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It is no secret that the release of GLP-1 drugs like Ozempic, Wegovy, Mounjaro have made these companies very strong buys in recent times.
However there is reason to hold caution in these companies, if simply buying because of these ground breaking drugs, and it is not tariffs, contrary to popular belief.
I would argue, it is in-fact America itself. You see, the reason these drug companies have been able to make so much money off of these drugs, is not because all americans are fat. Although there is some truth, in that the rates of diabetes and obesity in the states contribute to these revenues, it is actually the american health insurance system itself, which allows these drugs to sell at absorbent prices in the first place. You can't sell these drugs at the same prices elsewhere in the world, because governments, and entities like the EU do not allow it.
You see, the sale of GLP-1 drugs in america accounts for around 30-50% of revenue of the worldwide distribution of these drugs; And in the early days this was absolutely a golden goose. Because they are so powerful for weight loss. It made them extremely popular, and in turn, sales skyrocketed. However, this is exactly why there may be a problem.
You see American Insurance companies started losing so much money in coverage of these drugs, that many, if they continued at their current rate, would have not only lost money, but may have actually gone bankrupt if they continued for long periods of time. So the American insurance companies changed course, and started to reduce the coverage for these drugs:
Blue Cross Blue Shield of Massachusetts: Will stop covering GLP-1s for weight loss starting January 1, 2026, while continuing coverage for diabetes.- Independence Blue Cross (IBX): Has restricted coverage for weight loss GLP-1s, requiring a diagnosis of Type 2 diabetes, cardiovascular disease, or sleep apnea for coverage.
- Blue Cross Blue Shield of Michigan: Has stopped covering GLP-1 drugs for weight loss for fully insured large group commercial members starting in January 2025.
- North Carolina's State Health Plan: Dropped coverage for weight loss GLP-1s for state employees in April 2024 due to high costs.
- Kaiser Permanente: Will drop base coverage for GLP-1s for weight loss for commercial and ACA members in California (with a BMI less than 40) starting January 1, 2025.
- MassHealth: Has transitioned coverage, with Zepbound becoming the preferred option and Wegovy and Saxenda being discontinued for most adult members starting in January 2025.
And most of all, American insurance companies, hold the most powerful card, in all of medicine. A sort of Trump card, so to speak. The use of Prior Authorization.
This is a foreign concept to most people outside of the US, and it is somewhat hard to understand. So to explain it as simply as possible:
It allows American insurance companies to deny covering anything they want. From medications to anesthesia or even surgeries. They do this in a convoluted way, but in simple terms, they hire their own physicians to review prescriptions from patients doctors, and accept or deny coverage, based on their Physicians opinions(the insurance companies), rather than a patients physician.
This in turn allows them to basically deny coverage for anything, for really any reason, as they don't really have to justify it in court, 99% of the time.
Even when coverage exists, insurers are implementing stricter prior authorization requirements, including:
- Higher BMI thresholds for coverage.
- Requiring trials and failures of non-GLP-1 weight-loss medications.
- Mandatory participation in additional weight-loss programs.
- Monitoring for a certain percentage of weight loss to maintain coverage.
- Medicaid: Coverage varies by state. Some states cover GLP-1s for weight loss, often with prior authorization and BMI requirements.
- Medicare: Generally does not cover weight loss drugs, although there are exceptions if the drug is also approved for another medical condition (like cardiovascular risk reduction for Wegovy in certain patients).
So in conclusion, these companies can still do very well with these drugs, and still make a lot of money, but the tides are shifting, and the well of wealth is not endless, so it may be wise to temper some expectations.