On February 25th, the FDA announced that the GLP-1 drug shortage was over. Under normal circumstances, shortages are bad for consumers and drive-up prices. But the GLP1 shortage did the opposite. Secondary market producers, called Compounders, got the go-ahead to start manufacturing and selling GLP-1s in 2022 at a much reduced cost. Compounded GLP-1 medications costs ranged from $100 to $400, compared to the list prices of $1,000 to $1,400 for drugs like Wegovy and Ozempic.
During the shortage years, the GLP-1 market went wild—fills for two GLP1-s, Wegovy and Zepbound, increased by 100% and 300%, respectively. Hence, the recent FDA announcement—the shortage is over and compounders must discontinue by May, 2025—worried consumers that the party is over. In a couple of months, it’ll be back to the monopoly and thousand dollar price tags.
So, it was a surprise when two of the biggest players in the GLP-1 market, Novo Nordisk and Eli Lilly, announced that they are going to offer GLP-1s directly to consumers. Offering their weight-loss and diabetes medications directly to patients, similar to how the compounding companies were operating, is a marked departure from the norm and could have profound effects for patients, plan sponsors, and the broader healthcare system.
What This Means for Patients
For patients, the ability to access GLP-1s like Ozempic, Wegovy, and Monjuro without navigating insurance hurdles will be huge. This approach would streamline access to weight loss drugs offering:
- Faster access without prior authorization or step therapy battles.
- More transparency in pricing, as patients are dealing directly with the manufacturer.
- Easier access: Eli Lilly partnered with telehealth providers to offer Zepbound throughtheir platforms and ships direct.
- Uninsured or Underinsured: Nordisk’s program is designed for uninsured or those with insurance that doesn’t cover weight loss medications.
- Home Delivery: Wegovy is shipped directly to patients’ homes.
But there are downsides as well. Plan sponsors may refuse to cover DTC prescriptions, which means patients will have to cover the full price of the medication, experiencing higher out-of-pocket costs and limiting access for those who need these medications the most. Direct purchasing could go the way of other medications with cash pay options, where the patient does not go through their healthcare plan sponsor at all.
Impact on Employers & Plan Sponsors
DTC could be very helpful to employers and health plans, but they will need to consider their approach to GLP-1 coverage carefully. These drugs are expensive and having members purchase them outside the plan would save millions of dollars. Yet, they are also extremely popular and limiting coverage could have far reaching consequences, like poor employee retention or lower satisfaction rates. Some key questions come to mind:
- If members use DTC, will the plan sponsor reimburse the cost? If yes, what percent?
- If manufacturers continue to shift to a DTC model, how will pharmacy benefits change in response? Could this disrupt formulary strategies, forcing employers to rethink plan designs?
- What checks on high-cost brand name drugs could be put in place if the manufacturer and consumer cut out the plan sponsor?
- Will the DTC price be less than the negotiated price offered to members?
Plan sponsors have struggled with managing the high costs of GLP-1s, with some restricting coverage or shifting coverage off pharmacy to the medical benefit to save costs. If more pharma companies move to DTC models, self-funded employers will likely need to adapt their benefits strategy to accommodate this shift.
Where do PBMs fit in?
This is not the first time pharmaceutical companies have tried to sidestep traditional distribution models. We’ve seen similar moves in:
- Insulin pricing reforms that allowed patients to buy insulin directly at lower costs.
- Migraine medications offered via direct online sales to improve access.
A positive spin on the shift is that the DTC model is more consumer-centric healthcare, where patients have greater control over their medication choices and purchasing options. But it doesn’t guarantee an affordable cost.
For employers and health plans, the priority remains the same: ensuring the best possible care at the most sustainable cost.
At RazorMetrics, we help plan sponsors and PBMs navigate these industry shifts by providing data-driven solutions that maximize savings and optimize prescription choices. Whether medications are sourced through traditional channels or direct-to-consumer programs, our approach ensures members get the right drug at the right price—without unnecessary complexity.
What’s Next?
Novo Nordisk and Eli Lilly are setting a precedent and if it pays off then we can expect that other pharmaceutical companies will follow suit. Plan sponsors should get ahead of this trend by proactively evaluating how DTC models could impact their drug spend and explore options that maintain prescription affordability and access.
Healthcare models are evolving, and those who adapt quickly will be in the best position to support both their members and their bottom line. RazorMetrics is monitoring the situation closely and looking at solutions to help plan sponsors and the lives they cover stay ahead of the game.
