Obesity/Diabetes Drug Class GLP-1s' Cost-Saving Potential: Decoding Impact on Healthcare Spending

Due to the recent achievements of GLP-1s, Goldman Sachs sees significant potential for Eli Lilly And Co LLY, Novo Nordisk A/S NVO, and other companies to venture into categories that exceed the scope of consideration for most investors at present.

Given the overlap and interlinked nature of metabolic diseases to each other, several trials are currently investigating GLP-1-based medications in indications and endpoints related to cardiovascular disease, chronic kidney disease, heart failure, NASH, Peripheral Arterial Disease (PAD), Obstructive sleep apnea (OSA), knee Knee osteoarthritis, and even Alzheimer's disease. 

If all 23 upcoming studies prove successful, manufacturing can keep up with increasing demand, and pricing aligns with our previously forecasted models, the total annual revenue could reach $400 billion, and U.S. individuals treated with GLP-1 could potentially grow to 68 million.

The potential for spending on GLP-1s will be somewhat predicated on the cost savings they could drive for corporate/government payors.

The analyst looks at US healthcare spending on categories impacted by Novo Nordisk's SELECT trial and other outcomes studies for conditions like OSA and NASH. 

Total healthcare spending in those categories is ~$850 billion, and the risk reduction observed in outcomes trials would imply a reduction in spending of ~$300 billion, or 35% of spending on these categories (e.g., diabetes, surgical procedures, cardiac arrhythmia, stroke, heart attack, coronary heart disease, kidney disease, and OSA)

Goldman anticipates that GLP-1-based medications will significantly impact the health of individuals, drug manufacturers, and the healthcare system in the upcoming decade. 

According to their projections, the potential scenarios suggest that the annual revenue derived from this category of prescription drugs is poised to reach unprecedented levels, marking it as the highest revenue-generating class in history.

Manufacturers, insurers, and individuals must factor in the expenses linked to GLP-1-related medications. It's crucial to weigh in the Option Value of Weight Management. 

Though investing in manufacturing capabilities, providing insurance coverage, and bearing out-of-pocket costs might be substantial, it's essential not to hastily overlook the potential these treatments hold for individuals and the healthcare system. 

Initially labeled as anti-obesity drugs, GLP-1-based medications are now demonstrating significant benefits across various conditions, extending their efficacy beyond those who are moderately overweight.

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