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    Audi reveals new all-electric Q6 e-tron SUV, its first next-generation EV

    Audi on Monday revealed its new all-electric Q6 e-tron SUV, the first production vehicle on its next-generation EV architecture.
    Ordering for the Q6 e-tron quattro and a performance variant will open this month in Europe.
    Audi plans to introduce about 20 new or significantly redesigned models and derivatives globally through 2025, more than half of which will be electric.

    The Audi SQ6 e-tron SUV.

    Audi on Monday revealed its new all-electric Q6 e-tron SUV, the first production vehicle on its next-generation electric vehicle architecture.
    The Volkswagen-owned luxury carmaker says the new “Premium Platform Electric” opens up new levels of technology for Audi, including a rapid EV recharge time of 158 miles in 10 minutes.

    The vehicle ushers in the next generation of EVs for Audi, which continues to offer more all-electric and plug-in hybrid EVs despite growth slowing recently for EVs.
    Audi confirmed it plans to introduce about 20 new or significantly redesigned models and derivatives globally through 2025, more than half of which will be electric.

    The Audi SQ6 e-tron SUV,

    Ordering for the Q6 e-tron quattro as well as an “S” performance variant will open this month in Europe, starting at 74,400 euros or about $81,000, and 93,800 euros, or $102,030, respectively. The Q6 e-tron has an estimated range on a single charge of 625 kilometers, or 388 miles.
    Top performance specifications for the U.S. include up to 510 horsepower, max speed of 143 miles per hour and 0 mph to 60 mph in 4.2 seconds.
    Exact pricing and model details for the U.S. are expected closer to when the midsize SUV goes on sale domestically later this year, according to an Audi spokesman.

    Audi currently offers all-electric Q4 and Q8 SUVs as well as a $106,500 GT sedan in the U.S. market.
    The Q6 e-tron features a new but familiar Audi design including sleek headlamps, mesh-style grille and an overall aggressive exterior design.
    The new EV platform includes an 800-volt battery architecture and a maximum charging capacity of 270 kilowatt hours.

    The Audi SQ6 e-tron SUV.

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    Homebuilder sentiment turns positive for the first time since July

    U.S. homebuilders are feeling more confident about their businesses than they have since last summer, as they see better demand despite stubbornly high mortgage rates.
    Homebuilder sentiment went positive for the first time since July and gained for the fourth-straight month.
    The popular 30-year fixed mortgage rate has hovered around 7% since February.

    U.S. homebuilders are feeling more confident about their businesses than they have since last summer, as they see better demand despite stubbornly high mortgage rates.
    Homebuilder sentiment rose 3 points in March to 51 on the National Association of Home Builders/Wells Fargo Housing Market Index. The reading gained for the fourth-straight month, hitting its highest level since July.

    Sentiment also moved into positive territory for the first time since July. Fifty is the line between positive and negative sentiment.
    Mortgage rates came down in the first week of March, only to shoot back up in the second week. The average rate on the popular 30-year fixed mortgage has hovered around 7% since early February.
    “Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” said NAHB Chairman Carl Harris, a custom homebuilder from Wichita, Kansas. “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”
    Of the index’s three components, current sales conditions rose 4 points to 56, expectations in the next six months rose 2 points to 62 and buyer traffic increased 2 points to 34.
     Regionally, on a three-month moving average, sentiment rose most in the Midwest and West. 

    The report also noted that fewer builders are lowering home prices to attract buyers. In March, 24% of builders reported cutting home prices, down from 36% in December 2023 and the lowest share since July.
    The average price cut remains steady at around 6%. Builders are still using sales incentives such as buying down mortgage rates.
    “With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” said Robert Dietz, chief economist for the NAHB. “However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber.”

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    United Airlines CEO tries to reassure customers after string of flight problems

    United Airlines flights have suffered a series of problems in recent weeks.
    A tire fell off a Boeing 777 after takeoff from San Francisco, and, in a separate incident, a missing panel was discovered after a flight landed in Oregon.
    United’s CEO told customers that the incidents were unrelated but the airline will incorporate the findings into training and procedures.

    United Airlines CEO Scott Kirby speaking in Chicago on June 5, 2019.
    Kamil Krzaczynski | Reuters

    United Airlines CEO Scott Kirby on Monday sought to reassure customers about the carrier’s safety after a series of flight problems in recent weeks.
    In one incident this month, a tire fell from one of the carrier’s Japan-bound Boeing 777s shortly after takeoff, damaging cars in a San Francisco airport parking lot. In another, a missing panel from the plane was discovered after the older Boeing 737 landed in Oregon on Friday.

    “Safety is our highest priority and is at the center of everything we do,” Kirby said in an email to customers. “Unfortunately, in the past few weeks, our airline has experienced a number of incidents that are reminders of the importance of safety.”
    Kirby said the incidents, which the Federal Aviation Administration is investigating, were “all unrelated” but that the team is reviewing the details “and using those insights to inform our safety training and procedures across all employee groups.”
    The string of recent mishaps occurred during heightened scrutiny of the aviation industry after a door plug panel blew off an Alaska Airlines’ nearly new Boeing 737 Max 9 on Jan. 5.

    A United Airlines plane.
    Source: NBC Houston KPRC2+

    On March 8, a United 737 Max plane rolled off a Houston runway. On March 4, a United Boeing 737 that was heading to Florida from Houston returned to the airport after the engine ingested plastic bubble wrap, with video on social media showing flames coming out of the engine.
    United’s CEO said the airline had already planned to implement changes such as “an extra day of in-person training for all pilots starting in May and a centralized training curriculum for our new-hire maintenance technicians.”
    “You can be confident that every time a United plane pulls away from the gate, everyone on our team is working together to keep you safe on your trip,” Kirby wrote. More

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    Weight loss drug Wegovy is now approved for heart health — but that won’t mean broad insurance coverage just yet

    The blockbuster weight loss drug Wegovy is now approved in the U.S. for heart health. 
    But some health plans and employers are still reluctant to cover Wegovy due to its hefty price tag, which they say could significantly strain their budgets.
    Plans are likely to take notice of Wegovy’s new approval and start considering whether to cover the treatment when they next update their formularies.

    Victoria Klesty | Reuters

    In the U.S., Wegovy is no longer just for weight loss.
    The blockbuster drug — one of a handful of weight loss treatments to skyrocket in popularity over the last year — is now approved in the U.S. for heart health, too. But that may not translate to wider insurance coverage of the weekly injection drug from Novo Nordisk and similar obesity treatments just yet.

    Some employers and other health plans are still reluctant to cover Wegovy due to its hefty $1,350 monthly price tag, which they say could significantly strain their budgets. They also have other questions, such as how long patients actually stay on the treatment. 
    At the very least, some plans will take notice of Wegovy’s new approval and start assessing whether to cover the treatment when they next update their formularies, some insurance industry experts told CNBC. That could mean difficult decisions ahead for insurers and likely a patchwork system of coverage for Americans who are seeking treatment to navigate.
    “The more benefits that come from weight loss drugs, I think the greater the pressure is going to be to start including those drugs in a formulary and cover them in standard insurance plans,” said John Crable, senior vice president of Corporate Synergies, a national insurance and employee benefits brokerage and consultancy. “But my gut tells me it’s going to take more to convince some insurers.”
    Wegovy is part of a class of drugs called GLP-1s, which mimic a hormone produced in the gut to suppress a person’s appetite and help regulate blood sugar. Coverage for those treatments when used for weight loss is a mixed bag. 
    Roughly 110 million American adults are living with obesity and approximately 50 million of them have insurance coverage for weight loss drugs, a spokesperson for Novo Nordisk said in a statement. The company is actively working with private insurers and employers to encourage broader coverage of those drugs, and is advocating for the federal Medicare program to start covering them, the spokesperson added.

    The Centers for Medicare and Medicaid Services is reviewing the FDA’s expanded approval of Wegovy and will share additional information as appropriate, an agency spokesperson said in an email.
    The spokesperson added that state Medicaid programs would be required to cover Wegovy for its new cardiovascular use. By law, Medicaid must cover nearly all FDA-approved medications, but weight loss treatments are among a small group of drugs that can be excluded from coverage. Around one in five state Medicaid programs currently cover GLP-1 drugs for weight loss.
    Some of the nation’s largest insurers, such as CVS Health’s Aetna, cover those treatments.
    But many employers don’t. An October survey of more than 200 companies by the International Foundation of Employee Benefit Plans, or IFEBP, found only 27% provided coverage for GLP-1s for weight loss, compared with the 76% that covered those drugs for diabetes. Notably, 13% of employers indicated they were considering coverage for weight loss.

    Downstream health effects

    The Food and Drug Administration approved Wegovy for weight management in 2021. In a landmark decision earlier this month, the agency expanded that approval after Wegovy was found to cut the risk of serious cardiovascular complications in adults with obesity and heart disease.
    The decision was based on a five-year, late-stage trial, which showed that weekly injections of Wegovy slashed the overall risk of heart attack, stroke and cardiovascular death by 20%. 
    The approval demonstrates the significant downstream health benefits of Wegovy — and potentially similar drugs — for severe conditions caused by excess weight. Obesity increases the risk of several conditions, such as diabetes, heart disease and even some cancers. 

    An obesity patient takes a injection of weight loss medication.
    Joe Buglewicz | The Washington Post | Getty Images

    It also challenges what some health experts call an “outdated” narrative driving hesitancy among some insurers: that weight loss treatments offer only a cosmetic rather than a medical benefit. 
    “We haven’t previously seen any anti-obesity medication decrease the risk of heart attack and stroke,” said Dr. Jaime Almandoz, a weight management and metabolism specialist at the University of Texas Southwestern Medical Center in Dallas. “What we have is proof that treating obesity is essentially life-saving, and I think it really shifts the conversation.” 
    And the lack of broader insurance coverage for those drugs creates a “huge equity issue in our country around treatment access and even health access,” said Dr. Angela Fitch, knownwell chief medical officer.
    Some health experts also argue that covering Wegovy and other GLP-1s for weight loss could reduce a plan’s health-care costs down the line and improve future health outcomes for patients. 
    Shawn Gremminger, the president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said employers would be “well disposed to cover” those drugs if they are effective at lowering long-term costs. Members of that group represent private, public, nonprofit and union and Taft-Hartley organizations that spend over $400 billion annually on health-care.
    But he said that it will likely take years before employers have access to concrete data on the potential cost savings of covering those treatments. 
    Gremminger added that employers are “a little bit less focused” on what covering weight loss drugs will mean for overall health-care spending 10 years from now. Their focus is on providing care to their current employees, some of whom will end up leaving the company down the line. 

    Boxes of Wegovy lie beside a packaging line at Novo Nordisk’s facility in Hillerod, Denmark, March 8, 2024. 
    Tom Little | Reuters

    Employers have other questions, too, including about longer-term data on GLP-1s for weight loss, and about patients stopping those drugs prematurely. It also isn’t clear to some employers whether patients have to stay on Wegovy for the rest of their lives or if they can eventually taper off of it, Gremminger said.
    Obesity and heart disease are chronic diseases, which means most patients will have to keep taking Wegovy along with diet and exercise to maintain the health benefits. Novo Nordisk said, “not unexpectedly,” data from their clinical trials shows that people who took Wegovy regained weight when they went off the drug.
    “This supports the belief that obesity is a chronic disease that requires long-term management, much like high blood pressure or high cholesterol, for which most patients remain on therapy long term in order to continue to experience the benefits of their medications,” Novo Nordisk said in a statement.
    But Gremminger said the standard of care for the long-term use of weight loss drugs is “in flux.”

    Considering the costs 

    Faced with the dramatic cost of covering Wegovy and similar drugs, the state of North Carolina is paring back.
    State employees will no longer have insurance coverage for GLP-1s when used for weight loss at the beginning of next month. The plan will still cover GLP-1s for diabetes, such as Novo Nordisk’s Ozempic, along with some older obesity drugs.  
    North Carolina’s treasurer and a GOP candidate for governor, Dale Folwell, told CNBC the expanded approval of Wegovy last week doesn’t change anything.
    “We’ve never questioned the efficacy of the drug. We’ve always questioned what we’re having to pay for it,” Folwell said. “Even as the scope of the use of this drug widens, it doesn’t change the cost.” 

    North Carolina State Treasurer Dale Folwell attends the Republican Governors Association conference in Orlando, Florida, Nov. 16, 2022.
    Phelan M. Ebenhack | AP

    He said dropping weight loss drug coverage wasn’t a decision the plan’s board of trustees wanted to make in January, but it did so because the plan is “under financial siege” due to Wegovy. That treatment cost the state’s health plan nearly $87 million last year, according to a state presentation from January. Overall, GLP-1 drugs for weight loss cost the plan roughly $102 million in 2023. 
    An outside consultant projected a $1.5 billion loss by 2030 if the state plan continued to pay for those treatments. North Carolina also estimated that continuing to cover GLP-1s for weight loss would double the premiums for all 482,000 active employees and dependents on the plan, even those not taking the drugs. 
    Folwell said the state has been working with Novo Nordisk and Eli Lilly, the maker of similar treatment Zepbound, to reach an agreement on costs. But he noted that the companies have rejected the state’s recommendations “at every turn.” 
    A spokesperson for Eli Lilly said the company is committed to working with health-care, government and industry partners “to help people who may benefit from Zepbound access it, but obstacles to that goal still exist.” The spokesperson added that policies around insurance have “not caught up to science.” 
    Novo Nordisk said in a statement it urges Folwell and the state health plan to “put patients first” and reconsider the decision to drop weight loss drug coverage.
    Novo Nordisk believes “denying patients insurance coverage for important and effective FDA approved treatments for obesity is irresponsible,” according to a company spokesperson, who said the company will continue to engage with state health plan officials to address any potential cost concerns.
    Both drugmakers have launched programs to help patients, with or without commercial insurance coverage, afford their weight loss treatments.
    Novo Nordisk says its savings program can help patients without insurance coverage save up to $500 per 28-day supply of Wegovy. The company also said roughly 80% of Wegovy patients in the U.S. with commercial coverage for the drug are paying $25 per month or less.

    List prices of weight loss drugs before insurance

    Wegovy from Novo Nordisk: $1,349.02 per monthly package
    Zepbound from Eli Lilly: $1,059.87 per monthly package
    Saxenda from Novo Nordisk: $1,349.02 per monthly package

    Increased competition in the weight loss drug market could force the two companies to drive down the costs of their injectable treatments, said Ceci Connolly, CEO of the Alliance of Community Health Plans. The organization represents regional, community-based health plans that cover more than 18 million Americans across the U.S. 
    Health plans may also be more open to covering convenient and potentially cheaper oral versions of the drugs, which several drugmakers are racing to develop. Those cheaper options, though, are likely still years away. That includes cheaper generic versions of existing GLP-1s, along with treatments from rival drugmakers.

    Coverage with cost controls 

    More employers will likely start considering coverage of Wegovy following its expanded approval, according to Julie Stich, vice president of content at IFEBP.
    But the plans that decide to include Wegovy when they next update their formularies will likely consider implementing certain requirements to control costs. Those requirements will look different for Wegovy’s two approved uses. 
    Most employers that cover GLP-1s for weight loss already use cost controls, according to the October survey by IFEBP.
    Nearly a third of companies said they used “step therapy,” which requires their members to try other lower-cost medications or means of losing weight before using a GLP-1. Around 16% of employers used certain eligibility rules, such as requiring employees to have a certain BMI, or body-mass index, to receive coverage. 

    Fiordaliso | Moment | Getty Images

    Other employers are using financial requirements, such as annual or lifetime spending caps for the treatments. For example, the Mayo Clinic’s employee health plan added a lifetime coverage limit of $20,000 for weight loss drug prescriptions filled after Jan. 1. 
    Meanwhile some players in the insurance industry are trying to find ways to help health plans manage the costs of covering the treatments. 
    Last week, Cigna’s pharmacy benefits management unit said it will limit spending increases for GLP-1s to a maximum of 15% annually for employers and other health plans. Currently, some of the company’s clients are seeing spending for those treatments rise 40% to 50% annually. 
    If more insurers and pharmacy benefits managers pursue similar efforts, their affiliated health plans could become more open to covering weight loss drugs “knowing that their risk will be limited in that way,” Stich said.
    Clarification: This story has been updated to clarify the price of Wegovy. It’s $1,350 per month. More

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    Just how rich are businesses getting in the AI gold rush?

    Barely a day goes by without excitement about artificial intelligence (AI) sending another company’s market value through the roof. Earlier this month the share price of Dell, a hardware manufacturer, jumped by over 30% in a day because of hopes that the technology will boost sales. Days later Together AI, a cloud-computing startup, raised new funding at a valuation of $1.3bn, up from $500m in November. One of its investors is Nvidia, a maker of AI chips that is itself on an extended bull run. Before the launch of ChatGPT, a “generative” AI that responds to queries in uncannily humanlike ways, in November 2022 its market capitalisation was about $300bn, similar to that of Home Depot, a home-improvement chain. Today it sits at $2.3trn, $300bn or so short of Apple’s.The relentless stream of AI headlines makes it hard to get a sense of which businesses are real winners in the AI boom—and which will win in the longer run. To help answer this question The Economist has looked where value has accrued so far and how this tallies with the expected sales of products and services in the AI “stack”, as technologists call the various layers of hardware and software on which AI relies to work its magic. On March 18th many companies up and down the stack will descend on San Jose for a four-day jamboree hosted by Nvidia. With talks on everything from robotics to drug discovery, the shindig will show off the latest AI innovations. It will also highlight furious competition between firms within layers of the stack and, increasingly, between them.image: The EconomistOur analysis examined four of these layers and the companies that inhabit them: AI-powered applications sold to businesses outside the stack; the AI models themselves, such as GPT-4, the brain behind ChatGPT, and repositories of them (for example, Hugging Face); the cloud-computing platforms which host many of these models and some of the applications (Amazon Web Services, Google Cloud Platform, Microsoft Azure); and the hardware, such as semiconductors (made by firms such as AMD, Intel and Nvidia), servers (Dell) and networking gear (Arista), responsible for the clouds’ computing oomph (see chart 1).Technological breakthroughs tend to elevate new tech giants. The PC boom in the 1980s and 1990s propelled Microsoft, which made the Windows operating system, and Intel, which manufactured the chips needed to run it, to the top of the corporate pecking order. By the 2000s “Wintel” was capturing four-fifths of the operating profits from the PC industry, according to Jefferies, an investment bank. The smartphone era did the same to Apple. Only a few years after it launched the iPhone in 2007, it was capturing more than half of handset-makers’ global operating profits.image: The EconomistThe world is still in the early days of the generative-AI epoch. Even so, it has already been immensely lucrative. All told, the 100 or so companies that we examined have together created $8trn in value for their owners since its start—which, for the purposes of this article, we define as October 2022, just before the launch of ChatGPT (see chart 2). Not all of these gains are the result of the AI frenzy—stockmarkets have been on a broader tear of late—but many are.At every layer of the stack, value is becoming more concentrated in a handful of leading firms. In hardware, model-making and applications, the biggest three companies have increased their share of overall value created by a median of 14 percentage points in the past year and a half. In the cloud layer Microsoft, which has a partnership with ChatGPT’s maker, OpenAI, has pulled ahead of Amazon and Alphabet (Google’s parent company). Its market capitalisation now accounts for 46% of the cloud trio’s total, up from 41% before the release of ChatGPT.Skimming the creamThe spread of value is uneven between layers, too. In absolute terms the most riches have accrued to the hardware-makers. This bucket includes chip firms (such as Nvidia), companies that build servers (Dell) and those that make networking equipment (Arista). In October 2022 the 27 public hardware companies in our sample were worth around $1.5trn. Today that figure is $5trn. This is what you would expect in a technology boom: the underlying physical infrastructure needs to be built first in order for software to be offered. In the late 1990s, as the internet boom was getting going, providers of things like modems and other telecoms gubbins, such as Cisco and WorldCom, were the early winners.So far the host of the San Jose gabfest is by far the biggest victor. Nvidia accounts for some 57% of the increase in the market capitalisation of our hardware firms. The company makes more than 80% of all AI chips, according to IDC, a research firm. It also enjoys a near-monopoly in the networking equipment used to yoke the chips together inside the AI servers in data centres. Revenues from Nvidia’s data-centre business more than tripled in the 12 months to the end of January, compared with the year before. Its gross margins grew from 59% to 74%.Nivdia’ chipmaking rivals want a piece of these riches. Established ones, such as AMD and Intel, are launching rival products. So are startups like Groq, which makes super-fast AI chips, and Cerebras, which makes super-sized ones. Nvidia’s biggest customers, the three cloud giants, are all designing their own chips, too—as a way both to reduce reliance on one provider and to steal some of Nvidia’s juicy margins for themselves. Lisa Su, chief executive of AMD, has forecast that revenues from the sale of AI chips could balloon to $400bn by 2027, from $45bn in 2023. That would be far too much for Nvidia alone to digest.As AI applications become more widespread, a growing share of that demand will also shift from chips required for training models, which consists in analysing mountains of data in order to teach algorithms to predict the next word or pixel in a sequence, to those needed actually to use them to respond to queries, (“inference”, in tech-speak). In the past year about two-fifths of Nvidia’s AI revenues came from customers using its chips for inference. Experts expect some inference to start moving from specialist graphics-processing units (GPUs), which are Nvidia’s forte, to general-purpose central processing units (CPUs) like those used in laptops and smartphones, which are dominated by AMD and Intel. Before long even some training may be done on CPUs rather than GPUs.Still, Nvidia’s grip on the hardware market seems secure for the next few years. Startups with no track record will struggle to convince big clients to reconfigure corporate hardware systems for their novel technology. The cloud giants’ deployment of their own chips is still limited. And Nvidia has CUDA, a software platform which allows customers to tailor chips to their needs. It is popular with programmers and makes it hard for customers to switch to rival semiconductors, which CUDA does not support.Whereas hardware wins the value-accrual race hands down in absolute terms, it is the independent model-makers that have enjoyed the biggest proportional gains. The collective value of 11 such firms we have looked at has jumped from $29bn to about $138bn in the past 16 months. OpenAI is thought to be worth some $100bn, up from $20bn in October 2022. Anthropic’s valuation surged from $3.4bn in April 2022 to $18bn. Mistral, a French startup founded less than a year ago, is now worth around $2bn.Some of that value is tied up in hardware. The startups buy piles of chips, mostly from Nvidia, in order to train their models. Imbue, which like OpenAI and Anthropic is based in San Francisco, has 10,000 such chips. Cohere, a Canadian rival, has 16,000. These semiconductors can sell for tens of thousands of dollars apiece. As the models get ever more sophisticated, they need ever more. GPT-4 reportedly cost about $100m to train. Some suspect that training its successor could cost OpenAI ten times as much.Yet the model-makers’ true worth lies in their intellectual property, and the profits that it may generate. The true extent of those profits will depend on just how fierce competition among model providers will get—and how long it will last. Right now the rivalry is white hot, which may explain why the layer has not gained as much value in absolute terms.Although OpenAI seized an early lead, challengers have been catching up fast. They have been able to tap the same data as the maker of ChatGPT (which is to say text and images on the internet) and, also like it, free of charge. Anthropic’s Claude 3 is snapping at GPT-4’s heels. Four months after the release of GPT-4, Meta, Facebook’s parent company, released Llama 2, a powerful rival that, in contrast to OpenAI’s and Anthropic’s proprietary models, is open and can be tinkered with at will by others. In February Mistral, which has fewer than 40 employees, wowed the industry by releasing an open model whose performance almost rivals that of GPT-4, despite requiring much less computational power to train and run.Even smaller models increasingly offer good performance at a low price, points out Stephanie Zhan of Sequoia, a venture-capital firm. Some are designed for specific tasks. A startup called Nixtla developed TimeGPT, a model for financial forecasting. Another, Hippocratic AI, has trained its model on data from exams to enter medical school, to give accurate medical advice.The abundance of models has also enabled the growth of the application layer. The value of the 19 publicly traded software companies in our application group has jumped by $1.1trn, or 35%, since October 2022. This includes big software providers that are adding generative AI to their services. Zoom uses the technology to let users summarise video calls. ServiceNow, which provides tech, human-resources and other support to companies, has introduced chatbots to help resolve customers’ IT queries. Adobe, maker of Photoshop, has an app called Firefly, which uses AI to edit pictures.Newcomers are adding more variety. “There’s An AI For That”, a website, counts over 12,000 applications, up from fewer than 1,000 in 2022. DeepScribe helps transcribe doctors’ notes. Harvey AI assists lawyers. More idiosyncratically, 32 chatbots promise “sarcastic conversation” and 20 generate tattoo designs. Fierce competition and low barriers to entry mean that some, if not many, applications could struggle to capture value.Then there is the cloud layer. The combined market capitialsation of Alphabet, Amazon and Microsoft has jumped by $2.5trn since the start of the AI boom. Counted in dollars that is less than three-quarters of the growth of the hardware layer, and barely a quarter in percentage terms. Yet compared with actual revenues that AI is expected to generate for the big-tech trio in the near term, this value creation far exceeds that in all the other layers. It is 120 times the $20bn in revenue that generative AI is forecast to add to the cloud giants’ sales in 2024. The comparable ratio is about 40 for the hardware firms and around 30 for the model-makers.image: The EconomistThis implies that investors believe that the cloud giants will be the biggest winners in the long run. The companies’ ratio of share price to earnings, another gauge of expected future profits, tells a similar story. The big three cloud firms average 29. That is above 50% higher than for the typical non-tech firm in the S&P 500 index of large American companies—and up from 21 in early 2023 (see chart 3).image: The EconomistInvestors’ cloud bullishness can be explained by three factors. First, the tech titans possess all the ingredients to develop world-beating AI systems: troves of data, armies of researchers, huge data centres and plenty of spare cash. Second, the buyers of AI services, such as big corporations, prefer to do business with established commercial parters than with untested upstarts (see chart 4). Third, and most important, big tech has the greatest potential to control every layer of the stack, from chips to applications. Besides designing some of their own chips, Amazon, Google and Microsoft are investing in both models and applications. Of the 11 model-makers in our sample, nine have the support of at least one of the three giants. That includes the Microsoft-backed OpenAI, Anthropic (Google and Amazon) and Mistral (Microsoft again).Have the layer cake and eat it The potential profits that come from controlling more of the layers are also leading hitherto layer-specific firms to branch out. OpenAI’s in-house venture-capital arm has invested in 14 companies since its launch in January 2021, including Harvey AI and Ambience Healthcare, another medical startup. Sam Altman, boss of OpenAI, is reportedly seeking investors to bankroll a pharaonic $7trn chipmaking venture.Nvidia is becoming more ambitious, too. It has taken stakes in seven of the model-makers, and now offers its own AI models. It has also invested in startups such as Together AI and CoreWeave, which compete with its big cloud customers. At its San Jose event it is expected to unveil a snazzy new GPU and, just maybe, AI tools from other layers of the stack. The AI boom’s biggest single value-creator is in no mood to cede its crown. ■ More

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    The state of women’s sports: Top executives weigh in on parity, media share and NIL regulations

    Women’s sports reached an inflection point in 2023, propelled by major new broadcast deals, once-in-a-lifetime players and record-breaking audiences that dramatically changed the sports landscape.
    Revenue generated by women’s elite sports could surpass $1 billion this year, a 300% increase from 2021, according to estimates from Deloitte.
    CNBC surveyed some of the most high-powered women executives in sports to hear their thoughts on parity, lightning rod moments, media share and name, image and likeness regulations.

    Guard Caitlin Clark #22 of the Iowa Hawkeyes listens as the crowd cheers after breaking the NCAA women’s all-time scoring record during the game against the Michigan Wolverines at Carver-Hawkeye Arena on February 15, 2024 in Iowa City, Iowa. 
    Matthew Holst | Getty Images

    Women’s sports reached an inflection point in 2023, propelled by major new broadcast deals, once-in-a-lifetime players and record-breaking audiences that dramatically changed the sports landscape.
    From Caitlin Clark fever in Iowa to a packed house of 92,000 fans for women’s volleyball in Nebraska, women’s sports have never been more at the forefront.

    And it’s not slowing down.
    Revenue generated by women’s elite sports could surpass $1 billion this year, a 300% increase from 2021, according to estimates from Deloitte.
    Bigger media deals and more commercial sponsors are driving record valuations for women’s sports, with several teams’ values expected to exceed $100 million in 2024, according to Deloitte.
    Last year saw record media deals for women’s sports as the NCAA and NWSL both inked groundbreaking agreements. And investors from private equity to celebrities are lining up to get in the game.
    Yet, there’s still a lot of work to be done, specifically, in the areas of equal pay, prime-time access and even the need for more historical data.

    CNBC surveyed some of the most high-powered women executives in sports, ranging from league commissioners to team owners and CEOs, to hear their thoughts on the state of women in sports. Some of their answers have been edited for style, clarity and length.

    What do you see as the primary obstacle hindering the growth of women’s sports?

    Renie Anderson, executive vice president and chief revenue officer for the NFL: The obstacle, or really the opportunity, for today is to continue to amplify the spectacular athleticism of these women. Rather than be shocked and surprised that women are spectacular at sport, we need to do a better job of weaving in the message of greatness when highlighting the greatness in men’s sports. It’s there. It just doesn’t get the attention it deserves.

    Jessica Berman, National Women’s Soccer League Commissioner
    Jesse Grant | CNBC

    Jessica Berman, commissioner of the National Women’s Soccer League: Because the world has woken up to women’s sports, the expectations on how fast this can grow, from all stakeholders, is really challenging. We’re 100 years behind men’s sports, and so it’s not to say that we should move slowly. It is to say that it is challenging to sort of build the plane as quickly as so many stakeholders expect it to be built — and to do it in a way that’s sustainable and commercially viable.

    WNBA Commissioner Cathy Engelbert speaks to the media to award Breanna Stewart #30 of the New York Liberty with the 2023 Kia WNBA Most Valuable Player Award before the game against the Connecticut Sun during round two game two of the 2023 WNBA playoffs on September 26, 2023 in Brooklyn, New York. 
    David Dow | Getty Images

    Cathy Engelbert, commissioner of the Women’s National Basketball Association: One of the obstacles is the undervaluation of our assets. Whether it’s a patch on the uniform or an ad buy on a broadcast, we need to change the model. It’s based on decades-old spreadsheet models that are tailored to men’s sports and in those models, a lot of things that companies are now supporting in women’s sports aren’t being accounted for like their diversity, their community, the fact that they are not the “one and done” type.

    Jessica Gelman speaks during the 15th Annual Sports Business Journal Awards ceremony at New York Marriott Marquis Hotel on May 18, 2022 in New York City. 
    John Lamparski | Getty Images

    Jessica Gelman, KAGR CEO and founder of the MIT Sloan Sports Analytics Conference: A major obstacle has been available data on performance which supports and enhances storytelling. These stories create interest and drive (i.e. see Caitlin Clark’s NCAA scoring record quest). This past year the MIT Sloan Sports Analytics Conference donated to Sports-Reference to support the addition of college women’s data back to 1987.
    Jayna Hefford, senior vice president of operations for the Professional Women’s Hockey League: Women’s sports still struggle to secure prime broadcast windows, consistent airtime and traditional media coverage. Furthermore, the scarcity of traditional media coverage has historically forced women’s teams and leagues, as well as women-owned media companies, to take the lead in promoting their own narratives. This limited visibility has made it challenging to attract brand support, even though research indicates that companies investing in women’s sports see lucrative returns.

    Haley Rosen, Just Women’s Sports
    Source: Just Women’s Sports

    Haley Rosen, CEO and founder of Just Women’s Sports: One of the biggest obstacles hindering the progress of women’s sports today is relying on the legacy platforms. Legacy platforms aren’t set up to support women’s sports and build on the momentum. Yes, they’ll air the games. But there’s only so much time in the day for the shoulder programming and coverage needed to amplify the women’s leagues, and legacy platforms are always going to prioritize men’s sports. Viewership numbers are rising, but the relative percentage of women’s sports coverage on legacy platforms hasn’t changed.

    Mollie Marcoux Samaan, LPGA Commissioner, speaks during the State of the Association press conference during the first round of the CME Group Tour Championship at Tiburon Golf Club on November 16, 2023 in Naples, Florida. 
    Michael Reaves | Getty Images

    Mollie Marcoux Samaan, commissioner of the Ladies Professional Golf Association: Women’s sports today face two primary obstacles: investment and exposure. At the LPGA we’ve made some great strides. Our total revenue has gone up 65% in the last four years, and total purses — the prize funds players’ play for each week — has grown 70% since 2021. That’s because of investment, because of partnerships, because of corporate decision makers seeing not only the significant commercial value of the LPGA but also the opportunity to have a positive impact on the world.

    How can women’s sports leverage milestone events like those seen in 2023 to further expand reach?

    NEW YORK, NY – AUGUST 22: USTA President Katrina Adams speaks during the Louis Armstrong Stadium Dedication Ceremony at USTA Billie Jean King National Tennis Center on August 22, 2018 in New York City. (Photo by Steven Ryan/Getty Images)
    Steven Ryan | Getty Images Sport | Getty Images

    Katrina Adams, former pro tennis player and ex-CEO of the United States Tennis Association: I think what the Women’s Tennis Association has done for many years, is shown other professional sports what can be achieved if they use your voice and their talent, that they can survive. When you look at the players of today — you know, we talk about the [Caitlin Clark types] and Sabrina Ionescu and Coco Gauff, who was the highest paid athlete last year — there’s so many opportunities for these young women to use their platform to really speak up and speak out on what it means to be on a level playing field week in and week out.
    Berman: I think we have to go from these being moments to being part of a movement, so that we get out of the default of having these reference points be episodic, or transactional or in isolation, so that it can translate to more sustainable growth and investment. I think the more we can demonstrate and talk about some of those consistent data points that show that the business is actually being built in a more consistent way, the easier it’ll be to debunk the narrative that these are one-off success stories.

    Pamela Duckworth
    Source: FuboTV

    Pamela Duckworth, head of Fubo Studios at FuboTV: Female athletes are multifaceted — they are also mothers, businesswomen, philanthropists, media moguls and more. We can use the momentum from attention-grabbing sports moments to bring athletes’ stories to the forefront and connect with broader audiences that way.
    Engelbert: Sports is about marketing, marketing, marketing. If you look back at the history of the NBA that put the league on the map and the multibillion-dollar deals, it was a rivalry coming out of college, Magic Johnson and Larry Bird. Then it was a marketing genius with Michael Jordan and Nike. But you need capital to market and advertise. I think the marketing strategy we put in place now that we have this capital is to build household names, create rivalries, and promote games or events of consequence.

    Fanduel CEO Amy Howe attends The Future of Everything presented by the Wall Street Journal at Spring Studios on May 18, 2022 in New York City.
    Steven Ferdman | Getty Images

    Amy Howe, FanDuel CEO: Women’s sports need to continue to position their star athletes (i.e. Ionescu, A’ja Wilson and Breanna Stewart of WNBA) in the mainstream at parity with their male counterparts – the 3-point competition was a perfect example. Not surprisingly, all of this investment and support is fueling greater performance from female athletes which is driving added success in places like FanDuel’s business, where we saw a 270% increase in bet counts on women’s sports and 101% increase in handle, or amount wagered. It’s a real flywheel effect.
    Rosen: There are tens of millions of sports fans out there waiting to be onboarded into this space. We have to make it easy and fun for them to be a women’s sports fan and not just rely on the stand-alone moments. That means meeting them every day on their feeds, creating content that engages them and keeps them continually connected to this space. 
    Kelly Laferriere, chief business officer, A-Rod Corp.:
    The investment community and media companies are taking notice. They recognize the strategic value. Distributing women’s sports content across multiple media platforms to reach the widest possible audience will drive new revenue and keep women’s sports part of mainstream conversations. The Paris Olympics in July also creates an opportunity for female athletes to shine on the world stage.

    How do name, image and likeness regulations factor into the growth of women’s sports?

    Adams: I think it’s an opportunity for our women to finally be recognized and actually make a living. The men, they’ve had this opportunity for years, for decades, “under the table,” if you will, now the women are able to do it legally with the NIL. For them to make a little money and really grow the sport in their communities, in their cities in their college towns, etc. I think it’s great. They’re learning how to become entrepreneurs at a younger age, and they’re doing extremely well.

    A portrait of Renie Anderson NFL SVP, Chief Revenue Officer.
    Source: NFL

    Anderson: I think NIL helps likely a small few through their social media. I’m not sure outside of a handful of amazing athletes/influencers it’s going to be spread out throughout college sports for women, like it is for football for men. But I guess we wait and see. I don’t think it hurts, but for those few women that do benefit, it’s an opportunity for them to lift up other women.
    Duckworth: NIL opens doors for female athletes to build their own brands in ways that weren’t possible before. Why shouldn’t a female athlete make money the same way her male counterpart can? Money equals independence in my book. Kudos to major sports stars like Angel Reese or Caitlin Clark on showing young women just what can be built. 

    Billie Jean King and Jayna Hefford walk to centre ice for the ceremonial puck drop before Toronto plays New York in their PWHL hockey game at the Mattamy Athletic Centre on January 1, 2024 in Toronto, Ontario, Canada. 
    Mark Blinch | Getty Images

    Hefford: The positive impact of NIL on women’s college athletics has reverberated throughout women’s sports, creating a scenario where all boats rise. As more female athletes become household names, the investment in women’s sports is likely to increase, encouraging more young girls to start — or continue participating in — sports.
    Rosen: On paper, it’s great and we should celebrate anything that helps women athletes grow their brand and monetize their talents. There are obviously still some details that need to be ironed out, especially when it comes to team dynamics and the potential for NIL deals to force players into taking the short-term profit at the cost of their long-term development. More

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    Beyoncé’s country songs are bringing new listeners to the genre, boosting streams for Black artists

    Beyoncé is embarking on her country era with a new album, “Cowboy Carter.”
    The two singles she’s released so far have been smash hits and have boosted streams for other Black female country stars along the way.
    As Beyoncé helps break the country mold, she’s also bringing a younger audience into the western genre.
    The superstar isn’t alone: Country artists such as Maren Morris, Luke Combs and Kacey Musgraves have taken a more progressive approach to the genre than the traditional themes of beer, pickup trucks and rural living.

    Beyonce leaves the Luar fashion show at 154 Scott in Brooklyn during New York Fashion Week on February 13, 2024 in New York City. 
    James Devaney | GC Images | Getty Images

    Country music, meet Cowboy Carter.
    Superstar singer-songwriter Beyoncé Knowles is foraying into country music — taking on a genre that has excluded women of color for decades and in the process proving its listeners have a strong interest in Black female artists. Her country music era, launched during a Super Bowl ad in mid-February and headlined by an upcoming album, is broadening the industry’s listenership and igniting streaming numbers for songs by other Black female country artists.

    Country star Tanner Adell, a Black artist, saw U.S. streams of her track “Buckle Bunny” soar 305% during the first week of March, according to data from Spotify. Another song from Adell, “Trailer Park Barbie,” saw a 130% jump in streams, the music streaming company said.
    Other Black female country artists like Mickey Guyton and Reyna Roberts saw boosts too, and Knowles’ own country-esque song “Daddy Lessons,” off her sixth studio pop album, “Lemonade,” spiked 540% in streams the day after her two country singles were released last month, Spotify reported.
    “Texas Hold ‘Em,” one of those singles, made her the first Black woman to claim the No. 1 spot on Billboard’s Hot Country chart, according to the famed music magazine.
    That song and her second recent country hit, “16 Carriages,” will appear on “Act II: Cowboy Carter.” Knowles announced the album title in a Tuesday post on her website. It follows “Act I: Renaissance” and serves as the second installment to a three-part project.
    Knowles’ album announcement was a “pinnacle moment in time,” according to The New York Times bestselling author, country songwriter and lecturer Alice Randall, who was the first Black woman to write a No.1 song for an artist on the Hot Country chart, back in 1994.

    “Beyoncé is signaling that Black women have been in country music almost since the beginning,” Randall said. “We have finally broken through the redlining that kept us out of the charts.”

    Breaking into country

    Acceptance for artists of color in country music remains a challenge, though, — even for Knowles, whose recorded songs are mostly categorized as pop and R&B.
    While some music critics praised Knowles’ country tracks, other fans of the genre refrained from a warm welcome.
    Two days after the release of “Texas Hold ‘Em” — coined as a “pop-country” track with elements from folk musician Rhiannon Giddens on the banjo — pop radio stations played the track 49 times, according to an X post by the radio industry tracker U.S. Radio Updater. But country stations played it only twice, according to the post.
    Beyoncé fans — collectively known as the “BeyHive” — called in to an Oklahoma country station protesting the broadcaster’s initial rejection of a request to play “Texas Hold ‘Em.” In a separate occasion, a fan reported hearing a radio host comment that while the song is country and the instruments are country, “something else about it makes me think it’s not country.”
    Of the more than 2,100 artists played on country radio stations from 2002 to 2020, only about 1.5% were Black, compared with about 98% who were white, according to a report from SongData on representation in country music. Other artists of color, including those who identified as Hispanic, Indigenous, biracial or Filipino, made up about 1% of artists played.  
    Beyond just radio, Black artists and artists of color represented less than 4% of country songs played on the radio, airplay, charting songs, artists signed to major labels and award nominations, according to SongData.
    In the areas where artists of color did make strides over those two decades — gaining 3.2 percentage points in the share of songs played — the advances overwhelmingly benefited male artists of color, according to SongData. Among the artists of color whose songs received airplay, the report found that less than 3% were songs by women. 
    Some observers have argued the resistance to Knowles’ recent music stems from racism and political bias.
    “Artists of color are releasing great music that sparks a great conversation but hasn’t shifted the underlying limitations and racist format of the mainstream country radio,” said Jocelyn Neal, professor and department chair of music at the University of North Carolina-Chapel Hill.
    Country artists such as Maren Morris, Luke Combs and Kacey Musgraves have taken a more progressive approach than the traditional themes of beer, pickup trucks and rural living. Black LGBTQ hip-hop artist Lil Nas X dabbled in the genre with a “country-influenced” track, “Old Town Road.” The song was enmeshed in a racial debate after being removed from the Billboard Hot Country chart in 2019 after it was claimed the song lacked country elements when compared to other songs from the chart.

    Lil Nas X performs onstage during WiLD 94.9’s FM’s Jingle Ball 2019 at The Masonic Auditorium on December 08, 2019 in San Francisco, California.
    Tim Mosenfelder

    Political tensions have flared in the country music industry for decades, as newer and more liberal artists try to transition away from the genre’s “conservative” roots, Neal said. The genre’s fan base has long skewed conservative, she said.
    Knowles — along with superstar Taylor Swift, who both had mega years in 2023 — received a higher percentage of negative ratings from registered Republicans than any other demographic of voters, across political affiliation, race and age, according to an NBC News poll. Of voters polled, 34% had a negative stance on Knowles, while 16% had a positive view. More than 40% of Republicans were neutral. Among registered Democrats who were polled, just 5% had a negative stance on Knowles and more than half had a positive view.
    Beyoncé previously drew heat from country fans after the Houston native’s 2016 live performance of “Daddy Lessons” at the CMA Awards. She was joined by female country power group The Chicks, who made headlines in the early 2000s for speaking out against then-Republican President George Bush and the U.S. invasion of Iraq.

    Younger listeners feeling the western vibe

    As Beyoncé helps break the country mold, she’s inviting a younger audience into the western genre.
    One such fan, Tenley Patterson, 26, said she didn’t bother listening to country music before Beyoncé’s releases, but was impressed with the country tracks.
    “It’s not like country music I’ve heard before; it has a twang to it,” Patterson said. “It’s been slowly peaking my interest in the genre.”
    While the average country music listener is a member of the baby boomer generation, those born between 1946 and 1964, according to music data firm Luminate, there’s been a newfound interest among listeners who are part of Generation Z — those born between 1997 to 2012 — and millennials, two generations reported to be more diverse than older age groups.
    Country music in general saw an increase of 20 billion streams, a 24% year-over-year spike, from 2022 to 2023, according to Luminate.
    Spotify’s Nashville team, which monitors the music streaming giant’s country genre, said it saw a rise in Gen Z and millennial listeners in response to Knowles’ entrance. Rachel Whitney, head of editorial for the Nashville team, said playlists outside of the country genre are playing Knowles’ country tracks, broadening its reach.
    The Beyoncé draw is also boosting exposure for other artists on some lists, like Lainey Wilson and Cody Johnson, who have more “traditional” country songs, Whitney said.
    “It’s amazing to see how country is connecting with younger listeners,” Whitney said. “We can support that with our playlists and make sure we’re not making country this one specific sound.”

    (L-R) Beyoncé and Jay-Z attend the 66th GRAMMY Awards at Crypto.com Arena on February 04, 2024 in Los Angeles, California. (Photo by Kevin Mazur/Getty Images for The Recording Academy)
    Kevin Mazur | Getty Images

    Aside from Knowles, pop stars including Lana Del Rey and Post Malone are reportedly preparing to release country albums, according to Billboard. The news source says Ed Sheeran also could be releasing a country project in the near term. 
    UNC’s Neal, herself a Beyoncé fan, described the star’s career path as trailblazing, but said the push for diversity in country music requires more than one superstar.
    “Historical evidence suggests it takes more than one successful artist to move the needle on what is honestly 100 years of genre formation,” Neal said. More

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    Weight loss drug Wegovy is now approved for heart health — but that won’t mean broad insurance coverage just yet

    The blockbuster weight loss drug Wegovy is now approved in the U.S. for heart health. 
    But some health plans and employers are still reluctant to cover Wegovy due to its hefty price tag, which they say could significantly strain their budgets.
    Plans are likely to take notice of Wegovy’s new approval and start considering whether to cover the treatment when they next update their formularies.

    Victoria Klesty | Reuters

    In the U.S., Wegovy is no longer just for weight loss.
    The blockbuster drug — one of a handful of weight loss treatments to skyrocket in popularity over the last year — is now approved in the U.S. for heart health, too. But that may not translate to wider insurance coverage of the weekly injection drug from Novo Nordisk and similar obesity treatments just yet.

    Some employers and other health plans are still reluctant to cover Wegovy due to its hefty $1,350 monthly price tag, which they say could significantly strain their budgets. They also have other questions, such as how long patients actually stay on the treatment. 
    At the very least, some plans will take notice of Wegovy’s new approval and start assessing whether to cover the treatment when they next update their formularies, some insurance industry experts told CNBC. That could mean difficult decisions ahead for insurers and likely a patchwork system of coverage for Americans who are seeking treatment to navigate.
    “The more benefits that come from weight loss drugs, I think the greater the pressure is going to be to start including those drugs in a formulary and cover them in standard insurance plans,” said John Crable, senior vice president of Corporate Synergies, a national insurance and employee benefits brokerage and consultancy. “But my gut tells me it’s going to take more to convince some insurers.”
    Wegovy is part of a class of drugs called GLP-1s, which mimic a hormone produced in the gut to suppress a person’s appetite and help regulate blood sugar. Coverage for those treatments when used for weight loss is a mixed bag. 
    Roughly 110 million American adults are living with obesity and approximately 50 million of them have insurance coverage for weight loss drugs, a spokesperson for Novo Nordisk said in a statement. The company is actively working with private insurers and employers to encourage broader coverage of those drugs, and is advocating for the federal Medicare program to start covering them, the spokesperson added.

    The Centers for Medicare and Medicaid Services is reviewing the FDA’s expanded approval of Wegovy and will share additional information as appropriate, an agency spokesperson said in an email.
    The spokesperson added that state Medicaid programs would be required to cover Wegovy for its new cardiovascular use. By law, Medicaid must cover nearly all FDA-approved medications, but weight loss treatments are among a small group of drugs that can be excluded from coverage. Around one in five state Medicaid programs currently cover GLP-1 drugs for weight loss.
    Some of the nation’s largest insurers, such as CVS Health’s Aetna, cover those treatments.
    But many employers don’t. An October survey of more than 200 companies by the International Foundation of Employee Benefit Plans, or IFEBP, found only 27% provided coverage for GLP-1s for weight loss, compared with the 76% that covered those drugs for diabetes. Notably, 13% of employers indicated they were considering coverage for weight loss.

    Downstream health effects

    The Food and Drug Administration approved Wegovy for weight management in 2021. In a landmark decision earlier this month, the agency expanded that approval after Wegovy was found to cut the risk of serious cardiovascular complications in adults with obesity and heart disease.
    The decision was based on a five-year, late-stage trial, which showed that weekly injections of Wegovy slashed the overall risk of heart attack, stroke and cardiovascular death by 20%. 
    The approval demonstrates the significant downstream health benefits of Wegovy — and potentially similar drugs — for severe conditions caused by excess weight. Obesity increases the risk of several conditions, such as diabetes, heart disease and even some cancers. 
    It also challenges what some health experts call an “outdated” narrative driving hesitancy among some insurers: that weight loss treatments offer only a cosmetic rather than a medical benefit. 
    “We haven’t previously seen any anti-obesity medication decrease the risk of heart attack and stroke,” said Dr. Jaime Almandoz, a weight management and metabolism specialist at the University of Texas Southwestern Medical Center in Dallas. “What we have is proof that treating obesity is essentially life-saving, and I think it really shifts the conversation.” 

    An obesity patient takes a injection of weight loss medication.
    Joe Buglewicz | The Washington Post | Getty Images

    Some health experts argue that covering Wegovy and other GLP-1s for weight loss could reduce a plan’s health-care costs down the line and improve future health outcomes for patients. 
    Shawn Gremminger, the president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said employers would be “well disposed to cover” those drugs if they are effective at lowering long-term costs. Members of that group represent private, public, nonprofit and union and Taft-Hartley organizations that spend over $400 billion annually on health-care.
    But he said that it will likely take years before employers have access to concrete data on the potential cost savings of covering those treatments. 
    Gremminger added that employers are “a little bit less focused” on what covering weight loss drugs will mean for overall health-care spending 10 years from now. Their focus is on providing care to their current employees, some of whom will end up leaving the company down the line. 
    Employers have other questions, too, including about longer-term data on GLP-1s for weight loss, and about patients stopping those drugs prematurely. It also isn’t clear to some employers whether patients have to stay on Wegovy for the rest of their lives or if they can eventually taper off of it, Gremminger said.
    Obesity and heart disease are chronic diseases, which means most patients will have to keep taking Wegovy along with diet and exercise to maintain the health benefits. Novo Nordisk said, “not unexpectedly,” data from their clinical trials shows that people who took Wegovy regained weight when they went off the drug.
    “This supports the belief that obesity is a chronic disease that requires long-term management, much like high blood pressure or high cholesterol, for which most patients remain on therapy long term in order to continue to experience the benefits of their medications,” Novo Nordisk said in a statement.
    But Gremminger said the standard of care for the long-term use of weight loss drugs is “in flux.”

    Considering the costs 

    Faced with the dramatic cost of covering Wegovy and similar drugs, the state of North Carolina is paring back.
    State employees will no longer have insurance coverage for GLP-1s when used for weight loss at the beginning of next month. In January, the board of trustees for the state’s health plan voted to exclude those drugs from coverage. The plan will still cover GLP-1s for diabetes, such as Novo Nordisk’s Ozempic, along with some older obesity drugs.  
    North Carolina’s treasurer and a GOP candidate for governor, Dale Folwell, told CNBC the expanded approval of Wegovy last week doesn’t change anything.
    “We’ve never questioned the efficacy of the drug. We’ve always questioned what we’re having to pay for it,” Folwell said. “Even as the scope of the use of this drug widens, it doesn’t change the cost.” 

    North Carolina State Treasurer Dale Folwell attends the Republican Governors Association conference in Orlando, Florida, Nov. 16, 2022.
    Phelan M. Ebenhack | AP

    He said dropping weight loss drugs wasn’t a decision the board wanted to make, but it did so because the state’s plan is “under financial siege” due to Wegovy. That treatment cost the state’s health plan nearly $87 million last year, according to a state presentation from January. Overall, GLP-1 drugs for weight loss cost the plan roughly $102 million in 2023. 
    An outside consultant projected a $1.5 billion loss by 2030 if the state plan continued to pay for those treatments. North Carolina also estimated that continuing to cover GLP-1s for weight loss would double the premiums for all 482,000 active employees and dependents on the plan, even those not taking the drugs. 
    Folwell said the state has been working with Novo Nordisk and Eli Lilly, the maker of similar treatment Zepbound, to reach an agreement on costs. But he noted that the companies have rejected the state’s recommendations “at every turn.” 
    A spokesperson for Eli Lilly said the company is committed to working with health-care, government and industry partners “to help people who may benefit from Zepbound access it, but obstacles to that goal still exist.” The spokesperson added that policies around insurance have “not caught up to science.” 
    Novo Nordisk said in a statement it urges Folwell and the state health plan to “put patients first” and reconsider the decision to drop weight loss drug coverage.
    Novo Nordisk believes “denying patients insurance coverage for important and effective FDA approved treatments for obesity is irresponsible,” according to a company spokesperson, who said the company will continue to engage with state health plan officials to address any potential cost concerns.
    Both drugmakers have launched programs to help patients, with or without commercial insurance coverage, afford their weight loss treatments.
    Novo Nordisk says its savings program can help patients without insurance coverage save up to $500 per 28-day supply of Wegovy. The company also said roughly 80% of Wegovy patients in the U.S. with commercial coverage for the drug are paying $25 per month or less.

    List prices of weight loss drugs before insurance

    Wegovy from Eli Lilly: $1,059.87 per monthly package
    Zepbound from Eli Lilly: $1,059.87 per monthly package
    Saxenda from Novo Nordisk: $1,349.02 per monthly package

    Increased competition in the weight loss drug market could force the two companies to drive down the costs of their injectable treatments, said Ceci Connolly, CEO of the Alliance of Community Health Plans. The organization represents regional, community-based health plans that cover more than 18 million Americans across the U.S. 
    Health plans may also be more open to covering convenient and potentially cheaper oral versions of the drugs, which several drugmakers are racing to develop. Those cheaper options, though, are likely still years away. That includes cheaper generic versions of existing GLP-1s, along with treatments from rival drugmakers.

    Coverage with cost controls 

    More employers will likely start considering coverage of Wegovy following its expanded approval, according to Julie Stich, vice president of content at IFEBP.
    But the plans that decide to include Wegovy when they next update their formularies will likely consider implementing certain requirements to control costs. Those requirements will look different for Wegovy’s two approved uses. 
    Most employers that cover GLP-1s for weight loss already use cost controls, according to the October survey by IFEBP.
    Nearly a third of companies said they used “step therapy,” which requires their members to try other lower-cost medications or means of losing weight before using a GLP-1. Around 16% of employers used certain eligibility rules, such as requiring employees to have a certain BMI, or body-mass index, to receive coverage. 

    Fiordaliso | Moment | Getty Images

    Other employers are using financial requirements, such as annual or lifetime spending caps for the treatments. For example, the Mayo Clinic’s employee health plan added a lifetime coverage limit of $20,000 for weight loss drug prescriptions filled after Jan. 1. 
    Meanwhile some players in the insurance industry are trying to find ways to help health plans manage the costs of covering the treatments. 
    Last week, Cigna’s pharmacy benefits management unit said it will limit spending increases for GLP-1s to a maximum of 15% annually for employers and other health plans. Currently, some of the company’s clients are seeing spending for those treatments rise 40% to 50% annually. 
    If more health-care companies pursue similar efforts, their affiliated health plans could become more open to covering weight loss drugs “knowing that their risk will be limited in that way,” Stich said. More