The rising use of GLP-1s for managing obesity is expected to have huge impacts on the pharmaceutical industry. Here’s what we expect in the next few years.
Glucagon-like peptide (GLP-1) agonists, originally developed to treat type-2 diabetes, have been garnering attention after their subsequent approval for weight loss. GLP-1 acts by stimulating glucose-dependent insulin release from the pancreatic islets, which in turn slows down gastric emptying and supresses appetite. In addition to being successful standalone treatment pathways, GLP-1 drugs are expected to improve outcomes in individuals who have undergone bariatric surgeries.
Global GLP-1 sales were estimated at $40 billion in 2023, and are projected to reach $150 billion by 2032, registering a CAGR of 15.8% over 2023–2032, fuelled by the rising prevalence of diabetes and obesity.
Currently, two early innovators – Novo Nordisk (weight loss injection Wegovy and diabetes counterpart Ozempic) and Eli Lilly (weight loss treatment Zepbound and diabetes injection Mounjaro) – hold close to 100% of the market share. These companies are expected to maintain ~85% market share in mid- to long-term.
Ongoing shortage of GLP-1 drugs
Exploding demand and off-label use (for yet to be approved indications such as type-1 diabetes) are causing a supply shortage for GLP-1 agonists, which is likely to prevail in the near-term.
With multiple expansion projects across France, China and the US, Novo Nordisk aims to mitigate the ongoing shortage of GLP-1 drugs and keep up with its booming demand. The company has already committed $11 billion to build three additional fill-finish manufacturing sites in Italy, Belgium and the US, which will eventually help ramp up production. However, these sites can take two to three years to become fully operational, so the demand-supply gap may continue to stay unresolved in the near-future.
Meanwhile, Eli Lilly continues to build, upgrade and acquire facilities – since 2020, the company has committed more than $16 billion to develop new manufacturing sites in the US and Europe. Further, Eli Lilly inked deals with CDMOs such as National Resilience and BSP Pharmaceuticals to secure fill-finish services for GLP-1 drugs.
The sites engaged in fill-finish and packaging (pre-filled syringes) of GLP-1 drugs are also relied on by other drugs in the market, which raises a concern for various pharmaceutical companies in terms of capacity constraints or supply chain delays for other drugs. As the fill-finish process is a critical part of the broader pharmaceutical supply chain, any disruption at this stage has a cascading effect on the entire supply chain process leading to drug shortages and delay of patient therapies.
High cost of GLP-1 drugs limits patient access
Although demand for GLP-1 drugs is outstripping supply, there are few factors such as the high cost that are limiting the drug uptake. With a monthly package price of around $1,000, most insurers are hesitant to cover the drug as part of patients’ policies, and Medicaid coverage in the US is limited. This makes the drug inaccessible to a large proportion of the population and difficult for single-payer healthcare systems – such as the UK’s NHS – to acquire.
Given the high cost of these medications, coupled with suboptimal adherence rates, there’s a high potential for payers and patients to experience significant financial waste if medications are not taken exactly as prescribed.
How the market is going to change throughout the next decade
While the market is currently experiencing high demand and limited supply, there are a few factors we expect to change over the coming years.
1. Growing competition and expansion into new markets might reduce prices
Although the GLP-1 drug market is dominated by two key manufacturers, biotech innovators such as Zealand Pharma, Boehringer Ingelheim, and Viking Therapeutics are entering the market with similar drugs. With more competition, the leading manufacturers may revise their pricing strategies to compete for greater market share.
Similarly, they will also have to consider lower prices as they expand to new markets with single-payer healthcare systems that can’t meet the current price level.
2. The US Inflation Reduction Act will also limit price levels
The US Inflation Reduction Act introduced in 2022 aims to reduce domestic inflation, introducing price caps and forcing the negotiation of drug prices. Popular GLP-1s are expected to be targeted for price negotiations within the next few years, which might encourage a general price decrease across the market.
If a price cap is introduced, it will also limit potential future price increases for the drugs, meaning we will likely see a much steadier price level throughout the rest of the decade.
3. An oral alternative to injectables and expansion into new treatment
Apart from Novo Nordisk and Eli Lilly, manufacturers such as Roche and Pfizer are researching oral alternatives to the current injector-based application method for GLP-1s. This will not only improve patient convenience and adherence, but also reduce the reliance on injectable treatments.
By eliminating the step of aseptic fill-finish and pre-filled syringe packaging, suppliers will more likely be able to increase their capacity and meet drug demand as it scales.
This will be especially important as the use of GLP-1 agonists expands to treat other health conditions. Researchers are currently exploring GLP-1’s effectiveness in reducing heart disease and strokes, and treating patients with Parkinson’s disease, Alzheimer’s disease, and sleep apnea. If GLP-1s become a common treatment for these conditions, demand will only grow.
Continual monitoring of GLP-1 and strategic contract management are both crucial to avoiding disruption
If you’re operating in the GLP-1 market, or even in adjacent markets, you’ll need to continually monitor the drug’s demand, price, supply, and progress to identify any changes that might affect your own supply chain.
At The Smart Cube, we have extensive experience helping pharmaceutical companies monitor market risk, review their contracts, and manage their supplier portfolios to mitigate disruptions.
Get in touch with one of our experts today to learn how you can stay ahead of the market and protect your supply chain operations.