Foundations & Frontiers

How Ozempic Works

Estimating the impact of GLP-1s on healthcare and the economy.

Anna-Sofia Lesiv

July 18, 2024

Today, a new set of medications devoted to battling diabetes and obesity, like Ozempic and Wegovy, are completely recalibrating expectations on everything from the future of personal fitness and healthcare to consumer preference and productivity.

This world-changing potential all began with a single molecule. Glucagon-like peptide 1, or GLP-1, was initially discovered in the 1980s. It is a hormone secreted naturally in the gut of every person, every single day. 

After we eat, cells in the gastrointestinal tract and in the brain secrete GLP-1, which stimulates insulin production, inhibits the release of glucagon, and slows the emptying of the stomach.

Collectively, these effects promote the sensation of satiety, but the natural half-life of GLP-1 is only about two minutes. So, in just a few minutes after initial secretion, all of its effects wear off.

For decades, researchers suspected that developing a molecule with longer staying power that would continue to activate the same receptors stimulated by naturally occurring GLP-1 might be the key to effectively treating patients suffering from type 2 diabetes.

Though there were some GLP-1 drugs, like Byetta, Victoza, and Saxenda, that came on the market between 2005 and 2014, they needed to be administered twice a day, or daily. The breakthrough came with the development of dulaglutide (Trulicity), semaglutide (Ozempic and Wegovy), and most recently, tirzepatide (Mounjaro) whose effects last for an entire week.

Though not too many took notice when the FDA approved Ozempic for the treatment of type 2 diabetes in 2017, when the FDA approved Wegovy for weight loss in 2021, the first weight-loss drug it had approved in seven years, more people started to take notice. In a clinical trial run that year, participants who had been administered Wegovy lost 15% or more of their body weight. 

Developing a drug to treat obesity has been a holy grail-like quest in the United States, where the prevalence of obesity exploded from 15% in 1980 to over 40% by 2020. Once we got it, however, many started to worry.

A Morgan Stanley survey of patients taking weekly semaglutide injections reported that their daily caloric intake fell by 20-30%. Patients no longer had the appetite for packaged snacks, sugary drinks, alcoholic drinks, or fast food.

But consumer demand was the backbone of the economy, after all. Could a drug that effectively eliminated the desire to consume be good? Investors eyed the forecasts like hawks. When a Walmart executive mentioned that customers on GLP-1 drugs purchased less food, share prices of Hershey and PepsiCo tumbled. Many expressed concern about the cascading impacts on restaurants, restaurant suppliers, retail grocery stores, and even food delivery drivers. Seemingly, only airline companies applauded the news, as they anticipated that lighter passengers would mean less jet fuel for planes.

It’s safe to say these early concerns only registered a small part of the total picture. After all, obesity is a behemoth problem in America. Not only does it affect nearly half of the American population, but it also leads to a score of secondary conditions, from cardiovascular disease, the leading cause of death, to diabetes, musculoskeletal disorders, cancer, respiratory problems, and more. Some estimates suggest that treating obesity-related diseases costs anywhere from $147 billion to $210 billion annually.

It’s no wonder then that groups like the USC Schaeffer Center are predicting that if GLP-1 drugs like Wegovy would receive coverage under Medicare, the value to society could equal nearly $1 trillion over ten years.

More recent results from patients taking GLP-1 drugs show that not only do they actively help patients lose weight, but they also decrease the risks of heart disease, improve liver and kidney diseases, alleviate substance abuse issues and depression, and may even reduce the risk of dementia. It is truly remarkable that a single drug is able to address nearly all of the conditions the American healthcare system has been built to address. In March 2024, the FDA approved Wegovy as a preventative treatment for heart disease. 

A poll undertaken by the Kaiser Family Foundation in 2024, has revealed that 1 in every 8 Americans has already tried a GLP-1 medication at least once, with around 2 million Americans actively taking the drugs now. Goldman Sachs analysts are predicting that by 2028, that number could rise to more than 30 million Americans.

The impact on the economy, in their perspective, would be an unequivocally rosy one. Studies suggest that diseases arising from obesity dampen per capita output by more than 3% — as a result of missed days at work or diminished productivity. Analysts at Goldman Sachs believe that in a few years, these drugs may be single-handedly responsible for boosting the average labor force productivity in the United States. They estimate that if 30 — 70 million Americans began taking semaglutide or similar medications, US GDP could increase by 0.4% to 1%.

For these effects to be lasting, however, patients will need to continue taking GLP-1s, as all the benefits that come from appetite suppression and impulse control subside when you stop taking the drug. However, studies are showing that only a third of people continue taking GLP-1s beyond a year, and by two years, that number falls to 15%. 

Outside of the uncomfortable gastrointestinal side-effects that these drugs can induce, and the fact that most of these drugs are administered by syringe, their biggest current problem is their cost.

GLP-1 medication currently costs $1,000 a month, if paid out of pocket. However, the FDA approval of their use in conditions like heart disease is a silver lining as it suggests the scope of patients with subsidized access through government programs like Medicare, will increase. Furthermore, the effectiveness and popularity of the drugs are leading many pharma companies to develop competing treatments, which is expected to drive down costs over time.

Researchers at USC note that “When Sovaldi was approved as a cure for hepatitis C, its $84,000 price tag — $1,000 per pill — triggered Congressional probes and countless articles slamming its manufacturer, Gilead. Yet within 12 months, AbbVie launched a competitor drug and net prices fell by almost half. Similarly, HIV treatments at their launch cost more than $1,000 per month. Generic versions now sell for $69 per month or less.” Many expect similar dynamics to unfold with GLP-1 medications in the coming years.

Here we have a novel technology, that in just a few weeks, is capable of completely altering a patient’s desire and behavior for the better. Long term, it has the potential to diminish the prevalence of some of the most pernicious health issues rampant in the country. Should these changes persist, it will not only mean a stronger labor force, but a population that lives longer, a healthcare system that can reorient away from obesity management, and an economy incentivized to cater to consumers’ increasingly healthy choices. Amazing what a single molecule can do.

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