Employee Benefits, Prescription Drugs and the Importance of Benchmarking

Nothing keeps those in charge of their company’s employee benefits program awake nights more than the cost of healthcare, including prices for prescription drugs.  

While most business managers, human resource professionals and benefits specialists appreciate the importance of offering a valuable total compensation package in their efforts to attract and retain a talented workforce, virtually all fret over what such a package will cost. And they know how great an impact health insurance and pharmacy have on the bottom line. 

What might aid in getting a good night’s sleep — and certainly will assist in designing a competitive yet cost-effective benefits program — is benchmarking, the process of comparing benefits among companies of similar size, industry and geographic location. While Alera Group compiles the data and insights that will inform our 2025 Healthcare and Employee Benefits Benchmarking Report, the 2024 edition, release last June, remains a vital resource. 

Weighty topic: GLP-1s 

Now, perhaps more than ever before, prescription drug prices and their coverage by group health plans are in the public consciousness, thanks primarily to the great and growing population of drugs known as GLP-1s.  

Originally intended for the treatment of diabetes but now better known for their effectiveness in facilitating weight loss, GLP-1s are omnipresent during commercial TV broadcasts and are in the news almost daily for one development or other — usually good but occasionally bad. 

“Popular GLP-1 medications may have health benefits that extend beyond weight loss and blood sugar control, a new study finds,” touts one optimistic headline. 

“GLP-1 Agents’ Risks and Benefits Broader Than Previously Thought,” cautions another. 

The effectiveness and risks of GLP-1s are among the factors considered in cost-benefit analysis of whether to include coverage of the drugs in a group health plan — with considerable emphasis on the “cost” part of the equation. At least one state has determined the cost is too high, regardless of the benefits. 

Colorado’s Department of Personnel & Administration (DPA) recently announced plans to limit coverage of GLP-1s to treatment of Type 2 diabetes, cardiovascular disease and obstructive sleep apnea for the state’s roughly 40,000 state employees, a move the department says will save the state almost $17 million annually. 

According to the Colorado Sun, “The Colorado Department of Personnel & Administration says the cost of providing the GLP-1 benefit has grown exponentially. From July 2023 through December 2023, the cost was $1.5 million. That jumped to $4 million in the six months that followed, and then to $7 million from July through December 2024.” 

How the Colorado DPA arrived at the $17 million savings figure is unclear, however, given that, as of July 2024, only 854 state employees were prescribed a GLP-1 for obesity, at a cost of $1,300 per prescription — amounts that would result in a total annual cost of $1.11 million annually. 

Nevertheless, with the popularity of GLP-1s soaring and applicability of the drug expanding, it’s safe to say GLP-1s will continue to pose a significant cost to any health plan that includes them in its pharmacy coverage. 

Specialty drugs and biosimilars 

While Alera Group’s 2024 Healthcare and Employee Benefits Benchmarking Report doesn’t specifically address GLP-1 medications and biosimilar alternatives to extraordinarily expensive specialty drugs, our research into those topics continues.  

In addition to covering the popularity of GLP-1s and projected growth of their use — “GLP-1 medications are becoming so popular that JP Morgan predicts that total GLP-1 users in the U.S. will reach 30 million by 2030, encompassing approximately 9% of the nation’s total population” — our recently released 2025 Employee Benefits Market Outlook explores the rise in spending on specialty medications and the emergence of biosimilars.  

Among the Market Outlook’s key findings: The growing demand for GLP-1 weight loss drugs and specialty medications for chronic and rare conditions continues to drive up pharmacy spend. Employers are working to evaluate pharmacy benefit manager (PBM) contracts, adopt formulary strategies and explore biosimilar alternatives to mitigate rising costs. 

One drug in particular underscores the value of biosimilars. In the 10 years prior to the introduction of a biosimilar alternative, the 2025 Market Outlook reports, the cost of Pegfilgrastim — a drug used to help the body make white blood cells after receiving cancer medications — rose 117%. In the first five years after the FDA approved the use of the first biosimilar alternative to Pegfilgrastim, in 2018, the cost of medication performing the same function dropped 66%. 

Plan tiers and PBMs 

Rising healthcare costs in general and for specialty drugs in particular has accelerated another group health plan phenomenon: the introduction and expansion of plan tiers offering different levels of employee contributions. According to the employer survey that informed the 2024 Benchmarking Report, 46% percent of prescription drug plans offered four formulary tiers, while an increasing percentage offered a fifth tier, typically reserved for specialty drugs. 

This, noted Bob Eisendrath, Alera Group’s Pharmacy practice leader and a key contributor to both the Benchmarking Report and Market Outlook, underscores the importance of working with a diligent, reputable pharmacy benefit manager to design formulary options customized to the needs of your organization. 

“As the pharmacy marketplace continues to become more complex, access to your own data is imperative,” Eisendrath says in the Benchmarking Report. “The best way to identify clinical and cost opportunities is reviewing your data with an expert.” 

Next steps 

While Alera Group works on the research and reporting for the 2025 Employee Benefits Benchmarking Report, employers have two eminently useful resources available to them in the 2024 edition of the Benchmarking Report and the 2025 Employee Benefits Market Outlook. 

In addition, our Alera Group Engage series of webinars and webinar recordings, and frequent posts in our Insights blog provide timely information on subjects relevant to your business and HR functions, including legal alerts regarding benefits compliance. And, of course, Alera Group employee benefits experts are readily available to help.  

Click on the links below to access the employee benefits benchmarking and market reports. 

GET THE 2024 BENCHMARKING REPORT 

GET THE 2025 MARKET OUTLOOK