Daily Briefing

The cost of weight-loss drugs is putting some insurers off

New weight-loss drugs are becoming increasingly popular, but their high costs have led many insurers to limit coverage or deny it altogether. Advisory Board experts weigh in on how this could impact access and outline what they'll be watching as the industry response continues to unfold.

Patients on new weight-loss drugs face coverage difficulties

New weight-loss medications, such as Novo Nordisk's semaglutide, mimic a hormone called glucagon-like peptide-1 (GLP-1) to target areas of the brain that regulate appetite and food intake. Previously, these drugs were used to treat type 2 diabetes.

Compared to older medications on the market, GLP-1 drugs result in more weight loss for patients. For example, in a clinical trial of Wegovy, a higher-dose version of semaglutide approved for weight loss, patients lost an average of 15% of their body weight over 68 weeks, leading many experts to call it a "game-changer" for obesity treatments.

However, many patients hoping to take these new weight-loss drugs — which cost at least $900 a month — have faced difficulty getting coverage. Currently, Medicare does not cover weight loss medications, and only 22% of employers offer coverage for these drugs, according to data from the International Foundation of Employee Benefit Plans.

Among insurers who do cover weight-loss drugs, many are setting up strict prior authorization requirements that go beyond what FDA's label suggests. For example, one insurer only covers patients who have a BMI over 40 instead of the FDA BMI threshold of 30. Another insurer requires patients to try older weight-loss treatments first.

Some patients have been able to access GLP-1 drugs through off-label prescriptions of the versions formulated for diabetes, but these prescriptions have also led to cost increases for insurers.

According to an analysis by consulting firm Segal, insurer spending on GLP-1 diabetes drugs has risen significantly over time, rising from 0.6% in 2019 to 4.7% in 2023 so far. In addition, around 25% to 35% of recent claims for GLP-1 diabetes drugs have been for off-label prescriptions for patients without a diabetes diagnosis.

"For the plans, it's very scary," said Eileen Pincay, VP and national pharmacy practice leader at the Segal. "This is probably going to be even higher than what we're seeing for Humira in regards to cost, and I think that's what's scary about it."

To reduce costs, some insurers are now working to limit off-label prescriptions of GLP-1 diabetes drugs. For example, one insurer recently sent letters to physicians telling them that off-label prescriptions of GLP-1 diabetes drugs are "not a covered benefit" and that "off-label usage of medications can pose a risk to our members rather than prove beneficial."

Some insurers have also contacted pharmacies through pharmacy benefit managers (PBMs) to let them know that a diabetes diagnosis code is required to approve claims for these drugs. Pharmacies that fill prescriptions without the required code could face audits.

While many stakeholders are faced with challenges, Advisory Board's Regina Lohr notes that employers who self-insure for their employees' healthcare costs find themselves in a particularly challenging situation.

They want to provide their employees access to medications that could improve their health — but spending on these drugs has risen quickly. Employers have to balance access to these drugs with providing an affordable health plan to their beneficiaries. Limiting coverage to FDA-approved diagnoses is one of the few mechanisms they have to mitigate their cost exposure while still making a pathway for employees at greatest need to access the medications. 

What's the future of coverage for these weight-loss drugs?

According to a new study from the USC Schaeffer Center for Health Policy and Economics, Medicare coverage of new weight-loss drugs could save taxpayers between $175 billion and $245 billion over a ten-year period. More than 60% of these savings would be due to a reduced need for hospital inpatient and skilled nursing care

Advisory Board's Gabriela Marmolejos was struck by the number of assumptions that underpin the projected public health benefits in USC's study, including decreased heart disease, diabetes, and other related conditions that increase medical spending.

The study assumes all people over 24 with a BMI greater than or equal to 30 kg/m2 (or a BMI greater than or equal to 27 kg/m2 with hypertension or type 2 diabetes) would benefit from using these new weight management medications for the rest of their lives.

However, Marmolejos noted that not all patients will tolerate the side effects of these medications, and many discontinue use after one to two years, which could lead to weight cycling associated with harmful long-term health consequences.

While the paper rightly emphasizes the potential societal gains associated with better management of obesity nationwide, its one-size-fits-all approach to pharmacological obesity therapy is unrealistic. According to Marmolejos, leaders should ensure medications are prescribed as part of comprehensive obesity treatment plans that are tailored to individual patient needs and health histories.

Treating everyone with obesity in the United States would likely lead to a significant increase in healthcare costs. In a 2022 analysis from the Institute for Clinical and Economic Review, researchers found that if semaglutide was covered at its current cost for just 0.1% of eligible patients, insurers would have to move money or increase their premiums.

According to Stacie Dusetzina, a health policy professor at Vanderbilt University Medical Center, increased competition among drug manufacturers could help reduce the costs of these weight-loss treatments and also give insurers more room to negotiate. Currently, Novo Nordisk, Eli Lilly, Pfizer, and Amgen are all working on new weight-loss drugs.

Anand Parekh, chief medical advisor at the Bipartisan Policy Center, also noted that there needs to be more research on which patients benefit the most from these weight-loss drugs, which could allow insurers to at least open coverage to certain groups that need it the most first.

Overall, "[t]his is a really hard spot," Dusetzina said, noting that the high costs of these drugs will affect insurers, employers, and all members of a health plan if premiums increase or more costs are shifted to patients.

"It is a really important moment for thinking about this balance of what amount is paid by health plans, employers, the insured people and what amount is paid by the individual consumer needing these products," she added. "We want people to have access, but we also have to reckon with the price."

While we'll continue watching for any changes in how Medicare covers weight management medications, Advisory Board's Chloe Bakst suspects that it's unlikely to occur this year — or anytime soon — due to concerns around the high costs and long-term impact of the medications.

Bakst speculates that health plans, PBMs, and employers will continue to experiment with utilization management strategies as they look for ways to control spending on GLP-1s.

Crackdowns on off-label prescribing, stricter prior authorizations, and increased patient cost-sharing are all on the table, Bakst noted. These medications are one more example of the growing tensions between payers and providers related to clinical decision making.

For now, Advisory Board's Rachel Peroutky is taking all cost (and cost-savings) projections with a grain of salt. Obesity is an ultra-complex condition to manage. It's hard to believe that any single intervention — even one as effective short-term as the GLP-1s — will have a true long-term impact on health outcomes and utilization. According to Peroutky, we will know a lot more in the next year or two as we watch the industry response unfold. (Chen, STAT+ [subscription required], 8/3; Bettelheim, Axios, 8/2, Advisory Board interviews and analysis)

5 catalysts that will impact the future of weight management drugs

The weight management medication market is facing a crucial turning point. Learn about the five game-changing moments that will affect the use of GLP-1s for weight loss — from expanded indications to Medicare coverage — and find out what stakeholders should do now to prepare for the future.







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