What is Wegovy worth to your employer? Companies wrestle with obesity drugs' costs, long-term value.

'Insatiable demand' for obesity drugs sets up conflict between workers and employers

Amid mounting evidence of obesity drugs' longer-term health benefits, thorny questions persist about their value to employers.

In the near term, employers covering obesity drugs like Novo Nordisk's (NVO) Wegovy and Eli Lilly & Co.'s (LLY) Zepbound will spend much more than they'll save, according to a report released Wednesday by JPMorgan Chase & Co.'s Morgan Health unit. And any longer-term health savings may not matter much to some companies with high employee turnover. The median employee tenure in the U.S. private sector is 3.7 years, the report said.

The bottom line, according to the report: The "seemingly insatiable demand" for these high-cost drugs is creating "a new state of play, in which consumers' interests are sometimes at odds with their employers'."

Roughly half of people in the U.S. have employer-sponsored health coverage, but only about 40% of large employers cover GLP-1 drugs for obesity. And many that do cover the drugs are using an arsenal of strategies to limit their use, including requiring that workers have both an obesity diagnosis and other health problems before coverage kicks in, limiting the quantity or duration of coverage, requiring prior authorization or covering the medications only when alternative treatment options have been exhausted.

Yet the drugs' potential to improve long-term health is becoming more clear with new research, including a major study that found Wegovy can significantly cut the risk of heart attack, stroke or death due to cardiovascular disease in people who do not have diabetes.

As such research piles up, "part of the employer community may look at the data and say, 'OK, this is a health economics story,'" Eli Lilly Chief Executive David Ricks said Tuesday during a fireside chat at the JPMorgan healthcare conference in San Francisco. But most employers, Ricks said, look at coverage of obesity drugs purely as an employee benefit.

Lilly has seen "good growth" in employer coverage of the drugs, Ricks said, with many opting to cover the entire class of medications rather than just a specific drug.

Yet for other industry players, many questions remain about employers' and other private payers' coverage decisions. In the private-pay market, "you have the itinerant issue," where a company may decide to cover an obesity drug today but the health-savings payoff comes 10 years down the road, when the patient is covered by a different plan, David Gluckman, vice chair of investment banking and global head of healthcare at Lazard, said during a panel discussion on healthcare innovation hosted by Boston Consulting Group alongside the JPMorgan conference Tuesday. "That all has to be figured out," Gluckman said.

Morgan Health, which invests in healthcare companies while also helping to manage health benefits for JPMorgan employees, has some recommendations for other employers: Consider "advanced primary care," in which providers work collaboratively with a care team that gives patients ongoing, personalized support; ensure "appropriate" use of the drugs through prior authorization and other measures; and consider tying healthcare providers' payments to patients' health outcomes - an approach that has so far gained little traction in the private sector despite its well-established use in government programs such as Medicare.

The idea of linking providers' payments to the results they deliver for patients, the "value-based care" approach long used in government programs, hasn't taken hold in the private sector in part because there's less concentration of market power, Dan Mendelson, CEO of Morgan Health, told MarketWatch. In the private sector, "it has to grow more organically," Mendelson said. But with the right tools and technology, he said, "there will be increasing demand for it over the next five years."

In its own health plan, JPMorgan has already dipped a toe into the strategy, Mendelson said, through a contract with a primary-care provider that cares for some employees in the Columbus, Ohio, area. The provider has "upside and downside risk," he said, with payments fluctuating depending on patient-health outcomes such as blood-sugar levels, cardiovascular health and rates of routine screenings, such as mammography and colonoscopy. "They could get paid less if they don't attain the objectives," Mendelson said, "but what we're hoping for is to pay them more because they've achieved better health outcomes."

The company is also giving Columbus-area workers an extra push to attend to their health, recently opening three on-site advanced primary-care centers at its offices in the city - and it gives workers about $25 to pay those clinics a visit, Mendelson said.

Morgan Health is also rethinking JPMorgan's approach to covering obesity drugs, Mendelson said. Currently, the company provides the drugs for free to employees who have a body mass index over 30 or have another chronic condition, like diabetes, Mendelson said. That creates "very, very high demand" for the drugs among employees, he said. But despite the no-cost access, many workers stop taking the drugs because of side effects such as nausea and vomiting. "It's a waste for us," Mendelson said. "And it's a waste of resources for the system."

Now Morgan Health is looking at ways to coordinate wellness programs and primary care to help patients adjust their diet and lifestyle rather than just prescribing drugs, Mendelson said.

While workers clamor for the drugs and companies tinker with their coverage strategies, there's a lack of long-term data on the potential payoff for employers. More research is needed to determine how long it takes for employers to see cost savings from providing obesity-drug coverage, the report said, as their savings "rely on employees staying with their employers long enough for their avoided costs to accrue."

About the Author: This report was written for MarketWatch by Eleanor Laise.

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