Employers face soaring demand for obesity care benefits. Virtual care players are jumping in with a slew of offerings

Employers are seeing surging demand from their workers for benefits that cover obesity treatment and this is opening up considerable market opportunities for virtual care players.

A recent survey found that 44% of people with obesity would change jobs to gain coverage for treatment. And more than half of workers would stay at a job they didn't like to retain that coverage, according to the survey from the Obesity Action Coalition.

"I think very much that where we were on mental health as an employee benefit 10 years ago is where we are today on metabolic health. In 10 years, employees will move with their feet to employers who cover holistic metabolic health benefits," said Isabelle Kenyon, founder and CEO of Calibrate, a digital metabolic health platform.

Increasingly, as part of this focus on metabolic health, there is excitement around new and emerging obesity medications like semaglutide (Wegovy) and tirzepatide (Mounjaro). But drugs like Ozempic and Wegovy come with a hefty price tag, at least $1,000 per month. Neither drug is covered for weight loss by most insurance plans.

Semaglutide, which is sold under the brand names Ozempic, Wegovy and Rybelsus, accounted for $10.7 billion in drug spending in 2021, up 90% over the year before, which ranked it fourth among drug expenditures, according to a study published last year in the American Journal of Health-System Pharmacy.

Last year, the American Gastroenterology Association recommended coverage of weight loss drugs for those with BMI (body mass index) over 30 or BMI over 27 with complications. Currently, about 42% of people in the U.S. are obese, or have a BMI of 30 or higher, according to CDC data.

Health plan sponsors are facing increasing pressure to cover these medications. If these drugs are used by a substantial portion of those with obesity, the increase in medical costs will be high, according to Jeff Levin-Scherz, M.D., managing director and population health leader at insurance services company Willis Towers Watson (WTW). 

And these advances in game-changing obesity drugs come as employers are already facing the highest medical inflation rate in decades.

"Among our clients, about two-thirds of them are covering GLP-1 drugs for obesity, however, what we’re seeing is rapid uptake and costs that are unsustainable," Levin-Scherz said. "Coverage right now is pretty good, but if these drugs continue to be as expensive as they are now, I don’t know if we could project that they will continue to be covered this way."

Virtual care companies are now jumping into the market as they see big opportunities to combine prescriptions for GLP-1 drugs with online programs that focus on lifestyle and behavior change. The idea, digital health executives say, is to improve long-term clinical outcomes and ultimately reduce costs by helping people keep the weight off.

"When we talk to employers, it's not, 'I don't want to cover these drugs.' In fact, I literally have never heard that from an employer," said Kenyon, whose company, Calibrate, launched an enterprise business late last year. "What I hear from employers is, 'I want to cover these drugs and I want to do it in a way that guarantees outcomes and I want to do it in a way that contains cost.' And that does not mean one-way prescribing of GLP-1s."

She added, "Employers are feeling this already. They see it in their Ozempic spend, they see it in their Trulicity spend. I would say two-thirds of employers that we meet want a solution for this category today. And a solution means cost control and it means outcomes."

Employers will need to make some strategic decisions going forward. They can continue to cover these next-generation drugs for obesity but "will not save as much money as the drugs cost," Levin-Scherz said, or they can choose to not cover them at all but could find it harder to recruit employees.

But there's a high cost to not addressing obesity as well. Being significantly overweight contributes to many other chronic conditions and can lead to downstream health costs. Organizations spend twice as much on healthcare costs for individuals with obesity compared with individuals at a healthy weight, one study found.

Companies also could choose to cover the drugs but use different criteria than the one established by the FDA and set a higher BMI threshold in order for members to qualify for coverage of obesity treatment.

"Employers can also put in a prior authorization or step therapy that people have to go through such as medically guided diets or try less expensive medicines before they go to these more expensive medicines," Levin-Scherz noted.

Digital weight loss company Wondr Health recently rolled out a new program to help health plans and employers navigate the complexities of weight and anti-obesity medications. Through Wondr's program, individuals are assessed and triaged to determine if they qualify for anti-obesity medications and are then connected to practitioners and certified health coaches who provide tailored medication management paired with behavior change support.

"You can call it step therapy, you can call it "pre-auth" into the drug and then we stay with them while they are taking the drug and work with them to change their behaviors so when they do come down off these drugs, they don't revert back to those old habits and put that weight back on," CEO Scott Paddock said. Wondr currently works with 1,600 employers and 80 health plans, covering 11 million lives, according to Paddock. 

Some companies like direct-to-consumer health and wellness company Ro and telehealth giant Teladoc have recently expanded beyond their core conditions to launch new obesity-focused programs.

Building on its chronic condition management services as a result of its Livongo acquisition in 2020, Teladoc rolled out a new provider-based care service for employers to include weight management and prediabetes programs. "The feedback we are hearing from employers and health plans is that they recognize the benefits these drugs can have but are also mindful of both the cost and the potential for the drugs to be used outside of evidence-based clinical indications," said Jason Tibbels, M.D., Teladoc Health Chief Quality Officer. 

"We know that these drugs work best in conjunction with the range of solutions and tools that address the foundational pillars impacting cardiometabolic health including nutrition logging and coaching, activity tracking, sleep management and stress and mental health in-the-moment tools and virtual care," Tibbels said. "Without any lifestyle modifications members will need to continuously be on these drugs to retain their weight loss, thereby increasing an employer or health plan’s healthcare costs."

Virtual obesity care solutions that have historically focused on behavior change such as Calibrate and Found are also building out their offerings by adding new prescription service lines. Found developed a new platform that aims to help employers manage services and cost for workers struggling with weight, including GLP-1 drugs.

Calibrate's Kenyon says the startup's approach is to create a total cost of care equation that works for payers and employers. "We focus on 'right medication, right person, right amount of time' where some people are on the drugs, some people are off the drugs, but everyone's getting to a healthier weight that's leading to less total medical expense," she said.

Kenyon refers to Calibrate's approach to obesity drugs as "continuous authorization management." "I, as the provider, am on the hook for delivering that cost of care return for making sure that you actually get outcomes or I take you off the meds. That means, month in month out, we are constantly reauthorizing whether or not the patient gets access to the medication. We do that through partnerships with PBMs to really control the pharmacy spend."

Calibrate recently released data that showed members had 15% average sustained weight loss at 12, 18 and 24 months. 

Noom unveiled this week Noom Med, which offers GLP-1s to "medically qualified individuals." Noom’s Chief of Medicine Linda Anegawa, M.D., told Fierce Healthcare that the consumer-facing weight loss company is exploring the idea of a "potential enterprise offering."

Virtual chronic condition management company Omada Health also launched a new service designed to address cost concerns and support behavior and lifestyle change in conjunction with GLP-1 drugs. The company does not prescribe or fill prescriptions for the medications, CEO Sean Duffy said, as there are many providers, both in-person and online, that offer access to the drugs.

"These breakthrough medicines clearly have captured the zeitgeist but leave a lot of open questions, especially around the cost profile and affordability," Duffy said in an interview. "Listening to our employers and our payer partners, they're very concerned about costs and they're saying, 'If I am going to pay for this medicine for a subset of the population, I want to make sure that there's as much value out of that as possible.'"

Omada rolled out services to support employers and pharmacy benefit managers with administering coverage policies around GLP-1s, Duffy said. Medication coverage coupled with behavior change gives people the best chance to achieve long-term, sustained weight loss, and avoid a lifetime reliance on the medicines, he noted.

Make no mistake, the market opportunity is gigantic. Rock Health estimates that the serviceable obesity care market hovers around $13 billion in the U.S. Medication for obesity care makes up a large portion of the market at 40%—and it’s expected to increase as more drugs are approved beyond the six FDA-approved weight loss drugs and insurance coverage is expanded. Digital health solutions make up a burgeoning 55% of the market, according to the digital health investment firm.

"Some estimates suggest that the obesity care market may grow to as much as $54 billion by 2030, assuming access to medication-led treatment expands. Digital solutions with and without a medication component are key to that expansion and play a role in increasing access to scalable and sustainable care," wrote Rock Health researchers.

Insurers footing the bill for expensive GLP-1s

So far insurers have taken a cautious approach to covering this pricey new class of weight loss drugs. 

UnitedHealth Group Chief Executive Officer Andrew Witty recently signaled that the insurer will take a stringent approach to reimbursing these next-generation obesity medications.

"I think as time plays out, what's going to be super critical here is that we need to get focused on the facts and reality of this marketplace. We need to really be clear about which patients really do benefit from these medicines and make sure we properly understand how they're going to use those medicines," he said during a Q&A with Wall Street analysts following the company's first-quarter 2023 earnings call. "There's a lot still to learn as these things progress through their final phases. And then finally, of course, we got to see the prices be affordable and that's going to be a key element of how this evolves."

When pressed by a Wall Street analyst to share Cigna's approach to GLP-1 drugs, CEO David Cordani acknowledged that the treatment protocols "represent a positive step forward, specifically for diabetics."

But he added that employers have had a "more limited appetite to expand coverage beyond clinical diagnoses such as diabetes for certain lifestyle treatments."We've seen more limited adoption of that, thus far," he said during the company's Q1 earnings call.

As a vertically integrated insurer, Cigna owns pharmacy benefit management company Express Scripts, which sits within its Evernorth business division, and that will help insulate the company from some of the drug cost pressures, Cordani said.

"As the evidence and demand for these medications continues to mount, we hope that employers and health plans act swiftly to extend coverage to more people who could improve their health and lives through high-quality obesity care and treatment," said Melynda Barnes, M.D., Ro's chief medical officer. Ro recently launched a weight loss program that provides access to GLP-1 medications. 

She added, "It’s safe to say that the status quo in weight management treatment isn’t working for any stakeholder with rising obesity rates, associated costs and poor health outcomes–payers should see GLP-1s for the rare opportunity they present to reset how things are done and to dramatically help patients."