Justin Plank | Spring 2025
Every year, the United States spends an estimated $173 billion treating obesity-related diseases like diabetes and heart disease, more than the annual budgets of 42 U.S. states combined. Amid this crisis, GLP-1 receptor agonists have emerged as a potential game-changer, offering not only weight loss but also the possibility of reducing obesity-related healthcare costs. Once a niche treatment primarily for diabetes, drugs like Ozempic and Wegovy have surged in popularity, fueled by celebrity endorsements and rising demand among high-income consumers. GLP-1 medications mimic naturally occurring hormones that regulate blood sugar and appetite, making them revolutionary for both diabetes management and weight loss. However, these medications can see prices as high as $1300, raising economical and ethical concerns. It is essential to explore the economic implications of GLP-1 drugs, analyzing their production costs, accessibility disparities, and broader financial impact on healthcare and society.
History of GLP-1’s
The foundation for GLP-1-based therapies was laid in 1986 when Joel Habener and Svetlana Mojsov identified GLP-1 as a hormone released from the intestine that triggered insulin secretion in response to glucose (Friedman 2024). This discovery was groundbreaking because it addressed a major drawback of existing diabetes treatments, uncontrolled insulin release, which often led to dangerously low blood sugar. Pharmaceutical giants quickly mobilized research teams to explore GLP-1’s potential, setting the stage for a revolution in weight loss medicine.
Novo Nordisk led the charge, developing liraglutide (Victoza) in 1996. After a 14-year approval process, Victoza became the first GLP-1 drug for type 2 diabetes in 2010. The introduction of semaglutide (Ozempic) in 2017 marked a major breakthrough, offering once-weekly dosing that improved patient adherence. In 2021, the FDA’s approval of Wegovy signified a turning point, expanding GLP-1 therapy from diabetes management to a powerful tool against obesity. With the power to tackle both diabetes and obesity, GLP-1 therapies are reshaping public health strategies and redefining the future of chronic disease management.
The Current Landscape of GLP-1’s
Today, GLP-1 receptor agonists have evolved into a multi-billion-dollar industry, with demand outpacing initial projections. Novo Nordisk and Eli Lilly now dominate the market, with their drugs Ozempic, Wegovy, Mounjaro, and Zepbound driving projected sales to $100 billion by 2030 (Buntz, 2024). Yet, with rapid expansion comes an array of economic and logistical hurdles. As these drugs reshape healthcare, questions surrounding affordability, accessibility, and long-term economic impact become impossible to ignore.
Understanding the High Costs of GLP-1 Therapies
Shortages
The high cost of GLP-1’s is driven by the overwhelmingly high demand for GLP-1’s which has triggered supply shortages. Between 2018 and 2023, prescriptions for GLP-1’s increased by 300%. (Innovative 2024). The demand surge far exceeded pharmaceutical companies’ initial forecasts, creating an imbalance between supply and patient needs. Due to the sophisticated and expensive manufacturing process of GLP-1’s, companies struggled to increase production in response to high demand. Even when manufacturers increase production, regulatory approvals and insurance hurdles slow distribution. Furthermore, shortages force rationing, leaving many patients, especially in lower-income areas, unable to access these treatments.
Production Costs
The complexity of GLP-1 drugs results in significantly higher production costs compared to traditional small-molecule drugs like aspirin. Pharmaceutical development is notoriously expensive, with research and development, clinical trials, regulatory approvals, and patent protections all contributing to the financial burden. On average, developing a new drug costs approximately $3 billion, takes around 15 years, and has a high failure rate (Theron 2025). Since many drug candidates fail in clinical trials due to safety or efficacy concerns, pharmaceutical companies must recoup these sunk costs by setting high prices on the successful drugs that do reach the market.
Patent Exclusivity
Furthermore, manufacturers operate within a limited profit window due to patent exclusivity, which typically lasts 12 to 14 years before generic competition emerges (Kesselheim, 2017). Once exclusivity expires, competing pharmaceutical firms can produce cheaper, generic versions, leading to a significant drop in prices. Patent exclusivity for Novo Nordisk’s semaglutide (Ozempic, Wegovy) extends until at least 2032 in the U.S., delaying the entry of lower-cost generics (Novo’s Ozempic Seen, 2024) However, until that point, firms aggressively price these drugs to maximize returns, particularly in the U.S., where weaker price regulation allows for significantly higher costs.
Insurance Barriers and the Two-Tiered Healthcare Divide
Insurance Coverage and Its Impact
Insurance coverage for GLP-1 receptor agonists varies significantly, largely depending on their FDA-approved indication. Medications like Ozempic and Mounjaro, approved for type 2 diabetes, are typically covered by insurance, while weight-loss-specific drugs such as Wegovy and Zepbound frequently face coverage denials, leaving many patients without reimbursement options.
Even when covered by private insurance, out-of-pocket costs can exceed $500 per month, making GLP-1s financially out of reach for many patients. Co-pays, deductibles, and step therapy requirements further restrict access. In response to affordability concerns, Eli Lilly recently lowered the out-of-pocket price of Wegovy to $499 per month for uninsured patients paying in cash (Robbins 2025). While this price cut appears significant, it does little to help insured patients with high cost-sharing or those reliant on government insurance programs like Medicaid and Medicare.
For Medicaid recipients, states independently determine coverage for obesity treatments, leading to vast disparities. As of August 2024, only 13 state Medicaid programs cover GLP-1s for obesity treatment, while 37 states have opted out due to cost concerns (Essel 2024). The financial strain on government programs is evident as West Virginia’s Medicaid pilot program for weight-loss drugs was suspended after costs ballooned to $1.4 million per month, despite the state having a 40% obesity rate (Strassman 2024). Unlike Medicaid, Medicare follows a federal standard, meaning its policies apply nationwide. While Medicare covers drugs used for diabetes treatment, it excludes weight-loss drugs due to these outdated policies. As a result, over 50 million Medicare beneficiaries lack access to GLP-1’s for weight loss. While financial and policy barriers limit access to GLP-1 drugs, these challenges disproportionately affect marginalized communities, particularly racial and ethnic minorities, who already face systemic healthcare inequities.
In theory, patient assistance programs (PAPs) offer a lifeline, providing discounts, free medication vouchers, and financial support. However, strict eligibility requirements exclude many uninsured and underinsured individuals, leaving affordability challenges largely unaddressed. The resulting financial disparities disproportionately affect marginalized communities, particularly racial and ethnic minorities, who already face systemic healthcare inequities.
Emergence of a Two-Tier System
The high cost of GLP-1s has led to a stark two-tier system: wealthier patients can afford consistent treatment, while lower-income individuals, who often have higher rates of obesity and diabetes, struggle to access these medications. This disparity is particularly pronounced in marginalized communities. Insurance coverage plays a major role in these inequities. Black and Hispanic Americans face higher uninsured rates than their white counterparts, worsening systemic inequities in access to GLP-1 medications (Artiga et al., 2024). Additionally, Blacks and Hispanics are more likely to work in jobs that do not offer employer-sponsored insurance, forcing them to rely on high-deductible individual plans with significant out-of-pocket costs.
Beyond financial barriers, racial disparities in provider access and prescribing patterns further limit treatment options. Studies show that Black patients are 19% less likely to be prescribed GLP-1 drugs than white patients, and Latino patients are 9% less likely, even when they meet clinical criteria. (Kaplan 2024). These disparities in access and prescribing not only reinforce existing health inequities but also exacerbate the long-term economic and medical burdens of obesity in marginalized communities. As GLP-1 drugs remain out of reach for many who need them most, the broader costs of obesity, both for individuals and the healthcare system, continue to rise. Understanding these financial and societal impacts is crucial to addressing the full scope of the obesity epidemic.
Long-Term Effects on Public Health and the Economy
Obesity and Healthcare Costs
Obesity imposes a substantial financial burden on the U.S. healthcare system, with estimates suggesting that obesity-related healthcare expenses account for more than 12% of the $33 trillion in total spending on major health programs (States 2024). These expenses include both direct costs, such as hospitalization, medications, and chronic disease treatments, as well as indirect costs, including lost productivity, absenteeism, and lower lifetime earnings due to obesity-related mortality.
Obese individuals require more frequent medical care due to increased rates of type 2 diabetes, cardiovascular disease, and obesity-related cancers, leading to $147 billion in annual medical costs (Cawley 2021). Medicaid and Medicare disproportionately bear this burden, contributing to rising taxpayer-funded healthcare expenditures. Because insurers do not adjust premiums for obesity, non-obese individuals must incur the higher medical costs of obese individuals in shared insurance pools. This results in an estimated $150 per capita welfare cost, disproportionately affecting women and the elderly (Hammond and Levine 2022). Obesity is not just a medical concern, it is also a major economic issue affecting workplace efficiency. Obese employees take an average of 3.73 more sick days per year than non-obese employees. In addition, Obese workers are 194% more likely to take paid time off, resulting in $11.7 billion in lost productive time annually (Hammond and Levine 2022). Obesity-related disabilities and premature mortality reduce overall workforce participation, further diminishing economic output.
By 2030, more than 50% of U.S. adults are projected to be obese (Healy 2019), pushing total economic costs to nearly $350 billion, up from $215 billion in 2010 (Hammond and Levine 2022). If GLP-1 therapies become more accessible, they could help curb this trend by reducing obesity related comorbidities, decreasing long-term healthcare expenditures and improving employee health. However, the true impact of GLP-1 accessibility extends beyond just healthcare savings, it has the potential to reshape economic structures by influencing insurance models, workforce productivity, and long-term financial planning. As these drugs gain prominence, they are not just shaping the future of preventative medicine, they are forcing a critical reckoning in healthcare economics.
The Economic Case for GLP-1’s
The rise of GLP-1 receptor agonists represents a defining moment in the intersection of medicine and economics. At a time when obesity is not just a public health crisis but a profound economic burden, these drugs offer a glimpse into a future where preventative medicine could reshape entire markets. They hold the potential to reduce healthcare expenditures, redefine life insurance models, and enhance workforce productivity, all of which have far-reaching consequences for economic stability.
Yet, their promise is undermined by a fundamental challenge: accessibility. Without broader affordability, these drugs risk amplifying health disparities rather than alleviating them. High prices, insurance barriers, and systemic inequities threaten to confine their benefits to those who can afford them, leaving behind the populations most affected by obesity. Unlocking GLP-1’s full potential requires bold policy reforms, insurance adjustments, and pricing strategies that balance innovation with accessibility. The choices made today won’t just define the future of obesity treatment, they will shape economic and public health outcomes for generations.
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