The buzz about Ozempic, Wegovy and other related weight-loss medications is everywhere. These new drugs create an inescapable dilemma for companies that offer health insurance, as their exceptional effectiveness comes at a very high price. These expensive medications further threaten the affordability of employer-sponsored health insurance plans. Yet programs to constrain use, if not managed well, can lead to friction, conflict and dismay among prescribers, pharmacists and, most importantly, patients.
What is the landscape for anti-obesity drugs today?
This class of high-cost drugs poses a unique challenge in that over 40% of the adult population is eligible for treatment. This contrasts with expensive genetic therapy and oncology medications, which are only appropriate for a small portion of any population.
Obesity rates are on the rise globally, and obesity is associated with an increased risk of cardiovascular disease, diabetes, cancer, musculoskeletal disease and disability. Bariatric surgery is very effective at treating obesity, but less than 1% of those who meet medical necessity standards have had this procedure. Few weight-loss programs have shown sustained weight loss over large populations, and past obesity medications had unacceptable side effects and, in some cases, were very dangerous. Other currently available anti-obesity medications are less expensive but lead to much less weight loss.
The GLP-1 medications, glucagon-like peptides, slow food down in the stomach and decrease food cravings in the brain. Patients on the newer GLP-1 drugs like Wegovy, Ozempic and Mounjaro can lose as much as 15% of their body weight.
These drugs are effective at treating diabetes and have also been shown to prevent major adverse cardiovascular events (such as heart attacks and strokes) and to diminish the symptoms of one type of heart failure. We expect this class of drugs will also prove to be effective treatments for fatty liver disease. Obese patients who successfully lose weight on GLP-1 medications will likely require long-term medication therapy to maintain this weight loss.
These drugs have mostly gastrointestinal side effects, which resolve in most patients over the first few weeks as the dose gradually increases. There are isolated reports of suicidality and gastrointestinal blockage, but drugs in this class have been used in people with diabetes for almost two decades without major signals that they are unsafe for long-term use.
GLP-1 drugs are generally given weekly as a self-administered injection. They retail for between $12,000 and $15,000 annually, and employer-sponsored health plans pay around $9,000 annually after discounts and rebates. Liraglutide (Saxenda), semaglutide (Wegovy) and Zepbound (tirzepatide) are currently approved for the treatment of obesity, and many physicians likely give patients “off-label” prescriptions for Ozempic (semaglutide) and Mounjaro (tirzepatide), which are approved for diabetes and not obesity.
One analysis found that over half of those with new prescriptions for Ozempic and Mounjaro (56%) did not have a diagnosis of diabetes in medical claims. The diabetes versions of GLP-1 drugs have lower prices than the obesity versions. Zepbound has been introduced at a price 20% below Wegovy, but we don’t yet know the level of rebates and discounts that will be available.
Although these drugs will prevent some cardiovascular and other diseases, they will not be cost-saving to plan sponsors. Most healthcare cost savings from weight loss are years away, and many social benefits will not accrue to employers that sponsor health plans.
For instance, some analysts have suggested that weight loss from GLP-1 medications could reduce the use of jet fuel and improve the profitability of airlines. Indeed, an industry study projected $85 million in medical claims savings by treating 100,000 patients for five years. This is the equivalent of about two cents of medical cost savings for every dollar spent if the medication was acquired for $9,000 a year.
This first generic for liraglutide (Saxenda) could be available as early as 2024, although this drug requires a daily injection and leads to less weight loss than more recent GLP-1 medications. The drug ingredient patent for semaglutide (Ozempic and Wegovy) expires in 2026, but other patents could delay generic versions until the 2030s.
Utilization is skyrocketing. For example, data from WTW’s Rx Collaborative show that Wegovy, Saxenda, Ozempic and Mounjaro now collectively account for 9% of all ambulatory pharmacy spending in commercial health plans, even after rebates and discounts. One in 56 (1.7%) members filled a prescription for at least one of these medications last year. Total costs for these medications in the first half of 2023 exceeded their costs for the entire year of 2022.
Balancing demand and affordability
Many employers already offer their plan members programs to help them address their cardiometabolic risk factors, including obesity, hypertension, high cholesterol and diabetes. Consultations with nutritionists can help improve diet, and various programs and apps can support members as they seek to improve their cardiometabolic health. But for many with obesity, these programs are not enough. Employers seeking to balance provider and member demand for these medicines with health insurance affordability are choosing from the following range of actions:
1. Provide no coverage for anti-obesity medications
Nearly two-thirds of employers (62%) do not currently provide coverage for anti-obesity medicines, often because their plans were designed years ago when obesity was regarded as a “lifestyle” issue rather than a metabolic disease. These employers are reluctant to initiate coverage now, knowing the likely high costs.
Indeed, WTW’s 2023 Best Practices in Healthcare survey, completed this summer by 457 employers with 7.3 million employees, showed that 38% of employers offer coverage for obesity medications, and only 6% are planning to add this in 2024. Some employers, including Ascension Health and the University of Texas, have announced they will stop covering drugs to treat obesity altogether. Employers that do not cover drugs for obesity will likely see some plan members obtain these drugs for the diabetes indication instead.
Excluding all anti-obesity drugs will mean employers have the smallest outlay for these medications but could make it more difficult to recruit and retain employees, and most plan members will not gain the clinical benefits from these medications.
2. Restrict coverage for anti-obesity drugs to a smaller group than recommended by specialty societies and approved by the Food and Drug Administration
Anti-obesity medications are recommended by professional societies such as the American Gastroenterological Association and the Endocrine Society for those with a Body Mass Index (BMI)>30 or a BMI >27 and a comorbidity such as hypertension or diabetes. However, the clinical benefit from weight loss is highest for those with high levels of obesity, and some with BMIs of 27 or 30 might seek drug treatment for cosmetic reasons rather than for a clinical need.
Employers could offer coverage for only those with a higher BMI (such as 35) or those with a complication such as heart failure or previous cardiovascular disease. The WTW Best Practices in Healthcare Survey shows that 10% of respondents restrict coverage to those with higher BMI levels. If plans restrict GLP-1 coverage to those with higher BMIs, manufacturers might withdraw rebates. Therefore, employers that choose to offer them to only those who meet stricter criteria could pay a higher cost per member who takes these drugs.
3. Cover GLP-1 drugs only after failure of other less expensive anti-obesity drugs or medical management programs, an approach known as “step therapy”
Since medical management programs and less expensive drugs are usually substantially less effective than GLP-1 medications, this approach may delay rather than prevent initiation of GLP-1 therapy in many members. This delay in therapy could be cost-saving for employers with high employee turnover. This approach could result in modest short-term drug savings, but it may lead to more member dissatisfaction and will only lead to cost savings if GLP-1 prescribing rates are diminished.
4. Require participation in medical management programs for eligibility for coverage of GLP-1 medications
Some employers, including the state of Connecticut, require ongoing participation in a medical management program to maintain eligibility for GLP-1 medications. Twenty-five percent of employers responding to WTW’s survey reported that they had implemented such a program. We don’t yet know if such programs will lower GLP-1 use or increase weight loss. Some vendors have suggested that they will taper patients off GLP-1 drugs after initial weight loss, but there is, at this point, no clinical research validating that this approach will allow for the maintenance of weight loss.
5. Change benefit design to increase cost-sharing for GLP-1 medications
Theoretically, employers could increase cost sharing for these medications to decrease patient demand. However, higher cost sharing can increase disparities by making this class of medications less accessible to lower-wage workers, and many members will obtain cost-free GLP-1 prescriptions when they hit their annual out-of-pocket maximum later in the plan year. Differential cost-sharing could also encourage more off-label prescriptions of diabetes drugs to treat obesity.
6. Provide coverage for these anti-obesity drugs only if prescribed by a limited group of providers
Some virtual care organizations promise to restrain the use of GLP-1 medications by using dedicated telemedicine providers who have been trained to prescribe these expensive medications less often and discontinue them sooner than community physicians. These providers might preferentially use less expensive medications and can offer access to nutritional counseling and lifestyle coaching.
Employers that put these programs in place should carefully monitor the total cost of care, as the cost of professional services and medications is generally not included in the vendor fee. Some vendors have suggested that they will taper patients off GLP-1 drugs after initial weight loss, but there is not yet clinical research validating that this will allow maintenance of weight loss.
7. Seek new ways to pay for GLP-1 medications for obesity
The current shortage of GLP-1 medications, including those not approved for obesity, gives pharmaceutical companies little incentive to arrange for alternative payment models. However, the entry of new GLP-1 medications will offer an opportunity to obtain lower prices, which could lead to large public health benefits. Recent reports show that the “net” price received by pharmaceutical companies for these drugs represents between a 48%-79% discount from the list price, which makes direct employer contracting to acquire these drugs much more attractive to the manufacturers.
One promising approach to achieve unit cost savings is to arrange procurement through a model other than “fee for service.” The subscription model arranged by the state of Louisiana for hepatitis C medications could serve as a model. GLP-1 medications are not expensive to manufacture, even including the cost of high-tech delivery pens; oral GLP-1 medications will be even less expensive to produce. A pharmaceutical company offering effective GLP-1 drugs for a more modest price could garner a very large share of the total market and make a handsome profit.
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This class of medicines can lead to substantial improvements in population health, but the benefits health plan members will obtain from these drugs will be limited if few members qualify for prescriptions. Although these drugs will prevent some cardiovascular and other diseases, they will not save costs to plan sponsors over time. The lower price of the most recently approved GLP-1 for obesity is helpful but remains high enough that many employers will not be able to afford to cover medications for obesity.
Health plan members can now benefit from effective, safe and highly scalable medical treatment for obesity. The only way we foresee these drugs being widely available to those who will benefit from them is with substantially lower unit costs, which can still support large industry profits. We are hopeful that with the approval of additional GLP-1 agents and widespread pressure from purchasers, these drugs will become available at much lower prices in the coming years.