Christopher Jacobs writes for the Federalist about the downside of a new Trump administration deal.
Should the rooster get credit for the sun rising in the morning? Hardly. Yet in recent weeks, two companies received significant financial benefits for taking actions that market forces were likely going to bring about on their own.
The agreement between the Trump administration and Eli Lilly and Novo Nordisk will encourage expanded and more affordable coverage for drugs that treat obesity, which is a positive development. But upon closer inspection, the “deal” on GLP-1s looks less than meets the eye, an agreement that uses the long arm of government to intervene in markets — and provide largesse to pharmaceutical companies in the process — when sheer capitalism may have done the trick, and at less cost.
The White House’s announcement trumpeted the fact that “the prices of Ozempic and Wegovy will fall from $1,000 and $1,350 per month, respectively, to $350 when purchased through TrumpRx,” a new direct-to-consumer website expected to launch next year. It went on to add that “the Medicare prices of Ozempic, Wegovy, Mounjaro, and Zepbound will be $245, less than half the prices proposed by the Biden Administration on such drugs.”
But a Wall Street Journal article dissecting the agreement’s effect noted that, as impressive as these discounts sound, the reality contains more nuance because the current “sticker prices” are inflated:
The net price, which reflects what pharma companies take home after rebates and discounts to pharmacy-benefit managers and others, is much lower. Leerink Partners analyst David Risinger says the effective price is only about 20% to 35% below what Medicare currently pays for Mounjaro, which is prescribed for diabetes.
Eliminating the middleman and selling the drugs directly to consumers will provide the biggest benefits to buyers whose insurance does not currently cover GLP-1 drugs for obesity and therefore would have to pay the inflated “sticker” price. But the pharmaceutical companies themselves will at best take a relatively small “haircut” on the net revenue they receive.
