Glucagon-like peptide-1 drugs, commonly known as GLP-1, treat common conditions such as type 2 diabetes. Today, they are also used for off-label purposes, including weight management and other outcomes. However, as they have become more widely used, their cost has risen, and this has had profound implications for employers who pay for their employees’ GLP-1 drugs through benefits plans.
For business leaders and HR executives in charge of arranging and updating their employees’ benefits, these costs present the challenge to mitigate the financial burden of these medications without leaving employees unable to access the treatments they need. This article maps out the knowledge and strategies to help reduce the risks of cost escalation in GLP-1 drugs without sacrificing employee benefits.
Why are GLP-1 Drugs in High Demand?
In 2025, GLP-1 medications are projected to account for around 10% of pharmacy benefit costs, up from roughly 7% in 2023In 2025, GLP-1 drug costs make up 10.5% of all medical insurance claims, compared to 6.9% in 2023. These drugs have many purposes, both on and off-label, including enhancing insulin secretion and weight loss. This means that in addition to treating diabetes, several GLP-1 drugs, such as tirzepatide and semaglutide, have also been approved by the FDA as adjunct treatments for obesity.
The benefits of GLP-1 drugs, including improved weight loss, cardiovascular, and metabolic outcomes, contribute to rising demand. This leads to challenges for employers, who have a responsibility to make sure their employees have access to the medications they need while keeping their plan costs low.
Why More Restrictive Coverage Cannot Solve High Drug Costs
In response to this demand, many employers opt for more restrictive coverage limits to confront rising costs. Potential strategies include requiring prior authorizations, enforcing stricter exclusions, or using insurance carve-outs to bill for GLP-1 costs separately. Some employers have chosen to exclude GLP-1 drugs for weight management purposes, while maintaining coverage for diabetes-related use.Some have completely excluded GLP-1 from coverage.
However, these strategies present new HR and employee satisfaction challenges that can offset or negate the cost benefits of stricter controls. The main challenges include:
- Worsening employee health, potentially leading to higher downstream costs for the business and employees.
- Employee dissatisfaction, including lower morale, especially problematic if employees are denied access to evidence-based care.
- Reputational damage as former employees report working conditions and coverage deficits.
- Health inequality, exacerbated by restrictions that cause those with fewer financial resources to be unable to keep their jobs or be forced to pay more for alternative medications.
- Compliance risks, both for current standards and potential regulatory changes.
In contrast to these challenges, competitive benefits fuel word-of-mouth talent attraction and retention, especially in growing industries. Employers who restrict access to GLP-1 drugs as a cost-saving measure can encounter social, public, and regulatory pressures that can raise concerns for partners. This suggests a more equitable and compliant solution to rising GLP-1 drug costs is needed.
Cost Management Strategies Business and HR Leaders Should Know
In a competitive market where talent retention often relies on offering versatile medical care, employers can use a combination of approaches to give employees the coverage they need while moderating healthcare spend. Here are a few examples:
1. Prior Authorization System (Evidence-Based)
Employers should consider an evidence-based prior authorization system. This can prevent speculative prescriptions that manipulate benefits packages to obtain off-label medications cheaply. These restrictions should be clearly based on FDA protocols to establish on-label and off-label usage and the proper clinical criteria that must be presented to grant a prescription.
Employee utilization reviews should be fast and available for appeals to avoid healthcare compliance issues with workers who need specific medications. However, by requiring physician documentation, employers can control costs while still providing GLP-1 authorization to employees with a legitimate medical need.
2. Preferred Care Pathways
Employers can offer preferred care pathways aligned with patient safety standards and medical evidence to prioritize lower-cost therapies before authorizing GLP-1 prescriptions. These can include more affordable alternatives to GLP-1 drugs and lifestyle changes.
Maintaining clinical monitoring on these pathways helps prevent delays in drug access and adverse medical events. With the proper oversight, preferred care pathways can provide employees with more affordable therapies without restricting GLP-1 access to those who genuinely need it.
3. Refined Contract Design
Employers can address many of the challenges of GLP-1 drug costs by renegotiating rebate structures, such as by tying them to outcomes rather than delivery. For example, in a value-based contract with a manufacturer, an employer may receive money back if a prescribed drug fails to hit performance milestones. This refinement aims to more closely sync drug expenditures with their real-world value to employee health.
Employers should review any benefit changes with legal and compliance advisors to ensure adherence to current federal and state coverage regulations.
Refine Employee Benefits Without Increasing Healthcare Costs
At New City Insurance, our team of employee benefits consultants helps businesses solve the challenges of rising medication costs without risking their reputations, employees’ health outcomes, or bottom lines. Contact us today and schedule a consultation to learn how our experience in compliance can transform your benefits package into employee-first coverage that attracts and retains rising talent without unnecessary costs.