A recent study estimated that Wegovy’s label expansion beyond obesity could push Medicare spending to $145 billion annually, but analysts remain dubious of the estimate.
New research recently generated eye-catching headlines on the impact of using Wegovy (semaglutide) to reduce the risk of major adverse cardiovascular events, with the authors calculating coverage could cost the federal government up to $145 billion a year—if all potentially eligible patients are covered by Medicare and prescribed Wegovy. Analysts, however, blasted that estimate as “sensational.”
That’s a very large number” for Part D spending on Wegovy, Rajesh Kumar, head of European life sciences and healthcare equity research at HSBC Bank, told BioSpace, adding that “someone has been trying to be too sensational.”
While the study found that up to 15.2 million beneficiaries may be eligible for Wegovy if Medicare used a more liberal definition of established cardiovascular disease, the authors concluded that a more likely scenario is that 3.6 million people could be eligible for coverage if Medicare adopted a more conservative definition.
“When established cardiovascular disease is narrowly defined, only 1 in 7 Medicare beneficiaries with elevated BMI [body mass index] are likely to be eligible to receive semaglutide, but costs to Medicare could still exceed $10 billion per year,” lead author Alexander Chaitoff of Brigham and Women’s Hospital, said in a statement. “In this conservative coverage scenario, that means most beneficiaries with elevated BMI and cardiovascular risk would remain ineligible for semaglutide, yet the medication could still potentially become one of the costliest drugs to Medicare.”
But what is happening in practice today and how will it shape the future of Novo Nordisk’s presence in the GLP-1 market?
Part D Coverage and Supply
Semaglutide, sold by Novo as Wegovy for obesity, won FDA approval to reduce the risk of cardiovascular death, heart attack and stroke in adults who have cardiovascular disease and are obese or overweight in March 2024. The Centers for Medicare and Medicaid Services (CMS), which does not currently cover treatments for obesity, quickly clarified that Medicare plans can reimburse drugs such as Wegovy when approved in additional medically accepted indications.
While a GLP-1 that receives FDA approval for chronic weight management alone would not be considered a Part D drug, CMS states that “if this same drug also receives FDA approval to treat diabetes or reduce the risk of major adverse cardiovascular events (cardiovascular death, non-fatal myocardial infarction, or non-fatal stroke) in adults with established cardiovascular disease and either obesity or overweight, then it would be considered a Part D drug for those specific uses only.”
The CMS ruling spurred calculations of the potential size of the Medicare opportunity. The researchers, who published their work last month in the Annals of Internal Medicine, analyzed data from respondents over 65 or who were on Medicare and who took part in the National Health and Nutrition Examination Survey between 2011 and 2020 to determine the number of potentially eligible patients and possible costs to the federal government.
Yet, Emily Field, director and head of European pharmaceuticals equity research at Barclays, contends that another factor—supply—will have a bigger impact than eligibility on the sales of Wegovy and also Eli Lilly’s rival GLP-1 drug Zepbound in the near term.
“It’s just coming down to supply,” Field told BioSpace. “We think the demand is so overwhelming that they’re going to be able to sell every pen they can make and it’s just a matter of how fast they can add this capacity.”
Kumar and other analysts at HSBC issued a report last week stating that supply constraints are easing for Novo—and Lilly—and the Danish drugmaker’s recent clinical readouts and FDA label expansion “might increase the access” of Wegovy, “though demand is likely to remain ahead of supply.”
Sizing the Opportunity
The authors of the Annals of Internal Medicine paper calculated the $145 billion figure by looking at how many people who are enrolled in Medicare meet four definitions of cardiovascular disease. Multiplying the number of people who meet a definition by the average net price of semaglutide generated potential costs to Medicare under the four scenarios.
The forecasts reflect an annual price of $9,550, which the researchers calculated by discounting the list price by 41%. However, Field sees the prices used in calculations of the impact of Wegovy and other GLP-1 drugs as an area where studies can overstate the potential costs. Indeed, the price used in the study exceeds the $8,400 figure quoted elsewhere and fails to reflect the potential for the number to fall further as volumes increase.
Field expects the net price will “continue to decline, because that’s what the companies have guided for [and] what we’ve seen in the type II diabetes space.” The net price of Novo’s Ozempic, the semaglutide brand in diabetes, fell 37% between 2019 and the end of 2023, she said.
Barclays estimates that the population in Novo’s Phase III cardiovascular outcomes study SELECT, which enrolled patients with a BMI of at least 27 kg/m2, accounts for around 10% to 15% of patients eligible for Wegovy.
Medicare programs run by Elevance, Kaiser Permanente and CVS Health began covering Wegovy to cut the risk of heart disease in the weeks after Novo won approval in the indication. It is unclear how far Novo’s efforts to penetrate the opportunity have progressed, partly because the company does not break down sales by reimbursement channel. In addition, Medicare plans from other insurers may defer expanding coverage until they can adjust their premiums to reflect extra spending on Wegovy, suggesting that the drug may not become more widely available on Medicare until 2025.
Expanding Markets, Falling Prices
The broad drug development programs underway at Novo and rival Lilly potentially position their respective GLP-1s to win approval in a range of indications beyond obesity. Field identified the publication of data from Novo’s Alzheimer’s disease study, which is expected in the second half of 2025, as an event that “could change the game dramatically.” There is also a legislative push to enable Medicare to cover obesity drugs. Both of these efforts could expand the Medicare population eligible for treatment with GLP-1 drugs.
In parallel, the Inflation Reduction Act (IRA) drug price negotiations could accelerate the downward trend in prices. Having won approval in 2017, Novo’s diabetes blockbuster Ozempic could be impacted by price cuts in 2027 due to the IRA’s Medicare Drug Price Negotiations Program, Reuters reported last month.
The authors of the Annals of Internal Medicine study note that their analysis estimates maximum budgetary impacts but is not a spending projection and does not account for future payment reforms from the IRA.
“The only data points that we have to go on at this point are the list that we just got” on the recently released prices for the initial 10 prescription drugs under the IRA, Field said. “Those were not massive departures from current net prices or investor expectations. I think people right now are feeling very comfortable with that risk going forward. But I would imagine noise around negotiations will probably kick up as we get closer to summer of next year.”
A Novo Nordisk spokesperson in an emailed statement to BioSpace said the company is “encouraged” to see the recent guidance by CMS “which is an important step for people covered by Medicare Part D who are living with both known heart disease and overweight or obesity.”
At the same time, Novo’s spokesperson said that “there’s more work to be done because Part D coverage is still not available for obesity medicines when used for chronic weight management.” The company will continue its efforts “to secure affordable access for the more than 110 million Americans living with obesity to have coverage,” according to the statement.
Editor’s note: Greg Slabodkin contributed reporting to this article.
