Blockbuster anti-obesity medications are straining the budgets of state health plans and Medicaid programs—a growing problem analysts and researchers say requires more innovative payment models to ensure the drugs are accessible to patients.
North Carolina’s State Health Plan voted Jan. 25 to stop covering GLP-1 medications like
The drugs, known as glucagon-like peptide 1 receptor agonists, were first developed for Type 2 diabetes. The Food and Drug Administration approved Wegovy in 2021 as a version of Ozempic specifically indicated for weight loss, and most recently approved Zepbound for chronic weight management in adults with obesity or overweight with at least one weight-related condition.
At least 16 state Medicaid programs cover one or more weight-loss medications, and just 10 programs broadly cover the drugs. With list prices for the drugs ranging from just under $1,000 to more than $1,300 per month, more state employee plans and Medicaid programs are likely to follow North Carolina’s lead and decide to not cover them, researchers and policy analysts say.
With health plans already paying for the long-term health costs associated with obesity—including treatments for heart disease and hypertension—states would be better off coming up with ways to ensure access to the drugs for those most at risk for these conditions, analysts say. Researchers and state officials argue this requires payment models like subscription agreements with manufacturers or coverage based on the value of the treatment, which analysts say would balance patient needs with the goal of limiting the financial burden on states.
“Increasingly when we see these types of drugs that are safe and effective, and may really benefit from being in the hands of many people,” states “are going to have to try to these types of models,” said Ameet Sarpatwari, an assistant professor of medicine at Harvard Medical School.
North Carolina
Combating obesity remains a top issue for the North Carolina state health plan, but continuing to pay for drugs like Wegovy at the current prices set by manufacturers isn’t sustainable, said Treasurer Dale Folwell, who oversees the state health plan.
“This is not a decision that the board wanted to come to, but as a fiduciary they felt responsible to do that,” Folwell said in an interview.
Folwell said the health plan is “not giving up” on finding a coverage solution, citing the importance of diabetes treatment affordability.
More than 1 in 5 adults in each US state and territory were considered obese as of 2022, according to data from the Centers for Disease Control and Prevention. In North Carolina, the obesity prevalence that year was at roughly 34%.
Folwell attributed much of the difficulty in developing a coverage plan to failures in the price negotiation process with drugmakers.
Novo, whose products Ozempic and Wegovy have a monthly list price of roughly $935 and $1,350 respectively, criticized the state health plan’s decision to end coverage. But the company said in an emailed statement that it will continue to work with officials to address any cost concerns.
Lilly didn’t comment directly on the North Carolina vote, but said in an email the company “is committed to working with healthcare, government and industry partners to help people who may benefit from Zepbound.”
Zepbound, which is predicted to become the best-selling drug in history, has a list price of about $1,060 for a one-month supply.
Struggle for States
Other states are likely to follow North Carolina’s lead as they re-evaluate budgets and their ability to pay for the GLP-1 medications, analysts say.
State boards “have to operate within a balanced budget” and “don’t have the same sort of capacity to deficit spend as the federal government,” Sarpatwari said.
States are also unlikely to see immediate returns on their investments in these anti-obesity medications, because the “biggest benefits from treating obesity come from preventing the development of long-term chronic diseases like diabetes and heart disease,” said Alison Sexton Ward, a research scientist at the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California.
“The true benefits to an insurer, to society, come from treating people before they develop those diseases and so they never incur any cost of diabetes,” Ward said.
Drugmakers have been working to show additional benefits of these anti-obesity drugs. In November, Novo released details from a study indicating Wegovy cut the rate of heart attacks and deaths in obesity patients with a history of cardiovascular disease.
Each of these drugs is expected to have exclusivity on the market for some time, delaying the introduction of generic drugs that could bring down prices. This should increase pressure on states to find a solution so patients can more easily access these medications, Sarpatwari said.
“This is not something where states can bide their time,” he said.
Long-Term Solutions
Some states have already sought alternative coverage plans for people seeking the anti-obesity medications, and analysts say states should engage in additional conversations on other payment models to adopt.
In July, Connecticut launched a trial lifestyle-management program called Flyte that state employees must join to get coverage for a GLP-1 medication. Connecticut Comptroller Sean Scanlon, who runs the health plan for the state’s roughly 270,000 employees, said in an interview that his team is about to launch a second phase of the trial program, introducing options for in-person specialist visits to add to the telehealth services the program currently offers.
But lifestyle programs can limit the reach of anti-obesity medications among certain populations, Ward said.
“We know that those sorts of programs don’t necessarily work and people have a lot of trouble sticking with them,” she said.
One alternative payment option, she said, is an outcomes-based structure, in which health plans link coverage based on the value of care the drugs provide. Another option is a subscription type model, in which plans agree to pay a discounted rate to the manufacturer, either upfront or through subscription payments.
Both of these models have also come up in discussions on paying for pricey gene therapies expected to come to market in the next few years.
Regardless of the model adopted, health plan administrators should be “skewing towards giving people access to the drugs that can make them better and that can save money in the long run,” Scanlon said.