Why Are Drug Prices So High in the US?

The price of diabetes and weight loss drugs in the U.S. are some of the highest in the world. In Germany, Ozempic (a drug for treating type 2 diabetes) is listed at $59 per month compared to $969 in the U.S.

It’s even worse for the revolutionary weight loss drug Wegovy, which is $1,349 per month in the U.S. and $92 in the U.K. Even in countries where Wegovy is still pricey (in Canada it’s $265 per month), costs for the exact same drug are more than five times higher in the U.S. Why?

This was the question U.S. Senator Bernie Sanders (I-VT) repeatedly posed to Novo Nordisk CEO Lars Fruergaard Jørgensen at a hearing before the Senate Committee on Health, Education, Labor and Pensions on September 24, 2024. 

“What we are dealing with today is not just an issue of economics and not just an issue of corporate greed, it is a profound moral issue,” Sanders said. 

“Novo Nordisk has developed game-changing drugs, which – if made affordable – can save the lives of tens of thousands of Americans every year and significantly improve the quality of life of millions more. If made affordable,” he said.

The Senate hearing was held not only to ask Jørgensen directly why Novo Nordisk (the pharmaceutical company that makes Ozempic and Wegovy) charges the U.S. more than other countries for prescription drugs, but more importantly, what can be done to lower the cost of these medications.

Why are medications more expensive in the US compared to other countries? 

Looking at other high-income countries, the U.S. pays five to 15 times more for Ozempic and Wegovy. 

“The U.S. is Novo Nordisk’s cash cow for Ozempic and Wegovy,” Sanders said. “Given that these drugs are taken for the course of a lifetime, Novo Nordisk can expect huge profits off these drugs year after year. Why does Novo Nordisk charge the American people such outrageously high prices for Ozempic and Wegovy?”

Note that these are the drug list prices, which are set by the manufacturer (in this case Novo Nordisk), but the final price charged to the customer (the net price) is often much lower once insurance, coupons, and other savings are factored in. 

Of course, pharmaceutical companies have to charge something for these drugs. The cost of researching, discovering, testing, and developing prescription drugs is not a cheap one. Novo Nordisk has also committed to investing billions of dollars toward expanding manufacturing in the U.S. so more people can have access to these life-changing medications. 

That said, it still doesn’t change the fact that the list price for these drugs in the U.S. is monumentally higher than in other countries. While Jørgensen didn’t provide a direct answer to Sanders’ question, he did allude to a few reasons – one being pharmacy benefit managers (PBMs). 

“We are very committed to making sure that Americans have access at an affordable price point for our medicines. There is nothing we would rather see happen,” Jørgensen said. 

“But we don’t control the price set for the patients,” he said. “We only negotiate against the PBMs to make sure we can move products to patients. Whether patients get insurance coverage and what price they pay we have no impact on.”

PBMs are large third-party companies, the “middlemen” between drug manufacturers, insurance companies, and pharmacies. PBMs are responsible for negotiating rebates and other discounts and developing formularies (a list of prescription drugs covered by insurance). The U.S. is one of very few countries to use PBMs, which have been under scrutiny for lack of transparency and inflating drug prices (in 2023, estimates suggest PBMs raked in more than $300 billion).

A 2024 report by the Federal Trade Commission (FTC) highlighted how enmeshed PBMs are in the U.S. healthcare system and the significant influence these companies have on access and affordability of prescription drugs for hundreds of millions of people. The six largest PBMs manage an estimated 94% of prescriptions in the U.S.; the lack of regulations around PBMs means they can hike up costs, which has forced nearly 30% of Americans to ration or skip doses of prescribed medication.

In September 2024, the FTC brought legal action against the three largest PBMs (CVS Caremark, Express Scripts, and OptumRx) for engaging in unfair rebating practices that yield profits for PBMs but artificially inflate insulin prices, forcing vulnerable populations to pay more for life-saving medication.

Another big issue is that, by law, the U.S. government cannot negotiate drug prices directly with pharmaceutical companies. This is very different from other countries where health authorities can directly negotiate medication prices. The end result is often much more successful, as seen in the case of Ozempic and Wegovy, at substantially lowering costs for consumers.

Though companies like Novo Nordisk don’t set the final net price for medications, Sanders and other senators asked: Why not just use the net price instead of the much higher list price? 

“If we look at it today, PBMs and their insurance companies get a fee based on the list price. The higher the list price the higher the fee they get,” Jørgensen said. “This means that in our experience, products that come with a low list price get less coverage – it’s less attractive. That becomes troublesome for patients because those who don’t have insurance or have high deductible plans are asked to pay the list price.”

Jørgensen used Novo’s now-discontinued insulin product Levemir as an example. He said that when Novo Nordisk substantially dropped the list price of Levemir, PBMs dropped insurance coverage for the medication. Though Novo Nordisk cited manufacturing constraints and the availability of other types of insulin as the main reasons for discontinuing Levemir, having the PBMs drop or limit coverage also impacted the decision. 

Jørgensen said that the intention isn’t for any consumer to pay the full list price – it’s only meant to be a starting point for negotiations with PBMs and insurance companies. Jørgensen added that for every dollar Novo Nordisk makes, 74% goes to PBMs and insurance companies. So for people paying the list price of Ozempic at $969, for example, almost $700 is going to PBMs and insurers; it’s unclear how much of that enormous amount of money going to PBMs (if any) is passed on to patients purchasing the medication. 

Though the hearing had big pharma in the hot seat, Sen. Tim Kaine (I-VT) agreed that PBMs are a huge part of the problem and need to be held accountable.

“I have come to conclude that we’re letting PBMs get away scot-free,” Kaine said. “One industry researches, one doesn’t. One industry produces lifesaving treatments, one doesn’t. One is under fairly intense scrutiny by this committee, and it’s the super duper profitable one that is getting away scot-free.”

“If we’re going to bring prescription drug prices down even more, we shouldn’t let up on Lars here but we need to get serious about the PBM reform piece of it,” added Kaine.

The solution? 

It’s complicated (welcome to the U.S. healthcare system). The good news is, few people are paying the list prices for these drugs. Roughly 90% of Americans have (or have had) health insurance, and most major insurers cover Ozempic and Wegovy – though there’s less coverage for Wegovy. With insurance and the Ozempic Savings Card Novo Nordisk offers, many people in the U.S. pay only $25 per month for Ozempic.

Novo Nordisk also offers a patient assistance program, which provides free medication for eligible patients. To qualify, you must be a U.S. citizen or legal resident, be uninsured or have Medicare, and have a total household income below 400% of the federal poverty level.

However, if your health plan is one of the high deductible plans, you could still be paying hundreds of dollars per month even with insurance. The biggest problem is for people who don’t have any health insurance who are then faced with the list prices of $969 for Ozempic and $1,349 for Wegovy – every month. The hard irony here is that in most cases, the people who can’t afford or don’t have health insurance are the ones who need these medications the most. 

“What doctors are telling us is that if the price of Ozempic and Wegovy are not substantially reduced, many of their patients who have diabetes and obesity, especially lower-income Americans – often minority Americans – will be unable to afford these drugs,” Sanders said. “Some of these people will unnecessarily die and others will suffer a significant decline in their quality of life.” 

Jørgensen said that while he’s supportive of “anything that can help patients get access,” his concern around Novo Nordisk lowering drug prices is that the PBMs would limit access or remove lower-priced drugs from coverage, presumably because the PBM wouldn’t make as much of a profit compared to drugs sold at a higher list price.

Sanders pushed back, saying he has received commitments in writing from the major PBMs in the U.S. that they would not limit access to Ozempic or Wegovy or take these drugs off their formularies if Novo Nordisk lowered the list price.

“Given this fact, will you commit today that Novo Nordisk will substantially reduce the list price of these drugs in the U.S. so that the American people are not paying far higher prices for these drugs than people in Europe and Canada?” Sanders asked.

While Jørgensen seemed skeptical of the commitments Sen. Sanders had received and didn’t promise to lower the prices of Ozempic and Wegovy, he did agree to collaborate with PBMs and other relevant parties on how to reduce costs for consumers. One idea committee members suggested that Jørgensen agreed with is moving to a net price scenario.

“If we did our business based on net price instead of list price that would mean our products would be much more affordable for patients. If we simply paid the PBMs a small fee for the limited risk and contribution they make, I think patients would be significantly better off," Jørgensen said. "Anything that will help patients get access to affordable medicine we’ll be happy to look into.” 

You can watch the full Senate committee meeting here.

See the latest on pricing and coverage for diabetes drugs here:

• Top Diabetes Drugs Get Lower Medicare Pricing
• Medicare Can Now Cover Wegovy for Obesity and Heart Disease
• Generic Victoza Now Available in the U.S.