Medicare does not reimburse weight-loss medications. It’s possible this restriction will be lifted … [+]
A number of different stakeholders across the healthcare landscape are lobbying legislators and the Centers for Medicare and Medicaid Services (CMS) to change statutory rules prohibiting Medicare coverage of obesity drugs. These 20-year old statutes were put in place prior to obesity being defined as a disease in 2013, and the advent of improved weight loss therapeutics in 2014, and most recently in 2021.
The Treat and Reduce Obesity Act, which would lift the de facto interdiction of Medicare coverage of obesity drugs, has been introduced and reintroduced several times in the past 10 years. It is expected to be reintroduced this year. As in previous renditions, it has bipartisan sponsors.
While the proposed legislation has fairly broad and apparently growing support among lawmakers, it faces considerable hurdles prior to passage. These obstacles relate to the budgetary implications of paying for costly medications for millions of Medicare beneficiaries.
Developed for diabetes, but used for obesity at higher doses, a new generation of medications can induce loss of 15% to 22% of body weight on average. That makes these therapeutics superior to earlier generation products.
In June 2021, for example, the Food and Drug Administration (FDA) approved a weekly injection of 2.4mg semaglutide (Wegovy) for chronic weight management, to be accompanied by a reduced-calorie diet and increased exercise. The drug was cleared for individuals with a body mass index (BMI) of 30 and above, or a BMI of 27 or more and at least one weight-related ailment. In a pivotal clinical trial, patients on Wegovy experienced an average weight loss of 15%.
In 2022, the FDA approved Mounjaro (tirzepatide) for the treatment of type 2 diabetes. The drug may soon be approved for obesity. In a Phase 3 study, use of tirzepatide led to an average weight loss of 22%. The compound is the first such medicine to deliver more than 20% weight loss on average, compared to placebo, in a Phase 3 study. The average weight reductions rose as the dosage amount of the active ingredient increased. As such, experts are praising it as a potential game-changing weight-loss agent.
None of the newer generation products are the proverbial magic bullet, as all need to be used in conjunction with a diet regimen and exercise. There are also important questions about durability of the treatments, and whether they would need to be taken continuously in order to maintain effectiveness. Nevertheless, they’re welcome additions to the armamentarium healthcare providers have to address obesity.
More than 40% of U.S. adults are obese, according to federal government data. At least 200 diseases, including heart conditions, cancer and kidney disease, are linked to obesity. And so, the market for more efficacious weight-loss drugs could be quite large. Analysts at Morgan Stanley recently stated obesity drugs are “set to become the next blockbuster pharma category,” estimating global sales could reach more than $50 billion in 2030, up from $2.4 billion currently.
Nevertheless, there are several obstacles that may prevent these drugs from reaching their full potential in terms of revenue growth. These include their high per unit price, their relatively poor cost-effectiveness numbers, the worry among commercial payers about the budgetary implications of reimbursing expensive maintenance medications for millions of beneficiaries, and severe restrictions in the public insurer sector (Medicare and Medicaid).
List prices of the newer products run from about $1,000 to more than $1,300 a month. Until now, commercial insurance coverage has exhibited wide variation for weight-loss treatments, including the newer generation products, both in terms of coverage and conditions of reimbursement. More importantly, Medicare does not cover weight-loss drugs, and many Medicaid programs – run or overseen by state agencies – do not, either.
To increase access in Medicare to obesity medications, lawmakers, advocacy groups, and drug makers are pushing for legislation to get rid of a decades-old prohibition on Medicare coverage of weight-loss drugs.* The proposed Treat and Reduce Obesity Act would do just that. The bill has been pending in Congress for years, but backers hope the emergence of more effective drugs will enable momentum for the legislation’s passage.
Several things could improve the bill’s prospects. First, if a Novo Nordisk-funded study, expected to be completed in 2024, shows that semaglutide reduces the risk of heart attacks, stroke, and death in overweight and obese patients who have had heart disease, this could demonstrate that medication-assisted weight loss saves lives.
Second, the bill’s chances of success could be greatly improved with price cuts, especially given that the Congressional Budget Office (CBO) must provide a fiscal score for bills of this nature. Here, budget impact and cost-effectiveness come into play. The budgetary implications of coverage expansion to include obesity drug reimbursement could be significant and must be weighed by the CBO. Even conservative estimates of uptake suggest that obesity drug coverage would add billions of dollars in Medicare Part D spending. Lowering prices of obesity therapeutics reduces Medicare’s pharmacy benefit expenditures.
Moreover, the obesity drugs’ cost-effectiveness would improve if they were less pricey. Last August, the Institute for Clinical and Economic Review (ICER), which performs cost-effectiveness assessments, released a report on obesity medicines. Of the treatments reviewed, the ICER report gave the best ratings to semaglutide (Wegovy) and liraglutide (Saxenda). At the same time, ICER did not consider Wegovy cost-effective at the current price. At $237,000 per quality-adjusted life-year (QALY) gained, it is substantially above the $100,000-to-$150,000 range considered the upper bound for cost-effectiveness in the U.S.
And so, ICER suggested price cuts to bring Wegovy’s price in line with its value. Specifically, ICER indicated a benchmark annual price range for semaglutide of between $7,500 to $9,800 would make the product cost-effective.
Conspicuously though, the ICER report also recommended that insurers provide better coverage of obesity medicines. ICER included a specific recommendation to pass the Treat and Reduce Obesity Act of 2021, as this legislation would undo the prohibition on weight-loss drug coverage in the Medicare Part D (outpatient) program.
In the event the Treat and Reduce Obesity Act passes, this would allow for Medicare Part D coverage of obesity therapeutics. However, this in and of itself would not necessarily open the flood gates to full, unimpeded coverage. In fact, it’s very likely individual Part D plans would limit coverage to several preferred agents, while possibly excluding others, and impose a wide range of conditions of reimbursement on covered products to reduce financial exposure. These would include extensive use of prior authorization protocols, step edits, quantity limits, and indication restrictions.