Generic Ozempic approval looms, yet big cost cuts might not come until next year, says Massimo Nini
Each month at BPM, we offer a slate of articles and content pieces that go deep on a particular topic. This January, we’re exploring GLP-1 and weight management coverage in benefits plans.
While Canada is poised to become the first country globally to have a generic version of semaglutide this year, plan sponsors have been left to understand what this means for their benefits strategies.
With over $2 billion spent annually on Ozempic in Canada - a material chunk of the country's roughly $50 billion total drug spend - the stakes are significant, notes Massimo Nini. Still, the timeline remains murky.
"It's going to be a very dynamic space for the next few years… No one actually knows when the generics are going to be approved," said Nini, senior vice president of consulting, underwriting and actuarial services at AGA Benefit Solutions. "A few companies have already submitted their application. Now, will it be six months, nine months, 12 months before it gets approved and rolled out? That's the magic question. The cost of the generic will also be influenced by how many companies actually get approved.”
According to Nini, Canadian legislation allows generic pricing to drop as low as 25 per cent of the brand name when three or more options exist but that likely won't come anytime soon. Notably, Novo Nordisk also plans to release its own generic version, which adds another layer of complexity to pricing dynamics and make precise forecasting difficult. As a result, actual savings will depend on how competitors and the originator respond.
To that end, Nini underscored that plan sponsors shouldn't count on steep savings in this year, noting a 75 per cent cost reduction is more realistic by 2027. And with competing GLP-1 drugs like Mounjaro still lacking generic equivalents, some plan members may shift toward those options rather than embrace an Ozempic biosimilar, he said.
Still, he expects the first generic to produce meaningful but not immediate savings - roughly a 30–50 per cent price reduction is a realistic, conservative estimate once a generic enters the market.
He also points out that this is unfolding against a backdrop of tighter prior authorization and step-therapy rules for GLP-1s. That tightening has made the landscape more complex over the past three years and will shape how much crossover there is between obesity and diabetes indications as generics arrive.
The GLP-1 space is about to get more crowded in other ways too as pill-based versions of these drugs are being released in the US later this year, with Canadian approval expected to follow. Nini suggests this could boost utilization among patients who've avoided injectables. He's also watching to see whether side effect profiles differ between delivery methods. Obesity drugs have existed for two decades, but their efficacy and tolerability have changed considerably.
Meanwhile, drugs like Mounjaro, another GLP-1 without a generic equivalent, complicate the picture as plan members might gravitate toward Mounjaro rather than switching to generic Ozempic, depending on how formularies are structured, noted Nini. He believes tightly managed formularies would prevent this, but not all plans have such restrictions in place.
Still, whether generic availability drives broader adoption remains an open question for Nini.
"I think somewhere between 20 and 40 per cent of plans cover obesity now. Are we going to get up to a 70 or 80 percent? Let's see," he said.
Nevertheless, with generic approval on the horizon, Nini urges plan sponsors to start conversations with carriers now. They need to understand how quickly generics will be added to formularies, whether implementation happens on day one or follows a longer transition, and what the process will look like for members currently on the brand-name drug.
He recommends working with consultants to prepare communications well before approval arrives. Members will want to know whether they'll have a grace period to convert, how their out-of-pocket costs might change, and whether the generic is truly equivalent. For some, the switch could be a net positive if copays fall. But sponsors also need to address concerns about safety and efficacy head-on.
"It's going through stringent approval processes, and it is safe and as efficient as the brand name," he noted.
Yet, he believes affordability will remain a persistent challenge, particularly as years of compounding inflation, even if current rates have moderated, continue to squeeze plan members facing out-of-pocket costs.
"Even in terms of diabetes or obesity drugs, they're not going to be covered at 100 per cent. There will be an out-of-pocket spend," Nini said, adding how members respond to those costs will shape utilization patterns through 2026 and even into next year.
Nini also underscored that the broader question of return on investment also remains unresolved.
"When we think about obesity drugs, the jury's out in terms of the ROI," Nini said, noting that covering these medications carries obvious costs, but the potential offsets like reduced mental health expenses, lower absenteeism and decreased disability costs are harder to quantify, particularly in Canada where private medical data is less comprehensive than in the US.
“In Canada, the benefit will likely impact the public plans before it impacts the private plans but there are some studies and the findings are there that there is an ROI,” Nini added. “Overall health does improve. Although not all of the benefits will be reaped by plan sponsors in terms of other components of the group benefit plan, when we look at the long term, there is something there around overall health improving and impact on productivity.”
