Employers Grapple with the Rising Costs and Popularity of Specialty Weight-Loss Drugs
Workspan Daily
August 10, 2023
Key Takeaways

  • A pickle for employers. The effectiveness of new weight-loss drugs are leading to increased employee demand, but there are side effects and costs to consider.  
  • Heavy cost involved. Specialty drugs designed to treat diabetes but are also effective in aiding weight loss can cost as much as $1,350 per patient per month, and coverage of weight loss medication can add $2.25 to $2.60 per member per month to an organization’s health plan spend. 
  • A criteria to purchase could be the best path. Employers might consider requirements for coverage of these speciality drugs such as a certain body mass index (BMI), co-morbid conditions, enrollment in a behavior modification program and/or a reduced-calorie diet.  

Specialty drugs that were approved for one purpose but have been unexpectedly popular due to their weight-loss effects can cost as much as $1,350 a month per patient. That steep price tag has now led some employers to restrict its employees’ access to them.  

After its costs for the drugs more than tripled over the past 18 months to about $5 million a month, the University of Texas System said it would end insurance coverage of Novo Nordisk’s Wegovy and Saxenda for its employees and others covered by its health plans effective Sept. 1, according to the Wall Street Journal

Continuing to pay for the medicines “is unsustainable due to the current rate of prescription drug expenditures,” said a university benefits newsletter. 

The reimbursement cuts, along with restrictions that other employers are implementing, mark the financial downside of the drugs’ medical triumph, according to the Journal: “While the medicines are the first to help people lose significant weight, employers that must foot the bill may not be able to afford it.” 

The Case for Contraction 

Employers are now shouldering an unexpected and “significant” burden as a result of the rising demand for these specialty types of drugs, said Cody Midlam, a director in WTW’s Pharmacy Practice.  

“WTW has found that a typical employer’s drug spending could increase by more than 50% if half of employees who were eligible for Wegovy were to seek it,” said Midlam. 

Webinar: 5 Creative Ways to Maximize Employee Benefits Without Growing Budgets 

Employers typically rely upon the medical and pharmacy benefits vendor to create formularies of drugs for coverage. These entities have teams that assess drugs, taking into account clinical and financial considerations. In some cases, such as with weight loss, coverage may be voluntary and employers can decide to cover or not cover these drugs.  

For the GLP-1 class of medications used for weight loss, any decision not to cover them is most likely due to cost, said Midlam, who added that such medications have been on the market for more than a decade and are widely covered for treating diabetes. 

An organization that chose to drop coverage of such drugs would need to inform their health plan or pharmacy benefit manager of this decision and sign the necessary forms, then distribute communications to their membership about the change. Benefit summary documents may require updating as well.  

During this period, employers can ascertain the turnaround time for this decision to be implemented, including any programmatic changes and member communications that need to be distributed.  

One consequence that employers will want to anticipate and mitigate, said Midlam, is member disruption.  

“For those members who were already taking the medications, employers can work with their vendor partners to determine if those members can continue receiving the medication as a covered benefit,” he said. ”Any financial agreements associated with drug spend can also be reviewed during this decision-making process.” 

Employers should clearly communicate the removal of benefit changes to their employees in an appropriate timeframe and clearly list any exceptions processes or other alternatives, Midlam said. “For example, employers may also share other weight-loss benefits that may be in place like a point solution or other vendor.”  

Since coverage of weight loss medication can add $2.25 to $2.60 per member per month, employers that offer such drugs should also consider adding prior authorization criteria to help manage cost growth, according to a recent Mercer analysis.  

Criteria could include requirements such as a certain body mass index (BMI), co-morbid conditions, enrollment in a behavior modification program and/or a reduced-calorie diet.  

Upon initiation of therapy, patients and clinicians should partner to create a comprehensive plan to achieve goals and use the medication purposefully alongside a targeted and managed lifestyle program.  

The plan should include a discussion regarding medication discontinuation when or if goals are met to prevent relapse and weight regain or weight cycling.  

The Case for Expansion

What is complicating matters for the bottom-line watchers is new data from a five-year Novo Nordisk trial that shows major cardiovascular benefits from its drug Wegovy, which will likely add pressure on insurers — and employers — to cover GLP-1 medications. 

The medication helps prevent strokes and heart attacks as well, according to reporting by the Wall Street Journal. Patients in a long-term trial had 20% fewer heart attacks, strokes and cardiovascular deaths combined than those who received a placebo in the study. The reduction surpassed the study’s goal of demonstrating at least a 17% reduction in risk. 

Course: Health and Welfare Plans: Strategic Planning and Design 

Even before that research was announced, however, pressure to cover such drugs had been growing steadily, said Katy Johnson, the American Benefits Council’s senior counsel for health policy. 

“Generally speaking, I have been hearing more from employers over the last several months about whether and how to cover prescription drugs than how to cancel them,” she said.  

Johnson cited “significant” employer benefits including decreased healthcare costs for those employees who lose weight by using these specialty drugs and are no longer classified as obese. 

“Employers are deeply committed to the health of their employees and their employees’ families, and so they are taking a serious look at these medications and how they can cover them in a way that’s not cost-prohibitive and that’s safe for employees.” 

Editor’s Note: Additional Content 

For more information and resources related to this article see the pages below, which offer quick access to all WorldatWork content on these topics: 

Related WorldatWork Resources
Employers Look to Balance Rising Health Costs, Benefit Upgrades in 2025
Workspan Daily News Bytes for July 19, 2024
Report: Employers Taking More Conservative Approach to Salary Budgets
Related WorldatWork Courses
Sales Compensation Course Series
Benefits Outsourcing - Selecting, Contracting and Managing Service Partners
Regulatory Environments for Benefits Programs
Be the First To Know

Get the latest news and insights in our weekly e-newsletter — featuring our most up-to-date Workspan Daily articles — delivered straight to your inbox from WorldatWork's experienced publications team.