The skyrocketing demand for GLP-1 drugs, initially developed for diabetes but now widely used for weight loss, is putting increasing financial strain on health plans and providers.
GLP-1s cost about $1,000 for a four-week supply, forcing some insurers and employers to scale back or end coverage due to soaring demand and costs.
The impact is evident in financial reports from major health systems, with insurers and self-funded employers scrambling to control costs while balancing patient access.
Rising costs drive health plan losses
Health plans have reported mounting losses tied to rising pharmacy costs, particularly from GLP-1 drugs.
Pittsburgh-based UPMC posted a $371 million operating loss for the nine months ending Sept. 30, 2024, largely attributed to increased medical utilization and pharmacy costs at UPMC Health Plan. Blue Cross Blue Shield of Massachusetts saw a $114 million operating loss in the first nine months of 2024 due in part to a 250% increase in GLP-1 claims.
Pittsburgh-based Highmark Health reported a $273 million operating gain for the nine months ending Sept. 30, 2024, but this was a notable decline from the same nine-month period in 2023. The company pointed to financial headwinds from rising healthcare usage, continued effects of Medicaid redeterminations and high prescription drug costs — particularly GLP-1s.
"These pressures developed earlier in the year, but they accelerated during the third quarter of 2024. As a result, we saw some deterioration in our operating gain primarily related to high prescription drug costs, the ongoing impact of Medicaid redeterminations, and the upward trend in healthcare utilization," Carl Daley, CFO and treasurer of Highmark Health, said. "While we anticipate these pressures to persist into 2025, our diversified portfolio of businesses, markets, and products allow us to adapt and adjust accordingly."
Self-insured providers are also feeling the squeeze. Brian Devine, CFO of Allegheny Health Network, a subsidiary of Highmark, said the organization has been significantly affected by GLP-1 costs on both the provider and payer sides.
"GLP-1s are definitely impacting us. Even on the provider side, since we're self-insured for our employees, it has affected our finances. On the health plan side, the impact has been very significant as well," Mr. Devine said on an upcoming episode of the Becker's CFO and Revenue Cycle Podcast. "Across our enterprise, we've put in the appropriate guidelines and requirements to qualify for GLP-1 care."
To manage costs, Mr. Devine said AHN is focusing on supply chain strategies and the use of generic alternatives where possible. However, with these drugs representing a new clinical approach to treating obesity and metabolic diseases, long-term cost benefits remain uncertain.
"There's definitely potential long-term benefits that we want to ensure our patients and members can take advantage of, but the cost is the challenge we're experiencing right now, and we’re not seeing the future benefit of lower claims yet," Mr. Devine said.
Insurers tighten coverage policies
The financial strain is prompting sweeping changes to GLP-1 coverage policies. While demand for these drugs continues to grow, payers are increasingly turning to prior authorization requirements and stricter eligibility criteria to manage costs.
"For weight loss drugs, most plans don't cover them. The explosion in cost and demand has led stakeholders to push for more management — more prior authorizations — because the costs are unsustainable," Chronis Manolis, chief pharmacy officer at UPMC Health Plan, told Becker's in September. "I've been at UPMC for more than 18 years and in managed care for a long time, and I can't recall a time when we put barriers on diabetes drugs. This is something to consider as we move forward, especially when future innovations could be even greater. That’s the challenge. But coming from an industry with many such 'blips,' I’m confident we’ll manage through this."
A delicate balance moving forward
With financial pressures mounting, health systems are tightening cost controls and payers are imposing stricter eligibility rules, making access to GLP-1s more challenging for patients.
Mr. Devine emphasized that prioritizing clinical appropriateness and supply chain efficiencies will be key in managing costs without compromising care.
"It's a fine balance. Ensuring [GLP-1s] are medically and clinically appropriate is the first step, followed by exploring supply chain efficiencies and cost-reduction opportunities," he said.
As the landscape continues to evolve, health systems and insurers will need to refine their strategies — whether through tighter utilization controls, alternative treatments or innovative payment models — to navigate the financial and operational challenges posed by the GLP-1 boom.