What Ozempic can teach CFOs about drug costs

For CFOs trying to limit spikes in operating expenses, keeping healthcare costs in check might feel like trying to alter a law of nature. The sun rises in the east. Birds fly south for winter. Spending on healthcare outpaces inflation.

Now, skyrocketing demand for weight loss injections like Zepbound and Wegovy—as well as Mounjaro and Ozempic, the diabetes medications they’re based on and which are prescribed off-label for obesity—threatens to make the work even more difficult. The treatments increased employers’ prescription drug spending last year, according to Mercer, and that spending is bound to increase as more employers begin covering them. Prescription drugs are already the main reason employers’ healthcare costs have been rising.

That price increase is landing on the CFO’s desk. As part of a growing focus on strategy, including ways to reduce costs, a large share of CFOs have already been heavily involved in making benefits decisions, according to the Integrated Benefits Institute. More than half of CFOs said either that they make benefits decisions with other business functions or that they make most or even all most or even all benefits decisions themselves, according to a 2020 survey, the health and productivity research nonprofit’s most recent look at the topic. Heads of finance who limit their involvement with benefits to signing off on the budget are actually a minority (28%), and an even smaller slice (17%) had no involvement.

In a simpler world, companies could respond to ever-rising costs for drugs by negotiating lower prices. We hear many of you laughing bitterly through your screens, because you know that is definitely not the world we live in.

Pay big money. Companies don’t have much leverage when negotiating lower drug prices with their insurer’s pharmacy benefit manager, or PBM, according to Shawn Gremminger, president and CEO of the nonprofit National Alliance of Healthcare Purchaser Coalitions. Even the smallest of the three major PBMs manages drugs for tens of millions of people, he said, which gives them bargaining power that even the largest employer health plan can’t match.

That said, while CFOs and other benefit decision-makers have no leverage to negotiate what they pay for the drugs, they can act to keep costs from rising more than they otherwise might.

“Employers are going to find themselves covering these drugs,” Gremminger told CFO Brew. “It's really a question of what are the structures and guardrails they put around [the coverage]?”

“Guardrails” does not mean not covering the medications. In its new recommendations for employers, an obesity advisory board for the National Alliance said not covering new anti-obesity medications would ignore an “emerging standard of care” and could make an employer’s benefits less competitive.

What to do, what to do? According to nonprofit healthcare research organization KFF, 65% of employers have self-funded plans. These plans let the employers decide what the policy covers, so they can try to curb their spending on the medications—hundreds of dollars per employee per month, even under a health plan’s discounted price—by putting conditions on who qualifies for them. That might include employees who haven’t lost weight on cheaper treatments and who have signed up for programs to change their diet and exercise habits, according to the National Alliance’s recommendations.

The recommendations also suggest making anti-obesity drugs part of a broader focus on the potential benefits of weight loss that includes prevention and, for those who need treatment, care from specialists who can provide ongoing individualized care, not just a prescription. That could have long-term benefits for the employee’s health, which in the case of obesity, would also save the employer money over the longer term.

Lesson time. The yes-with-conditions approach doesn’t just have to be for obesity medications. “The same types of guardrails,” Gremminger said in an email, “could be considered for other expensive but highly sought-after drug classes.”

That mirrors some of what large employers told Mercer last year. Four in 10 said they covered the new medications for obesity, although many required pre-approval or renewed approval to keep taking them. Two in 10 employers told Mercer they were “considering” covering the medications. However you manage rising costs, it is probably best to plan for the long haul because, as Mercer’s survey release noted, employees who take one of the weight loss drugs will probably do so for years.