Ozempic may gift US a $3 trln benefit
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Robert Cyran
NEW YORK, July 16 (Reuters Breakingviews) -The United States spends 17% of its gross domestic product on healthcare, about twice as much as the average OECD country, according to the Commonwealth Fund. Can weight loss drugs like Ozempic help shrink that? According to a recent study, the answer is probably no. But other medical breakthroughs have temporarily changed the course of U.S. spending. There’s hope that the fattest developed country in the world can stall growth for good.
A government estimate in June concluded spending will rise 5.6% annually until 2032. The Centers for Medicare and Medicaid Services think it will grow faster than the overall economy thanks to the aging population and poor healthcare productivity, among other things. At $22 trillion – the outlay the organization thinks the country will make by 2032 – it will account for almost 20% of GDP.
In the long arc of the United States' spending on medical treatments, that fits with the trend. Healthcare as a percentage of GDP tripled between 1960 and 2010. The hitch is that, for the last decade or so, the relative figure hasn’t budged.
Obvious suspects don’t fully explain the current slowdown. The Affordable Care Act probably helped. But medical spending growth was slowing prior to its 2010 passage, and major parts of the ACA weren’t phased in until 2016. Other effects, like the pandemic, could be transitory.
Other reasonable explanations offer some reasons for optimism. Harvard professor Joseph Newhouse pointed out people have become willing to pay for medical advances, which improve welfare. People still swallow aspirin, but now also take $100,000 cancer treatments. The onset of key drugs may have also helped. Cardiovascular spending fell dramatically from 2005 to 2012, and Harvard Professor David Cutler attributes half of that reduction to drugs such as statins.
The effects of obesity treatments from Eli Lilly LLY.N and Novo Nordisk NOVOb.CO might be similar. With list prices around $1,000 a month, the use of the drug in non-diabetic patients is probably not cost-effective. Nonprofit KFF, however, estimated the average obese health plan member’s medical spend in 2021 was $12,588 or 2.7 times as much as a non-obese member. If the net cost of the drug could be lowered to $500 a month and this reduced patients’ medical costs to that of non-obese people, that would save about 18% per obese patient, or roughly $250 billion annually based on the current population. And that could underestimate the savings. If healthcare expenditures were capped at 17% of GDP, then that would save the U.S. an estimated $2.6 trillion by 2032.
Of course, thinner patients may incur more or different medical costs. But obesity is associated with most major causes of U.S. death and illness. An ounce of cure is worth a lifetime of expense.
Follow @rob_cyran on X
CONTEXT NEWS
The U.S. Centers for Medicare and Medicaid Services Office of the Actuary releases projections for national health expenditure on June 12. They project average annual growth of 5.6% from 2023 to 2032. That is estimated to grow faster than annual growth in gross domestic product, taking health expenditure from 17.3% in 2022 to 19.7% of GDP in 2032.
Graphic: Obesity drugs may bend healthcare expenditure curve Obesity drugs may bend healthcare expenditure curve https://reut.rs/3zkxa7W
Editing by Lauren Silva Laughlin and Sharon Lam
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
