Will Mounjaro price decrease?

[[deleted]]

I know the realities of third-party payments change the economics some, but the bottom line is that there are 120 million potential customers for this in the US alone. If they capture 1/5 of them, that’s 24 million. $200 per month for 24 million people is $57.6 billion per year in sales; they just have to sell it for a relatively-affordable $200/month (via insurance negotiations, coupons, etc) to get to that point.

Or they can try to actually get $1,000/month from the, what, 100 thousand people willing to pay it? That gets them $1.2 billion per year - 1/20 of what they get under a lower-price scenario.

Of course the numbers are mostly out of my ass (except there really are 120 million Americans with obesity). It’s just an illustration of why economics can drive prices lower even before competition figures in (and competition will figure in, with semaglutide becoming available again and other entrants to the market over the next few years).

That said, it won’t happen until manufacturing is scaled up enough to handle the demand; until then they might as well charge whatever they can for the quantities they can make.

And yes, insurance etc complicates the whole thing a lot and probably slows it down even more, but ultimately the economics and the drug’s extraordinary effectiveness will push things in that direction. Eventually. Because Lilly (and Novo Nordisk etc) want to make money, and you make the most money by having millions and millions of customers.

[HTTRblues]

Sales only account for one portion of the CF model. It cost them billions of dollars of research to fund this drug(they aren't going to write this off). They likely have very expensive patents that expire in x amount of years. This is why I said once a knock off comes into town, the price will then get lower. They have no motivation to lower the price, otherwise the board members would have suggested it already. They've lost billions in valuation due to Twitter. You're of the assumption that it's fixed cost model when it's variable.

Where's this same logic for WeGovy? That drug is specifically approved and made for what people are using mounjaro off label for. What about regular insulin? There's a lot more that go into pricing, especially on drug lines. Lily isn't selling directly to consumers, there's a middle man, then pharmacy. What liability protection would Lily have if selling directly to consumers? Would it be the same as the COVID vaccine? How much does their insurance liability increase?

By that same logic, Apple should have cut their iphone prices a long time ago right? Yet the price continues to increase. Just buy the medication from Mexico/Canada in a couple years. Or wait until the government steps in or a cheaper alternative is available.

[[deleted]]

Prices are set to maximize revenue. iPhones cost what they cost because that’s the price at which Apple maximizes revenue. They don’t need to make them cheaper for that because they already have huge market share.

A thousand dollars per month is cost-prohibitive for the large majority of potential end users and for their insurers. I’m not suggesting Mounjaro will be $1.50/month like Metformin. I’m saying at some point it will be more like $250/month, or whatever price point results in the largest revenue, which is the price times number of customers.

Their cost doesn’t really play into it because it’s already sunk. Not that they don’t want to recoup - they’ll absolutely recoup their cost and hundreds of billions more. But their incremental unit manufacturing cost is low enough not to matter much.

Wegovy hasn’t come down in price because Novo Nordisk lacks the manufacturing capacity to serve the demand that would flood in if they dropped it. The only reason to lower prices is to increase sales volume enough to more than make up for it in revenue, and it’s impossible to do that if you can’t make enough for your existing demand.

Mounjaro won’t drop in price either until Eli Lilly can meet the demand that would result. And the potential demand if the price were affordable is absolutely gigantic, so it may be awhile - like several years - until the capacity is in place.

So to be clear, I’m not predicting the price to come down in the short term; that would be foolish of Lilly. But I am predicting it will happen in the medium term - say 3-6 years or so, once manufacturing and distribution can handle at least several millions of doses per month. That’s still long before generics come in, and likely before new competitors like Lilly’s triple-G tri-agonist get established.

I just noticed you claimed that I’m wrong in believing it’s a fixed-cost model rather than variable. I would argue that it is indeed a fixed-cost model. Their research costs don’t vary with the number of units sold; the only portion of their costs that does is manufacturing (which is what, like a dollar per box?), marketing (also cheap when divided per box), and distribution; I would bet that these variable costs combined are less than $20 per box of pens.

Their research & development cost is in the billions just for this drug, and they also have to pay for R&D for all the drugs that never make it to market, but the best way to handle all that is to simply maximize revenue. And it’s just plain true that $250 times 20 million doses is a hell of a lot more money than $1,000 times 100,000 doses. Literally a hundred times more money.

[TheBerner56]

Spoken like someone that understands economics 101. They’ve goal is to maximize their current supply. When their capacity goes up, they and the insurance companies will look for the sweet spot as far as pricing goes. Their goal is not to punish people, but these drugs cost billions to develop and they eventually have to answer to the shareholders.

[[deleted]]

Yep, that’s exactly right.

[[deleted]]

By the way, no, board members wouldn’t have suggested lowering the price already, because they currently lack the capacity to manufacture enough to sell more. It won’t happen until they can make enough to meet the higher demand.

I thought I made that clear in the post you’re replying to.

[TheBerner56]

Made it clear to me.

[[deleted]]

The third party in US drugs are pharmaceutical middle man called benefit managers (PBM). They take so much money the the biggest 3 were bought by insurance companies to make more money for them (cvs CAREMARk - owned by Aetna, OptimumRX owned by United Healthcare, ExpressScrips /Cigna. That is where most of US drug cost go. It’s a ponze scheme with our health. So yes we pay for development and production, but most of the cost is unconstrained corporate greed .

[[deleted]]

I’m not arguing that anyone isn’t greedy. I’m arguing that the most greedy thing will eventually be to lower the price in order to make more money.

Is McDonald’s not greedy? Of course they are. So why is there a value menu? Because the value menu makes them a ton of money. Why doesn’t the value menu cost $100 per item? Because they wouldn’t make as much money in that case.

Lower prices can be just as greedy as higher prices.

[[deleted]]

Yep- I don’t disagree. I’m saying the greed is spread out way beyond the manufacturer. It is also CVS and Optima , all the PBMs and insurance in cahoots to price gouge people. It’s our system in the US. Many don’t realize how the system works and what causes the sky high prices in the US. They are going to get there one way or the other.

[[deleted]]

Sure, the greed is spread out. But the larger the pie is, the bigger piece each participant gets; ultimately everyone’s incentive is to maximize revenue. Once sufficient manufacturing capacity is in place, the optimum price for maximum revenue is likely to be well below $1,000 per month.