Estimate of Savings from Generic Competitors to Ozempic and Wegovy

1) Medicare’s savings from generic competition to Ozempic.

Using estimates of net spending for Ozempic in 2022 by Medicare Part D, Public Citizen projects that Medicare would save $1.3 billion in the first year of generic competition and $1.6 billion in the second year of competition to Ozempic. As described in more detail in the Appendix, we estimated savings if the generics cost $100 per month and accounted for increased uptake of generics by patients over time.

	Net Spending on Ozempic in 2022	Net Spending if Generics were Available	Savings
Year 1	$2,452,925,141.00	$1,147,406,466.61	$1,305,518,674.39
Year 2	$2,452,925,141.00	$819,545,498.46	$1,633,379,642.54
Total	$4,905,850,282.00	$1,966,951,965.07	$2,938,898,316.93

 

2) Medicare’s savings from generic competition to Wegovy among enrollees likely eligible due to the new cardiovascular indication.

Federal law prohibits covering drugs solely for weight loss indications. However, as a result of the FDA approving Wegovy to reduce the risk of death, stroke, or heart attack in patients with obesity and excess weight, this year Medicare announced it would allow Part D plans to cover Wegovy for patients with elevated Body Mass Index (BMI) and established cardiovascular disease, regardless of whether the patient has diabetes. Using estimates of the number of Medicare enrollees who likely become eligible for Wegovy under this new cardiovascular indication (3.6 million), Public Citizen estimates Medicare would save between approximately $5 and $20 billion in the first year of generic competition to Wegovy. The range results from the lack of certainty on how many of the 3.6 million enrollees eligible for Wegovy will actually use the medication, so we constructed a lower and upper bound estimate of savings depending on 25% uptake among eligible enrollees vs. 100% uptake among these patients. Similarly, Public Citizen estimates that Medicare would save between approximately $6 billion and $25 billion from the second year of generic competition to Wegovy.

Even under the more conservative set of assumptions, where 25% of Medicare’s eligible enrollees use Wegovy, the program would save over $11 billion in the first two years of generic competition due to Wegovy’s sky high price currently. If even half of Medicare enrollees now eligible for Wegovy use the drug, Medicare would save over $20 billion from the first two years of generic competition on the drug. Finally, under more generous estimates of uptake of Wegovy among eligible enrollees (100% uptake), we estimate over $45 billion in savings from the first two years of generic competition.

	Savings if 25% of Eligible Medicare Enrollees Use Wegovy	Savings if 50% of Eligible Medicare Enrollees Use Wegovy	Savings if 100% of Eligible Medicare Enrollees Use Wegovy
Year 1	$5,061,409,200.00	$10,122,818,400.00	$20,245,636,800.00
Year 2	$6,332,504,400.00	$12,665,008,800.00	$25,330,017,600.00
Total	$11,393,913,600.00	$22,787,827,200.00	$45,575,654,400.00

 

3) Savings to Medicare if the program covers Wegovy for enrollees with an obesity diagnosis.

Bicameral, bipartisan legislation has been proposed to end the Medicare coverage exclusion for drugs used for the treatment of obesity or for weight loss management for individuals with excess weight and who have one or more related comorbidities.[1] We calculate that if Medicare covered Wegovy just for enrollees with an obesity diagnosis, the program would save between approximately $15.7 and $62.7 billion in the first year of generic competition to Wegovy. In the second year of generic competition to Wegovy, Medicare would save between approximately $19.6 and $78.4 billion.

Under the more conservative set of assumptions, we anticipate that if Medicare covers Wegovy for just 25% of enrollees with an obesity diagnosis, generic competition will save the program over $35 billion in just two years. If even half of Medicare enrollees with an obesity diagnosis used the drug, we anticipate that generic competition would save the program over $70 billion over two years. If all Medicare beneficiaries with an obesity diagnosis took the drug, generic competition would save the program over $140 billion in two years.

	Savings if 25% of Medicare Beneficiaries w/ Obesity Use Wegovy	Savings if 50% of Medicare Beneficiaries w/ Obesity Use Wegovy	Savings if 100% of Medicare Beneficiaries w/ Obesity Use Wegovy
Year 1	$15,664,511,530.80	$31,329,023,061.60	$62,658,046,123.20
Year 2	$19,598,413,065.01	$39,196,826,130.02	$78,393,652,260.05
Total	$35,262,924,595.81	$70,525,849,191.63	$141,051,698,383.25

 

Appendix: Methodology for Calculating Savings from Generic Competition on Ozempic and Wegovy

1) Medicare’s savings from generic competition to Ozempic.

To estimate savings to Medicare we used the following data sources and assumptions. According to Medicare’s gross spending data for the latest year available (FY 2022), Medicare spent $4,628,160,643.40 on Ozempic.[2] We used the Government Accountability Office’s estimate of rebates as a proportion of gross expenditure for Part D endocrine metabolic agents (47%),[3] which includes antidiabetic medications, to estimate net spending on Ozempic in 2022. We estimate net spending for Ozempic in 2022 to be approximately $2,452,925,141.00.

Next, we calculated how much Medicare would save if patients began using generics rather than the expensive branded medication. First, we estimated continued spending on the branded drug, Ozempic, given academic literature on generic uptake in the first and second year of competition. We prefer this approach to account for the fact that generic uptake increases over time. Experts have found that in the first year of generic competition for a drug, there is 66.1% uptake of generics; in the second year, uptake of generics increases to 82.7%.[4] For the first year of competition, we estimated that Medicare would continue to spend $831,541,622.80 and $424,356,049.39 on the branded medication, Ozempic, in the first and second year of generic competition, respectively.

Then, we calculated net expenditure on generics that would occur as a function of displacing Ozempic’s market share with an estimated price reduction compared to the brand price. The brand price for Ozempic is $968.52 per month.[5] Although inexact, we applied the Government Accountability Office’s rebate estimate for gross spending on endocrine metabolic agents in Medicare Part D to estimate a net price of $513.32 per month per enrollee. If generics can enter the market at $100 a month, the price ratio of generics compared to Ozempic would be 0.194811925. Thus, using this price ratio and expected uptake of generics in the first and second year of competition, we estimated that spending on generics would be $315,864,843.81 and $395,189,449.07 in the first and second year of competition, respectively.

We totaled the continued spending on the branded medication and generics to calculate how much Medicare would spend if generics to Ozempic became available. In the first year, we estimate that Medicare would spend $1,147,406,466.61 on Ozempic and its generics. In the second year, Medicare would spend $819,545,498.46. Compare this to how much Medicare is expected to spend on Ozempic without generics each year: $2,452,925,141.00. Thus, as a consequence of generic competition, Medicare is expected to save 1,305,518,674.39 in the first year and $1,633,379,642.54 in the second year of generic competition, for a total savings of nearly $3 billion in the first two years of generic competition to Ozempic ($2,938,898,316.93).

Caveats to this analysis include that we cannot account for increased uptake of generics to Ozempic because of their lower price. Second, we do not have precise information on the rebates provided by the branded manufacturer to Medicare Part D; however, we believe the savings here are underestimates because spending on Ozempic has dramatically increased recently. Between 2020 and 2021, Medicare’s spending on Ozempic increased by more than a billion dollars, and between 2021 and 2022, spending increased by an $2 billion. Thus, we likely significantly underestimate how much Medicare will spend on Ozempic in subsequent years since we depend on data from 2022, which also limits our savings projections.

2) Medicare’s savings from generic competition to Wegovy among enrollees likely eligible due to the new cardiovascular indication.

There is no historic data on Medicare’s spending on Wegovy due to statutory exclusions for coverage of drugs solely for weight loss. However, with Medicare’s announcement that Part D plans may begin to cover the drug for patients with elevated BMI and established cardiovascular disease, we relied on estimates in the academic literature. Experts in the Annals of Internal Medicine estimated that 3.6 million enrollees were highly likely to be eligible for Wegovy due to the new cardiovascular indication.[6] Under more liberal definitions of established cardiovascular disease, the authors predicted over 15 million enrollees could become eligible for Wegovy.[7] For the purposes of this analysis, we chose the more conservative estimate of 3.6 million enrollees becoming eligible for Wegovy under Medicare’s recent announcement.

We projected estimated net spending for Wegovy under Medicare if 25% of the enrollees highly likely to be eligible used the medication. Relying on prior estimates of the net price for Wegovy ($809 per month) from the Senate Committee on Health, Education, Labor and Pensions,[8] we calculated an annual net expenditure of $8,737,200,000.00 for these patients.

We used the methodology described above to calculate anticipated savings from generic competition in the first and second year of generics availability. We assumed generic uptake would be 66.1% and 82.7% in the first and second year of competition, respectively,[9] and we calculated the generic-to-brand price ratio based on the net price of $809 for Wegovy and $100 for generics (0.123609394). In the first year of generic competition, we anticipated that Medicare would continue to spend $2,961,910,800.00 on Wegovy. With the availability of generics, we project that Medicare would spend $713,880,000.00 on generics for enrollees. So, under the scenario with generics displacing Wegovy’s market share at a lower price, we expect total spending to be $3,675,790,800.00 as opposed to $8,737,200,000.00 (the net spending projected for Medicare if just 25% of likely eligible enrollees used Wegovy). That equates to savings of over $5 billion under this conservative scenario where only 1 in 4 eligible enrollees use the drug.

In the second year of generic competition, we estimate that Medicare would spend $1,511,535,600.00 on the brand medication, Wegovy, and $893,160,000.00 on generics. With a greater share of Wegovy’s market displaced in the second year and the lower price of generics, we anticipate total spending to be $2,404,695,600.00 under the conservative projection that only 25% of eligible enrollees use the drug. Compared to the estimated net expenditure on Wegovy without any generic competition ($8,737,200,000.00), we estimate over $6 billion in savings from the second year of generic competition. Thus, under a conservative scenario where only 1 in 4 Medicare enrollees eligible for Wegovy under the cardiovascular indication use the drug, we estimate $11,393,913,600.00 in savings from two years of generic competition.

If half of all enrollees highly likely to be eligible for Wegovy use the drug, we would anticipate net expenditures and savings to double. Without generic competition to Wegovy, net expenditure each year would be $17,474,400,000.00, and savings across two years of generic competition would be $22,787,827,200.00. If all enrollees who are highly likely to be eligible for Wegovy under the cardiovascular indication use the drug, we anticipate net spending per year to be $34,948,800,000.00 and savings after two years of generic competition to be $45,575,654,400.00.

As we stated above, there are several caveats to this analysis. First, we cannot account for increased usage of generics to Wegovy as a result of their lower price. Second, we do not have precise information on the rebates provided by the branded manufacturer to Medicare Part D for Wegovy; however, we believe our analysis provides an accurate range of potential spending for Medicare because we chose the stricter definition of cardiovascular disease in the literature and showed that Medicare stands to save over $11 billion in two years of generic competition in the conservative scenario where only 1 in 4 enrollees under this strict definition of cardiovascular disease use Wegovy. Thus, even if the final rebate amount is modified, we anticipate that if Medicare were to cover Wegovy for the weight loss indication, savings would be at least, and likely exceed, $11 billion across two years of generic competition because level of uptake and the definition of cardiovascular disease would significantly affect potential net expenditures and savings. For example, if more liberal definitions of cardiovascular disease are used, where over 15 million enrollees may be eligible for Wegovy instead of 3.6 million enrollees, our analysis may grossly underestimate potential spending on Wegovy and savings from generic competition.

3) Savings to Medicare if the program covers Wegovy for enrollees with an obesity diagnosis.

In light of bicameral, bipartisan legislation that would end the Medicare coverage exclusion for drugs used for the treatment of obesity or for weight loss management for individuals with excess weight and who have one or more related comorbidities,[10] we provide an estimate of potential savings to Medicare from generic competition to Wegovy if this exclusion were ended.

According to an article from the New England Journal of Medicine, experts found that 21% of Medicare Part D enrollees in 2020 had a diagnosis of obesity (9,956,755 enrollees).[11] Extrapolating to 2024, where Medicare Part D’s enrollment has increased by 11.9% since 2020, we estimate that 11,141,609 enrollees likely have an obesity diagnosis.[12] Using the net price for Wegovy for Medicare discussed above from the Senate HELP Committee’s report,[13] we estimate the annual net expenditure if Medicare ended the exclusion for anti-obesity medications and just 25% of those with an obesity diagnosis used Wegovy. We note this is likely an underestimate of the number of enrollees who would use Wegovy, not only because of the conservative estimate of uptake, but because this does not consider usage by patients who are overweight and have one or more weight-related comorbidity. We project, conservatively, that Medicare would spend on a net basis at least $27,040,684,666.82 covering the weight loss indication.

Using the methodology discussed above, we projected savings to Medicare with increasing generic uptake and displacement of the branded drug, Wegovy over time using the generic-to-brand price ratio. Again, we assumed generic uptake would be 66.1% and 82.7% in the first and second year of competition, respectively,[14] and we calculated the generic-to-brand price ratio based on the net price of $809 for Wegovy and $100 for generics (0.123609394). In the first year of generic competition, we calculated continued spending on Wegovy would be $9,166,792,102.05 while spending on generics would be $2,209,381,033.96. In total, we expect spending with generics available to be $11,376,173,136.01, representing $15,664,511,530.80 in savings in just the first year compared to what Medicare would expend with no generic alternatives to Wegovy ($27,040,684,666.82).

In the second year of competition, we would expect spending on Wegovy to drop to $4,678,038,447.36 and spending on generics to be $2,764,233,154.44. Thus, with generics available, we would expect a total spend of $7,442,271,601.80 as opposed to $27,040,684,666.82 without generic alternatives. That represents $19,598,413,065.01 in savings during the second year of competition under the conservative scenario in which 1 in 4 Medicare enrollees with obesity used this anti-obesity medication. Across two years of generic competition to Wegovy, we anticipate at least $35,262,924,595.81 in savings if the Medicare coverage exclusion for anti-obesity treatment is ended.

If 50% of Medicare enrollees with an obesity diagnosis took Wegovy upon ending the coverage exclusion, we anticipate that annual net expenditure would double to $54,081,369,333.63, and savings from two years of generic competition would be $70,525,849,191.63. If all Medicare enrollees with an obesity diagnosis took Wegovy, we would expect annual expenditures to be $108,162,738,667.26 and savings from two years of generic competition to approximate $141,051,698,383.25.

As described above, we cannot account for increased uptake of this anti-obesity medication due to lower costs from generic competition. Differences between the estimated net price here and the actual net price paid by Medicare will also impact this analysis. But we believe we’ve accurately projected the range of spending and savings possible by using conservative assumptions on levels of uptake that greatly affect possible net expenditures and savings. That is, if only 1 in 4 Medicare beneficiaries with an obesity diagnosis take Wegovy, we still project savings over $35 billion across two years of generic competition. Thus, even if the final rebate amount is modified, we anticipate that if Medicare were to cover Wegovy for the weight loss indication, savings would be at least, and likely exceed, $35 billion across two years of generic competition.

[1] Treat and Reduce Obesity Act of 2023, S.2407, 118th Cong. (2023); H.R.4818, 108^th Cong.  (2023) https://www.congress.gov/bill/118th-congress/senate-bill/2407.

[2] Ctrs. Medicare & Medicaid Servs., Medicare Part D Spending by Drug, Data.CMS.Gov, https://data.cms.gov/summary-statistics-on-use-and-payments/medicare-medicaid-spending-bydrug/medicare-part-d-spending-by-drug (last visited Sept. 16, 2024).

[3] U.S. Gov’t Accountability Off., Medicare Part D: CMS Should Monitor Effects of Rebates on Plan Formularies and Beneficiary Spending, at 19 (Sept. 2023), https://www.gao.gov/assets/gao-23-105270.pdf.

[4] Benjamin N. Rome, ChangWon C. Lee, Joshua J. Gagne, & Aaron S. Kesselheim, Factors Associated With Generic Drug Uptake in the United States, 2012 to 2017, 24 Value Health 804 (2021).

[5] Novo Nordisk, Find out the cost for Ozempic, NovoCare, https://www.novocare.com/diabetes/products/ozempic/explaining-list-price.html (last visited Sept. 16, 2024).

[6] Alexander Chaitoff, Liam Bendicksen, William B. Feldman, Alexander R. Zheutlin, & Hussain S. Lalani, Estimating New Eligibility and Maximum Costs of Expanded Medicare coverage of Semaglutide for Cardiovascular Prevention, Annals of Internal Medicine (Aug. 27, 2024), https://www.acpjournals.org/doi/10.7326/ANNALS-24-00308

[7] Id.

[8] Majority Staff of the Senate HELP Committee, Breaking Point: How Weight Loss Drugs Could Bankrupt American Health Care 6-7 (May 15, 2024).

[9] Benjamin N. Rome, ChangWon C. Lee, Joshua J. Gagne, & Aaron S. Kesselheim, Factors Associated With Generic Drug Uptake in the United States, 2012 to 2017, 24 Value Health 804 (2021).

[10] Treat and Reduce Obesity Act of 2023, S.2407, 118th Cong. (2023); H.R.4818, 108^th Cong.  (2023) https://www.congress.gov/bill/118th-congress/senate-bill/2407.

[11] Khrysta Baig, Stacie B. Dusetzina, David D. Kim, & Ashley A. Leech, Medicare Part D Coverage of Antiobesity Medications— Challenges and Uncertainty Ahead, 388 New England J. Med. Perspective 961 (2023).

[12] Juliette Cubanski & Anthony Damico, Key Facts About Medicare Part D Enrollment, Premiums, and Cost Sharing in 2024, KFF (July 2, 2024), https://www.kff.org/medicare/issue-brief/key-facts-about-medicare-part-d-enrollment-premiums-and-cost-sharing-in-2024/.

[13] Majority Staff of the Senate HELP Committee, Breaking Point: How Weight Loss Drugs Could Bankrupt American Health Care 6 (May 15, 2024).

[14] Benjamin N. Rome, ChangWon C. Lee, Joshua J. Gagne, & Aaron S. Kesselheim, Factors Associated With Generic Drug Uptake in the United States, 2012 to 2017, 24 Value Health 804 (2021).