It’s rare — miraculously rare — that a drug can have such a pronounced effect that its immediate benefits translate into healthcare savings for years, even decades. To the wonder drugs Harvoni and Sovaldi, which wipe out hepatitis C, we can now add the weight-loss medicine Ozempic and its cousins Wegovy, Mounjaro and Zepbound.
These drugs have shown remarkable effectiveness in reducing obesity. That points to long-term reductions in users’ vulnerability to the whole spectrum of obesity-related medical conditions, including diabetes, cardiovascular disease, bad knees and sleep apnea.
They appear to work on other unhealthful dependencies such as narcotic and alcohol addiction, and possibly even on Alzheimer’s.
‘Insurers routinely don’t see people for more than a few years at a time …. This limits the length of time that health gains can be internalized as reduced claims.’
— David Anderson, University of South Carolina health policy expert
Yet millions of Americans are unable to access these drugs, thanks to the two big, interrelated flaws in our healthcare system: unrestrained pricing by drug companies and the economics of health insurance.
We’ll explore how these factors work to deny access to drugs that address America’s No. 1 health malady. But first, a look at the seriousness of the obesity epidemic.
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Weight is typically measured by the body mass index, or BMI, which correlates weight with height. Roughly speaking (and not accounting for differences between males and females), a “healthy” weight for a 5-foot-10-inch person is reckoned by the Centers for Disease Control and Prevention to be 128 to 173 pounds, which translates to a BMI of between 18.4 and 24.9.
Between 173 and 208 pounds places that person in the “overweight” category and heavier than that is judged to be “obese,” defined as a BMI of 30 or higher. Those with a BMI of 40 or higher, or 278 pounds for a 5-foot-10 adult, are “severely obese.”
America has been getting more obese over time. In 1960, about 31.5% of U.S. adults were overweight; in 2017 the figure was 30.3%. In 1960, however, 13.4% of adults were obese and 0.9% severely obese; by 2017, 42.8% of adults were obese and 9.6% severely obese.
The rate of obesity among children — about 20% — is especially worrisome. Obese children are more likely than those with healthy weights to have high blood pressure and diabetes, and more likely to be obese in adulthood.
The toll this epidemic takes on the economy is horrific. Obesity and its consequences cost the U.S. healthcare system nearly $173 billion a year, the Centers for Disease Control and Prevention estimates.
Experience with the weight-loss medicines thus far shows that they can cut the rates of obesity-related conditions materially. A five-year study of more than 24,000 nondiabetic but obese subjects published earlier this month by a team of Taiwanese researchers found not only significant reductions in heart disease, hypertension, stroke and kidney failure, but in mortality from all causes as well. Those in the control group (not receiving the drug) had a 3.5% annual mortality rate; for those given the drug, it was only 0.75%.
So why would stakeholders in our healthcare system not be beating down the doors to make these drugs more widely available?
The answer, of course, boils down to money.
The estimated cost of Wegovy and similar drugs for insurers, net of bulk discounts provided by manufacturers (Denmark-based Novo Nordisk for Wegovy and Ozempic and Indianapolis-based Eli Lilly for Mounjaro and Zepbound) runs from about $8,600 to $9,100 a year. That’s a big lift for insurers contemplating coverage of drugs for which the public demand can be in the millions.
That might work if insurers could be sure that the long-term savings from their enrollees’ health improvements would save them as much or more. In our fragmented healthcare system, however, they can’t be sure that they’ll still be covering those enrollees in the cost-avoidance period. Customers can move to other insurers or leave the employers who were providing the insurance.
“Insurers routinely don’t see people for more than a few years at a time,” observes David Anderson, an expert in health policy at the University of South Carolina. “This limits the length of time that health gains can be internalized as reduced claims.”
As a result, insurers have been placing obstacles in the way of customers seeking coverage. Some require advance authorization before they’ll pay or limit coverage only to patients with a high BMI. Some insurance plans will cover them only for employees already diagnosed with diabetes, the condition for which these medicines were first developed, but not for weight loss alone.
Insurers administering plans for self-insured employers — large companies and institutions — are probably responding to their clients’ directives.
Some big employers that originally covered the weight-loss drugs have pulled back. The Mayo Clinic has imposed a $20,000 lifetime limit on the coverage for its employees. Purdue University will cover the drugs for employees with BMIs over 30, but requires employees to have lost at least 5% of their body weight after three months to continue coverage.
Others have simply dropped the option altogether. That leaves employees or the uninsured on the hook for the cost of $1,000 or more a month.
The insurer best positioned to pay for the weight-loss drugs and to reap the long-term benefits is Medicare, in which enrollees typically remain for life. Moreover, insurers are generally required to cover drugs considered the standard of care for known conditions.
Unfortunately, Medicare is prohibited by law to cover drugs prescribed specifically for weight loss. It can pay for them only if they’re prescribed for a related condition, such as heart disease or diabetes. For example, Wegovy was added to the standard formulary for Medicare’s Part D prescription benefit after it received approval from the Food and Drug Administration in March for the treatment of heart attack risk.
The popularity and efficacy of the drugs prompted legislators in June to update a measure unsuccessfully introduced in 2014 legalizing Medicare coverage for weight loss alone. The new version would cover mostly those who had been taking a drug for at least a year before joining Medicare, however.
Some experts estimate that expanding coverage of the weight-loss drugs would cost Medicare up to $6.1 billion a year, assuming that 10% of patients eligible for the coverage actually receive prescriptions. That would increase the $120-billion annual cost of Medicare prescriptions (net of enrollee premiums and contributions from state programs) by a little over 5%.
Whether that cost would be fully offset by subsequent healthcare savings for Medicare is unclear. Not every patient prescribed the weight-loss drugs tolerates them well enough to stay on them for even a year, and not all will escape a major health crisis that could have been averted by weight loss alone.
But it seems now that our healthcare system will have to deal with the new class of weight-loss drugs in one way or another. Wegovy and Ozempic are expected to be selected for the next round of Medicare price negotiations, due to take place next year with price reductions effective starting in 2027. Drug industry analysts don’t expect the drugs’ popularity to wane. The market for them reached $6 billion last year, according to Goldman Sachs, which projected that it would grow to $100 billion by 2030.
The weight-loss drugs are by no means the most expensive on the market — that trophy belongs to certain cancer drugs and gene therapies, some of which clock in at several million dollars per treatment. But none of those serve a market anywhere near the potential size of weight-loss treatments.
Unless the U.S. moves toward a single-payer healthcare system and starts to place limits on drug prices, it’s the manufacturers of the weight-loss drugs that will reap most of the benefits. Sales of Wegovy and Ozempic made Novo Nordisk the most valuable European company last year and helped drive an increase in profits at Lilly for the second quarter ended June 30 by nearly 69% over the year-earlier period.
To put it another way, America’s 20th century healthcare system is coming face to face with a spate of 21st century drugs. Something will have to give.