Slim pickings: is the GLP-1 bubble about to burst?

Ozempic: the semaglutide shot heard around the world. Since its release in 2017, the wonder drug has garnered overwhelming demand – as we know, less for treating diabetes than for its weight loss effects. As sales jumped 60% between 2023 and 2024 alone, analysts forecast that the overall weight loss drug market will hit $100 billion by 2030.

However, the widespread use of Ozempic has raised hot debate around accessibility, availability, regulation, and long-term impact. What’s more, price differentials between countries, supply shortages, heavy cost-bearing for payers and legal scrutiny call for something to give. This is thanks, in large part, to its prolific use ‘off-label’ – for conditions other than its authorized purposes. What does this mean for payers, and how could patent cliffs worldwide have in store for a ravenous market?

The damage

Despite the positioning of Ozempic’s sister drug Wegovy as an outright weight loss drug, Ozempic’s infamy owes to its wider accessibility, available in 21 countries. Even more critically for payers, unlike Wegovy (a lifestyle product), Ozempic is covered by health insurance – albeit, for type II diabetes. This is a low barrier to entry for patients whose healthcare providers are willing to prescribe the drug under the guise of preventative treatment for potential health risks. This leaves payers to foot the bill, varying drastically across international markets.

The U.S. Medicare Part D program is buckling under the weight of mounting expenses as it spends between $900 to $1,600 per prescription. Meanwhile, users in Sweden, the United Kingdom, Australia and France pay less than $100. Lars Fruergaard Jørgensen, CEO of manufacturer Novo Nordisk, has encouraged European governments to follow the U.S.’ example of subsidization (it’s thought, in a bid to pivot away from holding a reputation as a lifestyle brand). Given Medicare’s predicament across the pond, they’re unlikely to oblige.

On the sell side, neither Novo Nordisk nor its main rival Eli Lilly are able to meet demand across their largest markets in Europe and the U.S. Jørgensen admits that it will take “quite some time” to catch up, while more than 1-in-4 patients can expect to switch drug brands at some point during treatment, likely due to shortages. Having become something of a Veblen good (Novo Nordisk is Europe’s most valuable company, beating luxury retailer LVMH), market demand for Ozempic increasingly comes at the expense of lower-income patients, many of whom are more prone to such illnesses as diabetes - the conditions for which the drug is authorized.

This isn’t to say that budget-friendly retailers haven’t tried to integrate ‘off-label’ GLP-1s into their own commercial strategies. Take Costco: in September 2023, the chain launched a subscription-based weight loss program through its outpatient healthcare service, in partnership with telemedicine platform Sesame. The modus operandi? Ozempic and Wegovy. For $179 (excluding medication), members received a three-month subscription complete with a video consultation, drug prescription, intermediation with insurance, lab panel and patient support. However, within a year, Sesame announced that the program was closed to new members, though pre-existing members could continue. Neither party has disclosed the reason for its conclusion, but overwhelming demand would reflect a common thread seen throughout the market.

After spending $14.4 billion on Ozempic, Wegovy and Rybelsus last year, Medicare initiated negotiations with Novo Nordisk among other drug manufacturers in a first for the governmental body. If a deal is made, it won’t take effect until 2027 at the earliest. If not, generic alternatives will be kept from the U.S market until these patents expires in 2032. Some cliffs, however, are much shorter than others.

China’s patent cliff

China is on the cusp of a boom in generic production, as Ozempic’s local patent expires in 2026. As of June 2024, Chinese pharmaceutical firms were in the process of manufacturing at least 15 generic products, with the view to go to market between 2025 and 2027. A global shift in which China becomes the largest market for semaglutide products, at the dear expense of Novo Nordisk’s bottom line. Also, the Danish economy, in which nearly 1-in-5 jobs last year alone were created by the manufacturer. Thirdly, to the U.S. market: given the state of Sino-American trade relations, chances are low that Beijing and Washington D.C. will arrive at an amicable deal to ease the latter’s demand.

Some analysts have rebutted that, despite the looming cliff, generic competitors face key technical challenges – for one, that semaglutide, the active ingredient, is complex, and subsequently more difficult to insert into an injector pen. But this barrier has already proven porous: Rybelsus, Novo Nordisk’s first attempt at delivering semaglutide in pill form, achieved 24% sales growth in 2024 across EMEA and the Rest of the World. Eli Lilly, Pfizer and Roche are among the pharmaceutical giants in the early stages of development for biosimilar products. Perhaps even worse than like-for-like competitors for Novo Nordisk, some of these experimental drugs could gain market access as products for long-term weight maintenance, rather than rapid weight loss.

Despite scarce data on GLP-1 distribution for Ozempic and Wegovy, studies report low patient adherence, as those still using the drugs drop to less than a third (32%) after the first year, then to 15% after year two. The likely reasoning for this is a plateau in weight loss that most users will experience by the 18-month mark, followed by probable weight gain once dissatisfied consumers stop treatment. Eli Lilly is looking to create an alternative that offers a more sustainable, realistic ideal for its target audience, made even easier to integrate into daily life through a daily pill rather than a weekly shot.

Conclusion

While the onset of patent expirations for GLP-1 drugs ostensibly promise broader access and affordability for both payers and consumers, the current market presents complex challenges to safeguarding equitable access and patient safety. As demand continues to grow, it’s crucial for healthcare specialists, regulators, and manufacturers to take on an agile, wholistic approach to ensuring effective use of and investment in these products. Rest assured, they’re leaving a pen-sized footprint not just on the pharmaceutical industry, but the cultural landscape at large.