Medicare’s GLP-1 spending is skyrocketing, even without weight loss coverage: KFF
Medicare spending on pricey GLP-1 drugs like Ozempic has skyrocketed in recent years, and expanding the insurance program’s coverage of the drugs — like for weight loss — could cause spending to accelerate even more drastically, according to a new report.
Gross Medicare spending on GLP-1s rose from $57 million in 2018 to $5.7 billion in 2022, according to a KFF analysis of recent government data. As of 2022, Medicare covered three GLP-1s for diabetes: Ozempic and Rybelsus, manufactured by drugmaker Novo Nordisk, and Mounjaro, manufactured by drugmaker Eli Lilly.
“The fact that covering GLP-1s under Medicare Part D for authorized uses is already making a mark on total Part D program spending could be a sign of even higher spending to come,” Juliette Cubanski and Tricia Neuman, Medicare researchers at the health policy group, wrote in the report.
GLP-1s were initially developed to treat diabetes but have shown efficacy in helping patients lose weight and reduce the risk of cardiovascular events like heart attack or stroke. As a result, demand has soared for the medications — especially for combating obesity, which affects more than two in five American adults.
The drugs have proved a windfall for their manufacturers, but a source of financial stress for employers, health insurers and other sponsors of medical coverage. Even in the U.S.’ pricey prescription drug market — Americans pay some of the highest costs for medications in the world — GLP-1s are notably expensive: Annual list prices for the drugs can exceed $11,000.
The price tag of GLP-1s has curtailed coverage. To control spending, payers have limited access to the drugs, including through eligibility restrictions, care management programs and novel steps to restrict annual cost increases for clients. Only 25% of employers cover GLP-1s for weight management today, according to care delivery company Accolade.
As for Medicare, the massive insurance program is currently prohibited by law from covering weight loss drugs, though legislation has been introduced in Washington to change that.
Spending watchdogs and independent health policy experts have aired concerns that revoking this prohibition, and the subsequent surge in GLP-1 prescribing for seniors, could nudge Medicare closer to insolvency.
Medicare Part D plans cover GLP-1s for other indications, including diabetes and cutting cardiovascular risk. That’s already caused GLP-1s to rank among the top-selling drugs covered by Part D, the KFF found.
Medicare’s spending on GLP-1s is through the roof
Medicare Part D spending on GLP-1s, 2018 to 2022
Ozempic alone accounted for 2% of all Medicare Part D spending in 2022, the KFF said. That suggests the CMS could select the GLP-1 drug or its peers for price negotiation under a recently passed federal law allowing Medicare to negotiate the price of costly brand-name drugs directly with manufacturers.
The earliest the CMS could do so would be 2025, meaning a lower negotiated rice would be available starting in 2027, the KFF said.
Competition among GLP-1s could also moderate prices in the market, or lead to higher rebates negotiated between drugmakers and pharmacy benefit managers, which sit between drugmakers and insurance companies in the drug supply chain, the KFF said.
But absent actions to lower the cost of GLP-1s, “the combination of intense demand, new uses, and high prices for these treatments is likely to place tremendous pressure on Medicare spending, Part D plan costs, and premiums for Part D coverage,” Cubanski and Neuman concluded.
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