Does health insurance cover Ozempic and Wegovy?

A new generation of weight-loss drugs presents an opportunity to improve the health of millions of Americans — and a challenge for the nation’s health care system that will have to figure out how to afford them.

The demand for these drugs is proving to be extraordinary. Last week, Novo Nordisk announced it would temporarily stop advertising Wegovy, a diabetes medication that was approved for weight loss in 2021, to prevent high demand from leading to a shortage. Its sister drug with the same active ingredient, Ozempic, is not approved for weight loss but is in high demand for off-label use. And the market is only expected to grow: Eli Lilly has asked the FDA to approve another diabetes drug, Mounjaro, for use in losing weight.

The public health opportunity could also be significant. One in three US adults, more than 85 million people, are considered obese; another one in three are considered overweight. Obesity is a risk factor for various chronic health conditions — like hypertension, heart disease, diabetes, and so on — that are among the most common causes of death in the United States, and the treatments for these diseases are costly. Medical costs associated with obesity exceed $250 billion annually, according to the Institute for Clinical and Economic Review (ICER).

If these drugs can help people shed weight, and early indications are they’re very effective in doing that, that should help them avert those chronic conditions too. And indeed, preliminary research findings suggest Wegovy improves patients’ heart health, which could help to avoid costlier medical problems down the road. The new treatments have the added advantage of relative ease of use, compared to other obesity treatments like gastric bypass surgery. You can take an injection once a week instead of going under the knife. (Although, unlike a one-time surgery, you may need to take those injections in perpetuity.)

The American health care system has seen blockbuster drugs — treatments that are wildly profitable for pharmaceutical companies — before. But this is a special case: drugs that are meant to be taken over the long term to address conditions that affect more than half of the US population.

Not everyone who is obese or overweight is unhealthy, or interested in losing weight, and doctors likely won’t think the medication is appropriate for everyone. Even so, the potential number of people eligible is big enough that, even if the vast majority never fill a prescription, the weight-loss drugs could quickly become among the most common drugs in America, and the most expensive for insurers to cover. ICER estimated if just 0.1 percent of the potential patient population for Wegovy were to receive a prescription, the cost would be significant enough to drive up premiums for private plans.

But the US health system isn’t built to help a vast population take advantage of a very expensive drug, even one with these potential long-term benefits. And that raises questions about whether patients who might benefit and are interested will even be able to afford them.

Having health insurance doesn’t mean your plan will cover every drug on the market. Insurers make decisions, based on both clinical benefit and cost, about whether to cover different drugs, what restrictions to place on that coverage, and how much patients have to pay for them out of pocket. So far, drugs like Wegovy and Ozempic are usually excluded from people’s insurance coverage. Medicare and Medicaid generally do not include weight-loss drugs. Employer health plans, which cover half of the country’s population, typically don’t cover weight-loss drugs either, and are demanding documentation from patients and doctors to justify a Wegovy or Ozempic prescription.

In other words, we have new treatments that address one of the most pressing health crises in the country — and yet our health system seems to be actively discouraging their use. What gives?

Why health insurers typically aren’t covering Wegovy and Ozempic right now

Wegovy, Ozempic, and their peers are ushering in a new era of obesity treatment. Historically, being overweight or obese has been characterized as largely a personal failure and the result of poor lifestyle choices. But most of the medical community already treats weight issues as a biological problem, with behavior as just one component. The public has gradually been coming around to the same view.

The ability to take an injection once a week and see significant weight loss is another step toward treating obesity like any other disease, with the potential to improve health and prevent serious and costly medical conditions later in life. According to ICER, the patients in the clinical trials that evaluated Wegovy as a weight-loss treatment saw about a 15 percent reduction in weight after one year compared to people in the placebo arm of the trials.

That amount of weight loss can result in meaningful health benefits. According to the Centers for Disease Control and Prevention, even a 5-10 percent reduction in body weight can lead to improved blood pressure, cholesterol, and blood sugar. A small Mayo Clinic study estimated that patients saw a reduction in their likelihood of a heart attack or stroke after taking Wegovy for a year.

Those improvements should let people live longer and save the health system money. According to the Peterson-KFF Health System Tracker, people enrolled in large employer health plans who are diagnosed with obesity have significantly higher annual health care costs compared to people who are not: about $12,600 versus $4,700 in 2021.

But those benefits can only be realized for most people if their insurer covers the drug. Wegovy currently has a list price between $800 and $1,000 a month, or between $10,000 and $12,000 a year.

Even in the age of the Affordable Care Act, insurers still have a lot of leeway in deciding which prescription drugs to cover. According to the Wall Street Journal, less than half of large firms (those with more than 5,000 employees) cover weight-loss drugs under their health plan. For smaller shops, the share is even lower, less than 20 percent. Medicaid and Medicare, which insure about 35 percent of the population combined, don’t cover them either, even though obese patients are more likely to be covered by those programs.

Right now, employer health plans are pushing back against the high demand they are seeing for these treatments. Experts say that they don’t expect those attitudes to change until the prices come down or cheaper alternatives come onto the market.

“Until there are, coverage that’s offered through an employer’s health insurance plan may be limited to individuals who are in extreme need of these drugs,” Jennifer Chang, an expert at the Society for Human Resource Management, told me, “versus just as a means of losing weight.”

David Dillon, a health actuary at Lewis & Ellis, explained how this might look in practice. When doctors prescribe Wegovy for weight loss and patients submit their claim, insurers may ask the doctor for information from annual well visits or blood labs that indicate the person is at risk of developing diabetes. The Wall Street Journal reported that patients are already receiving that kind of request from their health insurer, and some are having their claims denied.

Most health insurers do cover gastric bypass surgery, which could in theory be more cost-effective because it’s a one-and-done procedure rather than a prolonged medication regimen. But they also require patients and doctors to meet a long list of criteria before covering that version of obesity treatment.

Medicare, meanwhile, is actually prohibited by law from covering weight-loss drugs under the legislation passed in 2003 that created its prescription drug benefit. Legislation has been proposed in the past to eliminate that exclusion, and drug makers are pushing again for lawmakers to repeal it with these new obesity drugs coming onto the market. Coverage of those drugs could impose significant costs to the program (as much as $27 billion every year) but could also potentially yield long-term cost savings.

Why employer health plans might not invest in people’s long-term health

This is one of the ways in which the US health system’s reliance on employer-sponsored insurance fails us. Most working-age adults are covered by the company that employs them. The priority for the company’s health plan is to try to keep costs as low as possible in the short term, to avert premium increases.

“We have a much more mobile workforce now. Not many folks are staying 20 to 30 years in the same role,” Chang said. “Those long-term benefits might not be a part of their thinking because they are thinking short-term, immediate results versus the long game.”

That’s because in the modern economy, employment is often a short-term proposition. The average tenure for a job in the United States these days is about four years.

“Because people often switch jobs and health insurers, there isn’t always an incentive to pay upfront for a drug that may generate health benefits and cost reductions in the future,” said Larry Levitt, executive vice president at the health policy think tank KFF.

Compounding that problem is that these weight-loss drugs currently appear to be overpriced compared to their value, even if that value is real. Based on ICER’s assessment of Wegovy’s long-term health benefits, the drug provides a value commensurate to between $7,500 and $9,800 per year. But the medicine’s list price is currently above $17,000 and, even when accounting for rebates paid by drug makers to health plans, the average annual cost is still higher (about $13,000) than its expected value.

One thing experts are watching is whether, in the future, the federal government determines weight-loss drugs should be classified as preventive medicine. Health plans are required to cover certain preventive services recommended by expert panels under the ACA. (That is, if the preventive medicine provision survives an ongoing legal challenge.) This would make it easier for patients to access the drugs — and much, much more costly for insurers.

That is the health system the United States has built. Drug makers that patent a novel treatment are given a monopoly and broad discretion to set whatever prices they want for their products. Insurers have some leverage to bring those prices down in negotiations, but they will also resort to restricting coverage to moderate their costs. And because employer plans can expect to cover a given patient for only a few years, they are incentivized to keep costs low in the short term without paying much mind to the potential for long-term savings by averting chronic health problems.

It is a situation driven by the peculiar structure of US health care. A breakthrough weight-loss treatment is going to present a cost challenge to other developed countries, where obesity rates have been rising for years, too. But those countries don’t face the same cost pressures.

In the UK, for example, a month’s supply of Wegovy costs about $100 instead of more than $1,000 — a reflection of the National Health Service’s assessment of the value it will provide. Novo Nordisk also knows it can drive a harder bargain in the US with its more laissez-faire market, reducing the need to try to extract as much revenue as possible from Britain. And the UK has adopted prescription criteria for all patients based on that assessment, with the drug prioritized for people who have specific health conditions, such as high blood pressure, diabetes or prediabetes, heart disease, and even sleep apnea.

So there will be some limits on coverage for weight-loss drugs and experts in the UK do expect some frustration among patients as a result. But that country is making a holistic assessment of the value these drugs can provide and setting costs and access accordingly.

In the US, meanwhile, your ability to take Wegovy or Ozempic or whatever comes next depends on the whims of your employer’s health plan — with little consideration for how it may affect your long-term health.