Identifying areas where drug costs are rising, and the unique challenges posed by GLP-1 drugs
Drug innovations can fill plan sponsors with a mixture of joy and trepidation. For one, blockbuster drugs offering new treatments can help plan members immeasurably. They can produce countless positive knock-on effects, from better disease management, to greater productivity, lower disability claims, and overall improvements in the quality and length of plan members’ lives. They’re also expensive.
That challenging dichotomy, between promise and cost, is perhaps best exemplified by the rise of GLP-1 drugs as treatments for both diabetes and obesity. These drugs are pricey, but could also easily cover a massive portion of plan members, which makes their impact on plan costs all the more significant. As GLP-1 drugs begin to occupy more and more of plan sponsors’ mental space, though, it’s important to recognize the wide array of drug categories where innovations and advancements are pushing prices higher.
“We are seeing new blockbuster drugs for MS. They’re helping people where there was no treatment before, but they’re coming with quite a price tag,” says Sandra Ventin, AVP for Benefits with Gallagher. “Medications used to treat cystic fibrosis appear infrequently, but when they do emerge the costs can be in the hundreds of thousands range. ADHD prescription use is on the rise, especially among younger adults, which is impacting plans. Biologics treating inflammation-related conditions like Crohn’s, colitis, and rheumatoid arthritis have historically been one of the top cost categories, but they’re quickly being surpassed by the GLP-1s.”
As drug innovations in such a broad set of categories pose new cost challenges to plans, Ventin advocates for hyper-focus on the aggregate cost per head in a plan. It is easy to get emotional when we witness spiking costs around drugs as a major concern, but in the context of the per average annual benefits spend for an employee with a large family needing dental care – this is often a larger spend than protecting a young employee who needs ADHD medications.
Managing drug costs through that average spend per head per year approach, with the addition of medical inflation, can help plan sponsors better control for the impacts of additional headcount &/or an aging workforce.
GLP-1 drugs, however, could be a real accelerator behind medical inflation. While from a per drug cost standpoint Ventin says that most plan sponsors are more concerned with a member’s cancer medications than they would GLP-1 drugs. The problem with GLP-1s is that such a huge percentage of plan members could be eligible for coverage. Utilization of these medications is a concern for the industry. Average per head costs are already being pushed up by all the other sources of health inflation, but GLP-1s are adding gasoline to that fire.
Ventin adds a key point that most plans have pooling protection, meaning they have insurance built into their plans to cover massive unforeseen expenses. GLP-1 drugs, however, will typically cost less than the average pooling limit of $10,000-$15,000 per person per year. Pooling protection isn’t protecting against the cost of these drugs. This trend moves the per head costs up significantly.
As her clients stare at these rising costs, she is talking to them about trade offs and restrictions. She works to remind them of the insurance policies in place protecting against off label use claims. She notes that most plans have accepted the need to cover these drugs for diabetes, protected by measures like an A1C test. The next industry challenge is in acknowledging obesity as a disease state and deciding on appropriate reimbursement.
US employers — who also cover the costs of a bariatric surgery — may be more inclined to cover obesity drugs to prevent surgical costs; for those patients that fall into the morbidly obese category. Ventin notes that Canada’ socialized healthcare system changes the incentive structure for employers. Nevertheless, despite rising costs in this and so many other disease categories, she believes that a focus on better health outcomes for members and ensuring rigour in the claiming process is followed, will help with organizational wellbeing.
“We need to re-visit drug formularies and be thoughtful with each clients’ drug spend. This conversation needs to be rationale and based on claims data, rather than saying that the sky is falling and everybody’s taking Ozempic, because that’s not the case.”
