Who should pay for Ozempic is the next big workplace fight

Insurance for weight-loss drugs like Ozempic is shaping up as the next power struggle between employers and employees.

Some companies have curbed or ended coverage for blockbuster weight-loss treatments known as GLP-1s. This has been to the chagrin of employees who can’t afford to pay for the drugs on their own.

The shift sets up a test of leverage and loyalty. As with recent tugs-of-war over work-life balance and the freedom to work from home, the question is how generous companies need to be to attract and retain talent.

Advocates for GLP-1 coverage say the benefit isn’t merely about money but also about workers’ sense of whether businesses care about their health. They predict people with in-demand skills will snub companies that don’t cover weight-loss medications.

For the moment, people can buy cheaper copycats from online pharmacies like Ro and Hims & Hers Health. But the Food and Drug Administration is about to rescind telehealth companies’ license to sell knockoffs, which the agency allowed only while the name-brand stuff was in short supply.

That means people who have been paying about $200 a month might have to pony up $500 a month or more for the real deal. Or they will have to find a new job where the drugs are included on the company health plan.

Some employers say the upfront cost of covering weight-loss drugs only pays off if slimmed-down workers stick around long enough for their other healthcare expenses—on obesity-related conditions like heart disease and joint replacements—to go down. Even as job-hopping moderates after a pandemic-era frenzy, long-term investments in employees are a tough sell to businesses.

“Does a GLP-1 pay for itself? The answer is, no,” says Robert Andrews, chief executive of the Health Transformation Alliance, whose members include about 80 major companies like JPMorgan Chase, Coca-Cola and General Electric.

Rough math

Andrews, a former Democratic congressman from New Jersey, collected anonymized healthcare data on member companies’ employees. He found people with Type 2 diabetes who were on weight-loss drugs for at least nine months had fewer heart attacks, strokes and emergency room visits than diabetics who didn’t take the same medications.

But GLP-1 users were still more expensive to their employers. The reduction in adverse health events wasn’t enough to offset spending on the drugs. He says these cost member companies about $650 a head each month after rebates.

Andrews says some businesses are limiting access to employees with diabetes, refusing to cover medication for weight loss alone. Others require employees seeking GLP-1 coverage to participate in supplemental weight-loss programs.

This is because sustaining the fat-burning effects often proves challenging, and companies don’t want to pay for temporary results. Members of Andrews’s group are generally large enough to absorb the expense, albeit grudgingly, he says.

Some smaller businesses are taking a different approach to GLP-1s.

“Many are actively asking us to either stop covering them for weight loss altogether or to give the employer the option of excluding them for their employees simply because of the incredibly high price of these drugs,” says Amy McHugh, a spokeswoman for Blue Cross Blue Shield of Massachusetts.

Massachusetts is one of more than a dozen states where Medicaid covers GLP-1s to treat obesity, according to the Kaiser Family Foundation. It’s a sign that employers believe they have the upper hand when they don’t feel compelled to offer a healthcare benefit that is available to people receiving public assistance.

George Huntley, CEO of the Diabetes Leadership Council, contends many businesses underestimate the cost of insuring obese workers.

He predicts companies will eventually come around to the idea that paying for weight-loss drugs is a net savings. This is after they factor in the cost of hiring and training people to replace employees who jump to competitors with better health plans.

The outlook

I can’t help but wonder whether companies looking for more immediate savings might target obese employees for layoffs or not hire them in the first place to avoid paying for weight-loss drugs. Overweight workers already are paid and promoted less, on average, than trimmer colleagues.

“Weight bias and discrimination has long been a factor in employment,” says Joe Nadglowski, CEO of the Obesity Action Coalition. “But we don’t see this getting worse right now.”

He says an upside of pricey GLP-1s is they help frame obesity as a chronic disease with a pharmaceutical solution, rather than a consequence of bad habits.

Plus, with roughly two in five American adults meeting the Centers for Disease Control and Prevention’s definition of obese, businesses may not be able to afford alienating such a large share of the workforce.

“That’s a lot of mighty good people who have a lot to offer to these employers,” says Millicent Gorham, CEO of the Alliance for Women’s Health and Prevention, which advocates for companies to cover weight-loss medications.

She argues the drugs can yield productivity gains by reducing sick days and keeping employees more engaged, with fewer thoughts about weight dividing their attention.

Still, some businesses that resist paying for weight-loss drugs may only give in when the bottom line changes, says Rena Conti, a health economist at Boston University. The FDA in December approved the first generic GLP-1, a version of Victoza. Generic versions of Trulicity and Saxenda could arrive in 2027.

Conti expects the price of those alternatives could be discounted 60% to 80%.

“Insurers and employers have this short-term choice about whether they’re going to cover GLP-1s now, but they’re likely going to make a different choice in two or three years,” she says.

Write to Callum Borchers at callum.borchers@wsj.com