These treatments improve patient care but could have cost implications for employers. Learn how to turn complex pharmacy benefits decisions into attractive, sustainable employee benefits plans.

Authors: Asha Chikani Clare Hunter Robert Kalman


Employers face some important new challenges in providing attractive and sustainable pharmacy benefits to their employees. At the forefront is a new class of weight-loss medications (WLMs) and an expanding set of gene therapies that are coming to market. These treatments represent step-change improvements in patient care, but they also have potentially dramatic cost implications for employers that choose to cover them. WLMs, also known as anti-obesity medications, are both a major opportunity and concern for employers. Obesity is prevalent in the US population, and it's linked to a number of costly conditions.

A turning point that changed prospects for weight-loss treatment

Treatment options for obesity were mostly geared toward behavioral interventions for the past few decades and have generally shown limited sustained effectiveness. Bariatric surgery is an exception, but the procedure is expensive and carries some risk for patients. While some WLMs made it to market, they didn't prove to be safe and effective enough to be an attractive alternative.

This situation has changed with the emergence of GLP-1 agonist drugs. First developed to treat diabetes, the discovery of their ability to promote weight loss has led several pharmaceutical companies to pursue indications for this purpose. Products have entered the market, with more in development, and a significant number of employers already cover them.

Trends affecting current and future adoption

New WLMs are the top trend driver in the pharmacy space for 2023, and their impact is only expected to increase due to several important factors. While these drugs carry a high monthly cost per patient, employers can reasonably expect health benefit savings to partly offset the expense over time. Loss of excess weight tends to reduce comorbidities. As a result, population health should increasingly improve.

Savings will probably take several years to fully materialize, but in the meantime, the impact of WLMs on the cost of pharmacy benefit plans is immediate. Potentially, many people will want to take WLMs. About 40% of US adults are obese, defined as those with a body mass index (BMI) of at least 30. And an estimated 30% are considered overweight because their BMI registers from 25 to just under 30.1 Others without medical reasons may just want help in shedding unwanted pounds. A poll shows that 45% of US adults are interested in taking a prescription medication for weight loss.2

The recommended duration for treatment is uncertain. Clinical evidence for these drugs shows that results aren't usually sustained when patients stop receiving treatment. Assuming that experience applies to employee and dependent populations, WLMs will potentially become long-term chronic therapies for many pharmacy plan members. While all the newest WLMs are injectable, oral formulations that delivered promising results in clinical trials are in development. If and when the Food and Drug Administration (FDA) approves oral formulations, they'll likely lead to even more employee interest, because they remove an important use barrier for many patients.

50% of employers don't cover weight-loss medication

Employer strategies for weight-loss medications

The best design strategy for WLM benefits depends on the unique characteristics of employee and dependent populations. Based on that analysis and their overall benefit design philosophies and values, some employers will provide coverage for WLMs while others will decline the opportunity, at least for the time being.

For employers that want to test the merits of coverage, investing some time in a strategic and holistic approach will help provide a reliable view of potential benefits. Helping to ensure the right plan members have access to WLMs and that they follow instructions for use is essential.

Certain utilization management (UM) choices have proven effective for many employers, such as requiring verified biometrics. If the plan member's BMI is used as a criterion for WLM approval, weight and height measurements must by checked for accuracy. Telemedicine prescribers are likely to receive self-reported biometrics, which could be suspect, but requiring chart notes and documentation from an onsite visit with a provider offers a solution.

Employer-sponsored wellbeing programs that focus on diet and lifestyle modifications encourage more comprehensive weight management, especially when they require active participation for WLM access. As part of the prior authorization process, the program vendor can send an eligibility file to the pharmacy benefit manager (PBM).

These approaches have worked for some employers, but they aren't necessarily typical UM practices. So they may require process auditing to check for proper implementation by the PBM. It's also important to align PBM contract terms with UM approaches to avoid reduced rebates. Finally, effective employee communications have considerable influence on the results, and a key message to get across is that WLMs are just one factor in successful weight management. Familiarizing employees with UM criteria and the reasons behind them can minimize misunderstanding.

The growing financial risk of gene therapies

Gene therapies constitute a remarkable breakthrough in healthcare. They introduce transformative cures for chronic or ultra-rare conditions that were either extremely expensive to treat or untreatable. In 2023, for instance, the FDA approved a gene therapy to treat select forms of hemophilia that will replace or significantly reduce the use of specialty medicines for this condition.

Plan members who are eligible for these therapies are likely to find them life changing. However, treatment costs can be exorbitant — averaging $1 to $2 million per dose.4 Employers also have to consider that future savings associated with gene therapies may not apply to them, due to turnover in their employee population.

Conditions with therapies available are extremely rare at the moment, which makes the odds of a claim quite low for plan sponsors except, perhaps, some of the largest. But a large pipeline of gene therapies is in late-stage development. As the number of approvals increases over the next few years, so will the total cost of treatments, along with the likelihood that employers of all sizes will have at least one plan member who can benefit.

Employers can avoid financial risk by choosing not to cover gene therapy treatments. Given the implications for affected employees, though, that decision may become increasingly unsustainable despite the growing financial risks associated with coverage. One of the biggest questions about gene therapy for most employers is not if the cost will hit their bottom line, but when.

Financial risk management for gene therapies

A top priority in managing the financial risk of covering gene therapies is assessing the organization's likely exposure over the next few years. Evaluating the timing of new therapies in the development pipeline and the potential number of plan members eligible for treatment is a critical step. With this forecast, employers have a basis for informed coverage and risk management decisions.

Some plan sponsors have used alternative funding vendors for specialty medications to help cover the costs of gene therapies and other expensive treatments. In many cases, substantial savings opportunities have followed — but this practice is currently in dispute. Several pharmaceutical companies are challenging the legality or tightening the requirements of their alternative funding programs — or both. Consequently, program availability could be limited.

These alternative funding programs can also create member noise if they're a requirement for access to gene therapies. To avoid or temper that response, employers can position this stipulation as a second prior authorization for financial case management, in addition to the clinical authorization. But the optics can be troubling when programs are intended for patients without adequate financial resources, especially if they're on the hook for 100% of the treatment costs if they don't use the program. Adding to these concerns, the shelf life of this option is likely to last a year or two at most. Considering these factors together, many employers have been reluctant to implement programs.

Stop-loss programs specific to gene therapy

Specialized programs are a management consideration for the financial risk gene therapies pose. While an employer can submit claims under general stop-loss policies, those policies typically lead to an increase in future premiums. Programs expressly designed for gene therapy are closely aligned with the unique features of contributing risks, and they spread the overall risk among a group of participating employers. Employer-specific penalties for claims are avoided.

The most common stop-loss program for gene therapy charges participating employers a fixed per-member, per-month fee. High claims expenses have set that amount at nearly $1, but if the actual total cost of claims paid in one year is less than the premiums collected, credits are applied to each participant in the following year.

When considering programs designed for gene therapy, employers should evaluate the coverage in detail. It's important to understand what the exclusions are, whether there's first-dollar coverage and how soon that insurance takes effect after a new gene therapy is approved. Also noteworthy are other coverage requirements, such as the location of the healthcare delivery organization designated as the center of excellence for each therapy. Many patients may need to receive care at a non-local site, which travel benefits can address.

PBM contract language reviews

Paying close attention to the terms of their contracts with PBMs will help employers manage the specific challenges associated with WLMs and gene therapies — and it's an important benefits management strategy in general. Intense competition among these third parties has created somewhat of a buyer's market, characterized by highly negotiable financial and nonfinancial terms. However, decision flexibility often ends once the contract is signed, since PBMs typically don't deviate from the original language.

Paying close attention to the terms of their PBMs will help employers manage the specific challenges associated with WLMs and gene therapies.

Non-financial terms such as definitions, market check language, or drugs that are excluded from rebates or minimum rebate guarantees can heavily influence financial results for employers. To protect these interests, having a seasoned pharmacy benefit consultant carefully review proposed contract terms is essential. Typically involving multiple drafts, this process helps to ensure that implications are fully understood, and the organization is able to obtain terms that best support their needs and objectives.

PBM vendors are a key part of the equation for specialty medication management. They bring experience in meeting both specific challenges and supporting the pharmacy benefit plan's overall success — but these relationships can present their own complexities for employers. Paying close attention to contract language is especially important.

It's a pivotal time for healthcare. Excitement about a burgeoning pipeline and approvals for specialty medications and therapies is checked by the reality of discouraging costs. So only a comprehensive strategy will do. Changes are creating new challenges and opportunities that raise the stakes for pharmacy benefit considerations, and with structured guidance, employers can make sense of complex decisions.

Author Information


1"Defining Adult Overweight and Obesity," Centers for Disease Control and Prevention, reviewed 3 Jun 2022.

2O'Mary, Lisa. "Curiosity About Weight Loss Drugs Opens Treatment Doors," WebMD, 15 Aug 2023.

3"Organizational Wellbeing Poll: Social Connectedness, Performance and Health," Gallagher. Unpublished internal data.

4"Cell and Gene Therapy Manufacturing Costs Limiting Access," Genetic Engineering & Biotechnology News, 21 Feb 2023.


Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services(Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services" and in Massachusetts as "Gallagher Benefit Insurance Services." Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.