Insurance not covered, supply shortages, rampant generic drugs, slow new drug development, new weight loss drugs still face challenges

The new type of GLP-1 weight loss drugs is not only changing the lives of the obese population but also generating billions of dollars in revenue for pharmaceutical companies such as Eli Lilly & Co. and Novo Nordisk A/S.

However, analysts believe that weight loss drugs currently face some challenges in the United States: there is not only the risk of insurance companies refusing to pay, but the ongoing supply shortages also create opportunities for lower-priced generic drugs. Additionally, it remains uncertain whether pharmaceutical companies can truly develop better weight loss medications. Another unknown factor is the attitude of Robert F. Kennedy Jr., the health and human services secretary nominee by elected President Trump, who has expressed reservations about the pharmaceutical industry and its new categories of drugs.

Supply Shortages, Limited Insurance Coverage, Generics Thrive

The two main GLP-1 weight loss drugs currently on the U.S. market are Novo Nordisk's Wegovy and Eli Lilly's Zepbound, both of which require weekly injections. Since the launch of these drugs, both companies have been struggling to meet market demand.

However, these new weight loss drugs have been in a state of supply shortage for most of the time. Previously, the U.S. passed a law allowing compounders to produce and sell generic drugs when a drug is in shortage or "commercially unavailable," which has angered Eli Lilly and Novo Nordisk.

But compounders are also dissatisfied with the FDA, concerned that the FDA's determination of whether weight loss drugs are in shortage could impact their business. These pharmacies have previously sued the FDA, demanding clarification on whether Eli Lilly's Mounjaro and Zepbound are still in shortage. In December of last year, the FDA announced that these drugs were no longer in shortage, meaning that compounders must stop producing generic versions of Eli Lilly's drugs within 60 to 90 days. However, related lawsuits are still ongoing. As of December 31, Novo Nordisk's drugs are still classified as in shortage by the FDA.

Data shows that many patients cannot obtain these drugs through insurance, leading them to pay out of pocket or purchase cheaper generics. According to Mercer's national employer health plan survey, about 44% of large employers provide coverage for weight loss drugs, but almost all limit it to patients who meet specific criteria.

Additionally, Medicare, the health insurance program for people aged 65 and older in the U.S., currently does not cover weight loss drugs. However, the Biden administration recently proposed a regulation requiring the U.S. government to provide obesity drug coverage for millions of Medicare users. The incoming Trump administration will decide whether to ultimately approve or block this proposal.

Trump's position on this issue remains unclear. His health secretary nominee, Robert F. Kennedy Jr., has criticized the use of drugs for weight loss and stated on social media platform X in September that the U.S. should "fundamentally address the obesity issue rather than rely on drugs." However, Trump's close advisor Elon Musk supports making GLP-1 drugs "super low-cost for the public" and claims to have also taken such drugs.

Manufacturers are Developing New Weight Loss Drugs

Currently, two types of weight loss drugs on the market reduce weight by mimicking the action of the gastrointestinal hormone GLP-1, which is released after eating and creates a feeling of fullness. Zepbound also targets another related hormone, GIP, which helps lower blood sugar and may increase metabolic rate.

A trial sponsored by Eli Lilly showed that Zepbound was more effective than Wegovy. Among 751 obese patients, those using Zepbound lost an average of 20.2% of their weight over 72 weeks, while the weight loss rate for Wegovy was 13.7%.

Manufacturers state that both drugs have additional benefits beyond weight loss. Wegovy is the only GLP-1 drug proven to prevent heart attacks and other cardiovascular events in patients with obesity and heart disease. Zepbound also became the first drug approved for the treatment of sleep apnea last December.

Due to the potential for huge profits, more and more pharmaceutical companies are developing their own weight loss treatments. At the same time, Eli Lilly and Novo Nordisk are competing to develop products that are more effective than current drugs in order to capture the market before patents expire. However, whether Zepbound can truly improve its effectiveness remains in doubt.

Novo Nordisk is testing a new drug called CagriSema, which combines GLP-1 with another mimetic hormone, cagrilintide. The first large-scale study released in December showed that CagriSema resulted in an average weight loss of only 20.4% over 68 weeks, similar to Zepbound's results, leading to a sharp drop in Novo Nordisk's stock price. The company continues to conduct other trials, including a direct comparison study with Zepbound.

Another promising candidate drug is Eli Lilly's retatrutide. This drug mimics three hormones: GLP-1, GIP, and glucagon. Mid-2023 studies showed that this drug could help patients lose up to 24% of their weight, and it is currently undergoing final phase trials, with results expected in 2026.

Slow Drug Development is the Norm

In addition, several companies are developing oral weight loss medications to replace weekly injections, but most have made little progress.

Pfizer's oral drug development failed in June 2023, and another drug trial that was taken twice daily was halted later that year due to side effects. Pfizer is currently developing a new formulation for once-daily use. Other companies, such as Roche, have also encountered similar issues, with experimental drugs showing severe side effects in preliminary studies.

Eli Lilly's orforglipron is one of the most advanced oral weight loss drugs being tested, with late-stage trial results expected in 2025. In mid-2023 trials, participants lost up to 14.7% of their weight over 36 weeks.

Analysts believe that drug development is typically a slow process, often accompanied by incremental improvements or outright failures, with breakthroughs occurring occasionally. The development of obesity drugs has long been a "graveyard" for pharmaceutical companies. Wegovy and Zepbound are among the first highly effective treatment drugs, and attempts to further improve upon these may not meet investors' expectations.