Weight-Loss Drugs: Cost and Cost-Effectiveness

February 15, 2024


Katrina Bishop
Policy Analyst


ACHI Communications

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Drugs like Wegovy and Zepbound are effective in helping people lose weight, but the high price tag keeps them out of reach for many. Our series on weight-loss drugs continues with a look at the drugs’ cost and whether they are cost-effective.

The Cost of Obesity

Obesity is a risk factor for many chronic diseases that contribute significantly to healthcare spending in the U.S., including diabetes, heart disease, stroke, and some types of cancer. A Milken Institute report estimates that the economic and social impact of obesity on the nation was nearly $1.4 trillion in 2018, consisting of $370 billion in direct costs for medical treatment for obesity-related conditions and indirect costs of $1 trillion for lost workdays.

An analysis by KFF found that on average, privately insured people with an obesity or overweight diagnosis spend more than double the amount on total annual healthcare costs that people without an obesity or overweight diagnosis spend — $12,588 for people with a diagnosis versus $4,699 for people without a diagnosis. Additionally, those with an obesity or overweight diagnosis have experienced faster growth in out-of-pocket costs over the last decade (37%) than those without such diagnoses (25%). People with obesity may have higher healthcare costs for a variety of reasons, including the direct cost of treating obesity as well as the cost of obesity-treating related conditions such as cholesterol, hypertension, and elevated blood sugar.

Obesity rates tend to be higher in the Midwest and Southern parts of the United States. Despite steps to address obesity, Arkansas’s obesity rates continue to be among the highest in the nation (34.7% of adults and 23.8% of public school-age children). A 2017 ACHI report found that medical and drug expenses increase along with the severity of obesity, with Arkansas health plans included in ACHI’s review spending an average of 31% more on those who are obese than those who are not.

Out-of-Pocket Costs for Weight-Loss Drugs

Evidence shows that Wegovy and Zepbound are more effective than older weight loss medications or lifestyle interventions alone, but cost is still a barrier for many.

For those without insurance coverage for weight-loss drugs, out-of-pocket costs in the U.S. can be over $1,300 a month for Wegovy or $1,060 for Zepbound.  Costs for these drugs are much lower in some other countries. For example, Wegovy is nearly four times more expensive in the United States than in Germany, where the drug’s list price is $328.

As manufacturers like Novo Nordisk and Eli Lilly struggle to keep up with the surging demand, compounded forms of drugs like Wegovy have risen in popularity and may provide a cheaper alternative for many. Typically, compounding — the process of combining, mixing, or altering ingredients — is done for a patient who cannot be treated with an FDA-approved drug. For example, a patient who has an allergy to a certain dye and needs a drug to be made without it, or an elderly patient who cannot swallow a pill and needs the drug to be in a liquid form. When a drug is in short supply, as is the case with Ozempic and Wegovy, compounders can create an altered version of the drug if they meet certain requirements in the Federal Food, Drug, and Cosmetic Act.

However, these drugs have not been FDA-approved or evaluated for safety and effectiveness, including whether the ingredients are safe for human consumption. Novo Nordisk and Eli Lilly have both released statements regarding the risk of using non-FDA-approved compounded versions of their drugs.

Do Medicaid and Medicare Cover Weight-Loss Drugs?

Over 40% of Medicaid beneficiaries have a diagnosis of obesity. The high retail price and potentially long-term use requirement of drugs like Wegovy present a financial challenge for states looking to offer this drug benefit to Medicaid enrollees.

Medicaid and the Children’s Health Insurance Program can cover a range of services to address obesity, including prescription drugs that promote weight loss. However, coverage varies by state and is generally limited. Currently, only Arizona, Delaware, and Idaho cover weight-loss medications, though nine state Medicaid programs (California, Connecticut, Delaware, Michigan, Minnesota, Pennsylvania, Rhode Island, Virginia, and Wisconsin) have added Wegovy to their preferred drug lists — lists of drugs that states encourage their providers to prescribe over others as a mechanism to negotiate higher supplemental rebates.

By law, Medicare is not allowed to cover weight-loss drugs, though a drug commonly used for weight loss may be covered for other indications, such as diabetes. The nonprofit Obesity Action Coalition (OAC) is currently advocating for passage of a bill that would expand Medicare benefits for intensive behavioral therapy programs and expand coverage for FDA-approved chronic weight management medications. Top corporate partners of the OAC are Novo Nordisk, maker of Ozempic and Wegovy, and Eli Lilly, maker of Mounjaro and Zepbound.

Employer and Insurance Provider Coverage

A survey conducted by the International Foundation of Employee Benefit Plans in October 2023 found that 27% of the 205 U.S. employers surveyed provide coverage of glucagon-like peptide-1 drugs (the class of weight-loss drugs that includes Wegovy and Zeopbound) for weight loss and 13% are considering doing so. Among the top factors that employers said impacted their decisions regarding coverage for weight-loss drugs were obesity as a risk factor for chronic disease and long-term costs of the medications.

As demand for these drugs continues to climb, some employers and insurance providers are beginning to question the sustainability of coverage. The North Carolina State Health Plan is the latest in a string of employers and agencies to cut coverage for drugs like Wegovy, following others like the University of Texas System, Ascension Healthcare, and Hennepin Healthcare in Minnesota. Other entities like Connecticut’s state employee health plan have taken a slightly different approach, requiring members who are seeking drugs like Wegovy to first participate in behavioral change, diet, and exercise programs.

In January of 2024, a consulting firm reviewed possible weight-loss medication coverage costs for Arkansas’s state employee health plan. The consultant estimated anticipated use and cost of the drugs, as well as potential medical savings, and found that the overall cost of the weight-loss drugs would be far greater than the offsetting medical savings — a net loss of nearly $200 million by 2030.

A report by the Institute for Clinical and Economic Review (ICER) found that although weight-loss drugs provide a net health benefit compared to lifestyle modification alone, the cost of drugs like Wegovy would need to decrease substantially (44-57%) to be considered cost-effective. Other drugs, such as Zepbound, were still under investigation when ICER’s report was published in October of 2022.

The Bottom Line

The availability of effective weight-loss drugs has the potential to be life-changing for people who struggle with obesity and obesity-related health conditions. However, high prices, inconsistent insurance coverage, and supply shortages leave many struggling to find affordable solutions. As more competitors enter the market, prices may go down. In the meantime, federal and state policy makers, employers, and insurers are continuing to examine the potential costs and benefits of these drugs to determine whether and how to cover them as a plan benefit.

The next post in our series will explore other key considerations when deciding if weight-loss drugs should be added to a weight-loss plan. See also the first installment in the series, in which we examined the drugs’ active ingredients and how they work, and the second, exploring what the drugs mean for adolescents struggling with obesity.

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