A surge in demand for new weight loss and diabetes drugs is expected to accelerate growth in health care costs for U.S. employers next year, employee health benefits consultant Mercer said Friday.
Sunit Patel, chief actuary at Mercer, told Reuters in an interview that GLP-1 drugs approved by the U.S. Food and Drug Administration could contribute 50 to 100 basis points to this trend.
On average, U.S. employers budget for a 5.2% increase in these costs next year, according to a Mercer survey of approximately 1,900 employers representing approximately 134,000 employer health plan sponsors. It’s standing up.
Mercer said the increased use of GLP-1 drugs has had a significant impact on increasing pharmacy benefit costs under these health plans. Pharmacy benefit costs in 2023 increased by 8.4% year over year, compared to 6.4% in 2022.
The higher costs associated with these drugs are due to pricing and increased patient volume, Mercer said. GLP-1 drugs, which suppress hunger and make you feel full longer, typically cost about $1,000 per patient per month.
Earlier this month, U.S. and British regulators approved Eli Lilly’s weight-loss treatment Zepbound, giving it a strong shot at Novo Nordisk’s Wegovy in a market estimated to have annual sales of $100 billion by the end of 2020. This paved the way for a new rival.
Employers cover the use of GLP-1 drugs to treat diabetes, but debate persists about covering the use of GLP-1 drugs to treat obesity. Mercer said about two-fifths of large employers currently cover GLP-1 drugs to treat obesity, and a further 19% say they are considering it. .
Patel said the impact on the health system of staff pay hikes by various hospitals is being felt gradually.
“It may take several more years for the price increases resulting from higher wages and health care supply costs in the health sector to be felt across all health care systems.”
Despite rising health insurance costs, major employers are avoiding passing on additional costs to employees through increases in deductibles, copayments, and out-of-pocket maximums in 2023.
At large companies, average employee deductible premiums rose by just $2 this year, and they accounted for just 22% of overall health care costs on average in 2022, Mercer said.
Beth Amland, director of health and benefits research at Mercer, said most companies expect employees to maintain a similar share of employer benefits spending in 2024.
He said employers could instead offset costs by offering multiple plans and encouraging participation in options that offer better discounts compared to more expensive plans.
“We are concerned that health insurance growth is rising faster than general inflation, and this will continue to be the case for years to come.”