A Game-Changer for Medicare and Medicaid
President Joe Biden has proposed expanding coverage of anti-obesity medications like Novo Nordisk’s (NOVO) Wegovy to millions of Americans under Medicare and Medicaid. The initiative, revealed Tuesday, could drastically reduce out-of-pocket expenses for patients, potentially cutting costs by up to 95%.
The move aims to make medications in the GLP-1 class, such as Eli Lilly’s (LLY) Mounjaro and Novo’s Ozempic, more accessible. These drugs have been shown to reduce body weight by 20% on average, prevent type 2 diabetes, and lower cardiovascular risks. However, their high price—around $1,000 per month without insurance—has been a significant barrier for many.
Current Coverage and Proposed Changes
Medicare presently covers GLP-1 drugs for diabetes treatment but excludes versions approved solely for obesity. Medicaid programs have discretion over coverage, with many opting out.
The proposed rule would mandate Medicare to cover obesity treatments, benefiting 3.4 million Medicare enrollees. Additionally, 4 million Medicaid participants could gain access if states comply. The program is slated to take effect in 2026, pending approval by the incoming Trump administration.
Political and Financial Implications
The regulation has sparked debate ahead of the 2024 presidential transition. Critics like Ge Bai, a health policy professor at Johns Hopkins, see potential political fallout if the Trump administration resists the plan, framing it as a cost-cutting measure at the expense of health benefits.
The financial stakes are substantial. The Centers for Medicare and Medicaid Services (CMS) estimate the federal government would spend $36 billion on coverage over a decade, with states shouldering $4 billion for Medicaid. Total Medicare drug spending during this period is projected at $2.1 trillion.
Diverging Opinions
While some, including Democratic Senator Ron Wyden, support the expanded coverage, others, like Senator Bernie Sanders, argue for price reductions from pharmaceutical companies. Sanders has criticized manufacturers for high drug prices, asserting that Medicare and Medicaid should not serve as profit hubs for companies like Novo Nordisk and Eli Lilly.
Market Reaction and Broader Healthcare Context
Shares of Eli Lilly rose 4.4%, while Novo Nordisk’s U.S.-listed shares gained 1.5% following the announcement. The proposal aligns with Biden’s broader healthcare agenda, which includes measures like capping insulin costs and negotiating drug prices under the Inflation Reduction Act.
What’s Next?
Public comments on the proposal are open until January 27, after the presidential inauguration. The final decision will likely rest with the incoming administration, with figures like Robert F. Kennedy Jr. and Dr. Mehmet Oz potentially influencing the outcome.
As the debate unfolds, stakeholders will closely watch how this pivotal decision shapes access to obesity treatments and broader healthcare policy in the U.S.