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Monthly Healthcare Insights: Medicare and obesity drugs, No Surprises Act

By Jeff Levin-Scherz, MD, MBA | April 29, 2024

Our population health leader weighs in Medicare and obesity drugs, the No Surprises Act, diabetes programs, birth centers, and more.
Health and Benefits|Benessere integrato

Employer implications of Medicare’s coverage for obesity drugs for those at high risk for heart disease

The Centers for Medicare and Medicaid Services (CMS) recently announced that it will allow carriers to cover Wegovy (semaglutide) for Medicare beneficiaries to prevent major adverse cardiovascular events (MACE) for those who have had previous MACE or are at high risk. This follows a New England Journal study that showed a 20% decrease in MACE in those who were on semaglutide, and the Food and Drug Administration’s (FDA's) addition of this indication for Wegovy.

This doesn’t mean that most Medicare beneficiaries who are obese or overweight and have a history of cardiovascular disease will now have insurance coverage of Wegovy. CMS will allow Medicare Part D plans and Medicare Advantage plans to cover the drug, but these plans won’t necessarily add it to their coverage. Insurers didn't consider this cost when they were planning their 2024 rates, so they’re unlikely to begin coverage quickly.

For next year, insurance plans might still be leery of adding this coverage. They will likely worry that coverage of Wegovy for those with a history of heart disease could cause adverse selection, or enrollment of sicker members, in two ways:

  1. Those who are overweight or obese with a history of heart disease would be more likely to choose these plans.
  2. Plans covering Wegovy would have higher premiums, which can lead to healthier people moving into less expensive plans. More expensive and generous plans attract more adverse selection with each passing year and eventually are so expensive that they aren't viable in the market. In insurance, this is called a “death spiral.”

What does this mean for employer-sponsored health plans? Thirty-eight percent of employers cover GLP-1 medications for obesity, and some employers will consider adding coverage for those with obesity and a history of heart disease. This will require pharmacy benefit managers (PBMs) to implement prior authorization to be sure those who are approved truly have cardiovascular disease. It's our understanding that rebates would be available to employers that cover obesity only with cardiovascular risk.

Implications for employers:

  • As GLP-1 drugs are approved for new indications, more employers are likely to begin to cover them.
    • The next big potential indication is the treatment of MASH (metabolic-associated steatohepatitis, previously known as non-alcoholic fatty liver disease). The drug that was recently approved for this indication is three times as expensive as GLP-1 medications. A low-dose aspirin a day was also recently shown to be beneficial for those with MASH.
    • It’s likely that GLP-1s will be shown to benefit a variety of clinical conditions. Whether or not they cover GLP-1s for obesity, employers should develop a global strategy for this class of medications.
  • Employer coverage for this indication alone, without adding coverage for obesity, will require that PBMs implement prior authorization.
  • Rebates for these medications are high (as much as 40% of the list price) so expenses would be much higher if employers didn't receive rebates.

GLP-1 anti-obesity drugs lead to substantial weight loss in the ‘real world’

We know that the GLP-1 anti-obesity drugs lead to substantial weight loss in clinical trials; semaglutide (Wegovy, Ozempic) and tirzepatide (Zepbound, Mounjaro) are associated with about 15% or more weight loss in structured clinical trials. However, prescription drugs often don’t work as well outside of clinical trials. Epic Research, which uses claims from the Epic electronic medical records data warehouse, which has over 200 million patient records, has published research demonstrating that the GLP-1 medications lead to sustained weight loss outside of clinical trials.

The study of over 410,000 who were on GLP-1 medications for any reason showed that treatment with maximum doses of tirzepatide was associated with 15% weight loss, and injectable semaglutide was associated with 10% weight loss. Oral semaglutide (Rybelsus), injectable liraglutide (Saxenda/Victoza), and dulaglutide (Trulicity, not marketed for obesity treatment), were associated with less than 4% weight loss at maximal doses. Given when these medications were approved, the sample had a high proportion of diabetics.

In March, sales of Zepbound were higher than sales of Wegovy for the first time, although Zepbound is still not on the formulary for at least one large pharmacy benefit manager. This isn't a surprise, given Zepbound’s increased impact and (slightly) lower cost. However, the weight loss possible with Wegovy will also substantially improve overall health and lower health risks for most obese people.

The FDA approved Wegovy to reduce the risk of MACE in those with a history of MACE, but studies of Zepbound are still pending. I expect that these will also show a lower risk of MACE, although we won’t know until the studies are finished and published.

Five percent weight loss would be considered a good response to a dietary intervention, and most who lose weight with diets regain a substantial amount of that weight.

Implications for employers:

  • This demonstrates that two of the GLP-1 drugs (tirzepatide and semaglutide, both injectable) are associated with much more weight loss than even especially effective diets.
  • Oral semaglutide (only FDA-approved for diabetes treatment) and injectable liraglutide (FDA-approved for obesity treatment as Saxenda,) lead to a relatively modest amount of weight loss. These less-effective treatments are just as expensive as tirzepatide and injectable semaglutide.
  • Liraglutide is likely to be the first GLP-1 to become available as a generic in two years; this data suggests that its clinical value is substantially lower than the other two drugs, even if its price goes down.
  • Some formularies might include only one of the two highly potent GLP-1 medications, which is reasonable as both offer substantial benefits.

No Surprises Act isn't lowering total medical costs

The Congressional Budget Office expected that the No Surprises Act (NSA), passed in 2022, would reduce overall medical costs by about 1%. The NSA covers services that are performed emergently, and those provided by hospital-based specialists, including anesthesiologists, radiologists, pathologists, and emergency medicine physicians. The Centers for Medicare and Medicaid Services recently released data from the arbitrations conducted when insurance plans and providers couldn’t agree on a price. The results suggest that when disputes go to arbitration, providers are the big winners, and health plans (and those who pay their premiums) are the big losers.

The NSA requires that health plans establish a Qualified Payment Amount (QPA) based on their in-plan payments. If providers are dissatisfied, they can go to an arbitrator for independent dispute resolution (IDR). The arbitration approach is modeled after settling salary disputes in baseball; each side makes a proposal, and the arbitrator chooses one of those two proposals. Theoretically, this prevents disputants from making outlandish proposals, for fear that the arbitrator will reject a price that's far too low from a carrier or far too high from a provider.

Providers argued that guidelines or guardrails for arbitrators should focus on out-of-plan payments, while insurers argued that guidelines should be based on in-plan allowable rates. The Department of Health and Human Services (HHS) established guardrails to limit the price accepted by the arbitrator, but they are on hold due to litigation.

A new Brookings Institute analysis found that over three-quarters (77%) of the arbitration findings were in favor of the provider, and almost three-quarters of cases (74%) were brought by one of four large private-equity-owned physician practices.

The analysis covered IDR results from emergency medicine, neonatal or pediatric intensive care, and imaging. The median prices determined by the arbitrators were about 90% of what the providers proposed, and between 2.6 and four times higher than what the insurance plans proposed. The researchers point out that higher prices in arbitration could increase provider leverage and lead to higher contractual rates. There were 288,000 cases submitted for arbitration in the first half of 2023, far more than the 17,000 predicted annually.

Implications for employers:

  • The NSA was designed to prevent patients from receiving surprise bills after getting hospital or emergency care, but in practice seems to be increasing the cost to health plans.
  • The guardrails promulgated by HHS could have prevented this outcome, but arbitrators aren't subject to this guidance as lawsuits wind their way through the court system.
  • Employers can talk to their carriers about their experience with independent dispute resolution. They can also advocate for effective regulations that don't raise the cost of health care.
  • Employers should be certain that their carriers are refunding any “shared savings” claimed for out-of-plan bills where the IDR erased these savings.

Peterson Institute finds that diabetes programs improve quality but raise costs

The Peterson Health Technology Institute, a new nonprofit dedicated to the evaluation of digital health interventions, published its first report, a review of peer-reviewed medical literature on digital diabetes vendors currently selling to employer-sponsored health plans.

They found that behavior and lifestyle modification programs had a modest impact on Hemoglobin A1C (HbA1C), an indication of long-term blood sugar control, and increased costs on average by $484 per patient per year. The researchers were more positive about the clinical impact of a nutritional ketosis program, which showed a clinically meaningful decrease in HbA1C. They also found that remote patient monitoring had only a small impact on HbA1C and increased costs by an average of $2,002 per commercial patient per year.

Vendors and an industry trade group complained that the study used a simulation model based on clinical trials to predict cost savings. But, industry-sponsored observational studies often show more substantial savings by comparing participants in the program with members who don't participate. However, these industry studies often fail to account for “selection bias,” where those who participate in the program are healthier and more motivated. Therefore, industry-sponsored observational studies tend to overstate savings.

Implications for employers:

  • The clinical improvements that some of these interventions showed, HbA1C decreases of 0.2-0.6%, are of at least some clinical benefit.
  • Vendor programs that delight employees and improve health can provide value to a company even if they don't decrease the cost of medical claims.
  • Employers should not count on huge cost savings from these programs, and any decreases in costs might happen much later.
  • Vendor contracts should include robust performance guarantees. Program performance should be monitored carefully.
  • Employers should look critically at vendor savings claims, which can be based on flawed methodology. Any contractual ROI guarantees should include detailed instructions for calculations of savings.
  • This evaluation suggests that employers seeking to establish a diabetes program should give nutritional ketosis a careful look. Many members, though, have difficulty following a very low-carbohydrate diet.
  • Good diet and exercise are important for health, but programs promoting lifestyle behavior change are often less effective than we would hope. The Peterson findings on digital diabetes vendors likely bear some relevance to digital programs for obesity care.

Birth centers can ease maternity access and decrease Cesarean sections, but face regulatory challenges

U.S. maternity care is much more “medicalized” than in other developed countries, and yet U.S. maternal outcomes are the worst in the developed world. The challenge of maternity access and quality is worst in rural and impoverished communities, which often don't have hospitals. One potential answer to the problem of poor access is birth centers, as outlined in this 2022 White House Blueprint for Addressing the Maternal Health Crisis. Instead of obstetricians, the centers are usually staffed by midwives, who can deliver low-risk pregnancies for women who don’t need surgery.

Birth centers are recognized as “an integral part of regionalized care” by the American College of Obstetrics and Gynecology and can be accredited by the Commission for Accreditation of Birth Centers. Some are adjacent to hospitals, and others are freestanding. Facility charges for birth centers are much lower than facility charges for hospital births. However, about 15% of patients who start their delivery process at a birth center will be transferred to hospitals if they need a Cesarean section or if there is any evidence of fetal or maternal distress.

Birth centers can also help with health equity, as many are staffed by professionals of color. The documentary Aftershock (2022) describes how birth centers serve as a resource for minority communities hard-hit by maternal deaths. While studies show better Black pregnancy outcomes with race-concordant providers, we have a shortage of Black providers.

But Modern Healthcare and The New York Times have reported that state regulations often create insurmountable barriers to birth centers. Some states require transfer agreements with nearby hospitals, giving hospitals veto power over potential competitors. In any event, hospitals are required by the Emergency Medical Treatment and Labor Act (EMTALA) to treat patients in need of emergency care. Many states have “certificate of need” (CON) regulations, and sometimes refuse to grant a CON to a birth center even if it’s being proposed in an under-served community.

The only birth center in the eastern part of Massachusetts, where I live, closed its doors in 2022 when the hospital system that owned the center said that it faced a staffing shortage. In some states, CON laws are so restrictive that midwives will only do home or hotel births. Even after doubling over a decade, birth center deliveries were only 0.5% of total U.S. deliveries.

Implications for employers:

  • Employers can ask their carriers if they have credentialed birth centers in their networks, and if there are birth centers available where their employees are concentrated.
  • Employers can also ask that their carriers publicize access to midwives and birth centers in their electronic directories and through their call centers.
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Population Health Leader, Health and Benefits, North America

Jeff is an internal medicine physician and has led WTW’s clinical response to COVID-19 and other health-related topics. He has served in leadership roles in provider organizations and a health plan and is an Assistant Professor at Harvard Chan School of Public Health.

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