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Amid tight labor market, employers grapple with coverage of pricey treatments

Healthcare costs per employee, according to large business owners


Facing a tight labor market and rising health care costs, employers are wrestling with how to afford a new wave of pricey, highly effective treatments without forcing workers to bear too much of the cost.


Why it matters: From emerging gene and cell-based therapies in cancer and other conditions to a buzzy class of weight-loss drugs, the landscape for game-changing treatments has never been quite so promising — or expensive for employers.


A new survey of the country's largest employers shows their focus on limiting expensive care as they try to avoid passing on costs to workers amid record low unemployment and following years of rising premiums and deductibles in workplace health plans.


State of play: The average health care costs per worker reached about $17,200 in 2023, up from $15,862 in 2022, according to an annual survey by the Business Group on Health, whose members mostly include companies of 10,000 workers or more.

  • The survey of 152 companies found employers expect their health costs to rise 6% next year after accounting for measures they use to keep costs in check.

  • The vast majority of employers (96%) said they will continue to use prior authorization in their pharmacy plans, step therapy (94%) — in which patients must try cheaper medications before receiving costlier ones — and use of lower-cost care settings for physician-administered drugs like biologics.

  • An increasing number of employers (79%) are limiting the initial supply of a new medication patients can get at the pharmacy.

  • When it comes to especially expensive drugs, more employers are exploring contracts with pharmacy benefit managers or drugmakers based on how well the treatments work.

As they have done in recent years, the companies in many cases are swallowing the bulk of increases instead of passing them on to employees, said Ellen Kelsay, Business Group on Health CEO.

  • "How long they're able to do that based on ... conversations about the overall trend growing at an alarming rate is to be seen," Kelsay said.

Between the lines: Nearly all companies (92%) said they were concerned or very concerned about affordability of high-cost drugs. In 2022, pharmacy spending accounted for 24% of companies' overall health spending, up from 21% just a year prior.

  • Specifically, nearly four out of five companies said they are concerned or very concerned about affording the pipeline of gene and cell-based therapies already approved and those under development. These treatments typically cost between $1 million and $2 million, the Institute for Clinical and Economic Review estimates.

  • "We're now seeing that pipeline and cell and gene therapies be for much more prevalent conditions. So they're expensive drugs that will be applicable to a wider swath of the population," Kelsay said.

  • In addition, 85% of employers said they are worried about the appropriate use and long-term cost implications for weight management medications, like the new class of drugs known as GLP-1s.

  • While 94% of employers said they'd cover GLP-1s for diabetes next year, about half said they'd cover the drugs for obesity treatment — and many said that's only if certain conditions are meant.

The intrigue: Employers also expressed increasing frustration with PBMs, as more indicated they'll look for alternatives that are more transparent about the prices they pay for drugs.

Of note: Employers say they've seen multiple health burdens on the rise coming out of the COVID-19 pandemic, though health insurers have so far reported modest impacts from delayed screening and care.

  • Roughly 1 in 5 employers surveyed say they have already seen an increase in late-stage cancers due to delayed screening, and another 41% are expecting to see an increase, according to the survey.

  • Nearly half plan to cover alternatives to colon cancer screening next year, up from 42% the prior year. 20% plan to promote lung cancer screenings, up from 12%.



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