Why was Novo Nordisk singled out as ‘greedy’ by Sanders and Biden?

On Tuesday, September 24th, 2024, Lars Fruergaard Jørgensen,¹ CEO of the Danish pharmaceutical company, Novo Nordisk A/S, was grilled in the United States Senate over the pricing of the type II diabetes and weight loss drugs, Ozempic and Wegovy. A Danish CEO being questioned in this manner was headline news in Denmark.

The background for the hearing was laid out in an opinion piece by Senator Bernie Sanders and President Joe Biden in USA Today on July 2^nd, 2024. The headline suggested that Novo Nordisk and its main competitor, Ely Lilly, “must stop ripping off Americans with high drug prices.” They noted that Ozempic, at $1,000 per month, costs six time more for Americans than for Europeans and that prices were unreasonable given a production cost of less than $5. The list price of Wegovy is $1,349 per month in the United States compared to $92 in the UK.

Lars Fruergaard had two main arguments in defense of the high prices for Americans. First, he blamed the high profits for the middlemen, the so-called Pharmacy Benefit Managers (PBMs) that negotiate drug prices for insurers, a system unique to American health care. Second, he argued that, for Americans with health insurance, the list price is not what people pay.

There are problems with both arguments, apart from the obvious one, that many Americans who need these drugs do not have a health insurance and that those who do have to pay either directly or via their employer.

Regarding the PBMs, they may very well have made a good profit. But this certainly did not prevent Novo Nordisk from running a good business in America, their biggest market. They sold for $15 billion last year in America alone and, according to their annual report for 2023, $33.7 billion worldwide. After production, R&D, marketing, and other costs were paid, their profit that year was $14.9 billion (44%). Novo Nordisk is currently the most valuable company in Europe, outpacing LVMH, German car makers, and all other major players. Their net worth is now greater than the GDP of our entire country. Without Novo Nordisk, our economy would be in recession. (This obviously creates worries of their own kind but does benefit my country in many ways.)

Bernie Sanders used Novo Nordisk to criticize the American health system and drug prices in general. I will make no effort to defend the American health system, but there is a reason he picked on Novo: their prices and profits are exorbitant.

Novo Nordisk is neither better nor worse than other pharmaceutical companies, but they have a unique history. The company was founded by the Nobel Laureate August Krogh. His wife had been diagnosed with type I diabetes, a death sentence at the time. He was permitted to take the recipe for isolating insulin with him home from the Canadian researchers who first produced it. His wife survived. There was a clause to Krogh producing insulin: the production was not allowed to be profitable but should be of general benefit. Danish bacon production provided lots of cheap pig pancreases and business was good. This led to the formation of what became the Novo Nordisk Foundation, which essentially owns the company. In 2023, the Foundation was ranked as the richest charitable fund in the world at $167 billion, dwarfing even the Bill and Melinda Gates Foundation.

All pharmaceutical companies exist in a market economy and, to survive, they must make the most of the same rules and regulation. CEO’s, sales personnel, and Board members are measured and rewarded for increasing sales and profits. It therefore seemed more self-righteous than convincing when, at the Senate hearing, Fruergaard played on the illustrious history of the company, claiming that they “focused on ‘unlocking cures’ not ‘daily stock fluctuations.’”

Pharmaceutical market conditions have likely led to Fruergaard’s stated strategy to ‘create a new market’, which include launching a campaign to convert obesity from a risk factor into a diagnosis, which would turn anyone with a BMI >30 into a patient, with the associated rights to treatment. People with a BMI > 30 comprise 20% of the population in Denmark (almost a million individuals) and many more in America, a substantial proportion of whom would be over-diagnosed, as the BMI is an over-simplified measure of health and weight. These individuals would generally need, and obtain the right to, life-long treatment in order not to regain their weight.

The previous CEO of Novo Nordisk A/S (and current Director of the Board of the Foundation), Lars Rebien Sørensen, spoke out against the idea of obesity as a disease. This was before Novo Nordisk A/S saw the market potential in GLP-1 analogues. This and much else around the development of these drugs was exposed in a series of excellent programs on national Danish radio some months ago.

Medical products are priced as high as the marketing department believes the market will bear. Production is limited and demand is high for Novo’s new drugs -- a completely new type of treatment with substantial and unique benefits. Therefore, they are introduced first in markets with the highest ability to pay, and at the highest possible price. There are many wealthy Americans. And those who are not wealthy are not commercially interesting, unless they are insured. The problems this system creates in terms of health inequality within and between countries are very real and costs lives. The access to AIDS medications is a good (or rather horrific) example. The current system undermines what is sometimes called ‘distributive justice’.

Pharmaceutical companies are protected by patents, which last about 6 years in Europe and about twice that in the USA. Patents create what is essentially state-guaranteed monopolies, something that societies usually have strong regulations against because of their potential to exploit markets. The pharmaceutical industry is basically exempt from normal market economy during this patent period. Yes, patents exist in other sectors too, e.g. Danish design furniture is patented. But if you cannot afford it, you can go to IKEA and get an alternative which, to be brutally honest, works just as well. That is not possible for Ozempic and Wegovy, which can be a life-necessity.²

The current system creates an unhealthy incentive to exploit people and health systems in a desperate situation and it lays claim to health care resources that could be used to provide more benefit to more people. This is an ‘opportunity cost’ and is an underappreciated harm of high drug prices.

Of course, there should be a ‘carrot’ that make companies willing to take on the considerable risk of developing new drugs. The question is how large that carrot needs to be and if it has grown out of proportion in the case of Ozempic and Wegovy. Given that our societies have been nice enough to secure our pharma industry state-guaranteed monopolies, it seems a reasonable request that society should also have a big say regarding pricing during this privileged period.

A prominent Danish politician suggested to me on live national radio that criticism of Novo Nordisk and allegations they were ‘greedy’ assumed that they were ‘evil’. The truth is that they are a for profit company doing their job, trying to maximize income (generally) within the regulations set by society. In fact, some of my closest friends work for pharma, including in production, sales, and leadership. They are certainly no more evil than me. The problem is that the system our societies have set up incentivizes prioritizing profit over the best interest of our societies and people, and even for Novo Nordisk sometimes regulation, as the profits are large enough to tempt anyone beyond reason. This causes very real and serious problems. Fortunately, our system is not governed by laws of physics but are open to optimization.

Karsten Juhl Jørgensen is a professor of evidence synthesis and screening at Cochrane Denmark, University of Southern Denmark. He is co-author of a systematic Cochrane review on breast screening with mammography.

1. No relation (which, given his income, is unfortunate).

2. Although some feel the same about Danish design furniture, I will venture to argue this is not the case.