Novo Nordisk stock slumped Tuesday after President Joe Biden and Sen. Bernie Sanders slammed the drugmaker and rival Eli Lilly for "unconscionably high" prices for weight-loss drugs. The two companies criticized their position.
The two companies make weight-loss drugs that mimic the GLP-1 hormone to increase feelings of satiety and markers of blood glucose, and slow how fast the stomach empties itself. These major blockbusters, Wegovy and Zepbound, cost roughly $1,349 and $1,060 a month before insurance, respectively.
But in an opinion piece in USA Today, Biden and Sanders said the companies can make their weight-loss drugs for significantly less than they charge. In March, a study from researchers at Yale University found companies could make these drugs profitably for less than $5 a month.
"In 2023, for example, Novo Nordisk made over $12 billion in profits, in part by charging Americans over $1,000 a month for a prescription drug that can be profitably manufactured for less than $5," Biden and Sanders said. "That is not making a reasonable return on investment. That is price gouging. That is corporate greed."
Novo Nordisk stock fell as low as 139.03 before paring losses to down 1.7% at 142.99, back above the 21-day moving average. Eli Lilly stock slumped 0.8% to 906.87. LLY stock slid to 878.50 soon after the open, nearly testing the 21-day line.
Novo Nordisk Stock: 'A Complex Problem'
In their opinion piece, Biden and Sanders said there's no reason someone in Paris, Texas, should pay higher prices for obesity or weight-loss drugs than people in Paris, France.
But Novo Nordisk and Eli Lilly say that view doesn't take into account the complicated health care structure in the U.S., which also includes middlemen known as pharmacy benefit managers, or PBMs. Both firms say their flagship diabetes and weight-loss drugs cost as low as $25 a month.
"We are disappointed that a very difficult and complex problem is being oversimplified and mischaracterized for political purposes," Novo Nordisk said in a statement emailed to Investor's Business Daily. "Each country has its own health care system and making isolated and limited comparisons ignores this fundamental concerns."
Novo Nordisk stock has climbed almost 41% this year as of the close on Monday. Eli Lilly stock has surged roughly 57% on a year-to-date basis.
Novo notes that the cost of its diabetes treatment Ozempic and weight-loss drug Wegovy has decreased about 40% since they launched, and more than 80% of Americans with insurance pay $25 or less each month for these medicines.
"Unfortunately, even when we lower our prices, patients in the United States don't receive the savings — this is a problem," Novo said.
Similarly, Lilly called out the PBM system, which "can drive prices higher."
"Comparing list prices in the United States to other countries ignores patient affordability programs and hundreds of billions of dollars in discounts and fees paid to PBMs by pharmaceutical companies that should lower the costs of medicines for Americans, but unfortunately his system can drive prices higher," Lilly said in an emailed statement.
Weight-Loss Drugs Under Scrutiny
Biden and Sanders, though, say drugmakers frequently blame PBMs when facing scrutiny over their drug prices.
"But these non-transparent tactics prevent payers from understanding what the drugs actually cost, thereby lowering their negotiating position," they said.
A component of the Inflation Reduction Act will soon allow the Centers for Medicare and Medicaid Services to begin negotiating the prices of some of the highest-cost drugs on the market. The legislation has riled drugmakers. They say reducing their prices will tamp down on the money they have to invest in innovation.
It could also force drugmakers to shift away from developing small molecule drugs — most pills and tablets. These drugs will have a shorter life span before facing price negotiation.
"As Americans we must not rest until every person in our country can afford the prescription drugs they need to lead healthy, happy and productive lives," Biden and Sanders said.
$100 Billion Market
The market for weight-loss drugs could grow to $100 billion by 2030, according to an October report from Goldman Sachs. That estimate includes about 15 million adults in the U.S. alone who might receive treatment with a weight-loss drug.
And Eli Lilly and Novo Nordisk will be the two dominant leaders of the market, Goldman Sachs said.
Lilly's weight-loss drug Zepbound is expected to bring in about $4.5 billion in sales this year, growing to $20.33 billion in 2029, the latest year for which FactSet has estimates. Diabetes drug Mounjaro is projected to generate a respective $11.1 billion and $29.95 billion.
Wall Street expects Novo's Wegovy and Ozempic to bring in a respective $8.78 billion and $17.83 billion in sales this year. Novo Nordisk stock analysts call for sales to grow to $18.22 billion and $22.13 billion in 2029.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
