Nearly 1 in 5 Americans with diabetes require some form of insulin, and out-of-pocket expenses for the life-sustaining medicine have doubled over the past 10 years. As the global leader in the insulin market, pharmaceutical giant Novo Nordisk (NVO 0.01%) must maintain revenue in the face of calls to lower treatment costs -- but one new development on the horizon may offer its future sales a partial reprieve.
Intensifying pressure to rein in prices
The White House has been promising lower prescription drug prices for several years. President Biden discussed capping insulin prices at $35 a month, and the House followed suit by passing the Affordable Insulin Now Act at the end of March. Opponents point out that much of the difference between out-of-pocket and drug expenses will be picked up by the government, so the act will do little to bring down the high insulin costs charged by drugmakers.
Despite patent expirations on both fast-acting insulin taken at mealtime, and long-acting insulin, which controls blood glucose levels for 24 hours, the market remains under the control of Novo Nordisk, Eli Lilly (LLY 0.07%), and Sanofi (SNY -0.48%). High barriers make it difficult for generics, known as biosimilars, to enter the market. It is far more expensive for biotech companies to develop and manufacture a complex biologic biosimilar than a traditional small-molecule generic.
In a move to increase marketplace competition, the FDA changed insulin's classification from a drug to a biologic in 2020. This paves the way to approve biosimilars for off-patent insulin. Semglee, the first long-acting replaceable biosimilar, entered the market at the end of last year. At around a third the list price of Sanofi's Lantus, Semglee offers significant cost savings.
It remains to be seen whether Semglee will exert enough market presence to push prices down. It certainly poses a risk to Novo Nordisk, since around 36% of Novo Nordisk's total revenue in the first quarter came from insulin, with long-acting versions making up about a third of those sales. Still, Semglee is based on relatively older technology, and patients are likely to prefer newer alternatives currently under development.
New, longer-acting insulin
As one important step toward reducing the burden for those suffering from the disease, Novo Nordisk has extended the activity of its long-acting insulin, which will enable less frequent dosing. At the end of April, Novo Nordisk announced results from its first of six ongoing Phase 3 trials for its newest long-acting insulin. Once-weekly injections of icodec performed as well as daily injections of Tresiba, Novo Nordisk's longest-acting insulin currently on the marketplace. This would enable diabetics to reduce treatment frequency from 365 injections to 52 injections a year.
Other options may soon offer the convenience of weekly injections, without the side effect of weight gain or the risk of triggering dangerously low blood glucose levels. These treatments, based on GLP-1 receptor agonists, have a different mechanism of action from basal insulin. Currently prescribed for individuals in a less severe stage of diabetes, recent studies suggest that the drug class may also have the potential to replace long-lasting insulin for basal glucose control. Both Novo Nordisk and Eli Lilly are developing this technology.
Novo Nordisk expects the market for these newer treatments to grow rapidly. In the company's most recent first quarter, sales for the GLP-1 segment increased by 45% year over year, in contrast to a 4% decrease in total insulin sales. The improved patient experience, with fewer injections, no weight gain, and lower risk of hypoglycemia, is likely to encourage patients to switch wherever possible.
Still vulnerable to regulations on fast-acting insulin
Unfortunately, diabetics at more severe stages of the disease often require mealtime supplements of faster-acting versions with more aggressive control. Fast-acting, pre-mix, and human insulins account for about two-thirds of Novo Nordisk's total insulin sales. Fast-acting insulin, in particular, may be susceptible to regulatory policies or new market entrants with lower-cost alternatives, since there is currently no technology that completely replaces the need for mealtime injections.
Novo Nordisk hopes that weekly injectable IcoSema, a combination of Icodec and GLP-1, could reduce the burden of the disease as it progresses. However, IcoSema is still several years from completing Phase 3 trials and would still not replace fast-acting insulin for the most severe cases.
Ultimately, the level of regulatory pricing pressure will depend on whether the Affordable Insulin Now Act passes the Senate, what forms of insulin are included in the price cap, and to what extent the government covers the difference between out-of-pocket and list prices. Novo Nordisk may lose some ground on fast-acting insulin, but should maintain sales of long-acting insulin if patients strongly prefer the convenience of weekly injections.