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What is the Potential Impact of New Drugs for Obesity and Alzheimer’s Disease on Medicare Costs, Coverage and Beneficiaries?
Two new KFF analyses examine the potential impact of Medicare coverage of new prescription drugs for obesity and Alzheimer’s disease on program spending and beneficiary out-of-pocket costs, as well as the role that the Inflation Reduction Act could play in mitigating these effects.
Manufacturers of both types of drugs are lobbying for broad Medicare coverage of them, though they face different challenges.
The availability of effective weight-loss drugs, including Novo Nordisk’s Ozempic and Wegovy (semaglutide) and Eli Lilly’s Mounjaro (tirzepatide), has the potential to be transformative for people who struggle with obesity and obesity-related medical conditions. But, as the first analysis explains, these drugs, which are expensive, are not covered by Medicare because current law prohibits Medicare from covering drugs prescribed for weight loss. Congress would need to amend the law for weight-loss drugs to be covered under Medicare, though coverage could also potentially be achieved administratively through a demonstration waiver or a Center for Medicare and Medicaid Innovation model.
Without coverage, access to these relatively high-priced drugs will continue to be limited to people who can afford them, raising equity concerns. Wegovy, for example, has an estimated annual net price of $13,600. While Black Medicare beneficiaries have the highest rates of obesity, they may be least able to afford these new drugs, given their substantially lower incomes and assets compared with White beneficiaries.
In the fight against Alzheimer’s, the Food and Drug Administration will soon announce whether it will grant full approval to the new drug Leqembi (lecanemab), made by Eisai and Biogen, after granting accelerated approval in January. Our second analysis explains that, if that happens, Medicare is expected to cover Leqembi for all indicated populations. Medicare coverage of a drug that could slow the progression of cognitive decline offers hope for Alzheimer’s patients and their families. But it also raises concerns about the potential impact on Medicare spending.
The take-up rate of Leqembi among eligible individuals is difficult to estimate, but for illustrative purposes, if five percent of the 6.7 million older adults in the United States with Alzheimer’s disease were to take Leqembi, at the annual list price of $26,500, this would add an estimated $8.9 billion to Medicare Part B spending annually, roughly equal to spending on the top three Part B drugs combined in 2021. If double that share were to take the drug, the higher spending would amount to $17.8 billion. Higher spending would likely lead to higher Medicare Part B premiums.
Even if Medicare were to cover Leqembi, patients administered the drug would be responsible for 20 percent of the cost, or more than $5,000 out of pocket in cost sharing each year, unless they have coverage that covers a portion of these costs. With higher rates of dementia and lower incomes among older Hispanic and Black adults than among older White adults in the U.S., Black and Hispanic beneficiaries may be less likely to get this treatment if they can’t afford it.
If covered by Medicare, these drugs could be among the limited number of drugs that would be subject to Medicare’s new drug price negotiation authority under the Inflation Reduction Act – but not for several years. For example, manufacturers of biologic drug products like Leqembi would be exempt from having Medicare-negotiated prices take effect for 13 years from the drug’s licensure date, which for Leqembi itself would be no sooner than 2036. For one of the small-molecule drugs being used for weight loss, negotiated prices could potentially take effect in 2027.
Another provision of the law will cap out-of-pocket Part D spending at $2,000 in 2025. The cap would make weight loss drugs more affordable if they are covered under Part D, but the law’s new cap does not limit out of pocket spending for drugs that are covered under Medicare Part B, as would be the case with Leqembi.
For the full analyses, as well as more data and analyses about Medicare and prescription drugs, visit kff.org.