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GLP-1 Medications and Employer Health Plans: What You Need to Know

Glucagon-like peptide-1 (GLP-1) receptor agonist medications represent one of the most expensive healthcare innovations in history. Originally developed for type 2 diabetes management, these drugs have gained significant attention for their effectiveness in weight loss, leading to widespread demand from plan members and increasing pressure on employer health plans.

As an employer managing healthcare benefits, understanding the full picture of GLP-1 medications is crucial for making informed decisions about coverage, cost management, and supporting employee health.


The Financial Impact on Employer Health Plans


The combination of their popularity and high cost creates a financial impact that can significantly affect overall health plan spending:


  • High Monthly Costs: Studies show that medications like semaglutide, liraglutide, and tirzepatide can cost as much as $804, $1,418, and $1,100 respectively per 30-day supply.

  • Potential Increased Plan Expenses: A recent study found that in the first year of GLP-1 use for non-diabetic obesity, there was no medical cost offset observed, and costs increased by approximately $1,487 per member compared to control groups.

  • Long-Term Budget Considerations: The long-term use of these medications may require employers to plan for sustained increases in pharmacy benefit costs.


Return on Investment Considerations


While proponents suggest that GLP-1s may eventually reduce healthcare costs through improved health outcomes, employers should be realistic about the timeline and magnitude of these savings:


  • Delayed Cost Offsets: Any medical cost savings from reduced comorbidities typically occur years after treatment begins.

  • Comparative Value Analysis: Employers should evaluate whether the same investment in other health initiatives might yield better overall returns.


The PBM Rebate Dynamic


Understanding the Rebate System

An aspect of GLP-1 medication costs that employers must understand:


  • Placement Fees and Rebates: Pharmacy Benefit Managers (PBMs) receive substantial placement fees—commonly referred to as rebates or formulary placement fees—from manufacturers of GLP-1 medications.

  • Formulary Influence: These fees are negotiated in exchange for preferred placement on health plan formularies, significantly influencing which medications are most accessible to employees.

  • Business Model Impact: For high-demand GLP-1s like Ozempic, Wegovy, and Zepbound, these rebates have become a central part of the PBM business model.

  • Profit Alignment: The profitability for PBMs often lies in these rebates rather than in the direct dispensing of the drugs themselves.


Implications for Employers

This rebate system creates several challenges:


  • Misaligned Incentives: Traditional PBMs may benefit from increased utilization of high-cost GLP-1s, potentially conflicting with employer cost-containment goals.

  • Pass-Through Questions: Savings from rebates do not always translate into lower costs for plan sponsors or employees.

  • True Cost Visibility: The rebate system can obscure the actual net cost of these medications to the plan.


GLP-1 medications represent both an opportunity to support plan members' health and a significant financial challenge for employer health plans. The complexity is further increased by the rebate system and aggressive consumer marketing that drives demand.


We can help you take a strategic, informed approach to coverage decisions and implement comprehensive support programs to navigate this effectively. Message our team here on LinkedIn, or visit our website for more information:

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