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Ozempic could face upcoming Medicare drug pricing negotiations

A pharmacist displays boxes of Ozempic, an injectable semaglutide drug used to treat type 2 diabetes manufactured by Novo Nordisk, at Rock Canyon Pharmacy in Provo, Utah, U.S., March 29, 2023.

George Frey | Reuters

Ozempic, the leading treatment for diabetes in Novo Nordiskcould be next on the list for price negotiations between manufacturers and Medicare.

The Biden administration this week released the first 10 drugs that will be subject to those negotiations, a process that aims to lower the prices of the drugs Medicare Part D spends the most on. The changes will come into effect by 2026.

Ozempic will likely be eligible for negotiations by the time the next drug cycle is selected in 2025, for price changes that will take effect. effect in 2027.

Several analysts expect the weekly injection to be a top pick because Medicare Part D has already spent more than $2 billion on the drug in 2021 — an amount close to some of the drugs chosen for price negotiations this week. Total Part D spending in 2021 was $98 billion.

They assume that Medicare will spend a lot of money on Ozempic in the coming years, given the high demand for this drug and similar treatments that can help patients shed unwanted pounds.

“Ozempic will be the biggest project that people will be watching very closely in the second round of negotiations,” Louise Chen, analyst at Cantor Fitzgerald, told CNBC.

Novo Nordisk’s Rybelsus, an oral diabetes drug, could also make the list because it contains the same active ingredient as Ozempic. Most Part D plans cover both patients with type 2 diabetes, but do not cover drugs for unauthorized uses such as weight loss.

Meanwhile, Novo Nordisk’s obesity injection Wegovy, which uses the same ingredient, is unlikely to be a target of near-term negotiations because Medicare does not cover weight-loss drugs.

A Novo Nordisk spokesperson did not comment directly on the possibility of Ozempic being included in the next round of negotiations. The spokesperson said the company “supports policies aimed at ensuring patients can afford their medications,” but criticized the negotiation process led by the federal Centers for Medicare and Medicaid Services, or CMS. .

“Unfortunately, we have seen CMS take aggressive steps to unilaterally price-fix without considering the impact on patients living with chronic conditions or the healthcare system as a whole,” the carrier said. word.

Ozempic, Wegovy and Rybelsus are part of a class of drugs called GLP-1, which mimic a hormone produced in the gut to suppress a person’s appetite.

Wegovy and Ozempic sparked a gold rush in the weight loss industry last year, with high-profile names such as billionaire tech mogul Elon Musk among recent users. But the injections are expensive, since the prices vary between 900 dollars and more than 1,300 dollars per month.

Medicare and private insurers typically get rebates and rebates on the drugs they cover, but the magnitude is unclear.

Why Ozempic Wasn’t Eligible This Year

The Medicare program spent $2.6 billion on Ozempic in 2021, according to an AARP study. Based on this figure, AARP said Ozempic was the 10th most expensive drug covered by Medicare Part D.

But Ozempic was left out in the first round of negotiations due to federal government selection guidelines.

The guidelines require that the drugs have been on the market for at least seven years after their initial approval or license in the United States, from the date the Biden administration releases the list of selected products.

The Food and Drug Administration approved Ozempic for diabetes in December 2017, making it ineligible for the first round of drugs unveiled this week. But Ozempic will likely be eligible for the next drug list, which will be released in February 2025, Evercore ISI analyst Umer Raffat said in a research note.

“This means Ozempic de Novo (along with Rybelsus) could be on next year’s roster,” he wrote.

Several analysts agree, citing how much Medicare will spend on Ozempic in 2021. That puts the drug high on the forecast lists for the second round of negotiations.

Reducing the price of Ozempic through negotiations could lead to significant savings for the Medicare program.

Medicare would save about $1.3 billion if the price of Ozempic were reduced by 40%, according to research by David Risinger, an analyst at Leerink Partners. At the same time, the program would only save about $342 million if Rybelsus were cut by the same amount.

It’s unclear exactly how much patients pay out of pocket for Ozempic, which has a list price of $936 per month in the United States. But a lower negotiated price for Ozempic will likely benefit the roughly 28% of Medicare beneficiaries who have diabetes.

Wegovy’s fate is uncertain

It’s still possible that the negotiations will affect Wegovy, particularly if Medicare decides to start covering the injection and other weight-loss treatments before the second round.

Citigroup analysts, in a note last week, said this was likely due to recent research showing Wegovy’s benefits for heart health.

Weight-loss drugs are being evaluated for their ability to treat diseases such as dementia and addiction, after a landmark study showed Wegovy helped reduce the risk of heart attack and stroke.

Bloomberg | Bloomberg | Getty Images

Earlier this month, Novo Nordisk released advanced trial data showing that Wegovy reduced the risk of serious heart problems such as heart attacks or strokes by 20%.

The results suggest that Wegovy has significant health benefits beyond helping patients lose weight, which could potentially lead to expanded use of the drug and increased coverage by insurers.

Other analysts say savings on the first round of drugs could help pave the way for Medicare to cover Wegovy.

Four of the ten drugs selected for negotiation cost Medicare more than $17 billion a year before any discounts or rebates. Lowering the prices of these drugs could potentially “free up” Medicare’s budget and make it easier for the program to cover popular GLP-1s like Wegovy, according to a note from Wells Fargo analyst Mohit Bansal.

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