Obesity Medicines Price Shocks Hitting Employers
Message to University of Texas Employees: Continuing to pay for obesity medicines is unsustainable. Message from Novo Nordisk: No comment. Price shocks for advanced obesity medicines are hitting employers. Things are starting to get messy in the marketplace and you can be pretty sure that they will only get messier as makers of obesity medicines proliferate, demand continues to grow, and economic pressures start to make the sticker price of Wegovy look like profiteering.
The University of Texas System announced to its employees that it will be cutting off all coverage for the two GLP-1 medicines approved by FDA for treating obesity, effective September 1. The reason was simple math. In the last 18 months, the system had seen costs triple (from a very low base) and they fear the financial impact of continued growth in spending.
Impulsive Decisions Harm Health
This example from the University of Texas appears to be an impulsive decision that carries the risk of causing harm to the health of employees. The decision gave employees who were benefiting from these medicines only eight weeks notice that they would be losing coverage. This assumes they were paying attention to the details of their health plan.
It appears to be impulsive because the explanation the University System offered is not very coherent. They say that costs for other long-term conditions have not come down. The absurdity of thinking a reduction in chronic conditions will show up in a time frame of just one year is extreme. They state they are looking for an increase in adherence to the medication before they reinstate coverage. But striking coverage will have the opposite effect. People definitely won’t keep taking drugs their health plan no longer covers.
Nope. This story doesn’t hang together.
More Thoughtful Approaches
Fortunately, other employers are finding a better way. The University of Michigan is experimenting with different copays to incent people to find the most cost-effective options. The state of Connecticut recently contracted with Intellihealth to deliver obesity care, including these medicines, through telehealth applications in an efficient way. This will also involve targeting the care for long-term health benefits, not just short-term weight loss. State Comptroller Sean Scanlon told the Wall Street Journal:
“To me, saying we’re not going to cover these anymore was a nonstarter, because these drugs do work. People want to take them.”
A Messy Transition
This is all part of a messy transition toward dealing with the most prevalent and costly chronic disease in America. It used to be that the options for treatment were so limited that few people received real medical care for obesity. They were merely told to do their best to lose weight without any help. So new obesity drugs like semaglutide came into the market at a high price, assuming that very few people would use them.
But these new drugs work so well that many more people want them and the costs at list prices are too high for health insurance plans to feel comfortable with the expanding use. Prices will have to come down. PBMs will have to adapt their business model so they are not adding to the problem or they will cease to have a viable business.
Change is afoot. Smart organizations will adapt and make life better for their employees.
Click here for more from the Wall Street Journal and here for further perspective.
Lightning Strike in Unna, Germany; photograph by Rainer Knäpper, licensed under Free Art License 1.3
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August 3, 2023
