The weight loss drug revolution exposes the weakest links in our health care system – drug prices and insurance

It's rare for a drug to have such a pronounced effect that its immediate benefits translate into health care savings for years or even decades. To the miracle drugs Harvoni and Sovaldi that eradicated hepatitis C, we can now add the weight-loss drug Ozempic and its cousins ​​Wegovy, Mounjaro and Zepbound.

These drugs have been shown to be remarkably effective in reducing obesity, suggesting that in the long term, users' susceptibility to the full spectrum of obesity-related diseases, including diabetes, cardiovascular disease, knee problems and sleep apnea, decreases.

They also seem to work for other unhealthy addictions such as drug and alcohol addiction and possibly even Alzheimer's disease.

Yet millions of Americans lack access to these medicines because of two major, interconnected flaws in our health care system: rampant pricing by pharmaceutical companies and the economics of health insurance.

First, let’s look at the severity of the obesity epidemic.

In America, the rate of obesity has increased over time. In 1960, about 31.5% of adults in the United States were overweight; in 2017, the number was 30.3%. However, in 1960, 13.4% of adults were obese and 0.9% were severely obese; in 2017, 42.8% of adults were obese and 9.6% were severely obese.

Of particular concern is the obesity rate among children, which is around 20%. Overweight children are more likely to suffer from high blood pressure and diabetes than children of a healthy body weight, and are also more likely to be obese in adulthood.

Obesity and its consequences cost the U.S. healthcare system nearly $173 billion annually, estimates the Centers for Disease Control and Prevention.

Experience so far with the weight-loss drugs shows that they can significantly reduce the number of obesity-related diseases. A five-year study of more than 24,000 nondiabetic but obese subjects published earlier this month by a team of Taiwanese researchers found not only significant reductions in heart disease, high blood pressure, stroke and kidney failure, but also in all-cause mortality. Among people in the control group (who did not receive the drug), the annual mortality rate was 3.5%; among those who received the drug, it was just 0.75%.

So why aren't our health care system pushing to make these drugs more widely available? The answer, of course, is money.

The estimated cost to insurers for Wegovy and similar drugs, net of volume discounts from manufacturers, is about $8,600 to $9,100 per year. That's a big sum for insurers considering covering drugs for which public demand can run into the millions.

This could work if insurers could be sure that the long-term savings from their enrollees' health improvements would save them as much or even more. But in our fragmented health care system, they cannot be sure that they will be able to insure these enrollees during the cost-avoidance phase. Customers may switch to other insurers or leave the employers that have insured them.

“Insurers typically do not treat patients for more than a few years at a time,” notes David Anderson, a health policy expert at the University of South Carolina. “This limits the period in which health benefits can be internalized in the form of lower claims.”

As a result, insurers are making it harder for their customers to get coverage. Some require prior authorization before paying or limit coverage to patients with high BMI. Some plans only cover employees who have already been diagnosed with diabetes, not weight loss alone.

Insurers that manage plans for self-insured employers – large corporations and institutions – are likely to respond to their customers’ instructions.

Some large employers that originally covered the cost of weight-loss drugs have backed out of doing so. Others have eliminated the option altogether, leaving employees or the uninsured with costs of $1,000 or more per month.

The insurer best positioned to cover the cost of weight loss medications and provide long-term benefits is Medicare, which typically keeps people covered for life. In addition, insurers are generally required to cover medications that are considered standard treatment for known medical conditions.

Unfortunately, Medicare is prohibited by law from covering drugs prescribed specifically for weight loss. They can only be covered if they are prescribed for a related condition, such as heart disease or diabetes. For example, Wegovy was added to the standard formulary for Medicare's Part D prescription benefits after it was approved by the Food and Drug Administration in March to treat heart attack risk.

The popularity and effectiveness of the drugs prompted lawmakers in June to update a measure introduced unsuccessfully in 2014 that legalized Medicare coverage only for weight loss. But the new version would primarily cover those who had taken a drug for at least a year before joining Medicare.

Some experts estimate that expanding coverage for weight-loss drugs would cost Medicare as much as $6.1 billion a year, increasing the $120 billion annual cost of Medicare prescriptions by just over 5 percent.

Whether these costs can be fully offset by subsequent health care cost savings for Medicare is unclear. Not every patient prescribed weight-loss drugs will tolerate them well enough to take them for even a year, and not all will escape a serious health crisis that could have been avoided by weight loss alone.

Yet it seems that our healthcare system will have to deal with the new class of weight loss drugs one way or another. Wegovy and Ozempic are expected to be selected in the next round of Medicare price negotiations. Pharmaceutical industry analysts do not expect the popularity of these drugs to wane. The market for these drugs reached $6 billion last year, according to Goldman Sachs, and predicts that it will grow to $100 billion by 2030.

Weight-loss drugs are by no means the most expensive on the market—that trophy goes to certain cancer drugs and gene therapies, some of which cost several million dollars per treatment. But none of these drugs serve a market anywhere near the potential size of weight-loss drugs.

Unless the U.S. moves to a national health care system and caps drug prices, slimming drug makers will reap the biggest profits. Sales of Wegovy and Ozempic made Novo Nordisk the most valuable European company last year and helped Lilly's profits rise nearly 69 percent in the second quarter ended June 30 from the same period a year earlier.

In other words, the American health care system of the 20th century is facing a flood of 21st century drugs. Something is going to have to change.

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