GLP-1 Drugs: Economic Impacts from Main Street to Wall Street

Typically, only those in the healthcare marketplace are familiar with pharmaceutical terms or drug names; however, the term GLP-1 and widespread familiarity with drug names Ozempic or Wegovy has become mainstream knowledge. Fluency with these names has not come by chance – rather this drug class has been spread like wildfire across multiple social media platforms.

The surge in popularity of GLP-1s has stemmed from social media including Tik Tok, as well as celebrity endorsements. While these products were originally targeted to treat type 2 diabetes, they have grown in popularity as a weight loss cure. To put this transformation in perspective, consider that over 80% of adults with type 2 diabetes in the United States meet the criteria for GLP-1 receptor agonists or SGLT2 inhibitors, though only one in 10 people used either medication from 2017 to 2020. With the U.S. obesity rate at a staggering 41.9% accounting for potentially 142,000,000 Americans, it was no surprise to see the growing demand for weight loss treatment, which ultimately led to a shortage of Ozempic and Wegovy.

In parallel to social media fueling consumer demand, the scrutiny of the budget impact of these drugs has expanded beyond the purview of insurers to encompass the Food and Beverage Industry. With the dramatic weight loss propagated by media outlets, and “Ozempic” diets to tolerate these treatments, Wall Street analysts are focusing investment strategies on the food and beverage industry and forecasting losses in the future for some of these companies and industry providers. These bets against food and beverage companies may be presumptuous considering that access to GLP-1s by those seeking this weight loss treatment is not automatic and there are additional considerations in these dynamics.

Determining the value and considerations of influence on future utilization of GLP-1s

Let us first start with the cost of these drugs at a list price of over $1,350 per month. At this cost, insurers and plan sponsors are faced with the decision of covering these products for patients who would be candidates based on the targeted population(s) with a body mass index (BMI) over 30, or over 27 with comorbid conditions (such as cardiovascular disease). Consider that the Institute for Clinical and Economic Review (ICER) identified that for GLP-1s to reflect cost-effective pricing in these targeted populations, it would require these drugs to be priced at an annual cost of $7,500, approximately one-third of the actual list price. We also need to consider the side effects of GLP-1s that impact tolerance, adherence, and persistence. With those considerations, it would be important to understand trends that would impact access and utilization.

Factors that would result in increased population adoption and utilization are:

• Growth in off-label use of GLP-1s marketed for diabetes as only Wegovy, Saxenda, and Zepbound (new to market) are approved for weight loss. Without controls in place, this can result in higher adoption.
• Products resulting in greater and faster weight loss can also impact the adoption of these drugs. With pipeline agents it will be important to be vigilant of newer agents that may leverage mechanisms of action that are more effective.
• Prescribing by providers in telehealth services for cash paying customers and those providers that would not traditionally prescribe weight loss products such as ENTs and dermatologists are another conduit that can impact the utilization of these products as we have seen with Ozempic.
• Compounding and patients not using insurance for coverage also referred to as “cash paying” customers result in higher utilization rates.

When we look at factors that may increase GLP-1 adoption, the value of an oral product will shift the market up to 20% providing an option for people who are needle-phobic. We expect the pipeline to continue to have an impact with adoption and availability of these products. However, just as there are factors that can influence increased utilization, it is important to consider factors that can reduce the utilization:

Utilization Management and Coverage

• Increase utilization management controls and varying coverage impact on insured access populations resulting in lower adoption rates.
• Utilization management controls that incorporate comprehensive management inclusive of lifestyle, activity, and diet allowing for tapering of drug.
• Controls on off-label uses, compounding, Rx/medical markers, and provider types.

Adherence and Persistence

• Medication non-adherence is higher in obesity patients compared to diabetes patients. Moreover, obese patients are more likely to discontinue treatment early as they are not committed to therapy thereby decreasing the value of the drug.
• With the persistence rate of these drugs at 20% at one year and 15% persistent at 18 months, the utilizing population drops over time.
• Tolerability will be another factor of the GLP-1s as gastrointestinal (GI) adverse effects, risk for stomach paralysis, and pancreatitis are additional deterrents in continuation or initiation of treatment.
• Because cost is a barrier at $1,350, based on insured status and socioeconomical factors, this will reduce utilization and adoption.

Epidemiological studies support that Hispanics, Blacks, females, and those with lower socioeconomic status have higher obesity prevalence rates. With Medicaid coverage varying state-by-state only 13 states cover obesity drugs for those on Medicaid. Also, older patients have obesity rates of 19% and Medicare currently does not cover obesity drugs. If Medicare covered GLP-1s, the annual cost could be $13.6 billion (based on a 19% obesity rate from traditional Medicare diagnoses in 2021) to $26.8 billion (based on a 41.5% obesity rate from survey data for adults ages 60 and older).

Economic Impact Considerations

The economic consequences of these products present a direct impact to payors (health plan insurers and plan sponsors) and patients with drug costs and healthcare utilization. With the adoption and utilization of GLP-1 by patients, we must consider that these patients are consumers of food and beverage goods. A translatable consumer impact from GLP-1s to the food and beverage industry can be described with a reduction in consumption of products, reduction in food/beverage services, and shifts or elimination of product(s) consumption. As we discuss the economic consequences, it is important to discuss the patient impact as obesity is a risk factor for cardiovascular sequelae and mortality. Treating obesity in silo with a product and not addressing whole health results in short-lived results with continued risks and complications of comorbidities. As payors are navigating the growing cost on drug spend, the question of total cost of care becomes paramount to the impact and value of GLP-1s. A whole health strategy in evaluating the approvals of these treatments is critical.

As we look at Food and Beverage Service and Production Companies, we need to look at the impact of GLP-1s as they bring caloric reduction due to the feeling of satiety and reduction in gastrointestinal transit time. Additionally, the GLP-1s bring an onset of GI adverse effects that worsen with unhealthy foods high in fat and salt. Via social media outlets like Reddit, advice from consumers highlights the “Ozempic” diet which advises on avoidance of unhealthy foods and consumption of vegetables, protein, no alcohol, and low carbohydrate diets. With GLP-1 impact to calorie reduction and potential shift to healthier food consumption, the food and beverage market could see shifts in traditionally higher consumption foods resulting in potential loss of consumers.

In terms of economic consequences, we need to consider that food and beverage consumption changes are impacted by medication adherence, formulation, and tolerance of treatment. The presumption that the impact to the Food and Beverage industry will be significant because of GLP-1 adoption and utilization needs to be critically evaluated across the aforementioned factors. Changes in consumption may only be lasting for a smaller percentage of consumers, considering less than 30% of patients remain on treatment at one year.

With the dynamic pharmacy landscape exemplified by the impact of GLP-1s, it is critical for plan sponsors to work with experts who can help them navigate these complex issues with a comprehensive strategy in place that encompasses pipeline surveillance, clinical management, and financial modeling that can provide effective valuation of these products and ensure a whole health approach. As the consequences from the pharmacy landscape such as GLP-1s introduced to the market, have macro-trend impact, analysts and investment firms should seek support from experts with pharmacy expertise, financial market experience, and robust data analytics capabilities.

Risk Strategy Consulting’s clinical expertise, supply chain, and pharmacy benefit experience uniquely allows us to leverage real-world data, market insights, and pipeline forecasting to advise our clients on impactful strategies that solve for these upcoming challenges with considerations for their ecosystem.