Rethinking employer coverage for high-cost medications

Employers have experienced sharp increases in their health benefit costs in recent years, and forecasts suggest that 2026 could be even worse. Health plan costs are expected to climb as much as 9% this year, placing immense financial pressure on employers. 

The main driver of this increase is prescription drugs, which, according to a survey by Mercer, are the fastest-growing component of health benefit costs. In the face of rising expenses, forward-thinking companies are exploring innovative strategies to maintain both fiscal and employee health.

The GLP-1 surge

At the heart of these escalating costs are GLP-1 receptor agonists. Originally developed to treat diabetes, their effectiveness as a weight-loss treatment has spiked demand for these medications. Employer-sponsored health plans have seen a dramatic rise in GLP-1 utilization in recent years, with 79% of employers reporting an increase in usage.

While these therapies could produce substantial savings in the long term by reducing health care expenses associated with obesity- and diabetes-related conditions, their average price tag makes widespread coverage unsustainable. Even with the availability of the FDA-approved Wegovy pill, the list price will remain at the injectable price of $1,349 per month. In addition to GLP-1s, high-cost specialty drugs for immunological conditions and cancer are also pushing pharmacy benefit costs skyward.

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In search of a better pharmacy benefit model

Rising drug prices and a lack of transparency in drug benefit costs have led to employer dissatisfaction with the current prescription plan model, with 61% of large employers actively evaluating new approaches for offering or managing their pharmacy benefit. 

Reinforcing the need to change the status quo, the federal government is pressing drug manufacturers to lower the cost of medications and expand direct-to-patient (DTP) availability of prescription medications. Some pharmaceutical companies are already pursuing new approaches to reduce the cost of GLP-1s by making them available to self-pay patients at steep discounts. Eli Lilly launched a DTP program for its GLP-1, Zepbound, and Novo Nordisk partnered with CenterWell Pharmacy to manage prescription fulfillment for the drug company's DTP Wegovy program — both offering substantially lower prices for their GLP-1 treatments. Additionally, the introduction of the Wegovy pill has further reduced the DTP costs of that treatment.       

While these DTP solutions offer access for some individuals without coverage, many employers see value in covering GLP-1s and other high-cost therapies that aren't always suitable for DTP programs. Besides aiding employee retention, covering these treatments can help maintain a healthy workforce and prevent escalating costs and lower productivity if employee health declines due to a lack of access to potentially life-changing medications.   

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Carving out high-cost drugs

Given the untenable costs of the current pharmacy benefit model, new approaches are needed to ensure access to high-impact medications, such as GLP-1s, without compromising employers' financial health.

An alternative model that is quickly gaining interest is the direct-to-employer (DTE) carve-outs. Although they are not new, the evolution of these programs includes innovative solutions to bring lower direct-to-patient pricing to employers. This approach enables employers to contract directly with pharmacies that offer carve-outs for specific high-cost medications, which have been negotiated with drug manufacturers, along with transparent price ceilings. Employers can then determine the appropriate cost-share formulas and utilization criteria for their employees. 

These arrangements can significantly reduce the cost of covering medications, like GLP-1s, to an amount similar to DTP offerings, ensuring cost predictability, eliminating inflated pricing and broadening medication access for employees.

The current environment is particularly favorable for these programs, with government policies encouraging manufacturers to form partnerships that will help lower the cost of drugs.  

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Ensuring clinical rigor and choice in DTE models

As with any new benefit model, there are key considerations for employers when pursuing DTE carve-outs. Most importantly, the contracted pharmacy partner should provide the necessary clinical expertise, oversight and data-driven monitoring programs to ensure patient safety and support adherence for those using these medications.

Another important factor is choice. Since patients may respond differently to drugs within the same category, it's beneficial to have a pharmacy partner that can provide access to multiple approved medications within a therapeutic class. For GLP-1s, offering options that could include Wegovy, Zepbound, and Ozempic within the carve-out allows physicians to prescribe the most appropriate medication for their patients.

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Charting a sustainable path forward

As pressures mount from rising costs and frustration builds over the current pharmacy benefit structure, employers are seeking a different path. Direct-to-employer carve-outs offer a compelling model to improve cost predictability and enhance employee access to GLP-1s and other high-cost therapies that can help drive better long-term health outcomes across the workforce. By adopting DTE carve-outs, employers can help safeguard both their financial health and the health of their employees.