paid to pharmacy benefit managers, the middlemen who negotiate drug prices for payers and employers.

Read More:
Insulin Makers Get Path to More Cash, Not Less, on US Price Cuts

North Carolina Drops Coverage of Costly Weight-Loss Drugs 

Ozempic Mania’s Billions in Bills Are Coming for Taxpayers 

Novo said in an email that 75% of its gross earnings goes to rebates and discounts to ensure patients have access to products like semaglutide, the active ingredient in Wegovy and Ozempic. Drugmakers often cite the high costs of research that may last years as a reason for their prices. Spending on drug research and development was almost $5 billion last year and will rise this year, Novo said.

Still, debate over the cost of drugs like Ozempic and Wegovy is ramping up. State health plans and Medicaid offices are seeing growing bills for Ozempic and its sister drug Wegovy, raising questions about whether the increases in cost are sustainable. In January, North Carolina cut off coverage of anti-obesity medicines for state employees, citing soaring costs and lack of agreement on pricing from drugmakers.

Surprisingly, the study found that the biggest cost in producing Ozempic is not the active medicine, called semaglutide, but the disposable pens used to inject it. They can be made for no more than $2.83 per month’s supply, the authors concluded, based on interviews with former employees and consultants to injection device manufacturers. One Ozempic pen is used weekly and lasts a month.

Other Costs

By contrast, the active drug in Ozempic can be produced for about 29 cents for a month’s supply, or 7.2 cents for a typical weekly dose, the research found. It’s not cheap to make — semaglutide costs over $70,000 per kilogram. But only a tiny quantity of the drug is used in each weekly dose.

Other costs include that of filling each pen, estimated at 20 cents per monthly dose, and other chemical ingredients, which the study estimates at 15 cents per monthly dose.

The analysis doesn’t include estimates for the cost of making Wegovy. Separate research from the University of Liverpool and elsewhere found last year that Wegovy could be produced for a mere $40 a month.

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