There are new drugs for weight loss: Side effects may include a broken budget

Connecticut’s state employee health plan was on course to spend $30 million this year on a class of diabetes drugs that is exploding in popularity for weight loss.

It was untenable, said Comptroller Sean Scanlon, who runs the plan, which covers 265,000 employees, including teachers, police officers and firefighters.

But instead of scrapping coverage of the drugs like some other large employers have, the state is trying something different and, if successful, could offer a road map for organizations — public and private — which see their finances hamstrung by the costly yet effective treatment.

Since July, state health plan members seeking drugs like Novo Nordisk’s Ozempic and Wegovy for weight loss must first take part in a clinical lifestyle management program called Flyte, which offers online tools for weight management. Participants can meet with providers and receive personalized care plans. Those providers might prescribe one of the medications, which the state health plan would then cover, or recommend a different course of treatment.

“I never considered getting rid of the drugs, but I also knew that the status quo was not going to work and we had to look at other options,” Scanlon said.

Connecticut’s experiment, which shows early promise, comes at a crucial moment for state and federal officials contending with the costs of these blockbuster treatments. Approval of such therapies could upend treatment for millions of Americans and become some of the best-selling drugs of all time. Roughly 40 percent of Americans are obese and these drugs have proven effective at treating conditions worsened by obesity, such as type-2 diabetes. They’ve even been shown to reduce risk of heart attack and stroke in some patients.

But the treatments are expensive and patients may need to stay on them indefinitely. The list price for a 30-day supply of Ozempic in the U.S. is just under $1,000. For Wegovy, a one-month supply is listed at more than $1,300. Eli Lilly’s Zepbound, the obesity therapy approved by the FDA last week, has a list price of just over $1,000 per month.

Medicare, by law, cannot cover weight loss treatments, though Novo Nordisk recently hired lobbyists to reverse that policy. Private insurance coverage is uneven, though on Monday the American Medical Association called on insurance companies to cover obesity medications, arguing that the long-term benefits and decreases in the need for other treatments will offset the drugs’ cost. For now, state Medicaid directors, public universities and state officials are just beginning to wrap their heads around who will pay for these drugs.

“We have a fiduciary responsibility not to bankrupt our plan based on the usage of one drug,” said North Carolina Treasurer Dale Folwell, a Republican running for governor, who manages the state’s public health plan for 750,000 employees.

His office estimated that spending on this class of drugs would exceed $170 million in 2024 and could jump to more than $1 billion over the next six years. In an effort to control costs, the state health plan will no longer cover these weight-loss drugs for new members effective Jan.1.

The University of Texas system, one of the largest employers in the state with more than 116,000 workers, dropped coverage for weight loss drugs in September after seeing costs for the medications rise from about $1.5 million to $5 million a month over an 18-month period ended in May, according to the university system’s benefits guidebook.

The University of Michigan, which covers about 120,000 people, increased copays — from $20 to $45 — to help cover the cost of the drugs, a class dubbed GLP-1 for the shorthand name of the active ingredient, after its plan spent nearly $9 million for 1,076 members on the drugs between July 2022 and June 2023. The copay will increase again on Jan. 1 to $75, according to the university’s employee benefits office.

“GLP-1s are one of many options for weight loss,” said Brian Vasher, assistant vice president for employee benefits and well-being programs at the University of Michigan. “We want employees to try lower cost effective options, including weight loss programs, oral preferred brand drugs and generics before using the high-cost GLP-1 agents.”

Connecticut’s experiment, administered through a company called Intellihealth, is showing signs of success, Scanlon said. As of Nov. 3, some 1,501 members of the state’s health plan have signed up for Flyte. Doctors have written GLP-1 prescriptions for about 80 percent of them. And the number of new prescriptions for these drugs is plateauing, while the plan had previously seen a 50 percent yearly growth in new scripts, the comptroller’s spokesperson said.

Connecticut pays about $110 a month for each participant in the program. Based on the current number of enrollees, the annual cost of Flyte would be about $2 million.

The state will evaluate results over a 10-month period and hear from employees before deciding whether to pursue a longer-term contract with Intellihealth.

Sloan Saunders, CEO of Intellihealth, said the company takes a comprehensive approach to obesity — in which providers consider different treatment plans, including lower-cost therapies, before writing prescriptions for anti-obesity drugs.

“Just prescribing someone Wegovy and sending them on their way really doesn't get great outcomes,” Saunders said.

The University of Texas, in explaining why it dropped coverage, noted in its employee guidebook that less than 46 percent of people using GLP-1s remain on the medications long-term, which “equates to a significant cost to the plan with less-than-desirable compliance with medication and treatment protocols.” Continuing to cover the drugs for weight loss would add $73 million a year to prescription plan costs and lead the system to raise premiums for all plan members by 2.5 to 3 percent, the guidebook said.

A spokesperson for the university system declined to comment beyond the guidebook update.

Folwell said North Carolina might have had to triple premiums if the state health plan didn’t limit access to these new drugs. That’s why the State Health Plan Board of Trustees in late October voted for a moratorium on covering the drugs for new users, which Folwell said will allow the state to evaluate whether it wants to permanently cut coverage for weight-loss drugs.

Folwell noted the state wouldn’t be considering dropping coverage if Novo Nordisk’s list prices in the U.S. were closer to what other countries pay. Wegovy is nearly four times as expensive in the U.S. as it is in Germany, and Ozempic is five times more expensive than it is in Japan, which has the second-highest list price among peer countries, according to a KFF analysis.

“There is variability in employer coverage and reimbursement for anti-obesity medications,” a Novo Nordisk spokesperson said in a statement to POLITICO. “Currently, [approximately] 50 million patients with obesity have access to this therapy class, which represents a trend of expanded coverage in government healthcare and commercial plans.”

Folwell said his office will explore different approaches to covering the weight-loss drugs over the next few months and is open to platforms like Flyte.

“We don't have a monopoly on good ideas in this world,” he said. “So we're interested in anything that we can learn from other states [that] are also under siege because of this price-gouging.”

As states grapple with the drugs’ costs, telehealth programs like the one Connecticut is using are beginning to garner interest among employers that want to offer coverage of the weight loss drugs without going bankrupt, said Jeff Levin-Scherz, population health leader at insurance consulting firm WTW. But companies are in the early days of examining their coverage policies, and it’s unclear how well these types of programs will work long-term at lowering costs and improving clinical outcomes.

“How much this strategy will take off will depend to some extent at what impact it has on cost, what impact it has on clinical outcomes and what impact it has on member satisfaction,” Levin-Scherz said.

About 4 in 10 Americans are obese, according to the CDC, with new research predicting that number could jump to half of Americans by 2030, creating a potentially huge market for these drugs, said Cynthia Cox, vice president at KFF. While the costs of other obesity treatments like bariatric surgery are also high, the difference with GLP-1s is that people might stay on the drugs for the rest of their lives, Cox said.

There are huge health care savings to be had from reducing obesity, which is associated with a host of chronic conditions including cardiovascular disease, but people may realize those savings decades later when they are enrolled in Medicare or with another employer’s plan. In effect, private insurers may invest in these drugs only to see public payers reap the rewards.

“That's where employers and health plans are doing this cost-benefit analysis of where does the payoff start to take place, and is it likely that that enrollee is still going to be on our health plan when we do start to see any cost benefit?” Cox said.

State Medicaid directors are also considering whether to offer the drugs for weight loss, said Kate McEvoy, executive director of the National Association of Medicaid Directors. Sixteen states offer coverage for at least one of the drugs, but most states limit who can receive them based on parameters like body mass index, or have implemented some form of cost-sharing, she said.

She compared the stunning growth in GLP-1s to the hepatitis C drugs that became widely popular in 2016, which had list prices of about $84,000 for a 12-week course of treatment. But those drugs cured hepatitis C.

“While Medicaid programs will see offsets in the market price based on rebates from the manufacturers, it's still a significant investment,” McEvoy said. “And it's also harder than the situation with hepatitis C drugs to forecast short-term cost savings.”

David Cutler, a health care economist at Harvard University, said GLP-1s could be the biggest-selling drugs in the U.S. since the hepatitis C drug boom. If prices for the GLP-1s follow a similar trajectory to the hepatitis C drugs, states might be waiting for the price to fall as more medications enter the market, Cutler said.

But while the cost of the drugs is high, their potential long-term health benefits and cost-savings “could be enormous,” which states should consider in their cost-benefit analysis, Cutler said.

The value of the drugs to patients’ health outcomes should matter more to states than the potential cost burden, Cutler added, especially if the medications can extend a person’s life.

“The plans are saying, ‘Why should I pay for this when I'm not going to benefit?’ And the short answer is of course your patients will benefit, but the cost savings which may occur, when they occur, will accrue to Medicare,” he said.