Eli Lilly, the most valuable pharma company in the world, has decided to go cheap. (Well, sort of.)
On Wednesday, when the $588 billion company debuted its powerful new weight loss drug, Zepbound, it did something unusual in the pharmaceutical world: It undercut the competition, pricing the shot almost 20% lower than Novo Nordisk's Wegovy.
Wegovy is the only other weekly injectable drug approved for weight loss. (Novo Nordisk's Ozempic, which contains the same drug as Wegovy, is approved only for diabetes.) But Zepbound is arguably more effective than Wegovy. It mimics two hunger hormones, not one, making it a stronger drug that prompts more weight loss.
Normally, when newer, better drugs are introduced, they match the price of similar drugs already available or come at a premium.
But Eli Lilly took a different approach. It gave Zepbound a "list" price of about $1,060, keeping it relatively in line with Mounjaro, the drugmaker's diabetes drug with the same main ingredient. Wegovy's list price is $1,349.
"With Zepbound priced at $1K, we think it demonstrates LLY is willing to trade price for volume even in a demand-heavy environment," analysts at Deutsche Bank said in a November 9 report.
Additionally, Eli Lilly said it is offering discounts and coupons, including Zepbound prescriptions at 50% off for patients who don't have coverage through their insurance provider. This means people whose private insurance coverage won't pay for the drug could get it for about $550 a month. People with employer coverage for Zepbound could get it for $25 a month, the company said.
Mike Mason, the president of diabetes and obesity at Eli Lilly, told reporters on Wednesday that the company set a lower price for Zepbound to bring broader access to anti-obesity medications.
For many people with obesity or overweight, including the millions who don't have health-insurance coverage for weight-loss drugs, opting for Zepbound over Wegovy could save them thousands of dollars. A year's worth of Zepbound works out to $12,718 — roughly $3,470 less than a year's supply of Wegovy.
The lower list price also could benefit insured patients with high deductibles or those whose plans require them to pay coinsurance — a percentage of the list price of a drug.
"A low list price strategy is helpful in a market where consumers receive no meaningful cost-sharing, which is likely in this space due to many plans refusing coverage for weight-loss indications," said Antonio Ciaccia, CEO of 46brooklyn Research, a firm that analyzes prescription-drug prices.
High prices, lack of insurance coverage leave Americans desperate for weight-loss drugs
Of course, while millions of Americans have shown they're willing to pay big bucks for weight-loss drugs, a price of more than $1,000 a month is still unaffordable for many, including people with lower incomes who are disproportionately affected by obesity. Medicare, the federal program providing health coverage to people 65 and older, also doesn't cover weight-loss drugs.
Patients hoping to see prices drop further may be disappointed, some analysts cautioned.
"We're not expecting any price wars when demand is dramatically outstripping supply," said David Risinger, senior managing director at Leerink.
Eli Lilly and Novo Nordisk have said that about 50 million people have some level of insurance coverage for weight-loss drugs. But more than 100 million US adults and children are estimated to have obesity.
A widespread lack of coverage for weight-loss medication and persistent supply shortages have blocked more people from getting their hands on the medications.
Novo Nordisk has struggled to make enough Wegovy, and earlier this year, limited its supply of lower doses so fewer people could start on the drug. On Wednesday's call, Eli Lilly CEO Dave Ricks said the company has ramped up its manufacturing capacity to meet demand for Zepbound.
Still, many employers and health insurers refuse to pay for weight-loss drugs, in large part because they say they're too expensive and will drive health-plan premiums higher. Some employers that previously paid for their workers' weight-loss prescriptions have started to reverse course.
So some Americans desperate for the shots have tried to buy them cheaper abroad or turned to less expensive knock-off versions, alternatives that experts say can be risky.
Zepbound's lower list price might not matter to employers
On Wednesday's call, Eli Lilly's Mason said the company set a lower price for Zepbound in part to entice more insurers and employers to cover the drug. More than 150 million people in the US get insurance coverage through employers.
"As we were talking to the end payers like the employers, they said that the list price was something that was a factor in their decision to expand access," Mason said.
But some experts were skeptical, because employers and insurers don't typically pay the list price for drugs. Instead, they work with drug-industry middlemen that negotiate discounts called rebates. The price of a drug after these rebates is called the "net" price.
And it's not clear how the net price of Zepbound will compare to what Novo Nordisk is charging for Wegovy. Researchers at the American Enterprise Institute estimated that the net price for Wegovy was roughly half the list price.
Craig Garthwaite, an economist at Northwestern University, argued competition will drive the net prices of weight-loss drugs lower still.
"The net price is still going to be a negotiation," Garthwaite said of Zepbound. "I imagine it ends up at or slightly below what you'll see for Wegovy, because they're in a price war now."
