According to BMO Capital Markets, Medicare coverage of Lilly’s Zepbound opens the door to using secondary indications to secure CMS coverage for obesity drugs.
The Centers for Medicare and Medicaid Services on Wednesday confirmed that certain Medicare plans can now cover the use of Eli Lilly’s blockbuster obesity drug Zepbound (tirzepatide) for use in obstructive sleep apnea, according to CNBC.
The news is a “significant positive” for Lilly, BMO Capital Markets analysts wrote in an investor note on Wednesday, adding that coverage would likely expand patient access to the weight-loss medication. This greater availability “could add another ~$1.4B to Zepbound’s peak revenue opportunity, with ~$1B coming from a Medicare patient population that would see significantly improved access,” the BMO analysts claimed.
Zepbound was approved by the FDA for obstructive sleep apnea late last month, making it the first drug available for certain patients with the illness. In the Phase III SURMOUNT-OSA trial, Zepbound was around five times more effective than placebo at cutting breathing disruptions in patients who were not on positive airway pressure therapy.
Under its current guidelines, CMS does not offer coverage for Zepbound and other GLP-1 receptor agonists when they are used for chronic weight management. Medicare covers only a limited number of obesity interventions, including bariatric surgery and behavioral therapy.
In November 2024, however, the agency announced that it is proposing changes in its Medicare Part D program, which would allow the plan to cover weight-loss drugs to treat obesity. If approved, the changes would also “require” Medicaid to cover these medications, CMS noted at the time.
In the meantime, drugmakers have been able to secure Medicare coverage for some secondary indications of their weight-loss therapies. For instance, Novo Nordisk in March 2024 won CMS coverage for Wegovy (semaglutide), which was originally only indicated for weight management but later secured the FDA’s approval for lowering cardiovascular risk in overweight and obese adults.
According to the BMO analysts on Wednesday, Medicare coverage for Zepbound in sleep apnea “marks a proverbial opening of the door for Medicare coverage of secondary outcomes indications,” a milestone that they claimed in an investor note is “positive for the class and patients.”
Wide coverage for these obesity treatments could prove very costly, however. An August 2024 study published in the Annals of Internal Medicine found that Part D coverage for Novo’s semaglutide alone could run the U.S. government up to $145 billion annually—confirming a March 2024 report from the Congressional Budget Office (CBO), which cautioned that Medicare would not able to sustain coverage of semaglutide at a price tag of $1,000 to $1,300 for a monthly supply.
The same month the CBO report was released, Sen. Bernie Sanders (I-Vt.) criticized Novo Nordisk for what he called the “outrageously high price” of semaglutide and cited a study published in JAMA that found the drug could be profitably made for under $5 a month.
