Insurers, Employers Face Pressure to Match Trump Deals on Drugs

The Trump administration’s deal to lower the cash price of blockbuster weight-loss drugs is heightening pressure on employers and insurers to negotiate better costs with the drugmakers, say lawyers, academics, and executives.

Eli Lilly & Co. and Novo Nordisk A/S announced Thursday they would lower the cost of their blockbuster GLP-1 drugs for cash-paying patients through President Donald Trump’s new aggregator site, TrumpRx, as well as for individuals enrolled in Medicare and Medicaid.

While the deal is seen as a win for the many Americans in the government programs, administration officials and drugmakers offered conflicting statements on whether insurers, employers, and their 165 million members will see lower prices too.

If health plans are excluded from the deal, drugmakers will likely look to preserve the higher profits they earn from commercial insurance, said Julie Selesnick, founder and principal attorney with Health Plan Legal Counsel.

Just one out of five companies with more than 200 workers cover obesity drugs, according to Peterson-KFF Health System Tracker. Insurance plans typically pay the highest prices for drugs and services.

“It’s going to take an already difficult situation—particularly for smaller employers, where the pressure grows every year to cover this—and make it harder, because there’s no indication that the drugmakers are going to be interested in lowering prices to match Medicare, Medicaid, or TrumpRx,” she said. “And historically, that has not been the case with other types of medications or medical services.”

But hopefully the broader access that the Trump administration is promising Lilly and Novo in the vast Medicare and Medicaid markets will help make drugmakers more flexible on insurance prices, Selesnick said. Competition in the obesity drug market is also set to explode, with more than 170 therapies in the pipeline as recently as June, according to a STAT news report.

‘A Cost Shift’

But that doesn’t make employers any less nervous in the near term.

Rob Andrews, CEO of the large employer cooperative Health Transformation Alliance, said he expects drugmakers to recoup lost revenue from health plans as they drop prices for Medicare, Medicaid, and self-paying patients.

“This is a cost shift, not a cost reduction,” he said.

That shift is more likely depending on how “coercive” the discussions with the Trump administration were, said Jeffrey Singer, a senior fellow at the libertarian Cato Institute and a practicing general surgeon. If Medicare pays a surgeon a low price for a hernia operation, he said, the surgeon tries to compensate through higher prices with private health plans.

“That’s just the reality of how it works,” he said.

But the unique nature of the GLP-1 market might break some of those traditional cost-shifting conventions, said Antonio Ciaccia, a drug pricing consultant and CEO of data firm 46brooklyn Research. If insurers cover their medications, the drugmakers will likely lose fewer patients to cheaper compounded alternatives that have been eating into their market share. Copycat versions of the drugs sold by telehealth companies have proliferated as the demand for the weight loss drugs has skyrocketed.

“Drug companies have better incentives to get closer to equitable discounting than I think would be typical,” he said.

Re-evaluating Coverage

Under the new deal, Lilly’s Zepbound will start at $299 for the lowest dose, $50 less than its current price on Lilly’s direct-to-consumer site LillyDirect. Wegovy will average $350, according to the White House, compared with $499 on Novo’s direct-to-consumer site NovoCare.

Novo Nordisk also plans to market a forthcoming weight-loss pill at a starting price of $150—pending its approval by the Food and Drug Administration—along with a potential discounted subscription model.

Employers that cover weight-loss drugs pay around $600 a month on average after manufacturer rebates, Andrews said, with the patient typically paying around $120 or less of that amount. If the plan scores a better price, then theoretically a member’s premiums and copays would also decrease.

Scrutiny is growing on whether the expense translates into larger health savings by improving rates of obesity-related diseases. Andrews predicted that employers would increase demands for value-based pricing deals, in which the drugmakers agree to modify the price in response to its efficacy.

“It looks like the drug produces $1,900 worth of medical benefit for $7,000 worth of spend,” he said, citing several years of data. “We need a negotiation that would put that more in line with reality.”

Alternative Arrangements

Alternative insurance arrangements could become more likely too, Selesnick said. That includes excluding the drug from a company’s health plan but setting up a health reimbursement arrangement that gives employees cash to purchase the drugs elsewhere.

“I would expect to see a lot of innovative programs and pricing structures pop up,” she said.

But health plans could also be less likely to cover the medications at all, especially if the cash price keeps falling, Singer said.

“If I was an insurance company, I’d be saying, well, this is great,” he said. “Then I don’t have to cover it.”

Health plans have legal considerations to weigh, regardless of whether they cover the drugs at a higher price or whether they don’t cover them at all.

Workers are suing companies like JPMorgan Chase & Co., Wells Fargo & Co., and Johnson & Johnson over higher drug costs in their health plans, while insurers are facing discrimination lawsuits for not covering them.

“If you’re an employer, it’s a minefield,” Selesnick said. “You don’t want to get sued. And I think that they’re going to have to keep their eyes open for new ideas and new programs that come up that find a way to make this more affordable.”