USC think tank highlights savings from anti-obesity drugs without considering drug costs
August 23, 2023
The new anti-obesity drugs like Wegovy (semaglutide) clearly help people lose substantial weight and improve their health. Health benefits of effectively treating obesity include lower risk of diabetes, cardiovascular disease, cancers including breast, colon, and endometrial, and lower likelihood of needing hip or knee replacements.
Researchers at USC Schaeffer Institute published a white paper using a simulation model to demonstrate that more widespread use of these drugs could reduce Medicare spending by $175-$245 billion over ten years. Medicare is currently legislatively prohibited from covering weight loss drugs, but the researchers assert that the societal benefits of Medicare coverage could reach $100 billion a year. The researchers also showed that the savings for Medicare were far larger if these drugs were covered by private insurance before members aged into Medicare.
There are two sentences buried in the report that bear careful review:
Our analysis quantifies benefits and medical cost offsets but does not account for the costs of the treatment itself. We view the latter as a question of how manufacturers and government will share the social benefits between them.
It’s worth looking at the graph of projected total societal benefit based on age and BMI at initial treatment. Another chart in the white paper shows that medical cost savings are about a fifth of total societal gains. This would mean that the annual cost for these drugs would need to be about $2000 (one fifth of the $10K of social benefit for starting treatment at 45) to “break even” in terms of total social benefit. Medical claims costs are a small portion (9-11%) of total social benefit.
Source: Ward, et al “Benefits of Medicare Coverage for Weight Loss Drugs” USC Schaeffer Center, April 18, 2023 LINK
The Schaeffer Center receives funding from pharmaceutical companies including Eli Lilly and Pfizer, which have GLP-1 drugs on the market or in the pipeline.
Implications for employers:
- The total societal benefits of these medications are large
- Be cautious of estimates that increased use of these drugs will lead to medical cost savings unless the price of these drugs drops dramatically.
- These drugs, like most other medical care, might be cost effective after price cuts (we get benefits for a reasonable price) as opposed to cost saving (where we get benefits and lower costs.)
Tomorrow: Potential employer benefits from a plan to remove lead pipes in Michigan
You can find previous posts in the Employer Coverage archive
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Addendum 1: 11/6/23: Added note that medical claims savings represents 18-21% of total benefits. The authors valued each saved “quality adjusted life year” at $150,000. *See second addendum for explanation
Addendum 2: 11/14: Authors stated that obesity treatment would lead to $140b to $188b in medical cost savings and $1.2t-$1.9t of total societal benefits. I’ve changed text to medical savings are 9-11% of total societal value.