“Competition is leading to lower prices, better value, and a more efficient, functional market,” writes health expert Sally Pipes. “And it’s delivering those things much more quickly than the government could ever hope to.”
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Prices for GLP-1 weight-loss medications are dropping fast.
Last week, Novo Nordisk—maker of Ozempic and Wegovy—announced it would cut prices for monthly supplies of both drugs to as low as $349 for existing patients buying directly. For new customers, the price will fall to just $199 a month for the first two months. The move follows similar price cuts by competitor Eli Lilly.
These blockbuster medicines recently carried price tags exceeding $1,000 a month. What happened?
Simply put, market forces worked. Novo and Lilly are competing fiercely for customers. That competition is leading to lower prices, better value, and a more efficient, functional market. And it’s delivering those things much more quickly than the government could ever hope to.
That’s worth remembering as lawmakers from both parties continue to flirt with price controls on prescription drugs.
Consider, for instance, the Democrats’ 2022 Inflation Reduction Act, which gave the federal government the right to set the prices of an ever-growing list of drugs dispensed through Medicare starting in 2026.
President Trump has also shown a fondness for price-setting. His “Most Favored Nation” executive order, issued this past May, attempts to strong-arm drugmakers into selling their medications at the lowest price they offer to any other developed nation. Governments in most of those other countries cap the prices of prescription drugs. Implementing “Most Favored Nation” would effectively import those foreign price controls to American shores.
We’re already beginning to see the negative effects of price controls in the United States. Early stage-funding for the development of new small-molecule drugs—medicines we typically take in pill form—has fallen nearly 70% since the IRA was introduced.
Price controls limit drug companies’ revenue—that’s their stated purpose. If “Most Favored Nation” policies take root, revenue will only decline further. Drug companies have less money to devote to research and development. The result will be fewer medical breakthroughs—and reduced access to state-of-the-art drugs for American patients.
Nevertheless, many people see high drug prices and immediately think that price controls are the answer. But as this year’s experience with GLP-1s shows, market competition can deliver lower prices much faster.
It’s no coincidence that Eli Lilly’s GLP-1, Zepbound, recently surpassed Novo Nordisk’s Wegovy in terms of U.S. prescriptions filled. Novo would no doubt like some of that market share back. The most sensible way to attract more customers is by cutting prices.
That’s a rational economic decision. And regardless of whether Novo increases its market share, patients will benefit from lower prices on GLP-1s.
Even in portions of the drug market where there’s little competition, high prices are only temporary. Patents only protect a new medicine for 20 years from the date when the application for the patent was filed. The clock starts while the drug is still in development. The average drug has 12 to 15 years of market exclusivity.
During that time, other branded medicines may enter the market, as has been the case with GLP-1s. And after those intellectual property protections expire, branded medicines must compete with generics for sales. Prices then fall precipitously.
The price for the first generic to hit the market is 39% lower, on average. A second generic delivers an additional 15% in savings, on average. When four generic competitors are on the market, the average price falls an additional 19%.
It’s no wonder that nine of every ten prescriptions filled in America each year are for generics.
The market for prescription drugs need not be any different than the one for mobile phone service, airline tickets, car insurance, or any other good or service. When companies are allowed to compete freely, quality improves, prices drop, and consumers reap the rewards.
Price controls short circuit these natural processes—and destroy the incentive for companies to invest in developing newer, better products.