Episode 54 – Midyear Update: Pharmacy Trends Shaping Employer Plans

Mike Stull (0:09)

Hi, everyone, and welcome back to HR Benecast. This is your host, Mike Stull. Stay up-to-date on all things Employers Health by checking out the links in the episode description.

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Today’s guests are two of my colleagues and first-timers on the podcast, Kevin Wencesalo, who’s the director of clinical solutions, and Jack Sullivan, senior director of actuarial and data analytics. Welcome, Kevin and Jack. It’s great to have you both with us today to kick things off.

Why don’t you each tell the audience a little bit about yourself and your role at Employers Health? And Kevin, why don’t you get us started?

Kevin Wencesalo (1:14)

My name is Kevin Wencesalo. I’m director of clinical solutions here at Employers Health. I’m based out of the Columbus, Ohio, office.

My team is mainly responsible for monitoring clinical trends, providing custom utilization management, and providing employers insight on what to look for next.

Mike Stull (1:33)

Great. And Jack?

Jack Sullivan (1:36)

Thanks for having me today, Mike. Jack Sullivan, lead the analytics team here at Employers Health. Graduated from Ohio State with an Actuarial Science degree, so naturally, I’m getting into the numbers today.

Mike Stull (1:48)

Excellent. Glad to have both of you here. Jack mentioned The Ohio State University.

He didn’t give the Lee, but I’ll put it in there for him. Kevin, where’d you go to school?

Kevin Wencesalo (1:59)

The Ohio State University College of Pharmacy.

Mike Stull (2:01)

Excellent. And you did your undergrad at Iowa State, right?

Kevin Wencesalo (2:05)

Iowa State, go Cyclones.

Mike Stull (2:06)

Nice.

Jack Sullivan (2:07)

I will chime in. At the time of recording, we just beat Texas, and I’m going to go ahead and call my shot.

About the time this drops, we’re going to go ahead and beat Michigan later on in the year.

Mike Stull (2:17)

Wow. Okay. Big, big predictions here on HR Benecast. I love it. All right. Let’s start talking about mid-year trends.

So, it’s crazy to think that we’re into September now, so more than halfway through the year. What are we seeing in our book of business in terms of the most significant pharmaceutical trends, and how do those look to be compared to last year and on par with the industry’s benchmark? So, Jack, we’ll start with you.

Jack Sullivan (2:53)

Yeah, Mike. So, I went to a conference earlier this year, and I asked the crowd, what characteristics would you like to know about a population if you’re trying to predict the gross PMPM for a company? What indicators would you want?

The best indicator would be a claims file, right? That’s how we do any reprice. But for this specific scenario, we’re pretending we don’t have a claims file.

What do you want to know about that company? The answers that were thrown out from the crowd were average age, industry, percentage of male, female, geographic location, all great answers, and probably the right ones over the past couple of years. The right answer at this point in time, believe it or not, is whether or not you are covering weight loss.

To determine these predictors, I ran a linear regression on these indicators and how it would determine a gross PMPM. And to no surprise, the best indicator of the ones listed is whether or not a client covers weight loss. For those interested, the second most predictive value was average age.

But covering weight loss now over the last couple of months, we’ve seen if you’re covering weight loss, it’s going to account for about $30 in gross PMPM. So, it’s become the most important predictor and the most significant trend we’ve seen.

Mike Stull (4:26)

And that $30 per member per month is up quite a bit. I mean, I know I think it’s up by at least a third, I would say, over the past year. I’m thinking that I was using about a $20 per member per month average for those that cover weight loss.

So, to be up at 30 is a jump.

Kevin Wencesalo (4:46)

Yeah. And specifically within that class, we’re going to be talking about those glucagon-like peptide ones or GLP-1s, which is what I’ll refer to them as. And that’s just not only in the weight loss side, but the diabetes side as well.

So, to name a few, Ozempic, Manjaro, Wegovy, Zepbound, they accounted for respectively 5.3% and 13.1% of pre-rebate trend for diabetes and weight loss. So, they definitely remain the top driver with Manjaro being the top one in the diabetes side, taking that top spot for Ozempic. And I foresee in 2026 that we’re going to continue to have this as a top driver as their indications expand, as well as more products come to market.

Tabling weight loss for just a second, it is important to remember that there are other drug categories that are trends of concern for our employers, one of which is going to be autoimmune products. So, we’re seeing greater use of higher efficacy and costing products such as Skyrizi for disease states like psoriasis and Crohn’s disease. Cancer is also another category for employers that has been of concern, especially after the pandemic.

There was a concern that delays in diagnoses would result in potentially more expensive therapies coming onto the plan. However, based on the data, we do see that that is beginning to level off. It’s still driving trend, about an 11.4% increase. However, when we look and compare that to the year prior and even the previous year before that, we saw about 15.7% at the start of 2024 and 19.5% at the start of 2023. So, it is leveling off, but it’s still remaining a top driver for a lot of our employers today. And then on a non-specialty side, it’s important to talk about migraine.

This category is significantly driven by direct-to-consumer advertising. I think a lot of people can think off the top of their head of a commercial with a certain celebrity and one of the drugs within this class, so Nurtec or Ubrelvy. It’s posted another year of roughly 20% increase in per member per month spend.

And one of the recent clinical updates that might be driving this is the update in the American Headache Society. They released a position statement in early 2024 saying that these drugs, CGRPs, should probably be first-line and should not require trial and failure of nonspecific migraine-preventive medications. And those are the lower-cost generics that we typically see.

So, beyond just weight loss, cancer, autoimmune, and migraine are probably some of the other significant trend drivers within the space.

Mike Stull (7:45)

So, as we think about what’s driving trend, we mentioned the GLP-1s, seeing about $9.56 per member per month in increased trend, so about 33%. Jack, anything else from a trend in the numbers perspective that we should know about?

Jack Sullivan (8:11)

I guess the only thing I should add is the actual trend of mid-year 2024 to mid-year 2025 of being 5.6%. That is gross PMPM with rebates, and our gross PMPM with rebates for 2025 mid-year was $123.

Mike Stull (8:30)

One of the other big things that I know we’re tracking is Skyrizi, and I think, Kevin, you mentioned that briefly in your remarks. And so, just some recent statistics that I’ve seen from the book of business. I mean, if you go back just a couple years ago, you know, we’re spending, you know, more than double on that medication than we were just in 2023.

When we look at 2024, I would say that we’re certainly on track to be well ahead in terms of the amount of spend on that particular drug. Looks like it’s contributing about $3.60 per member per month to trend. So, another one that’s certainly driving up costs.

Are there any other surprises that we’ve seen in spend and trend that are impacting our book of business or the industry as a whole?

Jack Sullivan (9:37)

Yes. In terms of surprises, I think most of our surprises come from PBM decisions where we don’t necessarily control what decisions they make. And with the changing landscape right now, we’re seeing PBMs that are choosing specific weight loss drugs to cover and also choosing specific biosimilars and specific manufacturers of those biosimilars.

And all those biosimilars have different WAC drops. So, it’s important to monitor and make sure that the PBMs are taking the proper amount of rebate credit based on each biosimilar and the different costs.

Mike Stull (10:18)

Great. Kevin, from your seat, anything that’s surprising to you?

Kevin Wencesalo (10:23)

I think asthma as a category that has historically been non-specialty, which usually encompasses those inhalers that we typically see, there’s been a recent shift into the specialty side. So, the rise of biologic use in asthma for drugs like Dupixent, Xolair, Nucala, Fasenra, this has really driven spend within a category. And they are drugs that are meant to be used as add-on treatments when a patient is not responding to those inhaler uses.

So, it is surprising. Part of it might be the cost of these medications to see this driving spend in such a way. And recently, one of the wonder drugs within this category, Dupixent, is looking at COPD, which is another breathing-related disease state, which would significantly impact this even further.

So, this shift into specialty is something new for a lot of our employers. And working with them to understand what’s been changing from a clinical landscape has been paramount in helping them understand that trend. And I think that is going to continue because we just see expanded indications for younger ages where asthma and COPD can be pretty prevalent.

Mike Stull (11:40)

Yeah, Dupixent is certainly one of the drugs that we continue to see increased spend in as well. And it is not a cheap drug, but from a specialty drug perspective, it’s certainly a cheaper option. And so, we know as that utilization increases, it puts strain on the specialty rebates.

And so, that’s something just from a contracting perspective that we’ve had to deal with, and all PBMs are having to deal with it as we move forward. So, from a clinical management perspective, let’s talk about what role clinical management plays in addressing the trends we’re seeing. Are there any specific strategies that plans are pursuing?

And Kevin, we’ll start with you.

Kevin Wencesalo (12:37)

I think formulary management remains the top influencer when it comes to driving significant change at a wide level. For example, when we’re thinking about biosimilars, we’re starting to see that movement within the pharmacy space where originator biologics like Humira are being excluded. So, CVS made that decision in April of 2024.

OptumRx has followed suit in 2025. And that’s when we see the actual shift from the originator product like Humira to one of its biosimilars. When products remain at parity, meaning that, let’s say, the biosimilar is at the same tier as the original biologic, we really don’t see that natural movement.

And this is consistent with what we’ve seen in the medical side where biosimilars have been available for a lot longer. We only see that change when PBMs are willing to make that exclusion to help members get to that biosimilar to help prescribers change those prescriptions. So, seeing Stelara this year, that’s probably the other top category drug mainly used for psoriasis and Crohn’s disease.

That is one that we are anticipating seeing getting excluded because at this time they are remaining on parity and we haven’t seen that movement just yet. That could be a significant trend driver when it comes to the specialty side. And then when we’re talking about more specific clinical management, prior authorizations is what we first go to.

This can be limited depending on the drug that you’re targeting. Are there a lot of clinical alternatives? Is it a super rare disease and it’s the first medication that’s available for treatment?

But in areas where we can make those changes, that’s been a good option to use to either require a step to look at the criteria and make sure it aligns with clinical guidelines. And in some cases, maybe go beyond those clinical guidelines to be a little bit more strict. And we’ve seen that a lot with when it comes to obesity.

So, from an Employers Health side, we’ve looked at some of the standard criteria that’s out there. Usually they’re looking at the body mass index or BMI of 30 or 27 with comorbidities. So, that means things like high blood pressure, high cholesterol, diabetes.

And we responded to a lot of our clients and consultants asking for higher BMI thresholds. So, BMI of 35, BMI of 40. And on top of that, we’ve also looked at how much weight is this member losing and does that qualify them to keep staying on that medication?

The standard is usually 5% off that baseline. We also explored looking at 10% as these newer, more expensive drugs have shown that they can achieve those results. And if you’re going to be paying for a more expensive drug, then they should be seeing the results.

So, we’ve moved that up to 10%. That’s been something that employers have been interested in, but it doesn’t seem to be enough in terms of helping managing that spend. So, we’re seeing a trend by employers in looking at things beyond the prior authorization, looking at 30-day limits, maximum allowable benefits, excluding potentially the GLP-1 side, GLP-1 drugs of obesity.

And in more extreme cases, we’re actually seeing clients close coverage for obesity and rather they’re opting for lifestyle management vendors to help with their overall health and wellness of their employees, rather than just paying for the drug and banking on that. So, that’s been definitely top of mind and it’s gotten more creative. It’s no longer just a, do I cover, do I not?

It’s really, once I cover, what other options can I do? And it’s been really hard to categorize them into clear buckets because every employer is doing it slightly different.

Jack Sullivan (16:49)

Yeah, I’ll chime in on… Kevin mentioned some of the weight loss restrictions and I wanted to… naturally as an actuary, I wanted to provide some numbers around that.

I mentioned earlier that we saw $30 PMPM on weight loss drugs for clients that are covering. I think a good reference point is 1% of members utilizing is about $10 PMPM. So, we’re seeing about 3% of members utilizing to get to that $30 PMPM number.

According to Centers for Disease Control and Prevention, otherwise known as the CDC, 40% of adults have a BMI of above 30 and 9.4% of adults have a BMI of above 40. So, 40% of adults having a BMI of above 30 and only 3% of members are utilizing these drugs. There’s a big gap there.

I think it’s fair to say we expect it to continue to grow these weight loss drugs and it’s important that they’re going to the right people.

Kevin Wencesalo (17:58)

I think at this initial stage when plan sponsors are looking to increase the BMI, they’re expecting that they’re cutting that existing spend or existing utilization by those amounts that you had mentioned. But one thing that we’re noticing since we are at such lower end of utilization than what would be expected from a national standard based on the target population is that that 3% of utilizers tend to be either more moderate or severe obesity members. So, one thing we’re looking closely into is can we track down what the BMI was for approval with our employers that have prior authorizations around that?

And we’re seeing numbers that don’t exactly line up with the national prevalence because I think at this time, the people that are seeking these drugs tend to be the ones that are needing it the most. But I do agree that over time, having a higher BMI threshold can help address that. It just might not cut it immediately as a lot of plan sponsors are expecting.

By putting it in today, will we see that type of reduction in 2026?

Jack Sullivan (19:12)

Yes. And along those same lines, I had a quick antidote. I signed up for the Columbus Marathon, which is a month and a half away.

And I did some research because I was interested. And I’m like five pounds away from having a BMI of above 30. So, that’s like one trip to Krispy Kreme for me.

So, I found that to be an interesting perspective for me as a person who’s about to run a marathon.

Mike Stull (19:42)

It’s all muscle.

Jack Sullivan (19:43)

All muscle.

Mike Stull (19:44)

It’s all muscle. That’s right. But I do think it highlights the issue with using body mass index and something that has been debated in the industry for a long time.

And these clinical criteria need something to base it on. And so, they take what’s widely available and what they can use. So, as we wrap up today, after you look at this year’s midyear data, is there a key takeaway that you have for planned sponsors and any trends that they should be thinking about as we, hard to say, as we head into the new year?

Jack Sullivan (20:31)

I think we mentioned the increased utilization of Dupixent and HIV drugs. The fact that they are low cost compared to specialty rebate. And for a lot of PBMs, they’ve already moved those out of the specialty channel and into the retail channel.

There are a lot more specialty drugs like that. And I expect we will continue to see PBMs move those drugs into the retail channel to avoid adverse underwriting. And so, I think that’s something that’s going to be important to monitor going forward in terms of evaluating contracts correctly and something to keep an eye on.

Mike Stull (21:18)

Absolutely. Kevin, from your seat?

Kevin Wencesalo (21:22)

For our clinical team, we’re really looking at the biosimilar space. I think right now we’re at the cusp of biosimilar markets maturing within the pharmacy side. So, we are still on that earlier end of things, but as that matures, we’re going to get more options around biosimilar availability for all the different disease states, as well as a little bit more room to create management that requires a biosimilar step.

I think a lot of it is severely impacted by the market share and hold that these manufacturers have, which usually equate to high rebates tied to these drugs. So, even if we create strategies, sometimes the rebate offsets don’t make it a financially viable option. But as more and more PBMs are starting to place biosimilars on their formulary and we get more biosimilars in general across the board, I think that that pressure can be alleviated and allow a lot more flexibility with creating a strategy to help with the specialty side of things.

Mike Stull (22:24)

Excellent. Well, certainly appreciate having you both on and thank you for making the time for us today. As always, be sure to subscribe to HR Benecast to be notified when new episodes are released.

Thank you for taking the time to listen and for your continued support, participation, and interest in Employers Health. Be well and we’ll see you soon.