Medicaid Utilization and Spending on New Drugs Used for Weight Loss

A relatively new group of medications used for weight loss has emerged, providing new opportunities for obesity treatment but also raising questions about access to and affordability of these drugs. Initially approved to treat type 2 diabetes, these drugs, known as GLP-1 (glucagon-like peptide-1) agonists, including Novo Nordisk’s Ozempic, Rybelsus, and Wegovy (semaglutide) and Eli Lilly’s Mounjaro (tirzepatide), are also highly effective weight-loss agents. These drugs are expensive when purchased out of pocket, and Medicaid coverage of these drugs when used for weight loss is currently limited, though some states are taking steps to expand coverage. This brief discusses Medicaid coverage of weight-loss drugs, recent trends in Medicaid utilization and gross spending on new drugs used for weight loss, and the potential implications of those new drugs for Medicaid programs and enrollees.

Does Medicaid cover drugs used for weight loss?

States can decide whether to cover weight-loss drugs under Medicaid, leading to variation in coverage policies across states. Under the Medicaid Drug Rebate Program, Medicaid programs must cover nearly all of a participating manufacturer’s Food and Drug Administration (FDA)-approved drugs for medically accepted indications. However, weight-loss drugs are included in a small group of drugs that can be excluded from coverage, and thus, some states do not cover weight-loss drugs in Medicaid. While a recent survey found a number of states were considering adding Medicaid coverage of weight-loss drugs, studies have shown a limited number of states cover weight-loss drugs in Medicaid, with some states only covering the drugs for severe obesity, with a comorbidity, or other restrictions. When prescribed by a physician, weight-loss medications should be covered for children under Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) program. While state coverage of weight-loss drugs in Medicaid is limited, most GLP-1 agonists in this analysis are approved to treat type 2 diabetes (Table 1) and would be covered by Medicaid for treatment of type 2 diabetes.

How has Medicaid utilization and gross spending on new drugs used for weight loss changed in recent years?

Medicaid utilization and gross spending on new drugs used for weight loss (GLP-1 agonists) have both increased rapidly in recent years, nearly doubling each year since 2019 (Figure 1). From 2019 to 2022, the number of prescriptions for new drugs used for weight loss increased over 600%, while spending per prescription increased 23%. Mirroring other KFF analysis, the cost of each of these drugs before rebates was over $900 per prescription by 2022. Those prices and spending numbers do not account for rebates, and states are likely receiving substantial rebates on these brand drugs—Medicaid and CHIP Payment and Access Commission (MACPAC) analysis of FY 2020 data found statutory rebates were around 61.6% of gross spending on brand drugs. New drugs used for weight loss still account for small shares of the total number of Medicaid prescriptions and spending before rebates, though the shares are growing. By 2022, these drugs accounted for 0.2% of all Medicaid prescriptions (up from 0.02% in 2019) and 1.3% of all gross Medicaid spending (up from 0.2% in 2019).

Specifically, increased utilization of Ozempic has contributed substantially to recent trends, likely because it was the first to receive FDA approval. Ozempic was approved to help control blood sugar levels for adults with type 2 diabetes in 2017, followed by Rybelsus in 2019, and Mounjaro in 2022 (Table 1). Wegovy is the only one of these drugs currently approved for chronic weight management and was approved for adults in 2021 and for children ages 12 and up in 2022. State Medicaid coverage of drugs approved for weight-loss (Wegovy in this analysis) is limited. Ozempic, Rybelsus, and Mounjaro are approved to treat type 2 diabetes and covered by Medicaid for that label indication, though they are also commonly prescribed off-label for weight loss, including for people with other related risk factors. From Medicaid data publicly available, there is no way yet to disentangle how much of the growing use of these drugs is related to treatment for diabetes versus obesity, or a combination of both.

What to watch looking ahead?

Expanding coverage of weight-loss drugs under Medicaid could increase access to those medications for people with Medicaid. Almost one-third of U.S. adults had obesity in 2021, and without insurance coverage, new weight-loss medications likely remain unaffordable and inaccessible for many individuals, and especially for Medicaid enrollees, who are low income. KFF polling found about half of adults in the U.S. would be interested in taking prescription weight-loss drugs, though interest drops if the drug is not covered by insurance or after hearing patients might gain weight back after stopping use. Some states are starting to take steps to expand coverage of obesity treatment including prescription drugs under Medicaid, and expanded coverage may help individuals afford the medications and address some disparities in access. To the extent that access to medications reduces obesity rates among Medicaid enrollees, there could also be longer-term reductions in Medicaid spending on chronic diseases associated with obesity, such as heart disease, type 2 diabetes, and types of cancer.

However, the new medications do include some side effects, and expanding coverage of weight-loss drugs in Medicaid will likely lead to further increases in Medicaid utilization and spending. Studies have also shown people can regain the weight if they stop taking the medications, suggesting the drugs may need to be taken long term and further impacting utilization and spending trends. New American Academy of Pediatrics (AAPs) guidelines also now recommend pharmacotherapy obesity treatment in children ages 12 and older, and changes in physicians’ practice stemming from the updated treatment recommendations could have a sizable effect on Medicaid programs and enrollees because Medicaid covers so many children. Lastly, obesity is caused by a multitude of complex factors, and uptake of new weight-loss drugs could improve health, but would not address all of the underlying contributors to obesity.