In one of its last major policy actions, the Biden administration on Tuesday proposed a rule that would allow Medicare and Medicaid to cover weight loss drugs for patients with obesity.
The rule — if greenlit by the incoming Trump administration — would dramatically expand access to drugs like Wegovy and Zepbound that have shown remarkable efficacy in helping patients lose weight, but at a steep price tag of roughly $40 billion over a decade for federal and state governments.
Currently, Medicare is forbidden by statute from covering drugs for weight loss, while only a handful of state Medicaid programs pay for the medications. But “people with obesity deserve to have affordable access to medication and support,” CMS Administrator Chiquita Brooks-LaSure said on a call with reporters Tuesday morning.
More than 40% of Americans are obese, according to the Centers for Disease Control and Prevention. That percentage is expected to reach 50% by 2030. It’s a serious issue: Obesity can cause or worsen other significant medical conditions, including heart disease, diabetes, strokes and some cancers, and for many patients is doggedly resistant to diet and exercise.
Over the past few years, medications known as GLP-1s have gained widespread attention for their effectiveness in treating obesity. Patients can lose as much as 15% to 25% of their body weight while on the drugs, which work by imitating hormones that communicate fullness when people eat. Research also suggests that GLP-1s may lower the risk of other chronic conditions related to obesity.
Yet despite soaring demand, cost has proved a significant barrier to GLP-1 adoption for many Americans. Even in the U.S.’ pricey prescription drug market, GLP-1s are notably expensive: Annual list prices for the drugs can exceed $11,000.
The price tag has put off many employers and payers from coverage — fewer than 1 in 5 employer-sponsored plans included GLP-1s this year, according to health policy research firm KFF.
Access to the newest anti-obesity drugs has also been patchwork for the 72 million Americans in Medicaid. Currently, only 13 states cover GLP-1s for weight loss, according to KFF.
And the 68 million Americans on Medicare have had zero access to weight loss drugs, given legislation passed two decades ago preventing the program from covering the medications. The CMS allowed some coverage earlier this year, approving Novo Nordisk’s Wegovy for Medicare enrollees who are obese or overweight with cardiovascular disease.
Now, regulators are aiming to get around statutory restrictions entirely by revising the CMS’ interpretation of the law to recognize obesity as a chronic disease instead of a weight management issue.
The changing medical consensus around obesity drove the new interpretation, CMS officials said Tuesday.
“This is not about weight loss per se. This is about treatment of a chronic condition,” Meena Seshamani, the director of Medicare, said on the press call.
The new rule would expand access to the drugs to an estimated 3.4 million people on Medicare and 4 million people in Medicaid, according to a White House press release.
It would do so by allowing obese patients — people with a body mass index of 30 or higher — to qualify for Medicare coverage of weight loss drugs. The expanded coverage would not apply to overweight individuals.
The proposal also reinterprets the Medicaid statute, so anti-obesity drugs can no longer be excluded from the safety-net program.
The move is likely to be popular among U.S. patients — especially since the CMS doesn’t expect the expanded coverage to increase their premiums or out-of-pocket costs, thanks to consumer protection provisions in the Inflation Reduction Act passed in 2022, according to Seshamani.
Some Medicare enrollees currently on GLP-1s could see their out-of-pocket costs fall by as much as 95%, officials said.
However, the expanded coverage could prove expensive for taxpayers. The federal government expects to spend about $25 billion on weight loss drugs in Medicare over 10 years, a figure that could exacerbate existing financial stress on the program.
That sum doesn’t include the impact of any savings from patients’ improved health, though the Congressional Budget Office has estimated savings from GLP-1 coverage will be small, in the ballpark of $50 million to $1 billion each year.
As for Medicaid, the federal government expects to spend $11 billion over ten years, while states will pick up an additional $3.8 billion, according to Medicaid director Dan Tsai.
It’s uncertain how states will react to the proposal, given Medicaid is already often the No. 1 or No. 2 line item on state budgets.
Among states that don’t currently cover obesity drugs, only half say they’re considering adding coverage, with many citing cost as a key barrier, according to a KFF survey published earlier this month.
Tsai concurred that states are facing “substantial” budget pressure, which is why the federal government plans to contribute heavily to price tag of weight loss drugs. Regulators have also invited states to comment on the proposal, including on the timing of implementation, Tsai said.
Some questions remain, including whether the coverage expansion will include only brand-name medications or compounded versions of the drugs, which pharmaceutical manufacturers have opposed; and how the government will deal with ballooning demand for weight loss drugs amid ongoing shortages.
Still, regulators throwing open the doors for doctors to prescribe GLP-1s to Medicare and Medicaid patients would be a boon for drugmakers like Novo Nordisk, which sells GLP-1s Wegovy and Saxenda, and Eli Lilly, which sells Zepbound. Stocks for both companies rose Tuesday morning following the news.
If finalized, the rule would also benefit chronic care management companies and telehealth players that have built businesses on expanded access to the drugs, including Hims & Hers, Ro and Omada.
It would have a more complex impact on payers, which generally follow Medicare’s lead in coverage determinations so could feel pressured to include GLP-1s in their plans despite cost concerns. Companies offering Medicare Part D drug plans, including UnitedHealth, CVS and Humana, would be the most directly impacted.
However, all this depends on whether the incoming Trump administration decides to let the rule go into effect. Due to regulatory notice-and-comment periods, the CMS won’t be able to finalize the rule before President Joe Biden leaves office in January.
Trump’s picks to lead the HHS and CMS have espoused differing views on GLP-1s.
Robert F. Kennedy Jr., who Trump plans to nominate for HHS secretary, has been critical of the weight loss drugs, arguing in media appearances and online that a cheaper way to address obesity would be expanding the availability of healthy food. However, television personality and physician Mehmet Oz, who Trump plans to nominate for CMS administrator, has expressed support for GLP-1s on his talk show and on social media.
Overturning Medicare’s ban on covering weight loss drugs has enjoyed bipartisan support in Washington, but legislation making the change has moldered in Congress.