Ozempic-maker experiments with pricing to reframe buyer value

Novo Nordisk, the maker of the popular if controversial drug Ozempic, is attempting to innovate on pharma pricing models for its Wegovy product, proposing a ‘risk-based’ pricing model that allows healthcare providers to spread the cost of the drug over a longer period with the promise of eventual savings down the line. 

These savings would come through a reduction in obesity-related problems and costs. 

Why Novo Nordisk’s pricing strategy matters

Across media, the medium is so often the message. For Novo Nordisk, it’s the pricing model that acts as the message to would-be buyers. The lesson – that the big price of a service or product will eventually deliver savings through its use – has great potential across the B2B marketing space. 

The story is deeper, however, as Novo Nordisk faces competition from rivals using a similar medical technology: will it be able to reframe its offer to the point that it can protect its first-mover advantage and the price premium that it’s established?

What’s going on

Danish pharma firm Novo Nordisk is adapting how it talks to healthcare systems as it seeks to increase the uptake of its effective but expensive weight-loss drug Wegovy. 

• The company is best known for its semaglutide drug, which is the active ingredient in the diabetes treatment Ozempic. An insulin regulator that also causes dramatic weight loss, it exploded into public consciousness when several celebrities like Elon Musk credited the product with helping the SpaceX CEO shed 13kgs. 
• In recent years, #Ozempic has blown up on TikTok to the point of causing shortages of the drug for type 2 diabetes patients to whom it is typically prescribed. Wegovy is the formulation specifically for weight loss.
  
• Very simply, it reduces people’s appetites while also slowing the rate of digestion to keep patients feeling fuller for longer.

Why now?

Such hype has boosted the profile of both the company and product but it remains expensive to buy. 

• In an interview with the Financial Times, CEO Lars Fruergaard Jørgensen explained the company’s new thinking about selling an expensive product that promises savings down the line, with recent trials suggesting that Wegovy can cut the risk of serious cardiac events by around a fifth.
  
• “How can healthcare systems justify making a large one-time payment upfront that leads to significant savings down the road? I think we need to share that risk to get going,” he tells the paper.
  
• In the US, the drug costs over $1,300 per month and many insurers don’t cover its costs. It is slightly cheaper in Europe, but healthcare systems – often taxpayer funded – have typically only prescribed the drug for patients with extremely high body mass index. 

The question, then, is whether a new pricing model can reframe the investment case away from saving individual lives and toward a system-wide investment in reducing obesity (42% of US, and 17% of EU populations). 

This goes far further

The Ozempic effect isn’t just a pharma story, but a full blown macroeconomic conundrum the likes of which we rarely see. Recently, the maker of Krispy Kreme doughnuts saw its securities downgraded on analysts’ assumption that widespread Ozempic use is going to hit demand. 

Walmart has registered some behavioural change among users of the drug who shop at the supermarket, with fewer food products sold as a result. 

Sourced from the Financial Times, Euronews, Lloyds Pharmacy, Bloomberg 

[Image: Novo Nordisk]