Prescription drugs have been the fastest-growing component of health benefit cost for years, but in 2023 pharmacy benefit cost jumped 8.4%, following an increase of 6.4% last year. A spike in the utilization of certain therapies for treatment of diabetes and obesity – glucagon-like peptide 1 (GLP-1) drugs – has had a notable impact on costs.
The combination of the high price of these drugs – typically about $1,000 per month per patient (not counting manufacturers’ rebates, which vary) – plus the large number of patients who may benefit from them can result in a substantial net new cost to a health plan.
Further, these are maintenance drugs that a patient would likely use over many years. While most plans cover GLP-1 drugs for diabetes treatment, employers are divided on whether to cover them for the treatment of obesity. Currently, about two-fifths of large employers (41%) cover GLP-1 medications for the treatment of obesity, often with authorization and/or reauthorization requirements. Another 19% say they are considering it.
A wave of new gene and cell therapies are also beginning to impact cost. Only a few have reached the market so far, but by 2025 the FDA estimates they will be approving 10 to 20 of these products per year. Resulting from major advances in medical science, these cutting-edge products have the potential to drastically improve or even cure certain serious or terminal conditions, offering hope to many individuals.
Unlike most traditional drug regimens, gene and cell therapies are one-time, ultra-high-cost treatments – as much as $3M per treatment – and plan sponsors must absorb the entire cost at once, a paradigm shift that presents unique challenges.
The majority of large employers are taking action to prepare for these infrequent but potentially significant costs by conducting risk assessments (21%), working with medical carriers and pharmacy benefit managers to implement clinical management programs (44%), and adding or enhancing stop-loss protection (10%).