In the dynamic world of biopharma, understanding drug pricing strategies is more than just an academic exercise—it’s a crucial element of market success. Glucagon-like peptide 1 (GLP-1) agonists¹ such as Novo Nordisk’s Ozempic, Novo Nordisk’s Wegovy, Eli Lilly’s Mounjaro, and Eli Lilly’s Zepbound offer a set of case studies that are helpful in illustrating common pricing structures. This article aims to explain these structures and explore concepts like flat pricing, premium pricing, and strategies to prevent market arbitrage. By dissecting these models, we gain insight into the broader context of drug pricing—a landscape where economics, market dynamics, and patient access intersect.

Unpacking Flat Pricing: A Uniform Approach

Across these four brands,² an important pricing approach known as flat pricing comes into play. Contrary to models that price medications based on dosage or quantity, flat pricing standardizes the cost per unit of time, regardless of dose. (In this article, we will use cost per 7-day week.) A flat pricing approach simplifies the pricing structure for both prescribers and patients, ensuring a predictable cost framework.

Looking into the U.S. list prices of these agents, one can see that each brand is priced at a per-prescription rate that ignores the administered dose. For example, as of November 2023, Ozempic is priced at $935.77 per pen (Source: Novo Nordisk); because each pen delivers 4, once-per-week maintenance doses of Ozempic, the list price is $233.94 per week. That price is the same, regardless of whether the patient is taking 0.5 mg per week, 1.0 mg per week, or 2.0 mg per week. This pattern of flat pricing for maintenance therapy holds across all four of these brands.

This model is particularly relevant in the context of chronic treatments where dosing can vary. Flat pricing eliminates any desire to “save money” by lowering a patient’s dose to a less expensive stock keeping unit (SKU) of the medicine. For a degenerative disease such as diabetes, it is easy to see how pricing all doses at the same price and thus giving patients and their doctors the ability to choose what is clinically best for them is ethical. Also, by employing a flat pricing strategy, manufacturers streamline the purchasing process, eliminating the need to calculate varying costs for different dosages. This approach not only facilitates easier budgeting for healthcare providers and patients but also minimizes confusion and administrative burden.

Not all medicines use flat pricing. Anti-cancer medicines that are dosed based on a patient’s weight or body surface area, for example, often have linear pricing where the list price is set per mg of active drug.

Exploring the Premium Pricing Strategy of Wegovy over Ozempic

In the competitive landscape of GLP-1 agents, Wegovy’s higher list price compared to Ozempic presents a fascinating instance of premium pricing. This strategy, where Wegovy is priced higher, may partially be attributed to supply and demand dynamics, including ongoing supply shortages. However, it’s also important to consider the historical context: Novo Nordisk’s Saxenda (liraglutide), another drug in this class, traditionally held a higher list price than Novo Nordisk’s Victoza (liraglutide), reflecting a pattern and possible precedent for the Wegovy-Ozempic dynamic.

This premium pricing approach suggests a strategic decision by the manufacturer to position Wegovy as a higher-end option, likely due to its higher efficacy in weight management and the historical lack of U.S. Commercial payer coverage for Saxenda. To the latter point, biopharma manufacturers sometimes choose a relatively high price of an agent that they believe will not be well reimbursed by payers, because they assume no price elasticity for coverage in those cases.

Curbing Arbitrage: The Pricing Strategy of Mounjaro and Zepbound

The similar list prices of Mounjaro and Zepbound illustrate a strategic approach to prevent arbitrage. Arbitrage, in this context, refers a patient or prescriber exploiting price differences between products that are essentially similar in order to pay less for their medicine (even if doing so might be off label). By aligning the prices of Mounjaro and Zepbound closely, Eli Lilly mitigates the risk of such practices, ensuring a more stable market environment.

One key reason Eli Lilly likely chose equivalent pricing for Mounjaro and Zepbound is that the doses of the products are the same. That situation stands in contrast with Ozempic-Wegovy, which have different maintenance doses (0.5 mg, 1.0 mg, and 2.0 mg; versus 2.4 mg, respectively). The same doses and same active ingredient in Mounjaro and Zepbound in many ways force Lilly’s pricing strategy.

Of note, because the list price of Zepbound was set in November, the 3.6% premium over the 2023 Mounjaro price may simply reflect Eli Lilly’s planned price increase for Mounjaro for 2024.

The pricing strategy between Mounjaro and Zepbound not only maintains market equilibrium but also reflects a calculated move to avoid unnecessary competition between these brands based on price alone. This case demonstrates how in the pharmaceutical industry, price disparities can lead to unintended market dynamics, including preferential prescribing based on cost rather than clinical efficacy. The similar pricing of these two products underscores a broader industry trend towards strategic pricing decisions that consider both market stability and long-term sustainability.

The Full(er) Picture: Copays, Assistance, and the Real Cost of GLP-1s

When considering any prescription drug prices, it’s crucial to look beyond the list price. The net price, lower due to discounts and rebates paid to payers and/or pharmacy benefit managers (PBMs), is more reflective of what the health plans actually pay. What’s more, for patients, the out-of-pocket cost is typically based on copays, which are entirely set by the patient’s PBM and/or plan.

For those on Commercial insurance plans, copay assistance programs can further reduce the financial burden. These programs, offered by pharmaceutical companies, aim to make treatments more accessible by lowering the out-of-pocket costs for eligible patients. This layered pricing structure, comprising list prices, net prices, copays, and copay assistance, paints a more nuanced picture of the true cost of GLP-1 agents and other prescription medicines to patients and highlights the complexity of pharmaceutical pricing strategies.

Understanding GLP-1 Pricing in Context

Understanding drug pricing strategies through GLP-1 agonists. From flat pricing models to premium pricing strategies and efforts to prevent arbitrage, this landscape is complex and dynamic. Moreover, considering factors like net prices, patient copays, and copay assistance programs adds additional layers to our understanding. This exploration not only provides insights into the pricing strategies of specific drugs but also offers a window into the broader mechanisms at play in pharmaceutical pricing. As the market evolves, staying informed about these intricacies becomes increasingly vital for professionals in the biopharma sector.

Notes:
(1) For the sake of simplicity, this article refers to these agents as GLP-1 agonists, even though Mounjaro (tirzepatide) and Zepbound (tirzepatide) are dual GLP-1 and glucose-dependent insulinotropic polypeptide (GIP) agonists.
(2) All trademarks are the property of their respective owners.