At 'Most Favored Nation' prices, can Medicare break even on GLP-1 drugs?

In November 2025, the White House announced pricing deals with multiple pharmaceutical manufacturers to lower domestic prices for glucagon-like peptide-1 receptor agonist drugs (GLP-1RAs) including Ozempic, Wegovy, Mounjaro, and Zepbound. Those deals are part of a new “Most Favored Nation” (MFN) policy that ties the cost of GLP-1RAs in the U.S. to the prices paid in other wealthy countries.

Although this shift brings Medicare closer to “breaking even” if GLP-1RAs are covered for weight management, a new analysis led by experts at the University of Chicago finds that the new policy isn’t quite there yet.

“People have been talking so much about the effectiveness and high value of GLP-1 drugs because of their effects not just on weight but also cardiovascular disease, metabolic health, and more,” said first author David Kim, PhD, a health economist at UChicago. “We’ve been very interested in providing some policy‑relevant evidence about what it would take to save money in the long run.”

Achieving cost neutrality would require the long-term healthcare savings to completely offset the cost of the drugs. Earlier in 2025, the same research group published papers demonstrating that although GLP-1 drugs deliver impressive long-term health improvements, their prices far exceeded accepted thresholds for cost-effectiveness. With expanded coverage, the researchers predicted that incremental Medicare drug costs would total nearly $66 billion over 10 years, with only $18 billion saved through reduced hospitalizations and chronic disease care, leading to a net total of $48 billion in new spending.

The new MFN policy, which benchmarks U.S. drug prices against what “comparable” high‑income countries pay, changes the equation. The announced deal set a Medicare price of $245 per month for GLP-1RA drugs when prescribed for weight management — far below previous U.S. list prices, which often exceeded $1,000 per month.

Based on this new information, the researchers used a new nationally representative simulation model to estimate the 10-year budget impact of expanding Medicare coverage to about 30 million current and future beneficiaries with obesity who do not yet have diabetes or cardiovascular disease. These individuals are not currently eligible for GLP-1 coverage based solely on weight.

In their main scenario, the team assumed that about 30% of newly eligible patients would start therapy and that 40% of those who start would remain on the treatment long term. They also built in parameters accounting for the fact that semaglutide, the key active ingredient in some leading GLP‑1RAs, is expected to lose patent protection around 2032, which could bring substantial price reductions.

At a $245 monthly price, the new model projected that Medicare would spend nearly $74 billion on GLP-1 drugs over 10 years if coverage expanded, with about $56 billion in downstream health savings thanks to better outcomes associated with diabetes, heart disease, and related complications.

“With a projected net effect of around $18 billion in additional Medicare spending over a decade, our model shows that GLP-1 drugs still don’t ‘pay for themselves’ yet at the new price,” Kim said. “But we see that the budget impact is much less severe than people have previously anticipated.”

Another innovation in the researchers’ latest analysis was splitting the fiscal impact into two separate cost buckets: the initial weight-loss phase and the longer maintenance phase. They found that most of the remaining cost sits in the long‑term maintenance phase, so they argue that smarter, more affordable weight‑maintenance strategies could make a real difference.

“Our results highlight the need to design innovative weight‑maintenance programs to reduce the long‑term cost burden,” Kim said. “That could mean alternative dosing schedules, transitioning to lower-cost drugs, or combining medications with intensive behavioral interventions and medical nutrition therapy.”

He also points out that since the team completed their analysis, policymakers have clarified that the proposed $245 Medicare price is inclusive of a $50 monthly copay. This clarification brings the actual cost to Medicare down to just $195 per month, which is much closer to the cost neutrality point of $185 that Kim and his team calculated.

“Ultimately, lower prices for GLP‑1 drugs do strengthen the case for expanding coverage in Medicare, and they also make it more feasible for other payers like Medicaid and private insurers to consider broader coverage,” Kim said.

 

“Most Favored Nation Pricing and Affordability of GLP-1Ras for Obesity Treatment in Medicare” was published in JAMA Network Open in May 2026. Co-authors are David D. Kim, Jennifer H. Hwang, A. Mark Fendrick and Dariush Mozaffarian.