New Direct-to-Employer GLP-1 Model Aims to Lower Costs

Pharmaceutical giants Novo Nordisk and Eli Lilly are embarking on a high-stakes transformation of how weight-loss medications reach the public. Amid soaring demand for GLP-1 drugs, the companies are testing a direct-to-employer model that could fundamentally alter the American healthcare landscape by bypassing traditional pharmacy benefit managers (PBMs).

Partnering with digital health firm Waltz Health, the manufacturers aim to allow self-insured employers to negotiate drug prices directly. This shift targets the "middleman" fees often charged by PBMs, which critics say erode the value of manufacturer rebates and drive up costs for patients.

Under the traditional model, a patient might pay a co-pay based on a drug’s $1,000 list price, even if the net price after rebates is only $500. By moving closer to net pricing, the new model could significantly reduce employee co-pays and broaden access. Currently, only about 19% of companies with more than 200 employees offer coverage for GLP-1 medications.

The move comes as Novo Nordisk aggressively expands its global footprint. The company is launching its blockbuster drug Ozempic in India this month, a move intended to capture a share of a weight-loss market projected to reach $150 billion annually by 2030. India currently has the world’s second-highest number of people living with type 2 diabetes.

Financial analysts remain bullish on these trends. Novo Nordisk (NVO) recently received a "Buy" rating from Berenberg Bank with a price target of $62, suggesting a nearly 29% upside potential. Approximately 60% of analysts currently maintain "Buy" or equivalent ratings for the stock.

While this direct-access model is currently limited to weight-loss and diabetes treatments, experts suggest it could trigger a "paradigm shift" in the industry. If successful, similar models could soon emerge for treatments related to Alzheimer’s and other cognitive disorders. However, the model may be less suited for rare diseases or oncology.

As PBMs face increasing political pressure to reform, this initial foray by Novo Nordisk and Eli Lilly may incentivize a wider competitive shift toward transparent, service-based fee structures in the pharmaceutical supply chain.

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🔖 Sources

Analysts See Upside In Novo Nordisk A/S (NVO) Driven By Diabetes And Obesity Trends

Lilly, Novo test direct-to-employer approach that could cut out PBMs and lower costs

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Keywords: direct-to-employer GLP-1 model

direct-to-employer GLP-1 model

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