Articles | January 23, 2023
The latest generation of prescription drugs originally developed to help people manage their type 2 diabetes have been causing quite a stir for patients, health professionals and benefit plans, now that they’ve been approved and are being promoted to treat weight loss. Health benefit plan sponsors who are presently excluding weight-loss drugs from coverage are revisiting coverage rules because of the effectiveness and demand for these newer weight-loss drugs.
Although this class of drugs, called glucagon-like peptide-1 or GLP-1, have been around for more than 17 years, with the first one, Byetta®, approved in 2005, it is only recently that the class has made a big name for itself with the introduction of the popular once-weekly diabetic drug, Ozempic®, and the equally popular obesity drug, Wegovy® (the same drug as Ozempic but with a different dose). These are the newer GLP-1 therapies that have shown superior results to prior therapies in lowering A1C (blood sugar) levels of diabetics and helping those who are obese lose weight.
However, the potentially large target patient population, as well as the increased utilization and high drug costs, are a growing concern for many plan sponsors. This article addresses the issues facing plan sponsors regarding weight-loss benefits and potential coverage of these newer weight-loss drug therapies.
GLP-1 is a hormone found naturally in our bodies that is insufficient in people who have type 2 diabetes. For diabetics, these drugs mimic the natural hormone and help lower blood sugar. There are two types of GLP-1 drugs: short-acting GLP-1 drugs (e.g., Byetta or Victoza®) and newer long-acting GLP-1 drugs (e.g., Ozempic or Trulicity®).
Until recently, metformin was considered the only first-line agent to treat type 2 diabetes, either alone or in combination with other anti-diabetic medications; GLP-1s were considered a second-line agent. Under the new diabetes guidelines issued in 2021, the American Diabetes Association also recommends that healthcare professionals consider prescribing GLP-1 agonists or SGLT-2 inhibitors (another class of medications that treat diabetes, such as Jardiance®) to reduce health complications, regardless of someone’s A1C level or metformin use. These medications reduce cardiovascular adverse events for type 2 diabetics with an established cardiovascular disease or who are at high risk of cardiovascular disease. The standards of diabetes care continue to be reviewed and updated each year. In the 2023 guidelines, the ADA emphasizes both supporting higher weight loss and focusing on obesity as a chronic disease.
In light of the new diabetes guidelines, it is not surprising that we are seeing increased utilization of GLP-1s. In fact, over the past several years, the percentage of plan spending on GLP-1 medications has increased faster than other diabetic medications. For example, since 2018, spending on Ozempic increased 34 times while spending on Trulicity increased 1.7 times, as shown in the graph below.
Source: Segal SHAPE, Segal’s data warehouse, 2018 to 2022
Weight loss continues to be an important topic for many Americans. Each year, about 45 million Americans go on diets and spend over $33 billion on weight-loss products. While some may want to lose pounds for cosmetic reasons, for those who are obese, weight loss is especially important for health reasons. In 2013, the American Medical Association officially recognized obesity as a “chronic disease” because it can be the underlying cause for other medical conditions, like heart disease, diabetes and even some cancers. Obesity can even shorten life expectancy by up to eight years and cut healthy life by up to 19 years. As a result, there is a growing argument to be made that providing coverage under group health plans to address obesity may be medically necessary and appropriate.
Even knowing all the issues that surround this disease, unfortunately, obesity continues to grow. According to the Centers for Disease Control and Prevention (CDC), the prevalence of obesity in the U.S. has almost doubled since 1998, as illustrated in the following graph.
Source: Centers for Disease Control and Prevention. Health, United States, 2020-2021
The prevalence of obesity is also high in children and adolescents: 19.7 percent, affecting about 14.7 million. Updated clinical practice guidelines on childhood and adolescent obesity were recently released by the American Academy of Pediatrics.
When people think of how to address obesity, the first things that may come to mind are healthy eating and exercise. However, sometimes those activities do not work on their own. For those obese patients, doctors may need to prescribe medicines.
Unfortunately, older weight-loss medications seemed to be subpar. Many of them did not result in meaningful weight loss and/or had many bad side effects, which is why it is not surprising that most group health plan sponsors chose not to cover those weight-loss medications.
The newer anti-obesity medications (AOMs), like the GLP-1 medications indicated for weight loss (i.e., Wegovy and Saxenda®), appear to provide a new hope for many, although they still come with some gastrointestinal side effects. These medications work by mimicking the hormone GLP-1 that targets areas of the brain that regulate appetite and food intake.
GLP-1s are providing better weight-loss outcomes than the previous AOMs. A study involving 1,961 individuals found that, on average, people who received injections of semaglutide (the chemical name for Wegovy) lost 14.9 percent of their initial body weight over 68 weeks compared with just 2.4 percent for a group receiving placebo injections. Such results are about double what older weight-loss drugs achieve, according to a 2021 article published in the New England Journal of Medicine. Another literature review, “Pharmacological Profile of Once-Weekly Injectable Semaglutide for Chronic Weight Management,” also concluded that semaglutide 2.4 mg was more efficacious than other approved weight-management medications, which include once-daily liraglutide 3.0 mg, orlistat (three times daily oral administration), phentermine-topiramate (once-daily oral administration) and naltrexone-bupropion (twice-daily oral administration). Semaglutide resulted in 7.9 to 16 percent greater reduction in body weight compared to the other drugs, for which the range was 5.0 to 9.9 percent.
As a result of the success of GLP-1s, plan sponsors that cover weight-loss medications have seen a dramatic increase in spending on those drugs in the recent years. In 2018, the average cost for Segal clients was $0.50 per-member, per-month (PMPM). By 2022, that had more than quadrupled to $2.21 PMPM. In addition, when comparing the costs across AOMs, Wegovy makes up most of 2022 plan spending at 58.4 percent, followed by Saxenda at 39.1 percent, as shown in the graph below. The older AOMs represent less than 3 percent of weight-loss medication costs.
Source: Segal SHAPE, Segal’s data warehouse, 2018 to 2022
Even though many plans currently do not cover weight-loss medications, these plans are still seeing the effect that the GLP-1 medication class is having on their diabetic plan spend. The tremendous growth in GLP-1s is attributable to many factors, which may include the latest American Diabetes Association recommendations and more notably, the off-label weight-loss use of these drugs thanks to all the social media buzz.
In reviewing recent drug-claim details for several large plan sponsors, we uncovered a growing number of GLP-1 claims being dispensed and paid for plan participants with no prior history of type 2 diabetes for plans that do not cover these weight-loss medications. This evidence suggests prescribers are already prescribing these drugs off label and PBMs are not rejecting these claims. As a result, plans will want to address these coverage issues with their PBMs and tighten up drug utilization controls or they will see growing expenses from these new GLP-1 drugs under their pharmacy benefit program.
Due to the exponential growth of Ozempic and other GLP-1s, it makes sense for plan sponsors to manage this class of drugs.
To help mitigate unnecessary utilization and prevent off-label prescribing of Ozempic, some PBMs are now offering utilization management (UM) to ensure that these drugs are only used for patients who have diabetes.
Some plan sponsors may be interested in implementing prior authorization for GLP-1s. Prior authorization is a more restrictive type of cost-management strategy, in that every prescription will be stopped at point of sale and may require a physician to confirm that the drug is being prescribed for those with diabetes or possibly provide documentation of medical records showing a blood glycemic level test (e.g., A1C) that confirms diabetes.
A reauthorization requirement can also be beneficial. It can confirm that the patient is having a positive response to GLP-1 therapy after a certain time frame (e.g., six months).
Smart prior authorization, also known as a step requirement, is a less disruptive approach. It looks for a metformin or a metformin combination product in the patient’s history. However, a recent Segal analysis found most patients were already using another established diabetes drug, which suggests this strategy may not be as effective as others in managing costs.
Before making any decisions on implementation of any UM edit, plans will need to consider any potential rebate impact, which will need to be run by their PBM vendor. Rebates for this class are expected to be significant given the competitive market choices available.
For a long time, plan sponsors may have viewed anti-obesity medications as lifestyle drugs that did not need to be covered because the perception was they did not address a medical need. Even today, it appears that most plans do not cover weight-loss medications, despite data supporting their medical necessity. For example, within the book of business for Employers Health, a leading group purchasing organization for pharmacy benefits, 60 percent of clients exclude obesity drugs, 25 percent cover them after prior authorization and the remainder allow access without any restrictions.
Among plans that do cover weight-loss medications, it appears that most plans require prior authorization. Some may also include some sort of behavior-management coaching and other potential treatment options, like nutrition counseling and/or an exercise program.
More recently, due to the ongoing obesity epidemic and the better outcomes of the newer AOMs (i.e., GLP-1 medications), some plan sponsors are either choosing to add anti-obesity coverage in their pharmacy benefit or are at least considering doing so. Effective weight-loss treatments will unquestionably increase short-term pharmacy plan spending, with the potential to reduce longer-term medical plan costs by avoiding some of the harmful complications of diseases that are driven, in part, by obesity. The AOM coverage discussion, however, continues to be an extremely difficult topic, as plan sponsors seek to balance the high cost of these newer medications against the sustained success of weight-loss outcomes. Even Medicare does not cover AOMs; but they do provide limited coverage for bariatric surgery and intensive behavioral therapy for weight loss for those who qualify.
When considering AOM coverage, one of the first steps is to understand the projected costs. For example, in 2021, Employers Health clients that cover AOMs and have prior authorizations spent $0.85 PMPM on obesity products, while those without any restrictions spent $1.08 PMPM. With expected growth in the GLP-1 class, plan spending will be much higher this year.
Specific drug costs in the GLP-1 class can be quite shocking. Wegovy has cash discount price of approximately $1,349 for a month’s supply and a year’s worth could potentially be more than $15,000! That is more than double the pricing recommendation of the Institute for Clinical and Economic Review (ICER), a private entity that provides an independent source of evidence review and creates cost-analysis reports. According to the ICER, Wegovy should be priced at $7,500–$9,800 per year to fall into the cost-effective threshold. Interestingly, Ozempic, with the same active ingredient as Wegovy, marketed for type 2 diabetes, has a monthly cash discount price of approximately $930 (according to GoodRx), which makes it less than Wegovy.
With the availability of multiple drug therapies demonstrating promising efficacy, we expect market competition to produce downward pressure on prices, most likely in the form of rebates for GLP-1s. PBMs will attempt to keep some of this manufacturer rebate money without passing it on to plan sponsors to boost profits. Plan sponsors will want to push PBMs to be transparent about net pricing net of rebates so they can make reasonable decisions about which drugs to cover and how best to mitigate the potential surge in pharmacy benefit plan costs.
Another important consideration is how long obese patients should be taking weight-loss medications. Contrary to pharmacy claims data, which suggest many people take weight-loss medications for a short time, experts and patients polled by ICER believe that weight regain after stopping treatment is common, which points to long-term use of these drugs, meaning continued high costs for the plan.
Additionally, Mounjaro®, one of the newer diabetes drugs, which was approved in May 2022 and has a unique dual mechanism of action (it activates the GLP-1 hormone as well as another hormone called the glucose-dependent insulinotropic polypeptide or GIP, both helping to improve blood sugar) may be even more effective than semaglutide in reducing weight. Its price is similar to Ozempic. Plans will need to be prepared to manage this drug as we can expect tremendous growth, especially due to off-label utilization and shortages of Wegovy and Ozempic.
Plan sponsors should take a comprehensive approach to managing obesity that includes both a pharmacy benefit and medical benefit perspective. Implementing the following strategies can help mitigate unnecessary cost and improve both quality of life and patient experience, while potentially leading to lower overall healthcare costs:
With high rates of obesity for most health plan sponsors, a prudent and thoughtful approach to expanding weight-loss coverage will be required. Tackling the obesity epidemic could produce long-term savings in the form of reduced levels of complications from heart disease and other expensive conditions to manage. The relatively new AOMs may be part of a new approach.
To learn more about this topic, refer to the resources below, which support observations in this article.
U.S. Food and Drug Administration. “FDA approves first oral GLP-1 treatment for type 2 diabetes.” September 20, 2019.
Kenney, Julia and Frida Velcani. “2021 Updates to the ADA Standards of Care.” diaTribe Learn. January 19, 2021.
American Diabetes Association. “Summary of Revisions: Standards of Medical Care in Diabetes—2021.” Diabetes Care 2021; 44 (Supplement_1): S4–S6. December 4, 2020.
American Diabetes Association. “American Diabetes Association Releases 2023 Standards of Care in Diabetes to Guide Prevention, Diagnosis, and Treatment for People Living with Diabetes.” December 12, 2022.
Boston Medical. “https://www.bmc.org/nutrition-and-weight-management/weight-management.” Accessed January 9, 2023.
The Lancet (via ScienceDaily). “Obesity May Shorten Life Expectancy by up to 8 Years and Cut Healthy Life by up to 19 Years.” December 5, 2014.
World Health Organization, “Obesity and overweight.” June 9, 2021.
Wilding, John P.H., D.M., Rachel L. Batterham, M.B., B.S., Ph.D., Salvatore Calanna, Ph.D., Melanie Davies, M.D., Luc F. Van Gaal, M.D., Ph.D., Ildiko Lingvay, M.D., M.P.H., M.S.C.S., Barbara M. McGowan, M.D., Ph.D., Julio Rosenstock, M.D., Marie T.D. Tran, M.D., Ph.D., Thomas A. Wadden, Ph.D., Sean Wharton, M.D., Pharm.D., Koutaro Yokote, M.D., Ph.D., Niels Zeuthen, M.Sc., and Robert F. Kushner, M.D. or the STEP 1 Study Group. “Once-Weekly Semaglutide in Adults with Overweight or Obesity.” New England Journal of Medicine. March 18, 2021.
Lau, David C., Rachel L. Batterham and Carel W. le Roux. “Pharmacological Profile of Once-Weekly Injectable Semaglutide for Chronic Weight Management.” Expert Review of Clinical Pharmacology. April 2022; page 260.
Centers for Disease Control and Prevention. “Health, United States, 2020-2021” (accessed January 9, 2023).
American Academy of Pediatrics. “Executive Summary: Clinical Practice Guideline for the Evaluation and Treatment of Children and Adolescents with Obesity.” January 9, 2023.
Employers Health PBM. “Rethinking Obesity Drug Coverage.” January 10, 2022.
Hoagland, William, Anand Parekh, MD, Geoffrey St. John and Michael Lovegrove. “Expanding Access to Obesity Treatments for Older Adults.” Bipartisan Policy Center. February 9, 2022.
Christopher Ibikunle, MD. “Everything You Need to Know About the Cost of Wegovy.” IBI Healthcare Institute. July 5, 2022.
Institute for Clinical and Economic Review. “Obesity Management.” September 2022.
GoodRx. “Ozempic.” (accessed January 9, 2023).
Fraiser Kansteiner. “Novo Nordisk’s New Weight Loss Drug Wegovy needs a ‘significant discount,’ ICER Says.” Fierce Pharma. July 13, 2022.
Chaput, Jean-Philippe, PhD and Angelo Tremblay, PhD. “Adequate Sleep to Improve the Treatment of Obesity.” Canadian Medical Association Journal. December 11, 2012; 184(18): 1975–1976.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
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