Mar 14, 2024 - Health

How Medicare can start covering a popular weight-loss drug for more people

Illustration of a bathroom scale with a dollar sign formed by the indicator in the weight scale window.

Illustration: Aïda Amer/Axios

Federal regulators' recent approval of anti-obesity drug Wegovy to reduce cardiovascular risks in overweight people opens the door for Medicare to cover the pricey treatment for more people — though takeup is likely to be slow initially.

Why it matters: More than 40% of Medicare enrollees have at least one heart condition, meaning the new Wegovy approval could greatly expand older adults' access to a drug that so far has been limited for this group.

Context: Medicare, the country's largest health insurer, is barred from paying for weight-loss drugs, but it can cover the drugs for other approved indications.

  • Those include diabetes, which the new class of GLP-1 agonists were initially approved for. In 2021, Medicare prescription drug plans spent $2.6 billion on diabetes treatment Ozempic for about a half-million enrollees, per KFF.
  • Drugmakers, who are lobbying Congress to reverse Medicare's prohibition on weight-loss drugs, are also working to secure the Food and Drug Administration's approval of these drugs for kidney disease, sleep apnea and other conditions that often go hand in hand with obesity.

Where it stands: Despite the FDA green light last week, the Centers for Medicare and Medicaid Services is still reviewing how it will cover Wegovy for heart risks.

  • Medicare prescription drug plans can add coverage for this indication at any point now. But the plans most will likely wait to change their formularies until after CMS has made its determination to ensure consistency, said a spokesperson for health insurance trade group AHIP.

Reality check: The proposition of covering Wegovy isn't that attractive right now for Medicare prescription drug plans, said analysts at investment research firm Capstone.

  • Plans can't adjust member premiums midyear, so the cost of covering Wegovy — which is listed at about $1,300 per month before any rebates or discounts — would come directly out of plan profits, said Capstone senior associate Angela Lamari.
  • Plans already cover cheaper generic drugs like statins to reduce heart attacks and strokes, so the benefit of covering Wegovy isn't likely to outweigh the cost if CMS considers those drugs to be in the same category.

Yes, but: Plans may be more interested in covering the drugs next year, Lamari said. Wegovy could be a big selling point for Part D plans competing for customers.

Between the lines: Medicare coverage of Wegovy for heart risks could mean millions of new prescriptions for drugmakers, Compass Point Research & Trading managing director Max Reale predicted in a new report.

  • Starting next year, Medicare beneficiaries' out-of-pocket drug costs will be capped at $2,000 annually, with the government picking up the rest.
  • Reale said that means the Medicare population could be more lucrative for drugmakers than the commercial market, since those insurers are more likely to make patients pay more out of pocket.
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