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

The insurer plans to cap annual price increases for GLP-1 receptor agonist drugs at 15% for employers and plans participating in its pharmacy benefit management program.

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 its investor day in New York City on Thursday.

Experts say the cap could protect employers from soaring GLP-1 drug costs while increasing patient access to these popular therapies, which have been difficult for most patients to obtain given their high prices and ongoing shortages.

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

Employers and plans participating in Evernorth's weight management program EncircleRx will not see annual spending increases of more than 15% on Novo Nordisk's Wegovy and Eli Lilly's Zepbound, according to Cigna.

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

"That is a completely unsustainable number, and our clients continue to come to us for help," Adam Kautzner, president of care management at Evernorth and Express Scripts, said at the investor day on Thursday.

The cap has the potential to expand employer coverage of GLP-1 drugs, experts say.

However, framing a 15% annual price increase as a major step forward in affordability shows just how much demand there is for GLP-1 drugs and how out-of-control U.S. spending on drugs is, said Arielle Trzcinski, a principal analyst at Forrester.

"It's a step in the right direction. 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 creating services around them.

Boosting 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 enormous potential in fighting 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. 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 to work. That kind of ongoing resource drain could sink some companies, experts say.

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.

In addition, the drugs remain in limited supply, according to the FDA. Shortages, combined with low coverage, are creating a bottleneck in access to 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 the supply chain issues are resolved, the number of people on these drugs is going to 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 more financial certainty in covering the drugs, Kautzner told investors Thursday.

Evernorth guarantees annual spending increases of up to 15%. But the guarantee amount varies by company 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, a weight management program Express Scripts launched last summer amid surging demand for GLP-1 drugs. The program combines access to GLP-1 drugs with lifestyle change services like coaching.

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

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

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

At the investor day, Kautzner said he is "confident" Evernorth can successfully manage cost trends given the division's experience serving patients in value-based care models. Evernorth's portfolio of value-based disease management programs, SafeGuardRx, already runs risk models for diseases like hepatitis C and diabetes, Kautzner said.

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

A row of executives sits on a stage. Cigna executives answer questions at an investor day in New York City on Thursday, March 7.

Photo credit: Rebecca Pifer/Healthcare Dive

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

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

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

UnitedHealth and Elevance launched their own programs for their PBM 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 say. That's because PBMs typically receive larger financial rebates from drugmakers if they place more expensive drugs on their formularies.

Starting last year, several insurers said increased 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 it's a positive contributor to earnings for the Evernorth business," Evernorth CEO Eric Palmer said on a call with investors in August.

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

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

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

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

If insurers and their pharmacy benefit managers already have plans in place to manage that demand, they will be handsomely rewarded once supply improves, according to O'Brien.

"Once the supply chain issues are resolved, the number of people on these drugs is going to be staggering," O'Brien said. "If these PBMs have already gotten everyone in line — it's like an amusement park. Let's open the gates and let everyone in. They're going to be well-positioned to take on these people at that point."