Expanded coverage for weight loss drugs could cost Medicare billions
Patient demand could result in expanded coverage, but it could cost the federal program between $13.6 and $26.8 billion annually.
Photo: Shana Novak/Getty Images
There's an increasing buzz among patients for GLP-1 weight loss drugs, such as Novo Nordisk's Ozempic and Wegovy, but if patient demand continues to grow and Medicare expanded its coverage in response, it could cost the federal program between $13.6 and $26.8 billion annually.
That's according to a new KFF analysis, which noted that manufacturers of weight loss drugs, such as Novo Nordisk and Eli Lilly, are pushing for a change in law to allow coverage under Medicare, despite uncertainty about the risks of using the drugs.
That would come at significant cost to Medicare, the analysis found. Wegovy, for example, has an annual estimated net price of $13,600. According to a recent study in the New England Journal of Medicine, if 10% of Medicare beneficiaries with obesity use Wegovy. The annual cost to Medicare could range from $13.6 billion – based on a 19% obesity rate from traditional Medicare diagnoses in 2021 – to $26.8 billion, based on a 41.5% obesity rate from survey data for adults ages 60 and older. Higher take-up rates would mean higher Medicare spending.
To put that in context, total annual Part D spending in 2021 was $98 billion. The authors do point out, however, that the estimates don't account for potential Medicare spending reductions that might occur if the weight loss drugs reduce spending linked to other conditions, such as heart disease.
According to Seeking Alpha, Novo Nordisk's shares rose about 2% in European trading Monday after demonstrating in a small study that Wegovy did cut the risk of heart disease. After taking the drug for a year, the risk of heart attack or stroke over the next 10 years dropped from 7.6% to 6.3%. Eli Lilly is pushing for its own GLP-1 drug weight loss drug, Mounjaro, for indication before the end of the year.
WHAT'S THE IMPACT
Medicare coverage of obesity services currently includes obesity screening, behavioral counseling, and bariatric surgery, but not drugs that are prescribed for weight loss. According to KFF, the 2003 law that established the Medicare Part D prescription drug benefit explicitly prohibits Part D plans from covering drugs used for weight loss, along with some other types of drugs.
Even though expanding coverage would cost Medicare billions more, maintaining the status quo could raise access and equity concerns given the current price, according to the analysis. Looking again at Wegovy, the annual cost is unaffordable for many beneficiaries, and since Black beneficiaries have statistically higher rates of obesity than other racial and ethnic groups, Black beneficiaries may be the least able to afford the new drugs, given their historically lower incomes and assets as compared to white patients.
The Inflation Reduction Act of 2022 could help lessen the cost impact of weight loss drugs on Medicare and Part D enrollee out-of-pocket spending, authors said. If covered by Medicare, weight loss drugs could be among the limited number of drugs that will be subject to Medicare's new drug price negotiation authority – but not for several years. At the earliest, a negotiated price for semaglutide, for example, would not be available before 2027, and not before 2031 for tirzepatide.
THE LARGER TREND
To limit the potential cost impact to Medicare, lawmakers could consider shortening the period between FDA approval and the year negotiated prices take effect, as proposed in the Biden Administration's FY2024 budget. But adopting this change to the newly-launched negotiation program seems unlikely in the current political climate, according to the analysis.
Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com
