Novo Nordisk A/S NVO is below mounting political strain over the excessive U.S. costs of its blockbuster weight-loss medication, Ozempic and Wegovy, because the race for the White Home heats up. The pricing disparity between the U.S. and different worldwide markets has drawn sharp criticism from lawmakers, placing the corporate within the political highlight.
Ozempic, for instance, prices round $969 monthly within the U.S., whereas the identical drug is on the market for as little as $71 in France. Wegovy, one other Novo Nordisk drug, is priced at $1,349 within the U.S., versus solely $92 within the U.Ok.
CEO Testifies Earlier than Congress: A Focus On PBMs
On Tuesday, Novo Nordisk’s CEO, Lars Fruergaard Jorgensen, testified earlier than U.S. lawmakers, addressing the numerous value hole between the U.S. and worldwide markets.
Jorgensen attributed a lot of the pricing subject to pharmacy profit managers (PBMs)—the middlemen between pharmaceutical corporations and insurers.
In an unique interview with Benzinga on Tuesday, Mauritz Pot, founder and CEO of Tema ETFs, which actively manages the Tema GLP-1, Weight problems & Cardiometabolic ETF HRTS, provided his perspective on what this political showdown means for Novo Nordisk shareholders and the broader healthcare panorama.
In accordance with Pot, Novo Nordisk’s main protection is that even when they scale back record costs, there is no assure that these financial savings shall be handed on to the tip client.
“The U.S. cost system is structured in such a method that even when producers like Novo Nordisk lower their record costs, it will not essentially lead to decrease prices for sufferers. The true subject is with the middlemen and with how a lot margin they’re extracting,” Pot mentioned.
PBMs: The Actual Bottleneck For Customers
PBMs have a major affect over the U.S. pharmaceutical pricing construction, as Pot defined.
Whereas reducing record costs might assist, PBMs might scale back insurance coverage protection in response, permitting them to take care of their very own revenue margins. This implies sufferers might nonetheless be left with excessive out-of-pocket prices, even when producers like Novo Nordisk lower costs.
Restricted Influence on Novo Nordisk’s Backside Line
From an investor’s perspective, Pot believes that pricing cuts alone are unlikely to considerably damage Novo Nordisk’s income or profitability from the U.S. market.
He highlighted that whereas record costs are excessive, the precise value paid by insurers and sufferers is usually a lot decrease, which means Novo’s U.S. revenues might stay comparatively steady, even when political strain to scale back costs continues.
The demand for Novo Nordisk’s weight-loss medication stays extremely sturdy. Pot defined that even with potential value cuts, the demand for GLP-1 medication like Ozempic and Wegovy far outpaces provide. That is unlikely to vary within the quick time period, creating a sturdy development alternative for Novo Nordisk.
“Even when the value halves, there’s nonetheless going to be a large alternative right here,” Pot mentioned.
Bipartisan Push for Decrease Drug Costs
With the 2024 U.S. presidential election looming, drug pricing has turn out to be a hot-button political subject. Each main events—Republicans and Democrats—agree on the necessity to scale back prescription drug costs, though they differ on one of the best mechanisms to attain this. Whatever the method, the push for extra inexpensive medication is bipartisan.
“Worth is being politicized in an election yr very clearly,” Pot mentioned.
Submit-Election M&A Exercise on the Horizon
Wanting forward, Pot anticipates a major improve in M&A exercise within the pharmaceutical sector, significantly amongst corporations within the weight-loss and weight problems therapy house.
Smaller biotech corporations growing progressive therapies might turn out to be enticing acquisition targets, particularly after the election.
“We’re prone to see a ramp-up in M&A exercise within the sector post-election, no matter who wins,” Pot said.
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