Is it possible for employers to keep costs down and cover GLP-1s?

This edition of Second Opinion is sponsored by Capital Rx, the full-service pharmacy benefit administrator deploying next-generation enterprise claims processing technology. Capital RX helps larger employers understand their costs and unbundle with Never Move Again™ to bring visibility to drug prices and improve health outcomes. Thanks to Capital Rx for making this piece free for readers!

I co-wrote and researched this piece with health policy writer and former Politico journalist Megan Wilson.

Within the next decade, nearly half of Americans may qualify to take a GLP-1 drug like Ozempic or Wegovy — and, as demand rises, many employers are asking: How do we cover them?

As we all know, these medications aren’t cheap. Before drugmaker discounts, the price tag can be as much as $1,300 per dose. One study shows that GLP-1 drug costs become one of a company’s top five expenses once a plan begins covering them. Experts worry that even emerging generics will be too spendy for patients. 

Several insurers have dropped GLP-1 coverage because of the price tag, but there are still signs employers will cover them. In one survey, 34 percent of employers claimed they are covering the drugs for diabetes and weight loss, a 31 percent increase over last year. While 57 percent of employers said they would cover the drugs solely for diabetes treatment — also an increase over 2023 — 19 percent are considering expanding coverage to cover weight loss. Given obesity is a chronic disease, what’s unclear is how employers will manage care outside of the drugs themselves. 

For this piece, we chatted with a few health executives from companies like Vida Health and Noom about the cost conundrum. Joe Murad’s Vida Health works with employers and health plans to provide employees with a care team of providers, including health coaches, dieticians, diabetes educators, and therapists. Murad said employers are bombarded with employee requests to cover their treatment costs. 

“Plan sponsors are searching for solutions because they're facing growing pressure to cover obesity treatment and GLP-1s in particular,” Murad told us. “You can't watch a show or sporting event without being inundated with advertising.”

So what does this all mean for employers who want to cover GLP-1s for their employees —- and where do things go from here? 

Instituting restrictions and requirements

Vida Health represents a growing trend we see across digital health. Employers are leaning on vendors, which also include companies like Flyte, Omada Health, and Noom which have their own medical teams to evaluate patients before prescribing GLP-1s. These companies also pair medication with behavioral change and monitoring. 

Lowering costs often means gatekeeping the priciest drugs, like Wegovy and Zepbound, and saving them for more extreme cases. Some employers have focused on covering the drugs for people with especially high BMIs or other conditions like diabetes and heart disease while pushing others toward behavioral and nutritional changes, broader weight loss programs, and cheaper weight loss medications like Contrave. Efforts are also underway to help patients wean off the medicines without rebounding, a well-documented problem. 

One patient we talked to who opted for bariatric surgery on the advice of her doctor and lost 50 pounds told us she is also taking GLP-1s because it was the only thing that helped her keep the weight off. Because of the medicines, she was able to quiet what she refers to as the “food noise” in her head and get closer to her health and weight loss goals. 

Murad and Vida’s chief medical officer, Richard Frank, said that the best approaches are tailored to each patient’s needs. This approach helps keep costs down by making people healthier overall, as some patients thrive with one intervention, and others require several.

Vida Health says its patients are better at sticking with their medications and experience a reduction in anxiety and depression symptoms. Within one year, the company claimed that its high-risk populations experienced a drop in their A1C of more than two points, and patients sustainably lost 7 to 10 percent of their body weight.

Vida says it saves its employer clients—including Charter Communications, Cargill, and Northrop Grumman—$2,000 per person on health care costs.

That speaks to an important trend: If employers agree to cover these medicines, they are increasingly opting to pair it with coaching, behavioral health support, and dietician access as part of broader programs tailored to the individual. 

Getting patients to stop taking GLP-1s (slowly)

There’s an open question about how to best taper people off GLP-1 medications once they’ve lost weight. Some clinicians worry that people are effectively being penalized once a medication like Wegovy has worked, and they’ll struggle to keep the weight off without it.

However, some in the biz—including Vida and Noom—have designed their programs to eventually get some patients to stop taking GLP-1s. Self-insured employers are footing much of the bill and are looking for programs that include safe tapering so patients aren’t taking these expensive medicines forever. 

In a chat with Noom CEO Geoff Cook, he made an interesting counterpoint. He told us that the studies showing that people are gaining weight back after stopping GLP-1 medications are incomplete. He claims the studies did not require patients to engage in any lifestyle modification while taking them, so, of course, the weight goes right back on.

Even before the GLP-1 boom, Noom’s business model was built on the idea that people can lose weight by establishing healthy habits, guided by its programs: If someone can stick with something for 12 to 16 weeks, they are more likely to keep it going, the company argues — and keep the weight they lose off.

“We believe that there's power in pairing the new behavior change program with the GLP-1 — because they're self-reinforcing — and promoting this concept of self-efficacy, this feeling that you can do difficult things,” Cook told Megan.

Noom still offers a weight loss platform for consumers, but last year, it began offering its services to employers as a benefit.

At HLTH, the health tech confab in Vegas held in late October, the company announced several new programs for employers who want to offer GLP-1s. One of them, a partnership with Waltz Health, claims to provide “cost-effective access to GLP-1 medications” in a way that “bypasses” intermediaries called pharmacy benefit managers.

“The biggest advantage of the product is that it is structured as a supplemental benefit, allowing the employer or payer to determine the level of financial assistance they want to provide by risk tier,” the company outlined. 

The influence of insurers and PBMs

Let’s get real about a player in the industry that we don’t talk about enough. Pharmacy benefit managers (PBMs) work on behalf of plans and employers to negotiate discounts with drugmakers and decide which medicines an insurance plan will cover. (Note: Megan covered these companies during her time at Politico.)

The three largest—CVS Health’s Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx—concern lawmakers and regulators because they control about 80 percent of the market. 

Critics argue that creates inherent conflicts: Pharmaceutical companies are incentivized to raise the price of drugs to offer more significant rebates to PBMs in exchange for favorable placement on a formulary. The biggest players in the industry deny this and have tried to proactively make tweaks to how they operate.

The rebate issue was discussed in depth during a September congressional hearing featuring Novo Nordisk CEO Lars Fruergaard Jørgensen. 

Senator Bernie Sanders, in an attempt to preemptively rebut the drugmaker’s likely arguments that PBMs were contributing to the high cost of GLP-1 drugs, said he’d received assurances from the Big Three that they wouldn’t restrict formulary access for GLP-1s if the drugmaker reduced prices on Ozempic and Wegovy. 

The two sides are still trying to set aside their acrimonious relationship and find ways to contain costs. Insurers and their PBMs have made some deals with drugmakers that capped the cost of the drugs for employers covering them.

However, criticism of the Big Three has created an opening for alternate PBMs that aim to be more transparent. It’s also created some interesting partnerships that we’re tracking closely. The sponsor for this piece, Capital Rx, is teaming up with Vida, while Noom has made a similar announcement about its relationship with Liviniti. 

Collaborating with vendors who have clinicians focused on care management for diabetes and weight loss means “you have a relationship with a team, you can start employing different strategies like gold carding, and then auditing them on the back end,” Sara Izadi, Capital Rx’s chief clinical officer and a PharmD, told Megan. 

The “gold carding” process means that patients seeing Vida’s doctors can bypass the prior authorization requirements that can delay a prescription. Capital Rx can then verify that the person met the criteria for obtaining a GLP-1.

Similarly, earlier this year, Noom forged a partnership with Liviniti that gives “preferred pricing” on the former’s services to employers who use the PBM. 

Drugmakers racing to compete

The most prominent (and expensive) drugs in the GLP-1 class are semaglutide, branded by Novo Nordisk as Ozempic and Wegovy for diabetes and weight loss respectively, and tirzepatide, Eli Lilly’s newer offerings for those conditions, respectively known as Mounjaro and Zepbound.

It was interesting to see the Wall Street Journal report that these two giants are in a pricing war to get plans (and patients) to pay up. But that still might not be enough. 

Competition may bring down the price tag as companies compete with each other. As you might expect, a slew of companies are trying to get in on the action; in fact, at least 124 GLP-1s are in development for weight loss alone. But whether — and how much — new entrants could bring down the cost of drugs like Wegovy is TBD. 

We’re also seeing generic drugmakers racing to develop cheaper versions of the drugs. Teva Pharmaceuticals dropped liraglutide, the first generic GLP-1 available in the United States earlier this year.

However, it might not catch on like other GLP-1s because it hasn’t shown the same levels of weight loss as semaglutide and tirzepatide, and experts worry that generic liraglutide — branded as Victoza and Saxenda — might still be too expensive.

Compounded options

The popularity of GLP-1s led to a shortage, paving the way for a direct-to-consumer market with dupes made by special compound pharmacies at a fraction of the cost. As we’ve explored in Second Opinion, there may be increasing regulatory scrutiny on companies that offer compounding.

Unlike generic drugs, they aren’t exact replicas of medications and aren’t FDA-approved for efficacy and safety. Frank, Vida’s chief medical officer, says Vida’s clinicians don’t prescribe them, and one health plan executive told us that employers avoid covering them due to the potential risks. 

Noom offers compounded semaglutide should consumers want to pay out of pocket. Cook said that they did due diligence on the compound pharmacy that makes their products. The facility is currently manufacturing a generic version of injectible epinephrine, the medicine in the EpiPen, which has to meet high standards set by the FDA.

The company is trying to expand access to these products. One of the new programs announced at HLTH allows Noom’s employer clients to access its behavior change programs and an option for workers to get a discount on Noom’s compounded semaglutide.

But the landscape for compounded GLP-1s is shaky. Although the shortage of semaglutide will likely continue through the end of the year, the FDA recently announced that tirzepatide was no longer considered to be in a shortage, making it more difficult for people using compounded options.

Medicare negotiation

Health industry experts predict that Ozempic could be selected for CMS’s next round of Medicare negotiations. (Wegovy will not be on the list, as Medicare is prohibited from covering weight loss medications.) According to an AARP analysis, the Medicare Part D program spent $2.6 billion on Ozempic in 2021, making it one of its costliest drugs.

For employers, this could play out in a few ways: Following government negotiation, Novo Nordisk could be pressured to lower the price for Ozempic in the commercial market, or the company could try to recoup losses from lower Medicare revenue by raising prices for individuals and employers. But it all remains to be seen.

What’s next

We only see the demand for these medicines continue to rise, especially as the drug companies making GLP-1s are working to find additional reasons for patients to take them. This makes it all the more important for employers to develop strategies for some level of coverage — not only for the health of workers and their families but also as part of a competitive edge in the marketplace. Then, there are considerations about whether these medications should be offered as part of a broader program and how to work with employees.

As plenty of studies have found, behavior change is always more challenging than it seems.