Ozempic Mania's billions in bills are coming for US taxpayers

An increasing issue facing state and municipal governments in the US is the cost of diabetes and obesity medications, which is threatening the balance of their healthcare budgets.

State health plans and Medicaid offices are receiving staggering invoices for GLP-1s (Ozempic, Wegovy, and its sister medicine) and other related pharmaceuticals from Novo Nordisk A/S. They represent a significant advancement in the management of two of the trickiest chronic illnesses. But the expenses threaten to drain government coffers, with list rates exceeding $1,000 per month.

“It’s not sustainable,” state employee health insurance supervisor Dale Folwell of North Carolina complained at a recent board meeting. “It’ll sink the plan.”

Other officials have also issued warnings about the skyrocketing prices. In July, Connecticut implemented additional hurdles for state employees attempting weight-loss therapy, following a 50% yearly increase in prescription expenditures since 2020. In June, Virginia increased the requirements for Medicaid participants seeking GLP-1s as a treatment for obesity. A Delaware official issued a warning about an increase in Medicaid claims for the medications since March and said that cost limits could be necessary for the state.

The medications are about to see an explosion in demand. Although wealthy people seeking fast weight loss solutions have received a lot of media attention, they actually make up a very small portion of the potential market for GLP-1s. Over 100 million Americans are obese, and more than one in ten have type 2 diabetes. The rates are greater for the 19% of Americans who are covered by Medicaid, the government health insurance program that typically consumes more than 25% of state budgets.

Health plan managers are concerned about tough choices and the requirement to restrict access, even as competitors Eli Lilly & Co., Novo Nordisk, and health advocates highlight an expanding list of advantages for patients. What about an overweight Medicaid client who is not diabetic but has a heart issue, even though the elementary school teacher with type 2 diabetes is covered by the medications? What if a police officer’s fat made her knee discomfort worse?

The cost to taxpayers will be determined in part by the responses to these questions. Additionally, given that pharmaceutical corporations may charge far more for prescription prescriptions in the US than in other nations, it can rekindle discussions about how much the general public is ready to pay for these medications.

Another example of the major effects that drug usage is having on society is hand-wringing. Chipotle Mexican Grill Inc. and Cava Group Inc. are two restaurant businesses that have anticipated the prescriptions will lead consumers to eat more healthfully. Walmart Inc. claims that the medications are already having a negative impact on food sales. According to an estimate by a Jefferies Financial Group Inc. analyst, weight reduction medications have the potential to save airlines millions of dollars on fuel expenses.

Wonder drugs

In 2005, doctors began prescribing early formulations of GLP-1 medications to treat type 2 diabetes, including Novo’s Ozempic and Eli Lilly’s Mounjaro and Trulicity. The most expensive chronic condition in the US is type 2 diabetes. According to the US Centers for Disease Control and Prevention, $1 of every $4 spent on health care goes toward treating the disease and its symptoms.

In spite of their formal names, glucagon-like peptide-1 receptor agonists are far more effective than previous generations of medications, according to doctors and advocacy groups.

Kevin Petersen, the ADA’s vice president of primary care, said it will transform medical practice.

As doctors and patients become more aware of the medications’ potential, the cost of the medications is increasing for states. When patients start taking GLP-1s, doctors typically recommend that they continue taking them indefinitely.

Bloomberg’s latest full-year data show that Medicaid spent $7.9 billion on GLP-1 drugs in 2022 alone, up more than double from 2020. According to the Medicaid and CHIP Payment and Access Commission, that’s equivalent to 8.6% of the 85 million Americans it covers in prescription spending prior to rebates.

The surge in Medicaid spending on GLP-1s appears to be driven by diabetes, not weight loss. The reason why a patient is prescribed a drug is not always disclosed by doctors. Trulicity reimbursements, however, made up 62% of the increase in Medicaid spending between 2020 and 2022 despite not causing the same dramatic weight loss as Ozempic or Mounjaro. For 2023, incomplete claims data indicate reimbursements for GLP-1s rose, especially for the newer drugs.

Newer diabetes formulations, new studies about health benefits beyond diabetes, and the likelihood that GLP-1s will soon be available in pill form (instead of injections) will likely make GLP-1s more popular with patients. Bloomberg’s analysis showed that if all type 2 diabetics on Medicaid were prescribed the drugs, the annual cost would be roughly $41 billion, nearly half of what Medicaid spent on prescription medications in 2022.