Obesity Drugs in the Payer Market: What to Expect

Ira Studin, PhD
President
Stellar Managed Care Consulting

The old axiom, “The truth is somewhere in between” may be a useful lens to gauge how a new generation of obesity drugs will perform in the payer market.

On one side is the school of thought suggesting that annual revenues will be in the multi-billions, with investment analysts’ tacitly assuming insurance will support demand.

On the other side is the “PCSK9” school, referring to extreme barriers payers created to restrict Repatha and Praluent coverage as an alternative to statins.

The discussion below will draw on conversations with payers and describe the likely payer market between these two sides.

Heavy discount or else

There is a through line from the cholesterol lowering drugs that put their stamp on the market starting in the 1990s and weight loss drugs today. Assuming Mounjaro follows Wegovy’s recently announced outcomes data, the parallel with statins centers on huge patient markets and drugs that reduce cardiovascular events.

What bears emphasis is that aggressive statin discounts were essential for formulary access. Despite their varying potency, in battles between Pravachol, Zocor, Lipitor, and Crestor, access depended on steep discounts.

I recall an interview with the chair of a health plan P&T committee years ago, in reviewing impressive outcomes data and testing a more moderate discount. His response, “class effect.” I said, “But they have the outcomes data.” His follow-up, “We require outcomes data when we want and assume class effect when we want.”

Based on current discussions with pharmacy directors, it is highly likely that, depending on the AWP, discounts for obesity drugs could range from 35-50%. Also, with added competition, pressure for greater discounting will escalate. If manufacturers hold their ground on discounts, the potential to lose access grows.

Adding to the challenge is that closed formularies today have far more market share than in the statin era and, with payers readily assuming “comparability,” any product could be non-formulary.

Rigorous prior authorization

In addition to a binary world of access, payers intend to use prior authorization (PA) to manage utilization. Discussions with key decision-makers point to requiring physician notes, with one sizeable insurer indicating it hired additional licensed practical nurses to review prescriber notes and BMI calculations.

Along with BMI requirements, a six-month try-and-fail diet and exercise step is likely. Also mentioned is a step through generics (e.g., phentermine) or older brands (e.g., Qsymia).

While tighter-than-label PA requirements are associated with orphan products, it would not be surprising to see high control plans use trial data to narrow the patient profile for coverage.

Heterogeneous coverage

In addition to the threat formulary restrictions and PA limitations pose for product revenue, availability of coverage creates a separate limiting factor. For the commercial population, of the six scenarios noted below, only 1 and 6 translate to broad coverage. Scenarios 2 to 5 represent a continuum from modest coverage available to none.

• Scenario 1: States where obesity is formally a disease and coverage is required.
• Scenario 2: States where obesity is not recognized and coverage requires a separate rider.
• Scenario 3: Employers where obesity drugs are paid for from health savings accounts.
• Scenario 4: Employers ending or planning to end coverage.
• Scenario 5: Employers not covering obesity drugs.
• Scenario 6: Employers covering obesity drugs.
  

Medicare is a big question mark, but four factors suggest no future coverage: 1) requires an act of Congress; 2) increased premiums; 3) lack of real-world evidence on safety for a senior population; and 4) multi-morbidities being so prevalent, as one medical director put it, “CMS is not worrying about the long-term complications from a risk factor like obesity.”

Past is prologue

For obesity drug coverage today, as it has always been for breakthrough treatments targeting large populations, in the payer market past is prologue: since payers have the upper hand on cost management, even in this era of transparency, high rebates delivering low net cost will be the norm.