A healthy dose of competition is driving down the prices of weight loss drugs

Prices for GLP-1 weight loss drugs are falling rapidly.

Last week, Novo Nordisk—maker of Ozempic and Wegovy—announced that it would cut prices for monthly supplies of both drugs up to $349 for existing patients who purchase directly. For new customers, the price will drop to just $199 per month for the first two months. The move follows similar price cuts by the competitor Eli Lilly.

These blockbuster drugs have recently come with price tags over $1,000 per month. What happened?

Simply put, market forces worked. Novo and Lilly compete fiercely for customers. This competition leads to lower prices, better value and a more efficient, functioning market. And it’s delivering those things much faster than the government could ever hope to do.

That’s worth remembering as lawmakers from both parties continue to flirt with price controls on prescription drugs.

Consider, for example, the Democrats’ 2022 Inflation Reduction Actwhich gave the federal government the right to set the prices of an ever-growing list of drugs distributed through Medicare starting in 2026.

President Trump has also shown love for price fixing. Of “Most Favored Nation” The executive order, issued last May, attempts to arm pharmacists to sell their drugs at the lowest price they offer in any other developed nation. Governments in most of these other countries cap the prices of prescription drugs. Implementation of “Most Favored Nation” would effectively introduce these foreign price controls to American shores.

We are already beginning to see the negative effects of price controls in the United States. Early-stage funding for the development of new small-molecule drugs—drugs we usually take in pill form—has fell almost 70% since the IRA was introduced.

Price controls limit drug companies’ revenue — that’s their stated purpose. If “Most Favored Nation” policies take root, revenues will fall further. Pharmaceutical companies have less money to spend on research and development. The result will be fewer medical breakthroughs – and reduced access to cutting-edge drugs for American patients.

However, many people see high drug prices and immediately think that price controls are the answer. But as this year’s experience with GLP-1 shows, market competition can deliver lower prices much faster.

It is no coincidence that Eli Lilly’s GLP-1, Zepbound, recently surpassed Novo Nordisk’s Wegovy for US prescriptions are filled. Novo would no doubt like some of that market share back. The most logical way to attract more customers is by lowering prices.

This is a sound financial decision. And regardless of whether Novo increases its market share, patients will benefit from lower GLP-1 prices.

Even in parts of the drug market where there is little competition, high prices are only temporary. Patents only protect a new drug for 20 years from the date the patent application was filed. The clock starts while the drug is still in progress. The average drug has 12 to 15 years old of market exclusivity.

During this time, other brand-name drugs may enter the market, as happened with GLP-1s. And after those intellectual property protections expire, brand-name drugs must compete with generics for sales. Prices then plummet.

The price for the first generic to hit the market is 39% loweron average. A second generic saves an additional 15% on average. When four generic competitors are on the market, the average price drops an additional 19%.

This is not surprising nine out of ten recipes filled in America every year is for generics.

Buying prescription drugs doesn’t have to be any different than buying cell phone service, airline tickets, car insurance, or any other good or service. When companies are allowed to compete freely, quality improves, prices fall, and consumers reap the benefits.

Prices control short-circuit these natural processes and destroy the incentive for companies to invest in developing newer, better products.