A staggering $1 trillion could be the annual cost to the US healthcare system if 40% of Americans with obesity begin treatment with GLP-1 drugs at current prices, according to Dr Jonathan Gruber, the Ford Professor of Economics at the Massachusetts Institute of Technology (MIT).
This figure, which rivals the entire budget of the Medicare programme, highlights the potential fiscal challenges posed by these promising yet costly treatments for obesity.
Gruber's insights were included in a comprehensive analysis by Goldman Sachs of this booming sector of the weight-loss market.
They are illustrative, rather than providing a real-world scenario but also underline the tricky cost-benefit calibration healthcare economists will be asked to make on behalf of 'payors'.
In the Goldman note, the potential impediments to mass adoption of GLP-1s were also discussed, while the investment bank fleshed out its forecasts for the potential scale of the market.
Eye-popping, but improbable
First, here's how MIT's Gruber gets to that eye-popping figure. And, he concluded that covering these drugs for obesity under US health insurance programmes could lead to expenses that far exceed the savings from reduced incidences of diabetes and other obesity-related conditions.
"Broadening the availability of these drugs to include the treatment of obesity would undoubtedly generate a host of health benefits, including the reduction of obesity itself as well as related—and often fatal—conditions like heart failure and stroke," said Gruber in an interview for Goldman research. "But the associated cost would be exorbitant."
He and colleagues Brian Deese and Ryan Cummings, estimate that the cost to state public insurance programmes, health insurance exchange subsidies, and US taxpayers if 40% of all Americans with obesity took these drugs at current prices—roughly $15,000 per year per person—would total over $1 trillion annually.
"That would exceed the cost savings to the government from reduced diabetes incidence and other obesity-related conditions by a whopping $800 billion annually," said Gruber.
"That is almost as much as the government spends on the entire Medicare programme and almost one-fifth of the entire amount America spends on healthcare. So, it’s a staggering figure"
Promising, but not a silver bullet
Glucagon-like peptide-1 (GLP-1) drugs, including Novo Nordisk (NYSE:NVO)'s Wegovy and Eli Lilly Co's Zepbound, have emerged as highly effective treatments for obesity.
These medications operate by targeting specific brain pathways that regulate food intake, thereby significantly reducing appetite and leading to substantial weight loss.
But this is not a case of one size fits all. Dr Fatima Cody Stanford, an obesity medicine physician at Massachusetts General Hospital and Harvard Medical School, told Goldman: "GLP-1 medications will be helpful to/feasible for only a fraction of the one billion people globally who have obesity.
"So, though extremely promising, GLP-1s are not the silver bullet for weight loss that many people make them out to be."
$100 billion market?
As noted above, these drugs carry a high price tag and there's limited insurance coverage, particularly by Medicare, which does not cover GLP-1s for obesity alone.
Goldman projects that some of these hurdles can be overcome, particularly through broader insurance coverage and increased manufacturing capacity.
Chris Shibutani, a biopharmaceuticals analyst at Goldman Sachs, is predicting the US patient population will grow from around two million people today to 15 million in 2030— around 14% of the US adult population with obesity—which would increase the size of the GLP-1 market from circa $10 billion today to $100 billion in 2030.
When that figure was first touted, some thought it unlikely. However, today, with additional potential health benefits, the prospect of oral delivery (rather than injection), and a possible price drop, the scenario looks more realistic than when first touted.
"Our $100 billion projection has become much less controversial since we first published it last fall due to promising results from several additional outcomes studies, which present a clear argument that the market could be even larger," said Shibutani.
"The most notable study was Novo Nordisk (NYSE:NVO)’s SELECT cardiovascular outcomes study that demonstrated a 20% reduction in major cardiovascular events in patients taking semaglutide (Wegovy), which was at the upper end of investor expectations.
"Other studies have shown significant benefits for diabetes patients with kidney disease, and expectations are high for studies on the potential benefits of GLP-1s, including Eli Lilly’s Zepbound, for patients with sleep-related breathing disorders that should read out imminently.
"So, while we based our estimate of potential market size solely upon the use of GLP-1 drugs for weight loss, these drugs’ clear benefits for patients with other serious health conditions could increase the US patient population beyond the 15 million we expect today."