As obesity rates in the United States soar, insurance companies, including Medicaid and Medicare, are facing financial headwinds to pay for prescription drugs for weight loss.
Semaglutide, the generic name for Mounjaro, Wegovy, and Ozempic, is an injectable medication using GLP-1 agonists (incretin mimetic drugs) to trigger the pancreas to release the right amount of insulin when blood sugar levels are high.
The Food and Drug Administration (FDA) approved semaglutide for treatment of type 2 diabetes in 2017. Since then, the off-label use as a treatment for obesity has garnered widespread attention.
Although three of the drugs contain semaglutide as the primary active ingredient, Ozempic is targeted specifically at type 2 diabetes patients, whereas Wegovy is marketed as a treatment for obesity, and semaglutide is the generic, available primarily from compounding pharmacies—those that can make specialized medications for individual customers.
Mounjaro, like Ozempic, is targeted at diabetes, and it uses a related drug called tirzepatide. A tirzepatide-based obesity drug is marketed under the brand name Zepbound.
Driving Shortages, Cost Hikes
Medicare, Medicaid, and most private insurance cover these drugs for the treatment of diabetes. Many employer plans and some Medicaid programs extend coverage for obesity. Medicare, by law, does not. Many have identified these drugs as a major driver of higher insurance costs and premiums in annual filings with state regulators.
The widespread use of these drugs for off-label weight loss is also driving concerns that they will become unavailable to patients with diabetes. The American Society of Health-System Pharmacists (ASHP) issued an August advisory warning of shortages of the Novo Nordisk products Ozempic and Wegovy.
FDA Delays
A larger policy issue is at stake as well, says Merrill Matthews, Ph.D., a resident scholar with the Institute for Policy Innovation.
“Off-label prescribing is very common, with surveys suggesting some one in five drugs being prescribed off-label,” said Matthews. “It used to be that cancer drugs were the most prescribed off-label, but that may have changed, with several psychiatric and other drugs being prescribed off-label.
“One important reason for off-label prescribing is the FDA approval process is long, complicated, and expensive—and patients are not inclined to wait for years, or even months, for a drug that might help them,” said Matthews. “If patients cannot get Novo Nordisk’s Wegovy, which is approved for weight loss, a doctor may prescribe Ozempic, which has the same active ingredient, semaglutide, just less of it.”
Premium Cost Driver
With insurers saying the demand for these drugs is driving up insurance costs, the situation could get worse before it gets better. The FDA says approximately 90 million privately insured Americans are potentially eligible to use the drugs.
Although some compounding pharmacies can provide generic semaglutide for under $200 a month, pharmacy and online prices—those most likely to be paid by insurers—range from about $950 to $1,080 a month. The cost to insurers covering these drugs would average approximately $1 billion per eligible million people insured.
“Semaglutide is unique in that it’s a brand-name drug that could help a very large population, and therefore put a strain on government finances and drive up private insurance premiums like no other drug we have seen before,” said Gregg Girvan, a resident fellow at the Foundation for Research on Equal Opportunity.
Cost Mitigators
A few factors can mitigate the cost, such as that semaglutide is classified as a small molecule drug, not a biologic, says Girvan.
“That means the drug’s FDA exclusivity will run out sooner, and several of the drug’s patents are set to expire within the next couple of years,” said Girvan. “The drug will also be eligible for the IRA’s Medicare drug price negotiations as soon as 2027, though again, this could be impacted by the availability of generics. These factors should in theory limit the financial exposure of taxpayers and patients alike.”
Semaglutide could make the case for reforming exclusivities granted to biologic drugs, often the priciest drugs on the market says Girvan.
“Given that semaglutide was first granted FDA marketing authorization in 2017, we would expect semaglutide to remain exclusive until at least 2029 if it were a biologic, and likely longer given possible extensions to that exclusivity,” said Girvan.
What About Diet, Exercise?
The money spent on these drugs would probably produce better results if used for therapies other than appetite suppression, says Chad Savage, founder of YourChoice Direct Care and a policy advisor to The Heartland Institute, co-publisher of Health Care News.
“For the roughly $1,400 per month that Wegovy costs, a patient could hire a personal trainer, train at the gym, include the gym membership, and have healthy meals specially prepared for them for an entire month and still have money left over,” said Savage. “That would have markedly more benefit than appetite suppression alone.”
Semaglutides pose important and potentially costly dangers to those that use them, says Girvan.
“People have to understand that this drug is unnatural in the way it achieves weight loss— it essentially starves the body by shutting off a person’s appetite,” said Girvan. “Patients on this drug must be mindful that they must remain on the drug for their entire lives to maintain its effect and must take extra care to eat enough and in the right variety that the body needs to function properly.
“There really is no substitute for proper eating and living an active lifestyle, which comes with a slew of other positive health effects beyond weight loss,” said Girvan.
Kevin Stone (kevin.s.stone@gmail.com) writes from Arlington, Texas.
