Medicare Coverage of Weight Loss Drugs May Reduce Access Disparities

May 23, 2023 - Given the substantial costs, Medicare coverage of weight loss drugs could lead to higher Medicare spending but may help reduce access disparities, according to a KFF policy watch.

GLP-1 (glucagon-like peptide-1) agonists were initially approved to treat type 2 diabetes but have become popular among people with obesity due to their effectiveness as weight loss agents. These medications, including Novo Nordisk’s Ozempic and Wegovy (semaglutide) and Eli Lilly’s Mounjaro (tirzepatide), are not covered by Medicare when used for weight loss.

The 2003 law that established the Medicare Part D prescription drug benefits prohibits Part D plans from covering drugs used for weight loss. The public payer’s coverage of obesity services and treatments includes obesity screening, behavioral counseling, and bariatric surgery.

The policy watch assesses the potential cost and equity implications if Medicare covered the anti-obesity drugs and how the Inflation Reduction Act could address these issues.

Drugmakers have been pushing for Medicare to cover these drugs, as there is some evidence that GLP-1s can lead to significant weight loss and can offer additional health benefits to people with medical conditions exacerbated by obesity.

Bipartisan legislation was introduced in the 117th Congress to allow Part D coverage of weight loss medication for individuals with related comorbidities, but a bill has not been introduced in the current Congress.

If Medicare offered coverage of the weight loss drug, the program would see significant spending increases. Wegovy has an annual estimated net price of $13,600. KFF cited a study that found if 10 percent of Medicare beneficiaries use Wegovy, the annual cost to Medicare could range from $13.6 billion to $26.8 billion. Total annual Part D spending in 2021 was $98 billion.

However, the estimates do not account for potential reductions in Medicare spending resulting from lower medical expenditures associated with other diseases due to weight loss, KFF noted.

Although authorizing coverage would lead to significant spending growth for Medicare, the current scenario may exacerbate access disparities as many Medicare beneficiaries cannot afford Wegovy. Black beneficiaries experience higher rates of obesity and tend to have lower incomes compared to White beneficiaries, meaning they could be least able to afford the drugs without Medicare coverage.

Provisions in the Inflation Reduction Act may help minimize the spending repercussions of covering weight loss drugs.

For example, the drugs could be among the medications subject to Medicare’s new drug price negotiation, although the negotiated price would not take effect for several years due to the drugs’ recent FDA approvals.

The policy watch suggested that lawmakers could shorten the period between FDA approval and the year negotiated prices take effect to help limit the cost impact on Medicare. However, researchers noted this is unlikely, given the current political climate.

Under the Inflation Reduction Act, the weight loss drugs would be subject to the inflation rebate that aims to limit annual increases in drug prices. The legislation will also cap out-of-pocket spending for Medicare Part D beneficiaries at $2,000 in 2025, although that limit may still be expensive for low-income beneficiaries.

Aside from adjusting the Part D law, Medicare coverage for anti-obesity drugs could happen through demonstration programs through the CMS Innovation Center or Section 402 authority.

Covering weight loss drugs could help improve access and affordability for beneficiaries, leading to better health outcomes. But at the same time, it would likely raise spending for Medicare. Policymakers must weigh these consequences when deciding on coverage authorization.