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Joseph Grogan: Medicare should cover Wegovy — but not negotiate its price

Biden's administration announced that Wegovy would be subject to price controls.
Thought Leader: Joseph Grogan
January 17, 2025
Source: STAT

Price controls are a surefire way to crush innovation.

President Biden took a groundbreaking step in proposing to cover GLP-1 obesity medications under Medicare and Medicaid in November. But on Friday, his administration announced that Wegovy, one of these drugs, would be subject to price controls. This is a surefire way to crush innovation and discourage new entrants to this important new class of medicines that could help millions of Americans.

GLP-1s, or glucagon-like peptide-1 receptor agonists, are safe and effective. They not only help people lose weight but also reduce the risk of diabetes, cardiovascular disease, and potentially fight addiction to alcohol, illicit drugs, and opioids — key priorities from President-elect Trump’s first term that also have huge potential to lower health care costs. They can play a substantial role in Trump’s Make America Healthy Again (MAHA) initiative, and potentially help rein in excessive government spending as the Department of Government Efficiency (DOGE) intends.

Even Robert F. Kennedy Jr., Trump’s choice to lead the Department of Health and Human Services and no friend of the drug companies, acknowledged that “GLP drugs have a place” in the MAHA initiative. And Elon Musk, who will lead DOGE, noted on X, “Nothing would do more to improve the health, lifespan and quality of life for Americans than making GLP inhibitors super low cost to the public.”

The question for Trump is: How do we go about it in the most cost-effective way? Allowing Medicare to cover these medications is a great place to start.

The Food and Drug Administration recently elevated obesity to a “chronic disease,” no longer just a “relapsing health risk.” This is a significant shift that gets the Centers for Medicare and Medicaid Services and the FDA on the same page. Medicare’s statute forbidding coverage of weight loss drugs was written to prevent coverage for unproven drugs like Dexatrim and fen-phen, not to limit access to proven chronic disease interventions like GLP-1s. To its credit, the Biden White House proposed a new rule in November 2024 that would expand coverage of these medications under Medicare and Medicaid. But to lower costs, Medicare announced that Wegovy will be added to the agency’s Inflation Reduction Act price controls.

This would be foolish. The thinking is based in part on a Congressional Budget Office (CBO) report showing that Medicare coverage of obesity medication would spike federal spending. However, CBO assumed drug prices would rise over time when in fact the opposite is true. Competition drives innovation, which lowers prices. Since 2015, spending on retail prescription drugs has largely been stable. Major reforms at the FDA during Trump’s first term accelerated review of generic and biosimilar medications contributed to drug prices growing at the slowest rate in decades. Further, negotiation itself has costs. Over 40 research programs having been discontinued since the IRA was enacted. We’re still exploring all of the conditions which GLP-1s could address. Cutting off resources at this critical juncture is misguided, especially when generics will drive the price down.

In the meantime, the innovator drugs still offer ample opportunity for savings by making patients healthier and obviating more intensive procedures. Medicare covers bariatric surgical procedures, such as certain gastric bypass surgery and laparoscopic banding surgery, which can cost as much as $33,000 per operation. GLP-1s cost about $1,000 per month, but that price is likely to come
down on its own. Further, one also has to consider the benefits to patients. While most bariatric surgeries are minimally invasive, they still are tremendously disruptive, requiring patients to interrupt their schedules, miss work, substantially change their diets and curtail calorie consumption, and there can be complications and side effects. Furthermore, it requires several consultations with a host of specialists, as many as ten, which is even not included in that cost.

When accounting for these offsets and other benefits of the medications, the USC Schaeffer Center, where I am a nonresident Senior Scholar, has estimated that Medicare coverage of weight loss drugs would yield nearly $1 trillion in health care and social savings over the next decade.

Under Biden, the Department of Health and Human Services’ budget ballooned to $1.9 trillion, offering DOGE plenty of space for cuts that should create room for investing in patient health through GLP-1 coverage. Biden’s nursing home rule would cost $17 billion and lead to facilities closing down. Additionally, Biden has sought to saddle vulnerable Americans with expensive and ineffective coverage through a rule expanding Obamacare at the expense of employer coverage and a rule that reduces the frequency of Medicaid eligibility verifications, preventing resources from going to those most in need. Repealing these would save $34 billion and $200 billion, respectively.

Chronic diet-related diseases cost nearly half a trillion dollars to treat. The Joint Economic Committee estimates government spending on obesity will exceed $4 trillion by 2033. We must reduce these costs, and done right, expanding access to obesity medications can help make a real dent and improve life for millions of Americans.

By Joe Grogan

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