EXCLUSIVE: Novo Nordisk faces political pressure over slimming drug prices ahead of election, but 'the real problem is the middlemen' – Novo Nordisk (NYSE:NVO), Tema GLP-1, Obesity & Cardiometabolic ETF (NASDAQ:HRTS)

Novo Nordisk A/S NVO is under growing political pressure over the high US prices of its successful weight-loss drugs Ozempic and Wegovy as the White House election campaign heats up. The price differences between the US and other international markets have drawn sharp criticism from politicians and put the company in the political spotlight.

Ozempic, for example, costs around $969 per month in the US, while the same drug is available in France for $71. Wegovy, another drug from Novo Nordisk, costs $1,349 in the US, but only $92 in the UK.

CEO testifies before Congress: Focus on PBMs

On Tuesday, the CEO of Novo Nordisk said, Lars Fruergaard Jorgensentestified before U.S. lawmakers and addressed the significant price gap between the U.S. and international markets.

Jorgensen attributed the pricing problem largely to so-called pharmacy benefit managers (PBMs), the middlemen between pharmaceutical companies and insurers.

In an exclusive interview with Benzinga on Tuesday, Mauritz PotFounder and CEO of Thematic ETFsthat actively Topics GLP-1, obesity and cardiometabolic ETF HRTSshared his perspective on what this political showdown means for Novo Nordisk shareholders and the healthcare landscape in general.

According to Pot, Novo Nordisk's main defence is that even if list prices are reduced, there is no guarantee that these savings will be passed on to the final consumer.

“The U.S. payment system is structured in such a way that even when manufacturers like Novo Nordisk lower their list prices, this does not necessarily translate into lower costs for patients. The real problem is the middlemen and the size of their margins,” Pot said.

PBMs: The real bottleneck for consumers

As Pot explained, PBMs have a significant impact on the U.S. drug pricing structure.

While lowering list prices might help, PBMs may also respond by reducing coverage to maintain their own profit margins, meaning patients will still have to bear high out-of-pocket costs even if manufacturers like Novo Nordisk lower their prices.

Limited impact on Novo Nordisk’s bottom line

From an investor perspective, Pot believes that price cuts alone will not significantly impact Novo Nordisk's sales or profitability in the U.S. market.

He stressed that while list prices are high, the prices actually paid by insurers and patients are often much lower. This means Novo's revenues in the U.S. could remain relatively stable even if political pressure to lower prices continues.

Demand for Novo Nordisk's weight loss drugs remains incredibly strong. Pot explained that even with potential price cuts, demand for GLP-1 drugs like Ozempic and Wegovy far exceeds supply. This is not expected to change in the near term, representing a solid growth opportunity for Novo Nordisk.

“Even if the price is halved, there is still a huge opportunity here,” Pot said.

Bipartisan push for lower drug prices

With the 2024 U.S. presidential election looming, drug pricing has become a sensitive political issue. Both major parties—Republicans and Democrats—agree that prescription drug prices need to be lowered, although they have differing views on how best to accomplish this. Regardless of the approach, the push for more affordable drugs is bipartisan.

“Price is clearly being politicized in an election year,” Pot said.

M&A activities expected after the elections

Looking ahead, Pot expects a significant increase in M&A activity in the pharmaceutical sector, particularly among companies active in weight loss and obesity treatment.

Smaller biotechnology companies that develop innovative treatment methods could become attractive takeover targets, especially after the election.

“We will likely see a surge in M&A activity in this sector after the election, regardless of who wins,” Pot explained.

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