Paying the Cost of GLP-1s
GLP-1s, or the glucagon-like peptide-1 class of drugs, have attracted widespread public attention for their significant weight-loss results and growing evidence of benefits beyond diabetes management. These benefits have generated pressure to expand access to the drugs. However, federal law generally prohibits Medicare Part D from covering drugs used for weight loss. In response, the Centers for Medicare & Medicaid Services (CMS) launched a new program on July 1 under its demonstration authority, the Medicare GLP-1 Bridge, that temporarily expands access to GLP-1 drugs.
The Medicare GLP-1 Bridge will provide coverage of GLP-1 drugs for Medicare beneficiaries at a fixed $50 co-payment for consumers and $195 cost for the federal government – bringing the net price to $245 per monthly supply. The program provides coverage to Medicare beneficiaries seeking GLP-1 drugs solely for weight management who do not qualify for Part D coverage under another indication – such as type 2 diabetes – and is set to run through 2027.
CMS has not publicly released an estimate of the Medicare GLP-1 Bridge’s total federal cost, though a CMS official has claimed that they expect the model will save federal dollars in the long run as beneficiaries become healthier and consume less care. KFF estimated that depending on uptake for those eligible, the program could cost between $1.3 billion and $10 billion over the 18-month period. Previous efforts in Congress to change the law to allow Medicare coverage of weight-loss drugs were estimated by the Congressional Budget Office (CBO) to cost Medicare $35 billion over ten years, including about $3 billion in savings from improved health outcomes.
While treatments like GLP-1s provide significant health benefits, the improved health does not necessarily translate to net federal budgetary savings. Although there may be fiscal benefits over the long run – including reductions in needed care for chronic illnesses or acute medical episodes – those benefits are both hard to quantify and may be offset by other costs of added longevity.
While beneficiary costs under the Bridge will not count toward the Part D deductible or annual out-of-pocket limit, implementation of full-scale coverage would exacerbate cost pressures of an already popular drug.
GLP-1s are somewhat of an outlier due to their new use as a weight-loss medication, which by statute isn’t covered by Medicare. Yet they illustrate how federal health programs absorb the cost of innovative drugs or other medical innovations that are often introduced at a high price and represent a key driver of Medicare cost growth.
For example, the introduction of hepatitis C medications in the mid-2010s was responsible for Part D program payments increasing by nearly 15 percent in 2014. The 2022 Inflation Reduction Act’s price negotiation provisions can eventually lower the prices of these drugs – but not until they’ve been on the market for 7 to 11 years, at the earliest. And even at lower prices, new drugs and technologies often impose significant new costs on the U.S. taxpayer.
With Part D now expected to cost much more than previously believed and Medicare costs projected to roughly double over the next decade, it may be time to rethink how the program integrates – and shares the cost of – expensive new drugs and medical technologies. In order for seniors to enjoy the benefits of incredible new medical innovations, someone must pay the cost. A thoughtful system would, at minimum, bring greater transparency to these costs and allow trade-offs to be weighed.
At the same time, policymakers should work to reduce spending and lower the cost of current drugs and other health care, saving money for beneficiaries and government alike.
