Major pharma disruption--about time?

Eli Lilly (Zepbound) and Novo Norodisk (Wegovy) both go direct to consumers with weight loss drugs—a shot over the bow at pharmacy benefit managers and our bizarre drug costs.

What do you think? What frustrates you about all this? What’s your experience with PBMs, health insurers, and prescription drug access and pricing? For you, your spouse, your partner, your aging parents, or your kids? Comment, start a Chat, or respond to the Note; we’re really very interested in your thoughts on this—because it impacts a whole lot of people, and we bet you have an opinion.

Is this TLDR for you? Check Notes, where I posted the (very) short version earlier. This is an expansion of that with context. - mag

A shot over the bow of prescription access and pricing

Eli Lilly, the largest drug company in the world, just went direct-to-consumer with their weight loss drug, Zepbound, offering a cash discount if you skip going through your insurance company its PBM¹ and buy directly from Lilly. Novo Nordisk, the second largest pharma company in the world, followed immediately with discounted direct access to Wegovy. That’s called an industry-disruptive price war. These are industry-leading gazillion-dollar companies.

As Shelby Tutty from Women’s Health 365 Collective notes, part of this could be a reaction to competition from compounding pharmacies, who were allowed by the FDA to compound semiglutides while there was a shortage and apparently are going to continue to be allowed to produce competitor compounds to Wegovy for at least another 60 to 90 days.²

Why it matters to women

If you just look at weight loss drugs, interest is generally higher among women (51%) versus men (38%). Millennials and Gen X women are particularly interested. And you’d have to have been marooned on an island (which sounds pretty inviting right now frankly) to have missed all the news about these GLP-1 drugs. Here and here are a couple of our most recent posts on this. While sometimes I think it’s too good to all be true, the fact is that the data so far seems to be pretty solid, with some huge studies showing decreased risk in major categories that worry all of us, like cardiac health and diabetes.

The real potential is far more than this: a shot over the bow of drug access and pricing from PBMs and insurance companies?

But the real reason it’s worth a post goes far beyond weight loss drugs. This is the first time (that I know of) that Big Pharma has gone direct to consumers on high demand medications, right around the middlemen—the PBMs, or Pharmacy Benefit Managers, who are, of course, owned by insurance companies.³

It’s a nice gig if you can figure out how to do it. Here’s how that works.

Say you make…a dog contraceptive as an option to sterilization. [Disclaimer—I have no idea if this already exists; just go with me here.] A dog owner—let’s call her Sarah—may want to breed her purebred dog some day, but not right now. And this drug you manufacture is something she can give easily her dog at home, and could stop if she decides to breed her dog later. Sarah has pet insurance that she thought would cover the costs. But the insurer says no, they won’t cover it, on the advice of their consultants, a Pet Pharmacy Benefit Managers (PPBM). Since the PPBM has a different company name, Sarah may never discover her dog insurance company actually owns the PPBM, but the PPBM tells Sarah’s pet insurance company not to pay for the drug, or recommends raising the price so high that Sarah gives up the fight, or maybe she caves and uses another brand of pet infertility drug the PPBM recommends that costs less, but doesn’t have the best reviews on how it works. The PPBM recommendation to the insurer could be good medicine, or maybe the PPBM has…let’s call it “a sneaking suspicion’…that their owner, the pet insurance company, sensitive to stockholders, would prefer not to raise their internal costs this year, and so prefers not to cover the drug at all. Or if they have to offer it, they prefer to go with the alternative that doesn’t cost them as much, never mind a few questions about how well it works.

Both the PPBM and the insurance kind of know it’s likely too much trouble for Sarah to figure out how to get the drug cheaper from, say, Canada or Mexico, where consumers pay half of what the pet insurance company somehow manages to charge here in the States if they allow it all.

You—the manufacturer of this drug—suspect a lot of dog owners are really eager to buy the drug, but you can’t break through the…let’s call it the pharma/insurance drug cartels…so you just say, what the heck, and start selling it online yourself at a discount. You’ll still make money of course, but now your competitor does the same thing…and bingo, a price war where you, the manufacturers, still do just fine; you definitely get the attention of the cartels to possibly make them rethink their policies; and—more importantly—you’ve found a way around the cartels.

Hypothetical, of course. We’d never have drug cartels in the US.

Why this sounds familiar

Remember the quaint days of 2022 when That Other Old President, Joe Biden, talked Congress into breaking thorough a 20-year-old Medicare rule that prevented Medicare from directly engaging in price negotiations with drug companies? Medicare—which covers one out of five Americans—could have tremendous impact on drug pricing if they could negotiate, but it practically took an Act of God (AKA Inflation Reduction Act of 2022) to allow very limited negotiation on only 10 drugs considered “high-expenditure, single-source drugs without generic or biosimilar competition,” with the new prices to go into effect Jan. 1, 2026 to give time for everyone involved to adjust, another quaint idea.

And remember how that resulted in capping life-saving insulin prices at $35/month? Here’s the impact on Medicare beneficiaries: If the new law had been enacted effective in 2020, Medicare beneficiaries would have saved $734 million in Part D and $27 million in Part B on insulin costs. Put another way, you and I—all taxpayers—would have saved that much. And that doesn’t begin to cover the potential savings if Medicaid and ACA were also able to negotiate drug prices. Now you’re talking savings for up to 65% of the population.

And no, pharmaceutical companies likely would not have suffered much. The have a lot of room on pricing, with earnings “significantly greater” than non-pharm companies (13.8% compared to 7.7%).

Who might have suffered? Well, stockholders in pharmaceutical companies might have had a small haircut, many of whom are in Congress. Although how much is debatable. From a what-do-I-know perspective, it pretty much looked to me like pharmaceutical companies simply immediately raised the consumer cost on other meds needed by a lot of people. Can we talk pricing of asthma medications?

And in our new world order, President Trump is not a real fan of pharmaceutical cost reduction, although I thought he said he was during the campaign. Perhaps that’s been delegated to Secretary Kennedy. But apparently new information to Mr. Trump has revealed that high drug prices are caused by foreign countries, although it does seem many Big Pharma companies are headquartered right here in the US. So, on his first day in office, January 20, one of the nearly 80 of Biden’s Executive Orders, Trump rescinded included Biden’s Executive Order (EO) 14087 that directed HHS to consider “new health care payment and delivery models that would lower drug costs” for Medicare and Medicaid beneficiaries. So, no more of that silliness. (The good news is the insulin and the other med negotiations were by law—the IRA—not by EO. That means only a new law can change that, not an EO.)

The other reason all this sounds familiar is that there’s a been a lot in the press over the last couple years about the role of PBMs in both consumer access to, and costs of, drugs. Some—”some” is a key word here—are questioning the role of PBMs and what might be called the ‘cover’ they provide for health insurance companies; or at least that was a topic back in 2024.

What’s next?

I am definitely not an expert on all this, even though I have the gist of the issue because I’ve long seen it from both the provider and consumer sides.

But it seems to me that new direct-to-consumer pricing (dare we even hope for a little price war?) for a drug most PBMs don’t want to authorize⁴ is an interesting step. Because the real question is, now that Lilly and Novo Nordisk have done this, what’s to stop them from doing the same thing with other drugs users need or want but are priced out of accessing?

That’s the part that’s pretty interesting. Stay tuned.

1. PBMs, owned by healthcare insurance companies, are the companies who make decisions about which drugs the insurance company will use and how much they’ll cost. PBMs “act as intermediaries between health insurers, pharmacies, and drug manufacturers. They play a significant role in controlling prescription drug costs and ensuring access to affordable medications.” They negotiate drug prices with manufacturers, create drug formularies (lists of covered medications), process prescription drug claims, manage pharmacy networks, and provide drug utilization review services.” (Wikipedia) Basically, they completely control your medication access and cost if you’re on an insurance plan.

2. That shortage was declared over in late February by the FDA, and would ordinarily close the door for compounders to fill the void caused by the shortage. But both the declaration and a follow-up clarification note the FDA will not interfere with compounding pharmacies making these drugs for 6o to 90 days. In additional action today, Novo Nordisk) is joining the compound pharmacies—their putative competitors—in a lawsuit over the FDA's removal of semaglutide from the shortage list. The compounding pharmacies producing Ozempic and Wegovy claim the FDA did not follow proper rulemaking before saying the shortage was over. Novo Nordisk is saying they may still have trouble meeting demand.

3. Here are the three PBMs and their owners:

• CVS Caremark (owned by CVS, which also owns Aetna)

• Express Scripts (Cigna Healthcare)

• Optum Rx (owned by United Health Group)

4. There are varying degrees of coverage for GLP-1s by insurance plans for people at risk for diseases like Type 2 diabetes, for example. The need to take for uncomplicated obesity is a whole other issue, even though drugs like Wegovy and Zepbound are sister drugs of the ones used for those at risk for diabetes. See our earlier posts (here and here) for the current big debate: Whether handling weight will handle everything else (like high blood pressure, T2D) and should be the first focus. Generally, insurance companies aren’t yet covering much for weight loss without a risk factor, and there is no doubt that covering just hose at clear risk for disease has increased in their cost, although it’s still early to see the total impact. So covering those who simply want to lose weight is an even tougher question, and one to which a lot of people are demanding an answer.