Anti-Obesity Drug Surge Puts Pressure on State Medicaid Programs

State Medicaid programs are under pressure to cover blockbuster anti-obesity medications as evidence of their effectiveness mounts, but policy analysts say broader access will depend on lower list prices and a boost in support from the federal government.

The number of anti-obesity medications reimbursed by state Medicaid programs increased by more than 7,600 in 2011 to roughly 108,000 in 2022, according to a study published Thursday by the medical journal JAMA and based on findings from researchers at the Program On Regulation, Therapeutics, And Law at Brigham and Women’s Hospital and Harvard Medical School.

The main contributors to this increase were liraglutide, approved by the Food and Drug Administration in 2014 under the brand name Saxenda, and Novo Nordisk A/S‘s leading weight-loss drug semaglutide under the brand Wegovy.

At least 16 state Medicaid programs cover one or more weight-loss medications, known as glucagon-like peptide 1 receptor agonists. With list prices for the drugs ranging from just under $1,000 to more than $1,300 per month, some states have added requirements that individuals have additional medical conditions to qualify for coverage.

More states are looking at how they can cover these costly medications, as KFF has reported gross and net prescription drug spending increases for Medicaid programs since 2018. In the meantime, researchers and policy analysts say overall access to these treatments remains low.

Expanding coverage to broader segments of low-income populations covered by Medicaid will require a combination of solutions, including potential new payment models, higher manufacturer discounts, and greater federal assistance to states, researchers say.

“If we as a country are serious about making sure that these treatments, which are highly effective, are accessible to Medicaid patients and all patients regardless of income, we probably have to have a serious conversation about how to best do that,” said Benjamin Rome, a health policy researcher at Harvard Medical School and co-author on the study published Thursday.

Pressure on States

As a wave of effective anti-obesity drugs came to market, demands from patients for more states to pay for these medications has grown.

While Medicaid programs are required to cover most FDA-approved drugs, coverage for weight-loss medications has been “suboptimal,” as the treatments were “seen more as a vanity than they were as a medical treatment,” Rome said.

In 2017, the FDA approved Novo Nordisk’s Ozempic as a type 2 diabetes treatment, and in 2021 approved Wegovy as a version for chronic weight management in adults with diabetes. Ozempic has also been approved to reduce the risk of heart attack and other conditions, and the FDA on March 8 added a new indication for Wegovy to make it the first weight-loss medication indicated for life-threatening cardiovascular events in adults with either obesity or overweight.

“Newer anti-obesity medications like the GLP-1 therapies” are “far more effective than their predecessors, and they are associated with few side effects,” which “makes them far more attractive to many patients,” said Alison Sexton Ward, a research scientist at the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California.

This also has “really changed how insurers are thinking about this including how states are thinking about coverage,” said Rome, who based his study on public Medicaid State Drug Utilization Data from all 50 states.

Regardless of their effectiveness, most state Medicaid programs still don’t require coverage for anti-obesity medications, even as 40% of Medicaid enrollees were estimated to have obesity as of 2021.

Coverage Limits

The key deciding factor for Medicaid programs right now is whether their budgets can sustain covering these medications, leading some states that do cover the drugs to impose limits on who is eligible for coverage.

“What is your exposure in terms of the number of people this would impact? And what is the cost per patient of the drug itself?” said Matt Salo, founder and CEO of Salo Health Strategies and former executive director of the National Association of Medicaid Directors.

Even if a state Medicaid program covers these drugs, it’s not a guarantee they will be on the state plan’s preferred drug list, said Liz Williams, a senior policy analyst for KFF’s Program on Medicaid and the Uninsured. A spot on the preferred list means Medicaid-covered individuals can have access to the name-brand obesity drug via negotiated discounts with manufacturers without prior authorization.

While most state Medicaid programs list Ozempic as a preferred or nonpreferred medication on their formularies, this is for its indication as a type 2 diabetes treatment. At least 10 states require patients to have a comorbidity, such as heart disease or hypertension, to get Medicaid coverage for one of these drugs, according to KFF’s Annual Medicaid Budget Survey for State Fiscal Years 2023 and 2024.

Three states—Louisiana, Texas, and South Carolina—said in the KFF survey that they only cover one weight-loss drug—orlistat, sold under the brand Xenical.

“Access to these drugs for weight loss is likely still pretty limited,” Williams said.

At the same time, obesity itself costs the US healthcare system nearly $173 billion a year, according to the CDC.

In a “world where we are developing pharmaceutical therapeutical products that are addressing things undreamed of a generation ago, we’re going to need to have a different conversation around how we afford this,” Salo said.

Looking Ahead

As Medicaid programs look at adding or expanding existing coverage of anti-obesity drugs, policy analysts say potential solutions are multi-faceted.

Some have suggested alternative payment options, such as an outcomes-based structure, in which health plans link coverage based on the value of care the drugs provide. Another option is a subscription type model, in which plans agree to pay a discounted rate to the manufacturer, either upfront or through subscription payments.

States can also ask the federal government for support in this effort, whether it’s through a higher federal match, a grant, or some kind of tax credit for the manufacturers, Salo said.

But Medicaid programs won’t have the most negotiating power over the prices they pay for these medications until there are more competitors in the market, Salo argued.

Rome, however, said it will be a long time before we see less costly, generic versions of these products, due to the patent exclusivity on the brand-name versions.

“It doesn’t seem like we’re going to get any relief from generic competition in the near future,” Rome said.