Last week, the Centers for Medicare & Medicaid Services (CMS) announced that it would allow health plans under Medicare Part D (the Medicare prescription drug benefit) to cover Wegovy and other weight-loss medications if they receive Food and Drug Administration (FDA) approval for an additional medically accepted indication.

In Wegovy’s case, the FDA recently approved an additional indication “to reduce the risk of major cardiovascular events (such as cardiovascular death, non-fatal myocardial infarction, or non-fatal strokes) in adults with established cardiovascular disease and either obesity or overweight” in combination with a reduced caloric diet and increased physical activity. As a result, Wegovy can be available for Medicare beneficiaries who have an established cardiovascular disease and are either overweight or obese. Part D coverage is still not available for weight-loss medications in beneficiaries who do not have the additional medically accepted indication.

The decision to cover this new medication under Medicare made headlines because the high cost of the drug combined with the millions of beneficiaries eligible for the treatment will substantially increase costs for Medicare and Part D plans. Medicare coverage for Wegovy also raises questions regarding the affordability and accessibility of novel medications such as this one as well as sustainability of Part D plans.

To help dive a little deeper into the overall implications of Medicare deciding to cover Wegovy, I’m bringing in my colleagues Paul Radensky, Parashar Patel and Amy Kelbick.

AFFORDABILITY

The current list price of Wegovy is $1,349.02 per month. Under the Medicare Part D benefit, enrollees pay a monthly premium ($34.70), an initial deductible ($545), and then a 25% coinsurance up until a certain level (some of these cost-sharing amounts do vary by plan.) Starting in 2025, the Inflation Reduction Act will put in place an annual out-of-pocket cap of $2,000 for drugs covered by Medicare Part D, which will be indexed annually for inflation thereafter. Leading up to that change next year, when Medicare beneficiaries reach $8,000 in total out-of-pocket spending for the year, they reach the catastrophic benefit threshold and no longer have to pay any cost-sharing. The Inflation Reduction Act also requires the secretary of the US Department of Health and Human Services to negotiate the price of a certain number of drugs per year that are covered by Medicare Part B and D, starting with 10 drugs that will have negotiated prices in place starting in 2026. Depending on the cost to Medicare and utilization by Medicare beneficiaries, Wegovy could be a candidate for drug price negotiation in the future. However, the Inflation Reduction Act mandates that a small-molecule drug must be on the market for at least seven years without any generic competition to be eligible for negotiation.

While there are some protections in place for Medicare beneficiaries under Medicare Part D against high drug costs, and even more subsidies available for low-income beneficiaries and those dually enrolled in Medicare and Medicaid, the high cost of the drug could still be a barrier to many.

SUSTAINABILITY OF PART D PLANS

Adding such an expensive drug to a plan’s formulary may also result in an increase in each plans’ expected costs – which could drive up Part D premiums in future years. Since 2015, the Part D premium amount has been relatively stable, ranging between $32.74 and $35.63. However, in the 2023 Trustees Report – which was released before this most recent announcement – the CMS actuaries had already projected that the premiums would gradually increase over the next years, reaching $49.08 in 2032 (an increase of 41% over the 2024 premium amount). This decision could cause the CMS actuaries to revisit their premium estimates and could drive up premiums even higher. Importantly, this could also increase federal spending on Medicare Part D, as it is statutorily required that the federal government subsidize 74% of Part D spending.

ACCESSIBILITY

Cost is not the only barrier to accessing this new medication. In the guidance memo to Part D plans on covering this new medication, CMS states that “Utilization management tools such as prior authorization, step therapy, and quantity limits that are approved by the Pharmacy & Therapeutics committee may be applied at the point-of-sale at the same time the drug is added to the formulary. Part D sponsors may consider using prior authorization for these products to ensure they are being used for a medically accepted indication.”

Depending upon how stringent the criteria are for prior authorization approval with respect to pre-existing cardiovascular disease, coverage may be narrowed. For example, when Medicare initially covered bariatric surgery for patients with morbid obesity with at least one co-morbidity related to obesity, a number of Medicare Administrative Contractors (MACs) limited coverage of beneficiaries with diabetes mellitus as the qualifying co-morbidity to those with refractory diabetes mellitus. Subsequently, Medicare clarified that any diagnosis of type 2 diabetes mellitus would be sufficient to meet the requirement for at least one co-morbidity related to obesity without limiting coverage to patients who were refractory to treatment of diabetes mellitus.

The use of step therapy and prior authorization could limit or delay access to this medication. For example, CMS’s guidance does not address how plans should monitor if the patient’s diet and physical activity fall within the FDA-approved indication. Plans may choose to use utilization-management techniques developed for their commercial members, similar to strategies employed by Medicare Advantage plans.

As noted in an earlier Regs & Eggs blog post, CMS has instituted a number of reforms to the use of prior authorization in previous regulations. However, some of these reforms, including those finalized by CMS in the Advancing Interoperability and Improving Prior Authorization final reg, do not apply to drug benefits. Further, while many of these reforms are meant to streamline the use of prior authorization and, in the case of Medicare, prohibit plans from denying services that are covered under traditional Medicare, none of the reforms truly limit the use of prior authorization.

Step therapy is also heavily utilized by health plans as a way to steer patients first towards less-costly medications. Many providers believe that step therapy can lead to delays in obtaining the medicines patients need for the best outcome, potentially resulting in irreversible disease progression, complications or hospitalizations. In their view, step therapy poses particular challenges for very ill patients who are least equipped to manage additional bureaucratic hurdles.

All in all, Medicare coverage of this medication opens the door for other, similar weight-loss drugs that receive an additional indication that permits Medicare coverage. Questions around affordability, accessibility and Medicare costs will continue and may influence drugs selected for Medicare drug price negotiations.