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ARTICLE | The Employers' Guide To Ozempic and GLP-1 Drugs
The meteoric rise of Ozempic has been widely documented.
More than just the traditional drug marketing via billboards, commercials, and pamphlets at primary care offices, some of the most heavily publicized evidence of Ozempic’s effectiveness has been found on magazine covers, streaming platforms, and in social media feeds, all providing the kind of organic promotion that even huge sums of money can’t (always) buy.
While to some it may seem like a miracle drug - with potential health benefits including blood sugar regulation, cardiovascular issue risk reduction, and of course weight loss - there is, it seems, at least one catch - Ozempic is very expensive.
The sudden surge in demand as a result of Ozempic’s success has left manufacturers scrambling to keep up, which has contributed to soaring prices and in turn sent employers and insurance providers struggling to adapt to the rapid rise in popularity of a drug that can cost more than $1,000 per person per month.
Not all employers are addressing that tension between the growing employee demand and the accompanying growing expense in the same way, however, and in this piece we’ll take a look at some of those potential approaches as well as some of the potential costs and benefits associated with each.
Ozempic is a type of drug known as a GLP-1, which is a relatively new class of drugs that first gained approval from the FDA in 2005.
There are currently at least 10 different GLP-1 drugs, but treating diabetes, cardiovascular conditions, and/or weight loss seem to be fairly consistent among them, although new uses such as treating kidney disease are still being explored.
Ozempic was approved by the FDA as a diabetes medication in the final month of 2017 before hitting the market in earnest the following year, but it wasn’t too long before users and their doctors started taking note of the weight loss side-effect.
Nearly 20 thousand Ozempic prescriptions were written in 2018, which grew to just over 60 thousand active prescriptions in 2019, 100 thousand in 2020, and 160 thousand in 2021.
But in 2022, Ozempic seems to have crossed the tipping point, with prescriptions doubling to more than 300 thousand over the year before then growing by another 25% - up to about 375 thousand - within the first couple of months of 2023, which is the most recent data available.
Collectively, prescriptions for Ozempic and its GLP-1 weight loss drug competitors have grown by more than 300% over the last 3 years with total US sales growing from less than $5 billion at the end of 2020 to more than $15 billion at the end of 2023.
According to a Gallup poll released at the end of May 2024, more than 15.5 million people in the US had used one of these drugs for weight loss - representing 6% of the US population and counting.
According to the Pew Research Center, about 3 in 4 Americans are either overweight or obese based on current medical classifications, and that number has been growing pretty consistently for a quite awhile.
As a result, the target market of potential Ozempic, et al. weight loss users is considerably larger than the (still substantial) 30 plus million Americans with type 2 diabetes, and although the resulting Ozempic shortages are certainly more problematic for the latter group, any sufficiently substantial surge in demand will make the price goes up for everyone.
While the company that produces Ozempic has plans in the works to build a more than 4 billion dollar factory in order to improve production capacity, any release of demand pressure as a result of the increased accessibility of the drug is still likely several years away at least.
Further, that patent on Ozempic will prevent the production and sale of cheaper generic alternatives until at least 2031 in the US, so no short-term cost-saving hope on that front either.
Given these market conditions, Ozempic-comparable weight loss drugs are likely to continue costing upwards of 15 thousand dollars per patient per year for the foreseeable future.
For employers, those costs, which essentially were non-existent just a handful of years ago before doctors started prescribing GLP-1 drugs for weight loss, accounted for 8.9% of total employer health care spending in 2023 according to a survey from the International Foundation of Employee Benefits - up from 6.9% of total employer health care expenses the year before.
At those prices in the face of near-exponential demand growth, it is not hard to understand why multiple health systems have chosen to drop or reduce weight-loss-based GLP-1 coverage from their employer-sponsored plans, including Hennepin Health Care, University of Texas Health System, and the Mayo Clinic.
At the same time, however, other employers and health systems are looking past the sticker shock and weighing the totality of health benefits that can accompany weight loss in the cost-benefit analysis, including potential reversal of diabetes, cardiovascular improvements, reduced incidence of certain cancers, and improved arthritic conditions.
After looking at those net benefits, a growing number of companies including Elevance Health, Kaiser Permanente, and CVS Health are expanding coverage and concluding that it is worth paying the high ticket price of GLP-1 medication for improved patient outcomes and the expectation of reduced expenses in the long run.
In terms of proportional breakdown, those employers who see the value in GLP-1-assisted weight loss are still in the minority, but they have the momentum on their side, with the percentage of employers covering Ozempic or a comparable drug for weight loss purposes rising to 34% in 2023, up from 28% in 2022.
Further, larger businesses are even more likely to adopt GLP-1 weight loss coverage according to the head of Cigna’s health services business, who also noted that 50% of the employers utilizing their pharmacy benefits management system already cover GLP-1 weight loss uses, and that figure is inching up.
For those employers who are not yet ready to buy-in completely on the long-term benefits or for whom full coverage of Ozempic and comparable drugs for weight loss purposes is economically infeasible in the short-term, there are still several measures that can be taken in order to minimize the risk of runaway costs while still providing employees with a meaningful option.
The appetite for these drugs among employees is likely to continue growing, especially as new treatments and functions emerge (i.e. treating kidney disease), which will likely keep the costs relatively inflated in the short term even as new production capacity comes online.
In the long run, however, short term price inflation may be a small price to pay relative to the long-term benefits that can potentially come from a reduced risk of obesity-related illnesses that go well beyond cost savings, and that’s true for both employers and employees.
But more than just putting upward pressure on the price, that demand reflects health care that is both expensive and increasingly sought after by a large portion of the talent pool, so there’s also an opportunity here to differentiate your organization from the competition in terms of employee attraction and retention.
Although some employers are moving away from Ozempic and other GLP-1 coverage to curb those growing expenses, there are more employers moving in the opposite direction and opening up coverage, and absent an unforeseen change in circumstances, that trend is unlikely to reverse course anytime soon.
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