(This story is from our new Health Tech newsletter. If you’d like to sign up, just click here.)
Pharmacy costs are taking up a bigger chunk of employers’ total healthcare spending as popular GLP-1 weight loss drugs and other expensive therapies drive costs higher, a new survey found.
The median percentage of total healthcare costs that employers spent on drugs increased to 27% in 2023, up from 24% in 2022 and 21% in 2021, according to the Business Group on Health’s annual survey of 125 large employers providing health coverage for 17.1 million people.
“That is staggering,” Ellen Kelsay, the group’s CEO, said on a press call Tuesday. “This essentially suggests that virtually all of the healthcare trend increase is coming from pharmacy costs.”
Companies estimate that healthcare costs will reach $18,639 per employee in 2024, an increase from $17,201 last year. About a fourth of those costs are shouldered by employees in the form of premiums and out-of-pocket costs, while employers pick up the rest of the tab.
GLP-1 drugs, which are used to treat diabetes and weight loss and have seen huge demand, are a main driver of employers’ healthcare costs this year. The survey found that 56% of employers said GLP-1s are driving up healthcare costs to a very great or great extent, while 46% of employers answered the same for high-cost therapies. GLP-1 costs and the affordability of high-cost drugs are concerns for nearly all employers, according to the survey.
While almost all employers cover GLP-1 drugs for diabetes, 67% said they cover them for obesity, with another 13% considering covering the drugs for obesity in 2025 and beyond. About a third of employers said they cover GLP-1s for cardiovascular conditions and 29% said they’re considering adding it.
Some employers are considering new strategies to cut down on drug costs. About 40% of employers said they’re thinking of implementing a transparent pharmacy benefit management (PBM) program in 2026 or 2027. That’s on top of the 25% of employers that said they already have a transparent PBM.
That doesn’t necessarily mean they’ll switch away from the biggest PBMs, which include Express Scripts, OptumRx and CVS Caremark, but employers are considering other options, Kelsay said.
“They’re all being considered, and I think it’s all fair game as employers are going out to market to see how business may move among the big three, or to some of the newer entrants as well,” she said.
Meanwhile, 21% of employers said they are considering programs that work with cash pay tools, such as GoodRx or Cost Plus Drugs, on top of the 38% that already use such tools.
The most common strategies employers are currently using to manage drug costs include maximizing manufacturer savings programs, implementing new features and programs offered by their PBM, and making changes to prior authorizations.
Editor’s note: This article has been updated with press comments from the Business Group on Health CEO Ellen Kelsay.