Why Medicare Drug Price Negotiation Matters for Potential Medicare Coverage of Obesity Drugs

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Concerns about the estimated $25 billion, 10-year cost to Medicare of expanding coverage for anti-obesity medications, as the Biden administration has just proposed to do, may not be unwarranted, given long-standing cost pressures associated with high and rising prescription drug prices, and the high list prices for these medications specifically. But in considering the potential cost impact of this proposal, one possible mitigating factor is that it’s quite likely that one of these popular anti-obesity medications will be selected for negotiation in the next round of Medicare’s relatively new drug price negotiation program, established by the Inflation Reduction Act.

Semaglutide, manufactured by Novo Nordisk, is the active ingredient in three drugs that Medicare currently covers for type 2 diabetes and cardiovascular disease risk reduction, though not for use as obesity treatments – Ozempic, Rybelsus, and Wegovy. In 2022, Medicare spent $5.6 billion on semaglutide products, according to KFF analysis, making it among the top-selling drugs covered by Medicare that year. This is gross spending, not net of rebates, but total gross spending is the amount Medicare uses to select drugs for negotiation.

The list of selected drugs for Medicare price negotiation in round two is slated to be announced by February 1, 2025, so we should soon know whether Novo Nordisk’s semaglutide will be subject to negotiation next year. If so, Medicare’s negotiated price would be available to people with Medicare starting in January 2027, which could help to bring down the cost of expanding coverage for anti-obesity medications, both for Medicare and for beneficiaries who use this drug. A wild card in all of this is what the incoming Trump administration might do with both the negotiation program and the proposal to expand Medicare coverage of anti-obesity medications, but clearer signals on both fronts could emerge soon after President-elect Trump takes office in January 2025.