U.S. President Joe Biden on Tuesday proposed expanding coverage of anti-obesity drugs, like Novo Nordisk's (NOVOb.CO) Wegovy, for more than 7 million people with Medicare and Medicaid health coverage, which could cut out-of-pocket expenses for some by as much as 95%.
This would enable more Americans to afford new weight loss medications in the GLP-1 class that have been shown to reduce weight by as much as 20% on average and can help prevent type 2 diabetes but cost as much as $1,000 a month without insurance coverage. The drugs have also been shown in trials to lower the risk of heart attacks and cardiovascular-related death.
Current rules for the Medicare government health insurance program cover the use of GLP-1 drugs such as Eli Lilly's (LLY.N) Mounjaro and Novo's Ozempic for conditions like diabetes, but not the versions of those drugs like Wegovy that have been approved to treat obesity as a condition on its own.
Medicaid programs, which are state-run, can cover the drugs but many choose not to.
Lilly's shares were up 4.4%, while Novo's U.S.-listed shares were up around 1.5% in afternoon trading.
The proposed regulation, which was posted on the Federal Register by the Department of Health and Human Services on Tuesday, would require Medicare to cover these drugs as a treatment for obesity, expanding access for an estimated 3.4 million Americans with Medicare.
It would also expand access to the medications for approximately 4 million adult Medicaid enrollees, according to the White House.
The program would be effective starting in 2026 if President-elect Donald Trump's incoming administration backs the move; the rule's comment period is open until Jan. 27, after the inauguration. Robert F. Kennedy Jr., Trump's choice for health secretary, has said that America should tackle obesity through healthy eating, not medicine.
"This is setting up a political landmine for the Trump administration," said Ge Bai, professor of health policy and management at Johns Hopkins University.
Because the incoming administration is going to be under pressure to cut costs, Bai said the move could help critics on the left build a narrative that Trump is taking away important health benefits.
Indeed, Democratic Senator Ron Wyden said on Tuesday that he was pleased to see the broader coverage and would be watchdogging the Trump administration to ensure there is no backsliding.
Representatives of the Trump transition team were not immediately available for comment.
TRUMP'S DECISION
Larry Levitt, executive vice president for health policy at non-profit KFF, said it is an open question whether the incoming Trump administration will follow through on the proposed weight-loss drug requirement.
"RFK Jr. has expressed skepticism of these drugs, but Dr. Oz has praised them," he said, referring to Trump's pick of television personality and surgeon Dr. Mehmet Oz as administrator of the Centers for Medicare and Medicaid Services (CMS).
"Ultimately, this decision is likely to be made by the White House, which may be hesitant to stand in the way of coverage that will probably be very popular among many seniors," Levitt said.
The CMS estimates coverage will cost the federal government about $25 billion for Medicare and $11 billion for Medicaid over a decade. States would pay around $4 billion for their share of the Medicaid bill. The agency estimates total Medicare drug spending over the period at $2.1 trillion.
The Congressional Budget Office in October estimated that Medicare coverage of anti-obesity medicines would increase federal spending on net by about $35 billion over eight years. Total direct federal costs would increase from $1.6 billion in 2026 to $7.1 billion in 2034, it said.
Senator Bernie Sanders, who has criticized obesity drugmakers for the high prices of their drugs, said that Medicare and Medicaid need to demand Novo Nordisk and Lilly cut the cost of the drugs.
"We cannot allow Medicare and Medicaid to simply be a cash cow for Novo Nordisk and Eli Lilly," he said.
Reuters reported earlier this month that intense demand for anti-obesity drugs has triggered supply issues, with many patients turning to cheaper compounded versions sold online.
Biden, a Democrat, has pushed hard to bring down the cost of healthcare and prescription drugs, such as by capping the cost of insulin at $35 for seniors receiving Medicare, and enacting a $2,000 cap on out-of-pocket prescription drug costs for the same group.
Biden's Inflation Reduction Act also required pharmaceutical companies to negotiate drug prices with Medicare, which covers 66 million people. The first price cuts for 10 drugs, ranging from 38% to 79% and starting in 2026, were announced in August.
Ozempic and Wegovy are expected to be included in the next round of negotiations that will see new prices introduced in 2027.
During his first term in office, Trump had also sought to lower drug prices, but the measure was later blocked by a federal judge.
