What a Maturing GLP-1 Market Reveals About Modern Drug Markets and Their Future 

Glucagon-like peptide-1 (GLP-1) receptor agonists have become enmeshed in the American zeitgeist in a way that few drugs have. An estimated 18% of adults—or roughly 50 million Americans—report having taken one, making these products blockbusters on a remarkable scale. Their scale and ubiquity give GLP-1s a rare ability to illuminate the strengths and weaknesses of US drug markets and, increasingly, to reshape those markets.  

Some of what these drugs highlight is hardly new. They are case studies in the now pervasive nature of prior authorization and similar tools facing essentially all brand drugs. They re-emphasize how difficult it is for drugs to generate savings for the health care system, even with impressive clinical effects. They also show how markets with robust development and competition can produce highly cost-effective pricing before generic entry occurs. 

Nearly 10 years from the first approval for Ozempic, these drugs have also begun to reshape markets in ways that are worthy of attention. They have gained remarkable traction through direct-to-consumer channels and are catalyzing new approaches to employer coverage of products outside of traditional insurance. Finally, they have helped elevate compounding policy into debates over federal drug regulation and drug pricing. 

GLP-1s as a Window into Modern Drug Markets 

Prior authorization is here to stay 

Insurers and pharmacy benefit managers (PBMs) employ several types of formulary restrictions for brand drugs. In some cases, they require providers to obtain their approval before covering a drug (“prior authorization”). In others, they may choose to exclude a drug from coverage in favor of a competing product (“formulary exclusion”). In theory, these policies give insurers leverage to secure lower prices from drug makers and to direct patients to lower cost options. Patients, providers, and drug makers, however, often argue these restrictions are administratively costly and unduly burdensome. 

Data on GLP-1s show just how pervasive these policies have become. GLP-1s indicated for diabetes are nearly universally covered, yet 45% of attempts to start a new prescription were initially rejected by pharmacies for one of these reasons. For obesity indicated products, that number was 85%. In other words, tens of millions of Americans have experienced this administrative process for GLP-1s alone. While roughly half of those rejected typically end up with the originally prescribed medicine or a competitor, this process can delay access, generate administrative costs, and still leave roughly half of patients filling nothing despite having a prescription. 

Today, effectively all brand drugs are subject to prior authorization or formulary exclusion and that reality is unlikely to change soon. Evidence suggests prior authorization reduces the use of a drug by nearly 30%, while formulary exclusion is even more consequential. Insurers that abandon this practice would see their premiums immediately increase, lose enrollment to competitors, and likely experience significant adverse selection based on their permissive coverage policies. These forces are simply too great for insurers to ignore. 

Competition is valuable, even before generics  

News coverage about this market inevitably notes that these products can cost more than $1,000 per month, creating significant cost challenges. This obscures a remarkable evolution in pricing due to direct competition among manufacturers.  

Like other branded drugs, the true transaction (or “net”) price of these drugs is often proprietary. However, existing evidence illustrates just how fast pricing has changed. The estimated net price for Wegovy, for example, was roughly $700 per month in 2022—about 50% lower than the oft-quoted list price. This same product is now available for around $350 per month directly from Novo Nordisk. This likely serves as a key benchmark for prices paid by commercial insurers today. Critically, these prices are substantially lower than independent value-based price estimates based on the clinical effects of these drugs. A similar phenomenon has happened for competing products from Eli Lilly. 

Even if products are cost- effective, the scale of demand may still create budgetary pressures. That said, the existence of direct competitors has clearly improved access and reduced prices in this market. That will only intensify as Ozempic and Wegovy lose patent protection in coming years. 

Drugs rarely “pay for themselves” and that’s OK 

One of the biggest hopes for GLP-1s is that their ability to improve diabetes control, reduce weight, and improve other clinical outcomes will subsequently reduce the use of other health care services—potentially to the point that they fully offset the costs of the drugs themselves. This would substantially reduce the cost of expanding access to these products. Similar hopes have been held for other health care interventions, like greater access to primary care. If patients caught conditions early, the theory goes, they could address them before becoming more acute and costly.  

Interest in these types of cost offsets is often particularly strong among federal lawmakers, reflecting the realities of the legislative process. Congressional proposals are typically “scored” based on their budgetary impact. Policies that improve health or welfare, however, receive no explicit credit for those improvements from official scorekeepers.  

While possible, large cost offsets rarely manifest in practice for several reasons. Mechanically, obtaining and renewing a GLP-1 prescription requires health care visits that have costs, raising the bar for how much other health care spending must decline. Moreover, interactions with the health care system can generate additional care if patients learn about other conditions or treatment options that they were not aware of.  

Emerging empirical evidence suggests GLPs are not yet materially reducing other health care spending.¹ But this is the wrong standard by which to judge these, or other health interventions. Health care services and products should be judged on whether they produce meaningful improvements to health at a reasonable price. At their current prices, GLP-1s are clearly cost- effective. That should be viewed as a success, even if these drugs do not reduce overall health spending. 

GLP-1s as a Catalyst for Change 

The growing role of direct-to-consumer markets 

While coverage for diabetes-indicated products is nearly universal, obesity-indicated products like Zepbound and Wegovy are frequently excluded from insurance formularies. That has spurred drug makers to offer their products through direct-to-consumer channels at prices that are likely competitive with what they offer private insurers. While cash pay has long been an option for many drugs, this channel has grown rapidly for GLP-1s. For example, Eli Lilly reported that 55% of new Zepbound prescriptions in the first quarter of 2026 were self-pay. The recent launch of TrumpRx may further boost this channel by directing patients to manufacturers’ direct-to-consumer programs. 

While only a subset of brand drugs is likely well suited for direct-to-consumer sales, the evolution of this market bears watching. Products that treat large patient populations, are simple to administer, can be prescribed via telehealth, and carry modest price tags represent strong candidates for this type of model. This approach has the potential to generate more price competition by removing distortions created by third-party payment and could target insurance coverage to high-cost medicines.  

New models for employer coverage 

GLP-1s also have prompted interest in alternative models for employers that are unwilling to place products on insurance formularies. Notably, Eli Lilly recently announced its Lilly Employer Connect program that allows employers to provide a fixed contribution towards obesity treatments without adding the product to their formulary. In a way, this functions like a defined contribution model where employer outlays are predictable and employees are responsible for the remaining costs.  

This model reinforces pricing pressure on drug makers who know consumers in this program will continue to face out-of-pocket costs for their products at each fill. Particularly in market with competing products, these arrangements could give consumers salient incentives to prefer lower-cost options.  

Compounding policy as a new frontier in drug price debates 

In typical market conditions, pharmacies are allowed to compound near-copies of patent-protected products under limited conditions. At various points between 2022 and 2025, the FDA included both major GLP-1 products on shortage lists, which allowed compounders to make essentially identical copies of the approved, branded products. 

This spurred huge growth in compounded GLP-1s, aided by telehealth companies that issued large volumes of prescriptions. Even after these drugs were no longer in shortage, compounders continued producing products with the same active ingredients as GLP-1s, often arguing that they were sufficiently different (e.g., in combination with other ingredients). Because they produced in bulk and did not bear the costs associated with drug development or approval, compounders were able to offer products at low prices. This undoubtedly placed pricing pressure on branded manufacturers. 

Future administrations interested in brand drug pricing reforms are likely to take note of this experience. The FDA could attempt to place more drugs on the shortage list by applying a different standard when determining whether a drug maker is unable to meet market demand. They also could be more expansive when determining whether there is sufficient clinical need to justify placing a molecule on the 503B bulk-drug list. Both margins would allow greater opportunities for compounding alternatives. While certain to be challenged in court, this could become a new focus of drug pricing debates. Even the threat of action is likely to increase pressure on manufacturers.  

With a rare combination of clinical efficacy and enormous potential demand, GLP-1s have an unusual ability to highlight realities of the current brand drug market and catalyze change. With dozens of next-generation products in development, their role in motivating new coverage models and policy debates is likely only beginning. As policymakers evaluate the challenges driven by GLP-1s, they should remember that grappling with the consequences of highly cost-effective treatments for critical health challenges is the problem we want. 

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