GLP-1s: To Pay or Not to Pay?

08-13-2024

With obesity reaching epidemic levels in much of the world, more people are turning to weight-loss drugs in their quest for longevity and wellness. The demand for injectable prescription drugs like Ozempic, Wegovy and Mounjaro — known as GLP-1s — is quickly expanding. These medications have become wildly popular to treat myriad health conditions such as obesity and diabetes, or as a preventative medication against heart disease, strokes and other conditions.

The price tag is hefty, averaging $1,300 for a three-month dose, and the drugs are a life sentence for most individuals to maintain their weight loss. Patents for these drugs won’t expire for another decade, which means a long time before lower cost alternatives become available.

In the U.S., seven out of 10 adults are clinically overweight or obese. Adults with obesity spend an average of $1,861 more on healthcare than adults in a healthy weight range, while those with severe obesity spend about $3,100 annually in additional healthcare costs.

Employers that provide weight-loss treatment and medications as part of their health insurance are usually obligated to cover the cost of GLP-1 medications. More than a third of companies provide coverage for GLP-1 drugs for both diabetes and weight loss, up from 26% in 2023, while 19% of companies offering GLP-1s for diabetes are considering offering the drugs for weight loss as well.

The booming demand for GLP-1s — as well as the skyrocketing cost of specialty drugs — is having a major impact on healthcare benefits: The cost of pharmacy benefits rose 8.4% in 2023, following a 6.4% increase in 2022.

However, offering these treatments can result in long-term cost savings. For example, a 40-year-old worker who moves from obese to overweight could save $17,000 over his lifetime in direct medical costs and productivity; that same worker could see savings in excess of $28,000 if he achieves and maintains a healthy weight.

But employers need to do the math: Will these drugs offset the long-term impacts of obesity? Will employees remain long enough for the company to realize savings? Will covering these drugs be a differentiator in attracting and retaining talent? Answering these questions will help employers decide if, and to what degree, they’ll cover GLP-1 treatments.

The BUA Edge

Employers need to evaluate if access to GLP-1s aligns with their employee population’s wants and needs. Having the right tools and guidance can help employers formulate a strategy.

Employers should do the following:

Analyze the data. Data analytics provide the critical insights needed to determine the viability of offering weight-loss drugs. An analysis should include, at a minimum, an examination of health plan enrollment allocations, paid claims for various conditions per member per month and off-label GLP-1 utilization rates.

Take a long-term company view. Does the benefit of weight-loss drugs outweigh the costs in the long run? Obesity complications cost employers more than $30 billion annually in higher disability payments and more than $80 billion in higher health-related absenteeism. By offering GLP-1s to obese workers, employers can improve employee physical and mental health, increase productivity and reduce absenteeism.

Weigh the effect on recruitment and retention. As GLP-1s become mainstream, employees may expect their employers to cover their prescriptions for weight loss. Removing the class of drugs altogether could hurt recruiting and retention. But it’s also important to consider if premium increases associated with the additional costs will be sustainable.

Consider other cost-saving opportunities. Healthcare continues to be one of the greatest expenses for employers, but new and creative funding alternatives are emerging to help offset those costs. Employers may consider bundling benefits or alternate funding strategies, such as patient assistance programs, to more affordably provide these drugs. They should carefully consider long-term prescription contracts that could hinder the affordability and availability in today’s fluid marketplace. Other options may include sourcing from Amazon Pharmacy, which is hoping scale and distribution will achieve GLP-1 prescription cost savings, or serial entrepreneur Mark Cuban’s online pharmacy that is exploring ways to offer discounted weight-loss drugs through partnerships with major health insurers and their PBMs.

This information is provided for general information purposes only. It does not constitute professional advice and does not create a broker-client relationship. Please consult BUA about your specific needs before taking any action.