Large employers are increasingly worried about pharmacy spend, especially amid rising popularity of GLP-1 medications for weight loss, according to a new survey conducted by the Business Group on Health.
“The road ahead for prescription drug and pharmacy looks quite daunting,” said Ellen Kelsay, president and CEO of the BGH, during a press briefing on Tuesday.
The BGH, a nonprofit that represents large employers, surveyed more than 150 large employers in the U.S. between June and July that together cover more than 19 million people.
Growing spending on medications is expected to be a major driver of future health costs, along with increasing mental health issues and incidences of conditions like cancer among their workforces.
According to the survey, employers expect healthcare trend to increase 6% in 2023 and 2024 after plan design changes — higher than typical forecasts from prior years — in part due to rising pharmacy spend.
The median percentage of healthcare dollars spent on pharmacy increased from 21% in 2021 to 24% in 2022.
“Clearly, we’re heading in the wrong direction,” Kelsay said. “This is suggesting that virtually all of the market trend and increase in trend is coming largely from drug costs.”
Rising prescription drug costs are a leading concern for large employers, according to the survey.
Of large employers, 92% said they’re concerned about high-cost drugs in the pipeline, and 91% are concerned about pharmacy cost trend overall.
Those high-cost drugs include GLP-1s, drugs historically used for diabetes management that are increasingly being used to help consumers lose weight.
Nearly all employers cover GLP-1s for diabetes, but employers are split over whether to cover the drugs for weight loss, partially due to concerns about off-label usage, the BGH found.
Forty-six percent of large employers covered the drugs for weight loss in 2023, another 3% plan to add coverage in 2024 and 13% are considering adding them for the 2025 or 2026 plan years.
Those that have approved GLP-1s commonly require the medication to be indicated and approved for weight loss purposes and paired with lifestyle modification program. Patients also generally need to have a body mass index of equal or greater to 30, or a BMI of equal or greater than 27 with a comorbidity.
Some insurers have pulled back on coverage for GLP-1s as demand soars, which could hamper access for those who need the medications, experts say.
Large employers are continuing to deploy a range of tactics to manage drug costs, including prior authorization, step therapy and limiting the initial supply of new medication, according to Kelsay.
Employers are also looking to revamp arrangements with their pharmacy benefit managers, the middlemen that manage prescription drug benefits on behalf of payers.
Survey respondents said they plan to hold partnerships and vendors accountable for better value and transparency in results, pricing and contractual terms. Almost three-fourths of employers said they’re prioritizing requirements for more transparency in PBM pricing and contracting.
Some employers indicated they plan to assess the market for more transparent PBM alternatives in the next few years. Some payers have already taken steps in this direction. Earlier this month, nonprofit payer Blue Shield of California announced it was eschewing major PBM CVS Caremark in favor of a nontraditional pharmacy benefits arrangement with multiple vendors.
“We’re seeing more increased appetite and interest around transparency of PBMs,” Kelsay said.
Mental and virtual health
More than three-fourths of large employers have seen an increase in their workforces’ mental health needs this year, the BGH found.
Of large employers, 77% reported an increase in mental health needs like depression, anxiety and substance use disorder, representing a 33 percentage-point increase over last year. Another 16% anticipate an increase in mental health needs in the future.
“Mental health really stuck out as a key focus area for our members,” said Brenna Shebel, vice president of the BGH, during the press briefing.
Employers cited the increase in mental health challenges as the most significant lasting impact of the COVID-19 pandemic, and said they plan to increase access to mental health services.
Sixty-three percent of employers said they plan to work with their health plan and other vendors to expand mental health networks in 2024, up from 47% for the 2023 plan year.
Meanwhile, roughly three-fourths of employers plan to offer no or low-cost virtual counseling through telemental health for the 2024 plan year.
Many telehealth companies have doubled down on their mental health solutions, which have seen sustained demand even as the volume of other digitally delivered healthcare services eased post-COVID.
To that point, employers in the BGH survey were less inclined to see virtual care as transformative compared to prior years. Large employers were particularly concerned about the lack of care coordination between virtual and in-person providers and a lack of integration between disparate digital health tools.
Still, in 2021, 85% of employers said virtual health would impact overall delivery. That fell to 64% in 2023’s survey.
The drop is potentially a result of “more years of experience with virtual health and tempering of expectations of what virtual health is capable of,” Shebel said, noting that virtual health solutions that don’t work together and with in-person providers will “eventually be phased out by employers.”