A new class of obesity medications known as GLP-1s has taken the U.S. by storm, with 10 million Americans having already taken the medications and 5 million still currently using them. 

GLP-1s work by decreasing appetite and can reduce calorie intake by 20% to 30% daily, according to findings from a Morgan Stanley research survey. Consumers in the survey reported reduced food consumption in many food categories, with the differences being most notable for snacks, confections, carbonated and sugary drinks, and alcohol. 

Beyond the obvious impacts on physical health, the rising use of these medications in the United States will have varied implications for the U.S. economy. These include increased revenues for pharmaceutical companies, a reduction in obesity-related healthcare costs, shifts in the types of foods purchased, an overall decrease in food and alcohol consumption, and even a possible boost to worker productivity.

With the exception of the possible boost to worker productivity, each of the other changes will have ripple effects throughout the U.S. economy by way of changes in input purchase patterns, changes in employment and wages, and associated changes in household spending. Due to the mix of negative and positive impacts, the overall impact on the U.S. economy will be fairly minor, and there will be substantial variations among industries, with some experiencing net growth and others experiencing net decline, all else being equal.

Jenny Thorvaldson, IMPLAN’s chief economist and data officer, noted, “This report was particularly nuanced because there are so many wide-reaching impacts of GLP-1 use - both positive and negative. For example, it’s positive that we’re spending less on obesity-related healthcare services, but for some industries like dairy production for ice cream, they’re going to see a negative outcome. It will be fascinating to see how the continued use of these medications will impact our economy.”

Read on for highlights from Thorvaldson’s analysis, or check out the full IMPLAN report for a more in-depth look at the economic impact of the increased use of GLP-1 medications.

Changing Food Consumption Levels and Patterns

While food and beverage consumption is expected to fall on net, some of the decreases may be partially offset by increased consumption of fruits and vegetables, weight management foods, poultry, and fish. Top industries that will see positive impacts from increased interest in healthy foods include vegetable and melon farming, fruit farming, poultry and egg production, and commercial hunting and fishing.

Restaurant chains that mainly sell foods regarded as unhealthy face a longer-term risk, with same-store sales growth forecast to fall between 1% to 2%.

Reduced Obesity-Related Healthcare Costs

Data from the Kaiser Family Foundation indicates that the average annual healthcare expenditures for an obese member in a health plan were about $12,600 in 2021, about 3 times higher than the $4,700 spent for non-obese members. Morgan Stanley analysts estimate that 31.5 million people will take GLP-1s by 2035, which would translate into savings in healthcare costs of $264.65 billion.

Our understanding is that these are expenditures that insurers will no longer need to make. Households may also experience a reduction in spending on healthcare and may spend some or all of those savings on other things, but we did not model either of those in the IMPLAN analysis.

Increased Productivity

Researchers at Deloitte estimate that obesity-related absenteeism and presenteeism costs U.S. employers an estimated $4.3 billion annually. A boost to worker productivity could boost U.S. GDP but would have minimal indirect impacts, as it would largely go toward company profits rather than increased wages or input purchases.

Food Production Supply Chain

IMPLAN analysis reveals that the food production industry has an extensive supply chain.  If all projected users of GLP-1s were to adopt the same changes in food expenditure behavior reflected in the Morgan Stanley survey, more than 50 industries would experience a net loss of revenue of greater than $5 million just in terms of indirect (supply-chain) impacts. These losses grow when including the induced impacts (the additional changes in household spending due to loss of labor income) and the list of industries experiencing a net loss of revenue of greater than $5 million expands to include household expenditure categories like healthcare.

Top Indirect Revenue Losses from the Change in Food Expenditures

• Grain farming: ($61,797,187)
• Other real estate: ($44,366,355)
• Management of companies and enterprises: ($41,135,723)
• Wholesale - Grocery and related product wholesalers: ($40,103,782)
• Truck transportation: ($31,250,453)
• Dairy cattle and milk production: ($29,158,505)

To see the rest of the list, view the full report. 

Increased Production in the Pharmaceutical Industry

Morgan Stanley analysts expect the market for GLP-1s to be worth $105 billion annually by 2030. IMPLAN analysis reveals that the increased production in the pharmaceutical manufacturing industry would boost output in a wide variety of industries, not only in the expected direct suppliers to the pharmaceutical industry, like medicinal and botanical manufacturing, biological product manufacturing, and chemical manufacturing, but also in a wide array of other industries along the entire supply chain, from wholesale and transportation to advertising and commercial real estate. IMPLAN estimates the total indirect and induced output across all industries associated with the boost to pharmaceutical production at $125 billion.

Top Industries Indirectly Impacted by Boost to Pharmaceutical Production

• Wholesale - Drugs and druggists sundries: $11,444,608,345
• Medicinal and botanical manufacturing: $8,318,142,724
• Management of companies and enterprises: $4,931,780,725
• Biological product (except diagnostic) manufacturing: $3,199,068,045
• Other basic organic chemical manufacturing: $2,491,235,709
• Petrochemical manufacturing: $2,384,163,155
• Other real estate: $1,698,350,728
• Advertising, public relations, and related services: $1,531,664,086
• Internet publishing and broadcasting and web search portals: $1,523,767,399
• Wholesale - Other nondurable goods merchant wholesalers: $1,459,391,098
• Truck transportation: $1,281,985,679

Reduced Obesity-Related Healthcare Costs

IMPLAN analysis reveals that the reduction in healthcare spending would reduce output in industries ranging from real estate to insurance, legal services, medical laboratories, wholesaling, accounting services, and more. IMPLAN estimates the total indirect and induced losses across all industries associated with the reduction in healthcare spending at $420 billion.

Top Industries Indirectly Impacted by Reduction in Healthcare Spending

• Other real estate: ($15,029,787,685)
• Employment services: ($9,390,836,891)
• Insurance carriers, except direct life: ($7,932,051,337)
• Management of companies and enterprises: ($6,174,034,782)
• Management consulting services: ($4,631,642,339)
• Insurance agencies, brokerages, and related activities: ($4,296,341,875)
• Monetary authorities and depository credit intermediation: ($4,075,661,275)
• Legal services: ($3,495,210,602)
• Wholesale - Professional and commercial equipment and supplies: ($3,112,796,454)
• All other food and drinking places: ($2,892,576,577)
• Accounting, tax preparation, bookkeeping, and payroll services: ($2,797,565,671)
• Wholesale - Drugs and druggists sundries: ($2,569,378,874)

Interconnected Impacts

The rise in GLP-1 medication use exemplifies how healthcare advancements can trigger broad economic effects, spanning various industries and leading to nuanced shifts in economic activity. IMPLAN's comprehensive analysis highlights these interconnected impacts, providing a detailed understanding of the economic landscape shaped by the increasing adoption of these medications.