Rising Prescription Drug Costs: The Impact of GLP-1 Medications on Health Plans and Employers

The fastest-growing element of health benefit costs remains prescription drugs. Pharmacy benefit expenses increased by 7.7% in 2024, after rising 8.4% in 2023. A key factor behind this growth is the rising use of GLP-1 drugs for managing diabetes and promoting weight loss.

As of August 2024, Medicaid coverage for obesity drugs is still limited, with only 13 states offering GLP-1s for obesity treatment. According to KFF's annual budget survey, 12 states had GLP-1 coverage for obesity treatment under Fee-For-Service (FFS) as of July 1, 2024, with North Carolina adding coverage in August. All 12 states apply some form of utilization control, like prior authorization (in 11 states) and/or BMI requirements (in 11 states). Eleven of these states also cover all three GLP-1 drugs approved for obesity treatment (Saxenda, Wegovy, and Zepbound). While the survey focused on FFS coverage, Managed Care Organizations (MCOs) must offer the same level of coverage, but they may have different rules for medical necessity unless the state contract says otherwise.

Coverage for obesity treatments is also limited in other areas. A recent KFF analysis found that most large employers don’t cover GLP-1 drugs for weight loss, ACA Marketplace plans have limited coverage, and Medicare doesn’t cover them at all. However, things are improving. In 2024, 44% of large employers (500+ employees) are now covering obesity drugs, up from 41% in 2023. Among the largest employers (20,000+ employees), 64% offer coverage, a significant jump from 56% in 2023.

"GLP-1 meds could play a big role in tackling the obesity epidemic and helping cut future medical costs," said Tracy Watts, Mercer’s National Leader for US Health Policy. "While cost is still a concern, employers are adding authorization requirements to make sure these drugs go to members who’ll benefit the most."

On another note, prescriptions for GLP-1s in Medicaid and overall spending on these drugs have been rising fast, nearly doubling from 2022 to 2023. From 2019 to 2023, the number of GLP-1 prescriptions jumped by over 400%, and gross spending surged by more than 500%. In 2023, the cost per prescription, before rebates, exceeded $900. These numbers don’t account for rebates, though, and states are likely getting significant rebates on these brand-name drugs. While rebate details for specific drugs aren’t publicly available, a 2020 analysis by the Medicaid and CHIP Payment and Access Commission (MACPAC) found that statutory rebates made up 61.6% of total Medicaid spending on brand-name drugs.

In response to growing criticism of drug prices, Novo Nordisk, the maker of Ozempic and Wegovy, has stated that rebates and fees (across all payers) account for about 40% of the cost of these two drugs. While GLP-1s still represent a small portion of total Medicaid prescriptions and spending before rebates, those shares are increasing. By 2023, these drugs made up 0.5% of all Medicaid prescriptions (up from 0.01% in 2019) and 3.7% of total Medicaid spending (up from 0.9% in 2019).

For employers, according to a survey published Wednesday in Health Affairs, fewer than 20% of large companies in the United States include coverage for the popular but expensive weight loss drugs Wegovy and Zepbound in their health insurance plans.

Among the companies that do provide coverage, about a third report that it has a “significant impact” on their prescription drug spending.

This highlights the growing influence of these medications on employer health plans, as they balance the potential benefits with the rising costs.