Imagine there is a drug that can save Medicare as much as $245 billion over 10 years, can increase survival and quality of life, and can reduce the risk of chronic conditions like diabetes and cardiovascular disease. This is the promise of biopharmaceutical innovation and the potential of obesity drugs today. However, we have yet to reap the full potential of these innovations, not because they do not exist, but because Medicare and most commercial insurance plans will not cover them.
Biopharmaceutical innovators have researched, developed, and gained regulatory approval for multiple obesity medicines, and yet Medicare continues to not cover treatments for weight loss, in the context of the costly chronic disease of obesity. Rather than remove that restriction from the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 to expand patient access to these cost-effective treatments for the serious disease of obesity, the government is moving to price regulation which can disrupt the market dynamics and incentives that are already successfully reducing drug prices.
The frustration in “high” prices for drugs in the U.S. has only intensified. This year alone, we have seen two Presidential Executive Orders focused on lowering drug prices. Twenty-five drugs, many already experiencing sizeable discounts from market dynamics, have already been selected for government price regulation in Medicare. The most recent list of drugs selected includes a drug for weight loss, for people with obesity. The American public is likely unaware of how the U.S. market-based approach works to bring down drug prices over time and uniquely fuels the biopharmaceutical industry.
Other countries often get lower prices with a single payer model, government price regulation, and through restricting or delaying access. But in the U.S., market competition has already brought down prices of the wildly popular GLP-1 drugs by more than half, while expanding access to an effective treatment for patients. However, even as new evidence continues to support that the current prices are a cost-effective investment in public health, insurance coverage remains limited in the U.S.
Without government price regulation in the U.S., market competition has already worked to reduce prices for obesity medicines. When Wegovy ® (semaglutide) was launched, it cost around $1,300 per month. Estimates of its net price were down to around $717 a month in 2022. Zepbound® (tirzepatide) entered the U.S. market at the end of 2023. With more competition in the market, prices have continued to drop. In 2023, the price for Wegovy was down to around $649 per month. But still, insurance coverage has remained limited. Lack of coverage for obesity treatments offers a powerful warning indicator of the system’s inability to forecast long-term cost savings and make the investments needed to achieve them.
The manufacturers of the GLP-1 medicines began offering treatments direct-to-consumers at even lower prices. Zepbound direct to consumer price is $499 per month and Wegovy also sells direct to consumer for $499 per month. These direct-to-consumer programs fill a need to increase patient access due to low insurance coverage; however, healthcare is intended to be paid for through healthcare insurance, not out of the pockets of only those who are sick.
We understand the large population that could benefit from these treatments could result in a large budget impact; however, we also believe that the U.S. is capable of identifying a financing mechanism to cover treatments, which are cost-effective at both current health plan and direct-to-consumer discounted prices, with short-term budget impacts that have potentially huge long-term returns.
The U.S. is about to dramatically expand its regulation of drug prices in Medicare, with the number of drugs selected continuing to increase. Prices have already been set for the first 10 drugs, which saw limited additional savings beyond the market-based net prices. The next set of 15 drugs selected by Medicare includes an obesity medicine. It seems hard to imagine that the only solution we can find is to copy other countries that rely on government price regulation and ignore the dynamics of market-based approaches which have fueled our world-leading biopharmaceutical research industry in the U.S.
Market competition has worked to bring down prices while sustaining investment in development for GLP-1 medicines, for cardiovascular treatments, for Hepatitis C medicines, and for the generic drugs which make up more than 90% of the medicine supply in the U.S. today.
The U.S. can come up with a better solution to manage cost spikes from new treatments than government price regulation and denying coverage. Our future health (fiscal and physical) depends on it.
Dr. Whittington is an employee of MEDACorp which is an affiliate of Leerink Partners.
Kirsten Axelsen is a non-resident fellow at the American Enterprise Institute and a Policy Advisor to DLA Piper
