Medicare can now cover Eli Lilly's Zepbound for sleep apnea, Health Department agency says

• Medicare drug plans can now cover Eli Lilly's blockbuster obesity drug Zepbound for obstructive sleep apnea, the Centers for Medicare & Medicaid Services confirmed to CNBC.
• That opens the door for broader coverage of and access to Zepbound, which is not currently covered by Medicare and many other insurance plans for weight loss specifically.
• Medicare Part D plans can cover obesity drugs if they are used for an additional medically accepted purpose approved by the Food and Drug Administration.

Medicare drug plans can now cover Eli Lilly's blockbuster obesity drug Zepbound for obstructive sleep apnea, CNBC confirmed on Wednesday. 

That opens the door for broader access to Zepbound, which is not currently covered by Medicare and many other insurance plans for weight loss. Demand for the injection has soared over the last year despite its roughly $1,000 per month price tag before insurance.

In a statement to CNBC, a spokesperson for the Centers for Medicare & Medicaid Services, an agency of the U.S. Department of Health and Human Services, said "current Medicare Part D and Medicaid coverage rules apply" to Zepbound following its landmark approval in December for the most common sleep-related breathing disorder.

Medicare Part D plans can only cover obesity drugs if they are used for an additional medically accepted purpose approved by the Food and Drug Administration, the CMS spokesperson said, referring to the agency's guidance. The spokesperson added that Part D plans may consider using prior authorization — a process where a provider must first get approval from an insurer — for those drugs to ensure they are being used for that specific purpose. 

The FDA on Dec. 20 cleared Zepbound for patients with obesity and moderate-to-severe forms of obstructive sleep apnea, or OSA, which refers to breathing interrupted during sleep due to narrowed or blocked airways. That made Zepbound the first drug treatment cleared for the estimated 20 million people with those forms of the disease, according to Eli Lilly.

In a statement on Thursday, Eli Lilly called Medicare's coverage of Zepbound for the condition "good news."

Medicare Part D plans are similarly allowed to cover Novo Nordisk's weight loss drug Wegovy for its other approved use: lowering cardiovascular risks. The diabetes counterparts of Wegovy and Zepbound — Ozempic and Mounjaro, respectively — are covered by Medicare and most insurance plans. 

Both Novo Nordisk and Eli Lilly are studying their weight loss medicines as treatments for fatty liver disease, chronic kidney disease, sleep apnea and more. To be covered, those drugs would need to return late-stage trial results and then be submitted for FDA approval for those uses.

Meanwhile, state Medicaid coverage for Zepbound and other obesity medications depends on what condition they are prescribed for and whether their manufacturer has signed a certain Medicaid drug rebate agreement, according to the spokesperson. 

Under that agreement with the secretary of Health and Human Services, manufacturers agree to provide rebates to states in exchange for Medicaid coverage of their drugs. States share the rebates with the federal government. 

A state Medicaid program must cover Zepbound if it is prescribed for OSA and Eli Lilly has signed the Medicaid drug rebate agreement, the spokesperson said. 

But if Zepbound is prescribed for weight loss, state Medicaid programs are not required to cover it. 

The Biden administration in November proposed a rule that would allow Medicare and Medicaid to cover weight loss drugs for patients with obesity. The rule would give millions of people access to weekly injectables, but it would cost taxpayers as much as $35 billion over the next decade.

It is unclear if President-elect Donald Trump's administration will pursue the rule.