WHITE PAPER

3 health plan strategies for balancing
cost and access with GLP-1s
By Adam Siskind, Aleya Dutta Choudhury, Ayushi Khetan, Vinod Swarna, Vimbai Mudimu,Vikas Garg

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More than 70% of adults in the U.S. today are either overweight or obese, evidence thecountry is already in the midst of a significant public health crisis. Individuals with obesity
are at increased risk of serious comorbidities, including type 2 diabetes, cardiovasculardisease, acute and chronic pain, several types of cancers, mental illness, sleep apnea andosteoarthritis. Various treatment approaches have emerged over time, including lifestyletherapy, pharmacotherapy and surgery. Each treatment, however, comes with its own
complexities, considerations and downsides. Enter GLP-1s.
GLP-1s (glucagon-like peptide-1s) are a class of medications that play a critical role inregulating blood sugar by stimulating insulin production and suppressing glucagon secretion.
While GLP-1s have been approved for diabetes since 2005, additions like Wegovy andMounjaro (in 2021 and 2022, respectively) offer significant weight-loss advantages overprevious drugs, accelerating demand for them and fueling significant class growth.
GLP-1s’ results speak for themselves: 15%-20% weight loss, plus an emerging body of researchshowing that some of these drugs lower the risk of heart failure and stroke. These impressive
results have made these drugs extremely popular, with studies reporting that one in eightpeople in the U.S. have used a GLP-1 and roughly 6% of the population are currently taking
one. Prescriptions for some of these drugs are up by 2,000% since 2019, and manufacturersare struggling to keep pace with the surge in demand.
The explosion in popularity of GLP-1s is also causing an acute financial challenge for payers,
who are being forced into difficult coverage choices for their members. However, there are anumber of strategies they can use to thread the needle by offering coverage of these drugs tomembers who would benefit without exploding their budgets. In this white paper, we focus
on strategies for commercial plans, for which coverage decisions are made by employers
and payers.

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WHITE PAPERPayer strategies for GLP-1 drug coverage
To understand the impact of GLP-1s on payers’ bottom lines, take the example of Wegovy,
which costs a little more than $16,000 per member per year before rebates. The financial
impact of coverage decisions comes with extremely large multipliers, as seen in the figure.
For a payer with a million members, covering just 5% of additional eligible members would
cost around $420 million per year.
FIGURE :Annual impact of incremental coverage expansion for a hypothetical payer
Number of members

1,000,000

Eligible members: 51.9%*

519,000

Annual cost to payer for
Wegovy**$16,188

Coverage of 10% of eligible
members

51,900$840,157,200

Coverage of 15% of eligible
members

77,850$1,260,235,800

Annual cost to payer for
Wegovy**$420,078,600* Defined as those with BMI>30 (41.9%) and BMI>27 with weight-related comorbidities (10%).
** List price for Wegovy 2.4mg as of 2024: $1,349 per month. Rebates and drug adherence are not factored in.

While the annual incremental cost to payers is extremely high, it fails to capture the true
impact on payers’ long-term bottom line. This is because GLP-1s are not intended forshort-term use, since those taking GLP-1s report regaining most of their weight after
discontinuing use. Multiplying the high annual cost of GLP-1 coverage by years and even
decades has created a future payer cost burden well into the billions of dollars.
On the other hand, the lifetime cost of insuring a member who struggles to maintain ahealthy weight is also extremely high. Those living with obesity are prone to multiple
comorbidities, and their annual medical costs are approximately twice as high as those whomaintain a healthy weight. According to one study, broad Medicare coverage of GLP-1s wouldsave taxpayers $176 billion over the first 10 years and more than $700 billion over 30 years.

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These savings would come from reduced healthcare spending on hospitalizations, surgeries,
doctors’ visits, other medications, nursing home stays and more.
All this begs the question: Should payers continue to cover the significant costs of GLP-1drugs? And if so, then how? The answer to these questions will vary depending on a mixtureof factors, from member populations and their risk factors to plan type, benefit designand other trade-offs a payer may choose to make when weighing the costs and benefitsof covering GLP-1s.

3 strategic considerations for health plansconcerning GLP-1 medication coverage
The first strategic decision payers face with GLP-1s is whether to cover them and for whom.
Assuming they plan to cover these drugs for at least some of their members, they mustthen devise ways to do so that ensure the best possible outcomes for members, consideringboth cost and the quality of care. Internal stakeholders must be prepared to answer threequestions to equip decision-makers with the information they’ll need to strikea balance between member benefit and fiscal responsibility.

Question No. 1: What lines of business are you concerned with?
Approximately 40% of employers today provide coverage for GLP-1s for weight loss.
While coverage decisions for commercial plans lie solely with payers, coverage decisions
for Medicare and Medicaid are slightly more complicated.
For Medicare Part D. The current statutory guidelines for Medicare Part D state that
medications for anorexia, weight loss or weight gain will not be covered. There is increasing
public and industry pressure on the Centers for Medicare & Medicaid Services (CMS) andlawmakers to reconsider these guidelines; this, in addition to the FDA’s recent expanded
approval of Wegovy for the treatment of heart disease, has prompted changes to coverage,
with CMS stating that obesity drugs receiving FDA approval for an “additional medicallyaccepted indication” may now be covered under Part D.
For Medicaid. Medicaid coverage varies depending on state policies, the financial
implications of which have been significant. In 2022 alone, Medicaid spending on GLP-1s wasnearly $7.9 billion, or 8.6% of all plan spending. This considerable outlay has raised concernswith policymakers, prompting some states to consider further coverage restrictions. Evenso, as of early 2024, 16 states covered weight-loss medications through Medicaid, and thisnumber is expected to increase.

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Question No. 2: Which members will be eligible for coverage?
Payers can’t afford to cover GLP-1s for all members indiscriminately. While the majority of acarrier’s members may qualify for coverage because they are either obese or overweight with
one or more comorbidities, expanding access to all members would mean providing coveragefor both those who would benefit medically as well as those seeking GLP-1s for nonmedicalreasons. The latter scenario is not tenable.
In reality, there are three clear sets of members who would benefit medically from taking
a GLP-1: those with type 2 diabetes, those who are overweight or obese and those withcardiovascular risks. There are benefits of GLP-1s for each of these populations as well asmechanisms for managing utilization and costs (see “Question No. 3” below).
Along with the strategies laid out below, payers also can and should seek greater
understanding of these three segments through analyzing claims, hospitalization data,
medical records and social drivers of health data. Understanding cost exposure, treatment
pathways, comorbidities, socioeconomic and cost histories can help health plans predict
utilization and inform coverage decisions.

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Question No. 3: What policies should I implement to manage cost?
Once payers have decided on which lines of business and member segments to focus,
they must then implement three policies to preserve the proper balance between member
outcomes and fiscal responsibility. They are:

Policy 1: Thoughtful benefit design
When designing benefits, employers must consider several factors. The first is the potential
for benefit decisions to improve member health outcomes, increase productivity andimprove employee retention. Research has found that obesity can raise absenteeism due toinjury or illness by three days (or 128%) per employee per year. Managing a chronic condition
such as obesity effectively can significantly depress absenteeism while also promoting
employee well-being. Additionally, considering the rising demand for GLP-1s, it’s possible that
employers coverage decisions may have a significant effect on employee satisfaction andretention.
Given the price tag that comes with GLP-1s, however, employers owe it to themselves tothoroughly explore cost-containment strategies. Two stand out:Flexible savings accounts and health savings accounts. For plan members who areeither obese or overweight with a comorbidity, plans could consider offering Health Savings
Accounts (HSAs) and Flexible Spending Accounts (FSAs). Since these plan features allow
employees to set aside pretax dollars to cover out-of-pocket expenses to pay for GLP-1s,
this strategy would help ensure that only those who want the drug pay for it and that othermembers avoid subsidizing the cost through higher premiums. Positives of this approach:Greater flexibility for employees to manage healthcare costs. Negatives: Contribution limits
mean that employees would quickly max out an HSA or FSA.
Alternative contracting arrangements. Payers can and should explore alternative
contracting arrangements, such as value- and outcomes-based contracts, directly with drug
manufacturers. These arrangements can help mitigate costs by tying payments to agreedupon outcomes related to the primary health condition, other comorbidities or the reductionin healthcare utilization. Positives of this approach: Significant cost containment potential.
Negatives: The complexity of implementing these arrangements can be a deterrent.

Policy 2: Smart utilization management
Formulating strong utilization management practices, such as a well-defined priorauthorization framework or structured step therapy, is crucial to controlling the high costs
associated with GLP-1s.
Due to surging demand for GLP-1s, robust prior authorization frameworks are needed
to ensure that coverage is only granted for medically appropriate uses of the drug. After
identifying eligible members, drafting comprehensive coverage guidelines will ensure that© 2024 ZS | 5WHITE PAPERthese drugs are covered for only those members who qualify. And finally, devising welldefined treatment pathways for members can help reduce costs and manage drug demand.
Treatment pathway examples:
For those with type 2 diabetes. There exist well-established treatment pathways for thispatient cohort—typically starting with metformin in the first line before initiating pricier
therapies such as GLP-1s or SGLT-2 inhibitors.
For those with a BMI over 40 (or over 35 with at least one comorbidity). Researchers
project that expanding coverage for bariatric surgery can save between $1.50 and $4.80
per member per month over the long term, depending on plan design. While undeniably
effective, this option is only recommended for a small cohort of members with thehighest BMIs.
For all other eligible members. Lifestyle therapy remains the preferred first-line treatment
for those living with obesity. Aetna’s prior authorization policy for Wegovy, for example,
requires eligible members to participate in a comprehensive weight-management programfor at least six months before becoming eligible for a GLP-1.
Analyzing where a member is in his or her health journey and identifying which treatment
options are appropriate using a stepped, pathway approach will help payers control costs
while improving member outcomes and experience.

Policy 3: Innovative care management
Payers should look to innovative care management strategies to deliver on the approaches
to utilization management outlined above. We suggest three pathways for managing care formembers who struggle to maintain a healthy weight:
1. Proactive interventions. Predictive analytics can be used to identify members at risk ofdeveloping obesity-related health problems and to stratify them by risk level and projectedpatient journey. This allows care managers to tailor member-specific treatment paths.
Members with cardiovascular issues, in particular, can benefit from proactive interventions
that initiate care management before the member becomes eligible for GLP-1 coverage.
These interventions can serve to divert patient volume from expensive drug therapies,
safeguarding payer dollars while improving long-term member outcomes.
2. Member education and shared decision-making. Payers aren’t the only ones fazed by
the high cost and impact of GLP-1s; members are too. Education on treatment pathways
and options can help members better understand their options and encourage shareddecision-making. Guiding members through their options can empower them to make thebest care decisions for their own health.

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3. Equity and access. Roughly four out of five Black women in the U.S. live with obesity,
underscoring the need for care management frameworks that personalize care, improveaccess and provide advocacy and support in ways that help address issues of drug accessand health equity. Care management can help ensure members from demographic groups
at greater risk for obesity-related health issues enjoy the same access to GLP-1s and otherweight-management solutions as their more advantaged counterparts.

Looking ahead at the future of GLP-1s
GLP-1s can be genuinely life-changing for those living with obesity and obesity-related healthconditions such as diabetes and heart disease. But these drugs’ efficacy has now shown promise
across a range of comorbidities and diseases unrelated to obesity—everything from reducingthe risk of kidney disease-related events and alleviating obstructive sleep apnea to improving
cognition and brain shrinkage in patients with Alzheimer’s disease and lowering colorectal
cancer risk.
Not only are clinical trials demonstrating the benefits of the GLP-1s independent from and inaddition to weight loss but drug manufacturers are also creating clinical differentiation acrossindications—for instance, with semaglutide for cardiovascular benefits and tirzepatide forsleep apnea. If anything, the complexities of the landscape for these drugs are increasing, notdecreasing.
Given the volume of new studies and data concerning GLP-1s, health plans must be nimble
in crafting their policies for covering this drug class as a step therapy in diabetes, for weight
management and as a treatment for obesity-related comorbidities. While some health plans
already have adopted an agile approach to utilization and care management, many more willneed to build a GLP-1 Center of Excellence to stay in front of evolving trends and continuallyadapt programs and policies to ensure they are optimally balancing cost with quality of member
care and member outcomes.

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About ZS
ZS is a management consulting and technology firm
focused on transforming global healthcare andbeyond. We leverage our leading-edge analytics,
plus the power of data, science and products, to help
our clients make more intelligent decisions, deliver
innovative solutions and improve outcomes for all.
Founded in 1983, ZS has more than 13,000 employees
in 35 offices worldwide.

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