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Many US employers plan to pare health benefits as weight-loss spending soars

Many US employers plan to pare health benefits as weight-loss spending soars

Time of India16-07-2025
New York: More than half of large U.S. employers plan to scale back healthcare benefits next year as rising costs from weight-loss and specialty drugs squeeze budgets, according to a new survey released by consulting firm Mercer on Wednesday.
Among employers with 500 or more workers, 51% said they planned to increase cost-sharing in 2026, including raising deductibles and maximum out-of-pocket costs for workers. That is up from 45% of large employers who said they would increase cost-sharing for 2025.
Concern over the cost of GLP-1
weight-loss drugs
like Novo Nordisk's Wegovy has surged, with 77% of employers naming them a top issue, the consultancy said.
"More clients are saying ... 'I don't know how much longer we can sustain covering these medications'," said Alysha Fluno, a pharmacy innovation leader at Mercer, in an interview.
While some employers have covered GLP-1s hoping for long-term health savings, rising prices are forcing a rethink: "Some employers facing big cost increases in 2026 may feel this coverage is out of reach," Fluno said.
Greater competition in the weight-loss drug market in coming years will give
pharmacy benefit managers
more negotiating power with drugmakers and drive meaningful cost reductions, said Fluno.
Novo's Wegovy and Eli Lilly's Zepbound are listed at $1086 and $1059, respectively, but many patients pay less through their health plans.
Prescription drug costs jumped 8% last year, according to the survey. Mercer has forecast a 5.8% rise in overall health benefit costs for 2025.
Employers are also eyeing alternatives to traditional pharmacy benefit managers (PBMs), according to Mercer.
PBMs such as CVS Caremark, Cigna's Express Scripts and UnitedHealthcare's Optum Rx act as middlemen between drug companies and consumers. They negotiate volume discounts and fees with drug manufacturers on behalf of employers and health plans, create lists of medications that are covered by insurance, and reimburse pharmacies for prescriptions.
Drugmakers say they take an undisclosed cut of the discounts they receive rather than sharing them with patients and payers.
Regulatory scrutiny and calls for transparency are fueling interest in new models and emerging PBMs, with 34% of employers considering a switch.
The survey found 40% of employers are considering alternative contracting models for their prescription medicine benefits, such as those that price drugs based on the wholesale price that retail pharmacies pay for them.
Regulators have criticized the three largest pharmacy benefit managers for steering patients toward more expensive drugs and inflating prices to generate revenue gains, an accusation that the industry denies.
California pension fund CalPERS, the second-largest public purchaser of health benefits in the U.S., announced on Tuesday that Caremark would replace UnitedHealth's Optum Rx as the fund's PBM in 2026. CalPERS said its five-year contract with Caremark requires the PBM to boost transparency and oversight.
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Wegovy maker Novo's profit warning triggers $70 billion share rout
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Wegovy maker Novo's profit warning triggers $70 billion share rout

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Wegovy maker Novo's profit warning triggers $70 billion share rout
Wegovy maker Novo's profit warning triggers $70 billion share rout

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Wegovy maker Novo's profit warning triggers $70 billion share rout

Investors wiped $70 billion off Novo Nordisk 's market value on Tuesday after the maker of weight-loss drug Wegovy issued a profit warning and named a new CEO, as it battles rising competition in the obesity drug market . Novo named Maziar Mike Doustdar as its new chief executive, turning to a veteran insider to revive sales and reassure investors rattled by fears the Danish drugmaker is losing ground in the obesity drug race it started. 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Its shares plunged nearly 30% before paring some losses to trade down over 20% by mid-afternoon. The shares are now down 44% this year. "The magnitude of the guidance cut is a shocker," Markus Manns, a portfolio manager at mutual fund firm Union Investment, a Novo shareholder, told Reuters, adding that Novo's issues went deeper than "compounded" copycats to Wegovy. Compounded drugs are custom-made medicines that are based on the same ingredients as branded drugs. Live Events Novo has been hit by copycats of its GLP-1 drugs Wegovy for weight-loss and Ozempic for diabetes. U.S. law bars pharmacies from replicating approved drugs, but has allowed 'compounding' for patients needing custom doses or formulations. The company said in a statement that it cut its 2025 sales outlook due to lower growth expectations in the second half in the U.S., both for Wegovy and Ozempic in the GLP-1 diabetes market. The drugmaker, which became Europe's most valuable listed company following the launch of Wegovy in 2021, is now facing a reckoning as it looks to turn things around after the abrupt removal in May of CEO Lars Fruergaard Jorgensen. At its peak in June 2024, Novo was worth as much as $615 billion, but its shares have plunged on investor concerns about the company's experimental drug pipeline and its ability to navigate challenges in the U.S. market. "The stock has gone from being a market darling to one of its biggest letdowns," said Angelo Meda, portfolio manager and head of equities at Banor SIM in Milan, which has a small Novo stake. "The biggest concern is the illegal channel siphoning away market share - something that's hard to quantify. Rebuilding trust will take time." Reuters Novo Nordisk share price in Danish krone New CEO An Insider Doustdar, an Iranian-born, Austrian national, who grew up in the United States, joined Novo in 1992 and will take on the new role on August 7. He currently serves as vice president for international operations, a role he took after leading the company's businesses first in the Middle East and then in Southeast Asia, Novo said. "We need to increase the sense of urgency and execute differently," Doustdar told investors and analysts on a call. "The fact that my announcement comes right after the guidance update, just makes the mandate ahead even more clear." Some analysts and investors had argued that Novo should select an American, or a person with extensive experience working in the United States as its next CEO. Novo has lost its first-mover advantage in the United States this year to U.S. rival Eli Lilly. The new chief executive's most urgent challenge, according to investors and analysts, is to revive Novo's performance in the United States, the largest market by far for weight-loss drugs and where they are most profitable. Novo launched its weight-loss drug Wegovy nearly two and a half years before Eli Lilly's Zepbound. But Zepbound prescriptions surpassed those of Wegovy this year by more than 100,000 a week. In May, Novo said it expected many of the roughly one million U.S. patients using compounded GLP-1 drugs to switch to branded treatments after a U.S. Food and Drug Administration ban on compounded copies of Wegovy took effect on May 22. "Unfortunately, our latest market research indicates that has not happened," Chief Financial Officer Karsten Munk Knudsen said on a call with analysts on Tuesday. One million or more U.S. patients are still using compounded GLP-1s, he said. Novo has stepped up its dialogue with the U.S. FDA to limit unlawful compounding of its drugs, the head of U.S. operations David Moore added on the call. "Compounding continues to be an issue that we have to address," Moore said.

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