The Centers for Medicare & Medicaid Services (CMS) has confirmed that certain Medicare Part D plans can now cover Eli Lilly's blockbuster obesity drug Zepbound (tirzepatide) for use in obstructive sleep apnea (OSA), a significant development that could expand patient access to the weight-loss medication. This decision comes after the Food and Drug Administration (FDA) approved Zepbound for patients with obesity and moderate-to-severe forms of OSA in December 2023.



Zepbound's approval for OSA marks a major milestone, as it is the first drug treatment cleared for the estimated 20 million people with these forms of the disease. The drug demonstrated impressive results in clinical trials, with a mean reduction of up to 62.8% on the apnea-hypopnea index (AHI) compared to placebo. In two clinical trials, 43% and 51.1% of patients who received Zepbound experienced significant improvements, with some even achieving complete resolution of their sleep apnea symptoms.

Medicare Part D plans can only cover obesity drugs if they are used for an additional medically accepted purpose approved by the FDA. This new coverage rule applies to Zepbound following its landmark approval for OSA. Prior authorization may be required to ensure that the drug is prescribed for the approved condition. State Medicaid coverage for Zepbound depends on the condition it is prescribed for and whether the manufacturer has signed a Medicaid drug rebate agreement.

The Biden-Harris Administration proposed a rule in November 2024 that would allow Medicare and Medicaid to cover weight loss drugs for patients with obesity, potentially benefiting millions of people. This proposed rule seeks to make these treatments more accessible, with an estimated 3.4 million Medicare recipients and 4 million Medicaid enrollees set to gain access to weekly injectables like Zepbound. If approved, this rule could cut out-of-pocket expenses by up to 95% for some patients.



BMO Capital Markets analysts have estimated that Medicare coverage of Lilly's Zepbound could add another $1.4 billion to the drug's peak revenue opportunity, with approximately $1 billion coming from a Medicare patient population that would see significantly improved access. This expansion in coverage is a "significant positive" for Lilly, as it opens the door for broader access to the weight-loss medication and could increase its market share in the obesity and sleep apnea treatment market.

However, the potential cost implications for Medicare and taxpayers are substantial. An August 2024 study published in the Annals of Internal Medicine found that Part D coverage for Novo Nordisk's semaglutide alone could run the U.S. government up to $145 billion annually. Given that Zepbound is expected to have a similar price point to semaglutide, the high cost of the drug combined with the expected demand could lead to significant financial burdens for Medicare and taxpayers.



In conclusion, the CMS's decision to allow Medicare Part D plans to cover Zepbound for sleep apnea opens the door for broader coverage and access to the weight-loss medication. While this development is a significant positive for Eli Lilly and patients with obesity and sleep apnea, the potential cost implications for Medicare and taxpayers are substantial and warrant careful consideration. As the competitive landscape for sleep apnea treatments continues to evolve, both device manufacturers and other medication providers will need to adapt to the changing market dynamics.