Why Cigna is capping cost increases for pricey obesity drugs

Cigna is moving to limit how much health insurance providers and employers have to pay for pricey and in-demand obesity medications.

The insurer plans to cap annual price increases for the drugs, called GLP-1 receptor agonists, at 15% for employers and plans participating in a weight loss management program offered by its pharmacy benefit manager.

It’s the first financial guarantee available in the market for the drugs, according to the payer. Cigna’s health services division Evernorth, which includes PBM Express Scripts, announced the news on Thursday before the insurer’s investor day in New York City.

The cap could insulate employers from surging costs for GLP-1s while increasing patients’ access to the popular therapies, experts say. GLP-1s have been out of reach for all but a select few, given their high price tags and ongoing shortages of the medications.

The cap is possible through agreements that Express Scripts made with drugmakers Novo Nordisk and Eli Lilly. Cigna is not sharing specifics of the contracts.

As a result, employers and plans participating in Evernorth’s weight management program EncircleRx won’t see more than a 15% annual increase in spending on Novo’s Wegovy and Lilly’s Zepbound, according to Cigna.

In comparison, health plans are seeing the annual cost trend for weight loss drugs hit 40% to 50%, a spokesperson for the insurer said.

“It’s a completely unsustainable number and our clients continue to look to us for help,” Adam Kautzner, president of care management at Evernorth and of Express Scripts, said during the Thursday investor day.

The cap could expand employer coverage of GLP-1s, experts say.

However, a 15% annual price increase being presented as a major step forward on affordability shows both the incredible demand for GLP-1s and the country’s out-of-control spending on drugs, said Arielle Trzcinski, a principal analyst at Forrester.

“It’s a step forward. Is it enough? Maybe not, but in comparison to that 40% to 50% it feels like a much more palatable number,” Trzcinski said.

Cigna’s move illustrates how large insurers are looking for new strategies to prove the value of their pharmacy benefit offerings as they face federal scrutiny into their business practices and competition from drug pricing disruptors.

It’s also a snapshot of the evolving market for GLP-1s, as health services and pharmacy companies look to capitalize on not only providing access to the drugs, but creating services around them.

Increasing GLP-1 coverage

GLP-1s have long been approved to manage diabetes, but the medications — which control blood sugar levels and reduce hunger and food intake — have real potential to move the needle on obesity and the downstream health conditions caused by excess weight, according to physicians and researchers.

Yet payers have been leery about covering the drugs due to their cost. Wegovy and Zepbound — two of three GLP-1 medications currently approved for weight loss in the U.S. — have monthly list prices of $1,349 and $1,060, respectively.

And, the medication needs to be used in perpetuity to maintain its effectiveness. That sustained drain on resources could bankrupt some companies, according to experts.

As a result, only 25% of employers cover GLP-1s for weight management today, according to a recent survey by care delivery company Accolade. More than a third of employers cited cost as a barrier.

Moreover, the drugs remain in limited availability, according to the FDA. The shortages, paired with low coverage rates, are creating a bottleneck for the drugs despite sky-high demand.

More than 40% of Americans are obese, according to government data, creating a total addressable market for GLP-1s of almost 140 million individuals in the U.S.

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“Once the supply chain is figured out, it’s going to be amazing how many people will be on these drugs.”

Jennifer O’Brien

Partner, West Monroe

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Cigna’s new program is meant to make future GLP-1 cost trend increases predictable for employers, to give them more financial certainty in covering the medication, Kautzner told investors Thursday.

Evernorth is guaranteeing a maximum 15% annual increase in spend. But a company’s specific guarantee differs based on “client type, depending on current benefit offerings and size of patient population, among other factors including specific client preferences and financial strategy,” a Cigna spokesperson told Healthcare Dive.

Cost control risk

Cigna is gambling that it will be able to successfully control medical costs for members of EncircleRx, the weight loss management program Express Scripts launched last summer amid spiking demand for GLP-1s. EncircleRx ties access to GLP-1s with lifestyle modification services like coaching.

Employers pay a monthly fee to enroll their workers in the program. As such, Cigna could generate savings by improving members’ health outcomes and avoiding more expensive medical care down the line.

“If they can improve these individuals’ A1C [levels], blood pressure, cardiovascular health, that has long-term upside for them in terms of savings on medical spend,” said Forrester’s Trzcinski.

Cigna could also be on the hook for excess costs if the drugs and its lifestyle modification program are unsuccessful in changing members’ outcomes.

During the investor day, Kautzner said he was “confident” Evernorth can successfully manage trend, given the division’s history of caring for patients in value-based models. SafeGuardRx, Evernorth’s portfolio of value-based condition management programs, has run risk-based models for hepatitis C, diabetes and other diseases, Kautzner said.

Evernorth has some additional “proprietary” mechanisms that “do limit our downside risk,” Kautzner said.

Cigna has not shared enrollment numbers or savings projections for EncircleRx, but the financial upside of value-based programs can be huge.

SafeGuardRx — which covers 86 million lives across 14 value-based programs, including EncircleRx — created $6.4 billion in savings last year, according to its website.

Cigna isn’t the only insurance conglomerate with a weight management program that includes access to GLP-1s.

UnitedHealth and Elevance launched their own programs in January and February, respectively, for employer clients of their PBMs.

Express Scripts benefit

Expanding access to GLP-1s could also boost revenue for Express Scripts, experts say. That’s because PBMs generally receive larger financial rebates from drugmakers for including more expensive drugs on their formularies.

Starting last year, a number of insurers said rising utilization of GLP-1s was generating notable revenue or earnings in their pharmacy arms. That includes Cigna, which brings in three-quarters of its revenue from Evernorth, and just one-quarter from its legacy insurance business.

“GLP-1 utilization does continue to build, which in the Evernorth business is a positive contributor to our earnings,” Evernorth CEO Eric Palmer said during an August call with investors.

Enticing more employers to cover GLP-1s “would obviously benefit Express Scripts. They would definitely be incented to do that,” said Jennifer O’Brien, a partner at consultancy West Monroe.

The GLP-1 trend cap could also help Express Scripts in the court of public opinion. Large PBMs have been touting recent cost-cutting and transparency measures as they face rising criticism over their role in increasing drug prices and frustration from employer clients over opaque business practices.

A growing number of employers and plans are turning instead to vendors with clear operational models like Mark Cuban’s Cost Plus Drugs. Still, Cigna’s cost cap shows how major players are jockeying to entrench their position in the GLP-1 distribution market before drug companies fix their supply chains, lessening shortages of the drugs and throwing open the doors to broader access, experts say.

Supply isn’t expected to return to normal until later this year as drugmakers struggle to keep pace with the market’s appetite for GLP-1s.

If insurers and their pharmacy benefit managers already have programs in place to manage that demand, once supply improves they’ll see a windfall, according to O’Brien.

“Once the supply chain is figured out, it’s going to be amazing how many people will be on these drugs,” O’Brien said. “If these PBMs have all these people lined up, waiting — it’s like the amusement park. Let’s open the gates and let everyone in. And they’re well-positioned at that point to receive them.”

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