Novo Nordisk, the company behind the blockbuster weight-loss drug Ozempic, has risen to prominence as Europe’s most valuable company in 2023. However, its high U.S. prices have drawn significant scrutiny, prompting CEO Lars Fruergaard Jørgensen to volunteer to testify before the U.S. Senate.
Rising Prominence of Novo Nordisk
Novo Nordisk has soared to the mantle of Europe’s most valuable company in 2023, largely due to the success of its weight-loss drug, Ozempic. The drug has become highly popular for its effectiveness in aiding weight loss, significantly boosting Novo Nordisk’s market value.
U.S. Price Disparities
A major point of contention has been the price of Ozempic in the U.S. A Wegovy prescription, for example, costs about $1,349 per month in the U.S., compared to $140 in Germany and $92 in the U.K. These substantial markups have sparked outrage among American consumers and lawmakers.
Senate Inquiry and Testimony
Novo Nordisk’s CEO Lars Fruergaard Jørgensen has volunteered to testify before the U.S. Senate to address the significant price disparities. Originally, Novo Nordisk’s president, Doug Langa, was set to face a vote from the Senate Committee on Health, Education, Labor, and Pensions, chaired by Senator Bernie Sanders, which would have forced him to testify.
“The American people are sick and tired of being ripped off by giant pharmaceutical companies who make huge profits every year while charging us outrageous prices,” Sanders stated. He emphasized the need for Novo Nordisk to stop charging significantly higher prices in the U.S. compared to other countries.
Company’s Response
Novo Nordisk has stated that the U.S. healthcare system is partly to blame for the high prices. They argue that a significant portion of their revenues goes to middlemen, a situation not mirrored in Europe. Consequently, Novo Nordisk claims it retains only about 60% of the list price of Wegovy and Ozempic in the U.S.
Production Costs and Profit Margins
A study published in the JAMA Network revealed that Ozempic could be manufactured for 89 cents to $4.73 for a month’s supply, including a profit margin for Novo Nordisk. This finding undermines the company’s justification for the high U.S. prices, as the actual production costs are significantly lower.
Legislative and Public Scrutiny
Novo Nordisk’s rising profitability has not gone unnoticed. In 2023, the company’s net profits increased by 51% to DKK 83,683 million ($12 billion) and rose a further 28% in the first quarter of 2024 compared with the same period last year. This financial success, coupled with the high prices of their drugs in the U.S., has drawn significant attention from lawmakers.
Future Outlook
Novo Nordisk, like other drugmakers, aims to capitalize on its period of drug exclusivity before competitors can introduce their own versions of the appetite suppressant. However, with unsympathetic lawmakers scrutinizing their pricing strategies, CEO Jørgensen will need to present a compelling defense in September to justify the current pricing and maintain the company’s market position.