Pricing a Lifesaving Drug

Will Medicare use its ample leverage to make Wegovy affordable?

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The newest miracle blockbuster drug is a medication from the Danish manufacturer Novo Nordisk, long a prime supplier of insulin. The drug, semaglutide, marketed under the names Ozempic and the higher-dose Wegovy, is a classic case of a medication being developed for one purpose and turning out to have even more important benefits treating other conditions.

The question is whether the government will use its substantial leverage to make sure the medicine is affordable, or whether it will just become another source of windfall industry profits, at the expense of Medicare, Medicaid, other insurers—and ultimately of you and me as patients, ratepayers, and taxpayers.

Ozempic was approved by the FDA in 2017 as a once-weekly injectable treatment for Type 2 diabetes. It soon became evident that the drug also helped people achieve weight loss.

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Ozempic quickly became popular as an “off-label” anti-obesity drug. And in 2021, the FDA approved the higher-dose variant, Wegovy, as a treatment for extreme obesity. As my colleague David Dayen has reported, the race is on to develop copycat drugs, ideally in pill form, which would have an even larger market than the current injectables.

Now, further research has demonstrated an even more potent medical use. According to a study published last Friday in The New England Journal of Medicine, Wegovy offers significant benefits for patients with congestive heart failure, a condition affecting more than six million Americans, in which the heart gradually loses its ability to pump efficiently.

According to the New England Journal study, patients receiving Wegovy showed reduction in such symptoms as shortness of breath and fatigue, and showed greater improvement in general physical fitness.

Obesity per se is often a prime cause of congestive heart failure. It may be that Wegovy relieved congestive heart failure symptoms simply by helping patients lose weight. Or the drug could have independent heart benefits beyond the weight loss. The study indicated that Wegovy may have reduced inflammation. Confirmation of that inference will require further research.

For those not covered by insurance, Novo Nordisk prices Wegovy at around $15,000 a year.

Either way, the drug will now have another massive new market, as a treatment not just for diabetes and obesity but also for congestive heart failure. Novo Nordisk, armed with this latest study, is now on a massive lobbying campaign to get both private insurers and the government to pay for Wegovy as a treatment for conditions other than diabetes. For those not covered by insurance, Novo Nordisk prices Wegovy at around $15,000 a year, which most patients can’t afford.

But if private insurance and Medicare and Medicaid were to pay, the out-of-pocket expense would be far less and the market would vastly increase. So, of course, would the government’s costs.

Medicare currently covers Ozempic and Wegovy, but only as treatments for diabetes. Weight loss drugs are explicitly banned from coverage by the 2003 Medicare Modernization Act (which launched Medicare Part D) because of the prior experience with the weight loss drug combination called fen-phen, which was taken off the market due to potentially fatal hypertension and heart valve problems. By contrast, Wegovy appears to have heart benefits.

It’s not clear whether Medicare coverage of Ozempic or Wegovy for weight loss would require an amendment of the Medicare Modernization Act. But Medicare could certainly decide to cover them for treatment of congestive heart failure. The vast majority of people suffering from congestive heart failure are elderly. So Medicare would end up picking up most of the costs.

There are other new drugs in the same general category as Wegovy, such as Eli Lilly’s Mounjaro, a diabetes medication that also produces weight loss and could turn out to have heart benefits. And more such competing drugs are on the way. So Novo Nordisk is not a monopoly supplier, or won’t be for long.

In the past, Big Pharma succeeded in preventing Medicare from negotiating bulk discounts in drug prices. But that changed with the Inflation Reduction Act, which authorized HHS to negotiate drug prices, beginning with a relatively small initial list that could be expanded. Government also has the bargaining power that comes with the options of delaying coverage or not covering the drug at all.

In short, government has ample leverage to bargain for significant price reductions in this new class of lifesaving drugs, if it will only use it.

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