Economists Warn Of Costs If Medicare Covers New Obesity Drugs

Economists warn of costs if US Medicare covers new obesity drugs | Health

The cost of expanding U.S. Medicare prescription drug coverage to pay for expensive, new obesity medications could be catastrophic, health economists warned in a report published on Saturday.

Big-selling diabetes drugs have been repurposed as obesity treatments after demonstrating weight loss of more than 20% in clinical trials. While they are far more effective than older drugs, lifetime use might be required to keep lost weight off.

Once-weekly injections of Novo Nordisk’s (NOVOb.CO) Wegovy, for example, cost more than $13,000 per year in the U.S. after rebates and discounts. Mounjaro from Eli Lilly and Co (LLY.N), expected to gain U.S. approval for obesity next year, retails at $1,540 for a one-month supply for diabetes.

Presently, Medicare is forbidden by law from paying for antiobesity prescriptions. But should the bipartisan The Treat and Reduce Obesity Act get reintroduced and passed by Congress, Medicare will be compelled to cover drugs for weight loss.

Health economists writing in The New England Journal of Medicine estimate that if 10% of Medicare recipients with obesity diagnoses used prescription weight loss drugs, annual part D spending would be $26.8 billion for Wegovy compared with $1.32 billion for a generic version older Qysmia from Vivus Inc.

That amounts to nearly 20% of the total 2019 Medicare Part D spending, Khrysta Baig of Vanderbilt University School of Medicine and colleagues said.

“The burden of obesity and obesity-related conditions is unquestionably high, but the value of Medicare coverage of antiobesity medications remains unclear,” they said, adding that more research is needed to know whether weight loss induced by these drugs translates to better long-term health outcomes.

The Medicare health program covers more than 60 million Americans, most over age 65. The authors point out that many people in the program have already incurred the health problems associated with long-term obesity, unlike younger populations typically included in clinical trials.

Obesity prevalence in the United States is 41.5% among adults aged 60 and older, according to the Centers for Disease Control and Prevention.

The influential Institute for Clinical and Economic Review (ICER) has said the annual price of Wegovy would need to decrease to $7,500 to $9,700 for it to be cost effective compared with lifestyle modification alone. Even at that price range, it still would not be cost-effective compared with generic Qysmia, ICER said.

“Given the outstanding questions about the benefits of these drugs for Medicare beneficiaries, it would be prudent for Congress and CMS (the Centers for Medicare & Medicaid Services) to fully consider tradeoffs before passing legislation of this magnitude,” Baig said.

CMS: US Health Care Spending Reached $4.3 Trillion In 2021 During COVID

US Health Spending Edges Past $4.3 Trillion as Covid Drags On - Bloomberg

During the peak COVID timeframe in 2021, the U.S. spent nearly $4.3 trillion on health care. Government insurance programs, such as Medicare and Medicaid, made up 42% (or a whopping $1.8 trillion of national health care spending) in 2021. That’s according to the Centers for Medicare and Medicaid Services (CMS), which says private insurance programs, including employer-sponsored plans and plans purchased through the Affordable Care Act, made up 28% of spending, or about $1.2 trillion.

Also, out-of-pocket spending, such as premiums paid by individuals and other out-of-pocket costs, spending by third-party payers, investment in research and equipment, and public health activity accounted for the remaining 29%, or $1.2 trillion, of national health spending.

Breaking it down even further, in 2021, about 64 million Americans received health insurance through Medicare. The largest component of Medicare spending is on hospital care services, which accounted for nearly 40%, or $351 billion, of spending in 2021. Hospital care has been declining, however, as a share of Medicare spending since a prescription drug benefit became part of the program in 2006. Over the last two decades, spending on prescription drugs grew from less than $2 billion in 2000 to $120 billion in 2021.


About 77 million Americans, including children below the poverty level, nursing home residents, and non-elderly adults with disabilities used Medicaid in 2020. Medicaid spending for hospital care has been the largest portion of total payments for the program, making up roughly 35% of total spending on average, and is projected to stay relatively stable. Overall, spending for dental and other health, residential, and personal care expenditures are driving the growth in Medicaid payments. In the past 20 years, such spending has more than tripled from about $41 billion to $154 billion.

In 2020, private insurance programs covered 217 million people. Spending on hospital care services is the largest source of payment by private insurance programs. Such spending has tripled in the past two decades, from $150 billion to $449 billion. Another driver of overall growth in spending by private insurance is prescription drugs. Such spending has grown from $70 billion in 2000 to $152 billion in 2021.

CMS predicts federal spending for Medicare and Medicaid will increase faster than private spending. For example, according to their projections from March 2022, Medicare spending will climb from about $1.0 trillion in 2022 to $1.7 trillion in 2030, an increase of 68%. Medicaid spending would grow from $0.8 trillion to $1.2 trillion, an increase of 48%. Meanwhile, spending by private insurance programs would increase from $1.3 trillion to about $2.0 trillion, an increase of 50%.


According to the Peterson Center on Healthcare, some solutions to the continuing rise in health care spending could lie in tracking health care spending at the state level and addressing shortages and the high prices for medications, to name a few.

Last Updated 03/15/2023

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