Ozempic Could Cost Medicare An Extra $26.8B Per Year If Coverage Were Expanded: Analysis

Patient demand for GLP-1 weight loss drugs is continuing to grow, and, if Medicare were to expand coverage to meet that demand, it could cost the program billions each year, according to a new analysis.

Traditional Medicare does not currently cover these drugs, which include brand names like Novo Nordisk’s Ozempic and Wegovy, for weight loss. There was a push in Congress in 2021 to expand coverage to include the use of these drugs for weight loss, though that did stall.

Researchers at KFF noted that if just 10% of Medicare patients with obesity were to begin taking Ozempic for weight loss, it could cost the program between $13.6 billion and $26.8 billion per year. For the lower estimate, the analysts used diagnostic data from 2021 that showed 19% of Medicare patients were diagnosed as obese, and they based the higher estimate on survey data that suggest 41.5% of adults aged 60 and over are obese.

For comparison, the researchers said that total spending in Medicare Part D was $98 billion in 2021.

However, should these GLP-1 drugs prove effective in helping patients lose weight and manage or avoid other costly chronic conditions like diabetes or heart disease, the savings in overall healthcare costs could offset some of the additional spending, the KFF analysts said.

Medicare is a trendsetter in coverage decisions, and the commercial space often follows its lead.

“While competition among GLP-1 medications could have a moderating effect on launch prices, the combination of intense demand and high prices for these treatments is likely to place tremendous pressure on Medicare spending if coverage is authorized, even in the wake of the prescription drug provisions in the Inflation Reduction Act,” the analysts wrote.

“A decision to cover weight-loss drugs under Medicare could have ripple effects for employers and other payers if they follow Medicare’s lead,” they added.

One interesting wrinkle that could develop in this conversation is the new price negotiation powers afforded to Medicare under the Inflation Reduction Act. If these products were added to the limited list of negotiated drugs, the soonest there would be a negotiated price would be 2027 for semaglutide, based on its 2017 Food and Drug Administration approval date.

The IRA also caps out-of-pocket spending in Part D at $2,000 per year, which does help make these products more affordable for patients but could still lead to access challenges, the analysts said.

Policymakers could make adjustments to Part D to make these drugs more available at an affordable price, they wrote.

“If the underlying Part D law is not changed, adding Medicare coverage for obesity drugs could possibly be achieved through other pathways, such as a demonstration program through the Centers for Medicare & Medicaid Innovation or Section 402 authority,” the researchers wrote.


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