Weight-loss drugs such as Ozempic and Zepbound cost $900 to $1,500 for a month’s supply.
They cost so much partly because of the time and money it took to develop them, Eli Lilly’s CEO said.
Drugmakers want to capture a fair share of the value they create before patents expire, David Ricks said.
The latest weight-loss drugs including Ozempic, Wegovy, Mounjaro, and Zepbound have list prices ranging from $900 to $1,500 for a one-month supply.
David Ricks, the CEO of Mounjaro and Zepbound maker Eli Lilly, explained why these medications are so expensive on the «In Good Company with Nicolai Tangen» podcast this week.
Developing a new drug costs about $3 billion, takes around 15 years, and has a high chance of failing, Ricks said.
The huge costs, long timeframes, and slim probability of success means «the return on that risk needs to be substantial,» said the boss of America’s 10th-largest company that’s worth nearly $830 billion. The stock has risen 17% in the past year, and more than 500% since 2019.
Once a drug is approved and being used by millions, there will often be calls for cost-plus pricing, Ricks said. But without the prospect of large profits, «no one would have undertaken the risks to invent it.»
By the time their latest wonder drug is approved and hits the market, pharma companies only have about 10 to 12 years to cash in before their patent expires and rivals can produce cheaper generics, Ricks said.
Drug pricing reflects the limited timeframe they have to recoup their investment, earn sufficient profits to satisfy shareholders, and offset the cost of their many failed medications.
When a drug patent expires, other drugmakers quickly roll out generics at a fraction of the price, stopping the inventor from earning monopoly profits but making the medication accessible to almost anyone who needs it.
«One of the great gifts of our industry is that everything we invent goes to zero for us and goes to infinity for society because generic drugs are such a great deal,» Ricks said.
Ricks pointed to Prozac, which Eli Lilly introduced in the late 1980s. The antidepressant is sold around the world and «virtually free» as it costs only four or five cents a day in major markets, he said. He called it a «tremendous gift to society,» and said his company deserves more credit for those long-term benefits while their drugs are under patent.
When a new medication reduces costs for entire healthcare systems, its creators deserve a share of the savings, Ricks said.
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