Cigna Caps Annual Cost Increases for High-Priced GLP-1 Weight-Loss Drugs

Cigna is taking steps to limit what health insurers and employers pay for pricey, in-demand obesity drugs.

The insurer plans to cap annual price increases for GLP-1 receptor agonists in weight-loss management programs offered by its pharmacy benefit manager at 15% for employers and health plans that participate in the programs.

According to the payer, this is the first financial guarantee of its kind on the market for these drugs. Cigna's health services division, Evernorth, which owns pharmacy benefit manager Express Scripts, announced the news ahead of an investor day in New York City on Thursday.

The cap protects employers from soaring GLP-1 costs while also improving patient access to the popular therapies, experts said. Given the high prices and ongoing shortages of GLP-1 drugs, they have been out of reach for most patients except a select few.

The cap is made possible by agreements Express Scripts has reached with drugmakers Novo Nordisk and Eli Lilly. Cigna did not disclose the specifics of the contracts.

As a result, employers and health plans participating in Evernorth's weight-management program EncircleRx will see annual spending increases of no more than 15% on Novo Nordisk's Wegovy and Eli Lilly's Zepbound, according to Cigna.

By comparison, health plans are currently facing annual cost trends of 40% to 50% for weight-loss drugs, a spokesperson for the insurer said.

"That's a completely unsustainable number, and our clients have been coming to us asking for help," Adam Kautzner, president of care management at Evernorth and Express Scripts, said at the investor day on Thursday.

The cap is expected to expand employer coverage of GLP-1 drugs, experts said.

However, Forrester principal analyst Arielle Trzcinski noted that marketing a 15% annual price increase as a significant step forward in affordability speaks to just how staggering demand for GLP-1 drugs is and how out-of-control U.S. spending on drugs has become.

"It's a step in the right direction. But is it enough? Maybe not, but compared to 40% to 50% increases, it feels like a more palatable number," Trzcinski said.

Cigna's move shows large insurers are seeking new strategies to prove the value of their pharmacy benefit offerings as they face federal scrutiny of their business practices and competition from drug-pricing disruptors.

It's also a microcosm of the evolving GLP-1 drug market, where health services and pharmacy companies are looking to profit not just from providing access to the drugs, but also from building services around them.

Expanding GLP-1 coverage

GLP-1 drugs have long been approved to treat diabetes, but the medications — which control blood sugar levels and reduce hunger and food intake — have shown great potential in improving obesity and downstream health problems caused by excess weight, according to physicians and researchers.

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

And the drugs need to be taken continuously over a long period to be effective. That ongoing financial drain could sink some companies, experts said.

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

Additionally, the drugs remain in limited supply, according to the Food and Drug Administration. Shortages, combined with low coverage, have created a bottleneck for the drugs despite extremely high demand.

More than 40% of U.S. adults have obesity, according to government data, creating a potential market of nearly 140 million Americans for GLP-1 drugs.

"Once supply chain issues are resolved, the number of people taking these drugs will be staggering."

— Jennifer O'Brien, partner at West Monroe

Cigna's new program is designed to give employers predictability in future GLP-1 drug cost trends, giving them greater financial certainty when covering the drugs, Kautzner told investors Thursday.

Evernorth guarantees annual spending increases of no more than 15%. But the guarantee for a specific company will vary based on factors like "client type, current benefit setup and patient population size, as well as specific client preferences and financial strategies," a Cigna spokesperson told Healthcare Dive.

Cost-control risks

Cigna is betting it can successfully manage medical costs for members of EncircleRx, the weight-management program Express Scripts launched last summer amid surging demand for GLP-1 drugs. EncircleRx combines access to GLP-1 drugs with lifestyle intervention services, such as coaching.

Employers pay a monthly fee for employees to enroll in the program. As a result, Cigna can generate savings by improving members' health and avoiding more expensive medical costs down the road.

"If they can improve A1C levels, blood pressure and cardiovascular health for these people, that's going to save them medical costs in the long run," Forrester's Trzcinski said.

Cigna could also be on the hook for excess costs if the drugs and its lifestyle intervention program fail to successfully change members' health outcomes.

At the investor day, Kautzner said he was "confident" Evernorth could successfully manage drug cost trends given the division's history with value-based care models. Evernorth's portfolio of SafeGuardRx programs — which include risk-based models for conditions like hepatitis C and diabetes — has been operating risk models, Kautzner said.

Evernorth also has additional "proprietary" mechanisms that "really limit our downside risk," Kautzner said.

Cigna executives answer questions during an investor day in New York City on Thursday, March 7. Photo credit: Rebecca Pifer/Healthcare Dive

Cigna has not yet released enrollment numbers or savings projections for EncircleRx, but the financial benefits of value-based programs can be substantial.

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

Cigna is not the only insurance group offering weight-management programs that include access to GLP-1 drugs.

UnitedHealth and Elevance each launched their own programs for their pharmacy benefit managers' employer clients in January and February, respectively.

Benefits for Express Scripts

Expanding access to GLP-1 drugs could also increase revenue for Express Scripts, experts said. That's because pharmacy benefit managers typically receive larger financial rebates from drugmakers when they place more expensive drugs on their formularies.

Starting last year, several insurers said rising use of GLP-1 drugs was generating significant revenue or earnings for their pharmacy divisions. That includes Cigna, which gets three-quarters of its revenue from Evernorth and only a quarter from its traditional insurance business.

"GLP-1 utilization continues to grow, and that's a positive contributor to the profitability of the Evernorth business," Evernorth CEO Eric Palmer said on a call with investors in August.

Getting more employers to cover GLP-1 drugs "obviously benefits Express Scripts. They definitely have an incentive to do that," said Jennifer O'Brien, a partner at consulting firm West Monroe.

The GLP-1 cost trend cap could also help Express Scripts gain an edge in public opinion. Large pharmacy benefit managers have been touting recent cost-cutting and transparency measures as they face increasing criticism for their role in driving up drug costs and employer clients' frustration with their opaque business practices.

More employers and health plans are turning to providers with clear operating models like Mark Cuban's Cost Plus Drugs. Still, experts said Cigna's cost cap shows major players are racing to cement their positions in the GLP-1 distribution market before drugmakers fix their supply chains, reduce shortages and open the door to broader access.

Supply is not expected to return to normal until later this year, as drugmakers work to keep up with demand for GLP-1 drugs.

If insurers and their pharmacy benefit managers already have plans in place to manage that demand, they will be well-positioned to reap the rewards once supply improves, according to O'Brien.

"Once supply chain issues are resolved, the number of people taking these drugs will be staggering," O'Brien said. "If these PBMs have already got everyone lined up and waiting — it's like an amusement park. Let's open the gates and let everyone in. They'll be well-prepared to welcome them by then."