How Markets Solved the GLP-1 Shortage

As demand soared for weight-loss drugs, price signals worked.

By Tony LoSasso. He is professor and chair of the economics department at DePaul University. Excerpts:

"Demand has exploded for these breakthrough therapies—originally approved by the Food and Drug Administration for diabetes—that deliver dramatic weight loss. The companies that pioneered them, Novo Nordisk and Eli Lilly, couldn’t keep up.

This demand surge itself is a remarkable show of market forces. Many insurance plans don’t cover GLP-1 for weight loss. The product was good enough that consumers were willing to pay out of pocket. Then beginning in March 2022 the FDA opened the door to more competitive economic dynamics by declaring a shortage. Such a declaration temporarily allows compounding pharmacies—which usually create medicine for individual patients rather than commercial sale—to sidestep patent holders and produce and market a scarce drug. Patent rights come back in effect once a shortage ends. Thanks to the power of the free market, it didn’t take long.

Competing telehealth companies, such as Hims & Hers, Ro and WeightWatchers, rushed to make a profit. Businesses worked to offer lower-priced formulations and manufacturers scrambled to scale production—all textbook capitalism. As supply expanded, prices for patients paying out of pocket plunged from $1,000 or more a month to less than $200. By October 2024 the FDA declared there was no longer a shortage of Eli Lilly’s GLP-1 and said the same of Novo Nordisk’s version in February this year."

"The lesson is clear: Opening healthcare to free-market forces leaves consumers better off."

"With even a narrow opportunity to compete, new suppliers flooded in, forcing an otherwise constrained market to expand rapidly. Conventional wisdom says patients don’t care about price because insurers foot the bill. But in the GLP-1 case, many people were happy to reach into their wallets once they saw real value in the therapy. The market responded by expanding supply and lowering costs."