$1,000-a-month Ozempic, new weight loss drug, costs $5 to manufacture: Yale study

Industry experts have always known that there is a significant gap between the manufacturing cost and sales price of popular GLP-1 drugs, which are effective for both weight loss and diabetes management. Now they know also know how wide that gap really is.

Ozempic from Novo Nordisk, which sells for nearly $1,000 a month, can be manufactured for less than $5, according to a study from researchers at Yale University, King’s College Hospital in London and the nonprofit Doctors Without Borders. It generally can be produced for less than various forms of insulin.

“The profit margin is immense,” study author Melissa Barber, a public health economist at Yale, told “Fortune.” “There should be a conversation in policy about what is a fair price.”

Researchers estimated that a month’s supply of the treatment could be manufactured for a range from 89 cents to $4.73. They evaluated manufacturing costs for the weekly injection along with a profit margin with an allowance for tax to produce those estimates, which they call “cost-based prices.”

The manufacturer’s list price for a monthly package of Ozempic is $935.77 before insurance and other rebates. The findings suggest that GLP-1s “can likely be manufactured for prices far below current prices, enabling wider access,” researchers said.

Although Novo Nordisk declined to provide production costs for Ozempic and its weight-loss drug counterpart Wegovy, it noted that it spent almost $5 billion on research and development last year and will spend more than $6 billion on a recent deal to boost manufacturing to meet demand for GLP-1s. It also said 75% of its gross earnings go to rebates and discounts to ensure patients have access to its products.

The company added that out-of-pocket costs for Ozempic depend on a patient’s insurance coverage. Patients with private or commercial coverage for Ozempic can access a savings card and pay as little as $25 for a one-, two- or three-month supply for up to 24 months.

“With a steadily increasing number of people living with diabetes requiring insulin, strategies must urgently be developed to reduce insulin prices and ensure affordable and reliable access in all parts of the world,” researchers said. “Given the potential for generic manufacture to substantially reduce prices and thus increase access to these treatments, mechanisms that enabled early generic manufacture in other diseases, such as HIV and hepatitis C, should also be considered for use in diabetes medicines.”

Sen. Bernie Sanders, I-Vt., is leading the charge for manufacturers to reduce prices.

Related: Sen. Sanders calls on Novo Nordisk to reduce ‘outrageous’ cost of Ozempic

“As chairman of the Senate Committee on Health, Education, Labor and Pensions, I am calling on Novo Nordisk to lower the list price of Ozempic and the related drug Wegovy in America to no more than what they charge for this drug in Canada,” he said. “The American people are sick and tired of paying, by far, the highest prices in the world for prescription drugs while the pharmaceutical industry enjoys huge profits.”