As Weight Loss Drugs’ Star Rises, Plan Sponsors, Researchers Worry About Costs

In recent months, the interest in prescription weight loss medications has grown exponentially as celebrities tout the drugs and clinical trial results show their safety and effectiveness. However, while tens of millions of people could benefit from the medications, health policy experts tell AIS Health that payers are taking a cautious approach and are concerned at the financial impact if the FDA approves more drugs for that indication, as is expected.

A recent survey from the International Foundation of Employee Benefit Plans found that 22.1% of employers last year offered prescription drug coverage for weight loss, including 21.3% of corporations, 22% of public employers and 27% of multiemployer plans. Of the 470 companies that responded to the survey, 25% said obesity is one of the top three health conditions that has the largest impact on overall health costs.

Meanwhile, Jeff Levin-Scherz, M.D., the population health leader of WTW’s health and benefits practice, says that two-thirds of the companies WTW works with cover at least a portion of members’ prescription weight loss medications. WTW consults mostly for large companies, who are more likely to cover such drugs. And that percentage is expected to increase. WTW’s 2022 Best Practices Survey, for instance, showed that 35% of employers were targeting obesity and weight management as an important clinical area for their employees, while an additional 10% were expected to focus on that this year and 19% more are considering it for next year.

“It’s a combination of joy and excitement that now there are these new medications which meet a very substantial need,” Levin-Scherz tells AIS Health, a division of MMIT. “And there’s a lot of worry that health insurance premiums are already pretty hard to afford. Plans already have substantial out-of-pocket costs, and if a substantial portion of people who could get benefit from these drugs take them, it will be very hard to fund that. I think this is a major source of concern.”

Wegovy Dominates Market; Others Are Expected to Follow

For now, Novo Nordisk is dominating the weight loss medication market with Wegovy (semaglutide), a once-weekly injectable drug that the FDA initially approved for Type 2 diabetes but expanded the indication to weight management in June 2021. It was the first FDA-approved weight loss drug in seven years. The four previous medications approved between 2012 and 2014 failed to live up to their sales projections because of a lack of insurance coverage and safety concerns.

Novo Nordisk, meanwhile, saw a 124% year-over-year increase in the sale of obesity medications during the first quarter of this year, which the company largely attributed to Wegovy sales in the U.S. The sales could have been much higher, too, but Novo Nordisk has had trouble keeping up with the demand, leading to supply issues. The company recently began working with a second contract manufacturing organization to spur production of the drug, but Doug Langa, Novo Nordisk’s head of North America Operations, told analysts on a May 4 conference call that “to safeguard continuity of care, the supply of the lower Wegovy dose strengths in the U.S. will be reduced temporarily.” And on May 19, a Novo Nordisk spokesperson told Endpoints News that the company paused local advertising and postponed a national television campaign “to avoid stimulating further demand for this medicine.”

While Wegovy has become a hugely popular drug, Novo Nordisk could have even more demand for an oral version of the medication if it’s approved. On May 22, Novo Nordisk released the top-line results of a Phase 3a trial that found adults who took 50 mg of oral semaglutide once daily had a mean 15.1% weight loss after 68 weeks compared with a 2.4% reduction for people taking a placebo. A previous study that contributed to Wegovy’s FDA approval showed a 14.9% mean body weight reduction in people treated with the drug compared with a 2.4% reduction in the placebo group.

A Moody’s Investors Service report released on May 18 noted that Novo Nordisk expects obesity sales of $3.5 billion by 2025, but the research firm projects the company “will already surpass this goal in 2023” and that Wegovy sales could reach $8 billion by 2025, accounting for 24% of the company’s total revenue.

Novo Nordisk will likely be facing competition in the weight loss market in the coming months and years. Later this year, the FDA is expected to approve Eli Lilly & Co.’s tirzepatide for obese adults. Studies have shown people who take tirzepatide, which the FDA approved last year for Type 2 diabetes under the brand name Mounjaro, have a similar weight reduction than those who are prescribed Wegovy.

The Moody’s analysts noted that sales of tirzepatide for obesity could reach $4 billion in 2025, representing 9% of Eli Lilly’s total sales. Pfizer Inc. and Amgen Inc. are among the other companies that are evaluating weight loss treatments. On May 22, a Phase 2b study published in JAMA Network Open found that adults with diabetes who took a 120 mg oral dose of Pfizer’s danuglipron twice daily lost about 10 pounds after 16 weeks, which the authors noted was similar to the amount of weight loss found in a previous Phase 2 Wegovy study.

“The health benefits of [the new obesity medications] can be really enormous,” Levin-Scherz says. He adds that some people taking the drugs may have minor side effects such as nausea, diarrhea or constipation, but “for most people, the side effects are tolerable, and they get better over time.”

Employers Could Face Steep Costs

Still, Levin-Scherz notes that the medications’ effectiveness and encouraging safety profile could have a major impact on employers and plan sponsors.

The Moody’s report noted that the number of adults worldwide living with obesity is expected to increase from 764 million in 2020 to 892 million in 2025, citing projections from the World Obesity Federation. And WTW estimates that if half of the people eligible for the new weight loss medications end up taking them, that could increase outpatient pharmacy costs by about 50%. The medications have an annual list price of $13,000 to $15,000 per year, according to Levin-Scherz.

“The biggest challenge is they’re incredibly expensive,” he says. “It’s definitely a hindrance….The challenge about how to fund this is very significant.”

The medications could also have an impact on the federal government. A May 18 Kaiser Family Foundation (KFF) report noted that Medicare does not currently cover drugs that are prescribed for weight loss, although the program does cover obesity screening, behavioral counseling and bariatric surgery. While some legislators in the 117th Congress introduced the Treat and Reduce Obesity Act that would allow Part D plans to cover medications used to treat obesity or weight loss management in some adults, the KFF authors mentioned there has been no bill introduced in the current Congress.

A New England Journal of Medicine study published in March 2023 found that if 10% of Medicare beneficiaries with obesity used Wegovy, the annual cost to Medicare could range from $13.6 billion to $26.8 billion. The KFF authors said that those costs could eventually be lowered thanks to some provisions of the Inflation Reduction Act, including one that caps out-of-pocket Part D spending for covered drugs at $2,000. However, they wrote that “even paying $2,000 out of pocket would still be beyond the reach of many people with Medicare who live on modest incomes.”

In addition, “a decision to cover weight loss drugs under Medicare could have ripple effects for employers and other payers if they follow Medicare’s lead,” the KFF report added.

However, Marie Fischer-Sabatie, senior vice president at Moody’s, suggests that payers could help reduce costs in other areas by embracing the new drugs.

“We believe access will continue to expand as payers increasingly view obesity as a driver of medical comorbidities [e.g., hypertension, heart failure, high cholesterol] that contribute to rising health care costs,” she tells AIS Health. “Several studies are still ongoing at Novo Nordisk and Eli Lilly that aim to demonstrate that the use of weight loss drugs reduces cardiovascular diseases and other comorbidities. Positive results for these studies would give arguments to support an increased use of weight loss drugs.”

Julie Stich, vice president of content at the International Foundation of Employee Benefit Plans, agrees and cites the fact that obesity can increase the risk of chronic conditions such as high blood pressure, Type 2 diabetes, coronary heart disease and some cancers.

“Providing coverage for advanced therapies and weight management programs may not only help reduce health care costs but vastly improve workers’ well-being,” Stich says. “Currently, the price for weight loss drugs is steep, a serious consideration for employers that are considering adding them to their benefits coverage. As understanding of obesity as a disease grows, and more evidence becomes available to show the long-term impact of these medications, we may see an increase in the number of employers that cover the drugs.”

Contact Levin-Scherz via Ed Emerman at eemerman@eaglepr.com, Stich via Anne Peterson at annep@ifebp.org and Fischer-Sabatie via Olha Savsunenko at olha.savsunenko@moodys.com.

This article was reprinted from AIS Health’s biweekly publication RADAR on Drug Benefits.

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