Biden proposes Medicare, Medicaid coverage of weight-loss drugs

The Biden administration is proposing a rule that would require the US government to cover weight-loss drugs, potentially expanding access for millions of Americans with obesity and creating a huge new medical bill for President-elect Donald Trump.

The Medicare insurance program now pays for drugs like Novo Nordisk A/S’s Ozempic and Eli Lilly & Co.’s Mounjaro for people with health conditions such as diabetes. The new rule would give an estimated 3.4 million older Americans on Medicare, and four million more adults in Medicaid programs for the poor, access to weight-loss treatment, according to the White House.

The proposal would slash out-of-pocket costs by as much as 95% for the drugs that can carry a price tag of $1,000 a month, according to a White House official. The thinking is that the cost would be offset by the reduced incidence of diabetes, heart conditions and other illnesses tied to obesity.

Medicare, which provides coverage to about 52 million older Americans, currently doesn’t pay for related drugs like Wegovy and Zepbound for obesity. Just 13 state Medicaid programs cover the the blockbuster weight-loss medications.

The move is a victory for drugmakers Novo and Lilly, which are just emerging from shortages that have curtailed access to the brand-name medicines for the past two years. The booming market for obesity shots is expected to hit $130 billion by 2030, and both companies have been racing to convince insurers that the drugs are worth paying for.

Covering obesity medicines under Medicare and Medicaid “is an important step forward for patients,” Novo said in a statement. If left untreated, obesity can contribute to diseases such as type 2 diabetes, heart disease, high blood pressure and high cholesterol, the company said. Lilly didn’t immediately respond to a request for comment. 

Novo shares rose as much as 3.4% in Copenhagen, and they’re up about 8% for the year to date. Lilly rose 2% in premarket US trading, and it has gained almost 30% this year.

The proposal, which must still go through a formal rule-making process, also hands a challenge to the Trump administration, which has made reducing government spending a key objective. If the rule goes into effect, any effort to rein in costs by reducing access in the future would be a wildly unpopular move.

Trump’s pick to lead the Department of Health and Human Services, Robert F. Kennedy Jr., said last month that delivering healthy food to the American public could “solve the obesity and diabetes crisis” for a fraction of the cost of covering GLP-1 drugs.

Patients and doctors have been advocating for wider access to the drugs, and efforts to remove restrictions on Medicare coverage have been picking up momentum in Congress. Still, industry watchers and analysts weren’t expecting changes to happen until next year at the earliest.

Covering the drugs at their current prices won’t be cheap. Expanding Medicare coverage for the shots is likely to cost $35 billion over nine years, according to a Congressional Budget Office analysis released last month. 

However, the CBO also said it expects that semaglutide, the active ingredient in Novo’s Wegovy, Ozempic and Rybelsus, will be included in the government price negotiations under the Inflation Reduction Act in 2025, which could help lower costs. 

The proposed rule for the weight-loss drugs would go into effect at the same time as the program to lower medication costs through price negotiations, the White House official said.

In the meantime, Novo and Lilly have been conducting studies to show that the shots have health benefits beyond weight loss, part of their effort to expand insurance coverage. In March, major health insurers began paying for Novo’s Wegovy for some Medicare beneficiaries with heart disease, opening the door for wider access to the medication. 

Lilly rolled out cheaper, single-use Zepbound vials in August, in part to give Medicare beneficiaries an avenue to receive the drugs. 

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