GLP‑1 Medications

GLP‑1 (glucagon-like peptide-1) receptor agonists have rapidly transformed the landscape of obesity and diabetes management. Initially developed for diabetes, these drugs have recently seen a surge in popularity, largely due to widespread media coverage and endorsements as a “miracle cure” for weight loss. GLP‑1 drugs received initial regulatory approval in 2014, and 2021 is typically recognized as the year of a surge in use. Since then, their use has accelerated even further.

Between 2019 and 2023, the number of overweight or obese individuals without diabetes starting GLP‑1 treatment in the US increased by approximately 700%, according to analyses.¹ More data on increased usage can be found in the Kaiser Family Foundation (KFF) Health Tracking Poll.²

As utilization has soared, the financial burden has also skyrocketed: Costs have increasingly shifted to health plans and states, raising concerns about sustainability and affordability, as reflected in recent analyses from prominent academic studies and medical reports.

As insurers seek to balance upfront costs, clinical benefits, and long-term cost savings, the story of GLP‑1 offers a compelling case study for actuaries and others who may be navigating the evolving healthcare landscape. This article examines evolving health policies, coverage trends, and financial implications surrounding GLP‑1 medications, with a focus on their growing use for weight loss and other obesity-related comorbidities.

CURRENT UTILIZATION PATTERNS AND UNDERLYING DRIVERS

GLP‑1 drugs were originally developed for the treatment of diabetes, but their use has rapidly expanded to include weight loss and other obesity-related conditions. As GLP‑1 drugs have been heralded as “miracle cures” and “blockbuster medicines” for weight loss, demand has spiked recently across commercial health plans, Medicaid and Medicare.

Multiple industry studies also confirm a sharp uptick in GLP‑1 prescriptions and corresponding costs across the healthcare systems. Under Medicaid, GLP‑1 utilization and gross expenditure has surged in recent years, driven by both diabetes-related and off-label use.³

Regarding employer and Affordable Care Act (ACA) health plans, GLP‑1 drug spending is now among the fastest-growing drug categories, with costs rising faster than any other drug classes.⁴ GLP‑1 drugs also represent a disproportionate share of drug spending growth across all healthcare sectors, raising affordability concerns.⁵

A critical observation is that the increase in GLP‑1 drug use within Medicare Part D has outpaced the growth in the diabetic patient population. Based on publicly reported data from 2019 and 2023, 10 common diabetes prescriptions (mostly GLP‑1 drugs) under Medicare Part D grew by over 300%,⁶ while the diabetic population only increased modestly.⁷ GLP‑1 is not currently covered under Part D for weight loss, and such excess growth of GLP utilization over diabetic use growth may reflect off-label prescribing, expanded use following new indications or broader prescribing patterns across eligible populations.

Significant investments in research and development, coupled with insurance restrictions on weight-loss drugs, led to ever-increasing demand/cost. Several factors contributed to the pronounced spike in GLP‑1 spending in recent years:

• Perceived efficacy. Patients and providers increasingly view GLP‑1 drugs as highly effective for obesity and comorbidities, leading to broader prescribing patterns. Studies show patients treated with GLP‑1 receptor agonists experienced 15%–25% total body weight loss over 72 weeks.⁸
• Media coverage. Extensive media attention and patient testimonials have elevated these drugs to the status of “miracle” treatments and amplified demand.
• Regulatory approvals. The expanded FDA approvals of GLP‑1 drugs for cardiovascular disease, metabolic-associated steatohepatitis (MASH)⁹ and potentially other comorbidities (other renal, respiratory and neurological conditions) has broadened access to new patient populations.

A closer look at utilization trends reveals emerging drivers behind low adherence to GLP‑1 treatment following the initial spike, though the overall trajectory remains upward.¹⁰ These barriers have led to a moderation in growth:

• Affordability. Out-of-pocket costs for patients remain substantial, especially when weight-loss indications are not covered by employers, Medicare or Medicaid, which is the case in many states.
• Uneven coverage. The disparity in formulary coverage means that patient access is variable and limited in lower-income populations. Insurance providers are also tightening coverage by adding lifetime caps and requiring prior authorization.
• Supply shortage and limited alternatives. The increased demand for GLP‑1 drugs outpaced the supply. The FDA-declared shortage in 2024 temporarily opened the gates for patients to seek compounded versions of the GLP‑1 drugs. However, recent regulatory crackdowns on compounded GLP‑1 medications have reduced access to cheaper alternatives, leading to a drop in usage among cost-sensitive populations.¹¹
• Sustainable benefits. Effective long-term weight loss with GLP‑1 therapy requires ongoing, potentially lifelong use, as discontinuation may result in weight regain. Studies indicate that only one-third of patients remain on GLP‑1 therapy after one year; among those who stop, two-thirds experience a reversal of weight loss.¹² This pattern is driven by physiological factors like metabolic adaptation and plateauing weight loss, as well as behavioral challenges such as medication fatigue and the persistent nature of obesity.
• Potential side effects. Common side effects of GLP‑1 drugs include gastrointestinal symptoms, and they may increase the risk of pancreatitis, kidney issues and muscle loss in some patients.¹³

I believe that further research, including controlled studies and real-world evidence, will be essential to accurately assess the scope of cost savings and guide future policy decisions on GLP‑1 coverage and utilization.

RECENT POLICY DEVELOPMENTS AND COVERAGE UPDATES

U.S. healthcare policies have shaped the access and coverage for GLP‑1 medications, with notable distinctions among employer health plans, ACA plans, Medicare and Medicaid. Recent federal policy affected this landscape by introducing lower, most-favored-nation (MFN) pricing¹⁴ and expanding coverage pathways for Medicaid and Medicare. Additionally, a federal direct-to-consumer initiative, TrumpRx, offering discounted GLP‑1 pricing for cash payers, has been introduced.

• Employer health plans. Most employer plans allow coverage for GLP‑1 drugs when prescribed for diabetes, but only a few employers cover GLP‑1s for weight loss, often with restrictions like body mass index (BMI) thresholds or lifestyle program participation.¹⁵
  • Recent policy shift. MFN pricing and TrumpRx do not directly impact employer plan coverage. However, TrumpRx may offer lower out-of-pocket options for individuals paying cash, thereby reducing reliance on employer coverage for some patients.
• ACA Marketplace plans. Weight-loss coverage is not mandated under the ACA, and insurers that participate in the ACA market can elect whether to cover GLP‑1 drugs for weight loss. Thus, patient access to, and coverage for, GLP‑1 drugs vary by plan and state.¹⁶
• Medicare. Medicare Part D remains more restrictive regarding GLP‑1s, as they are only covered for FDA-approved indications like type 2 diabetes, cardiovascular risk reduction and chronic kidney disease. Weight loss coverage is prohibited at the current stage, as it is one of the excluded categories under Medicare Part D, per Section 1860D-2(e)(2)(A) of the Social Security Act.¹⁷
  • Policy shift. Proposed federal legislation would allow Medicare to cover GLP‑1 drugs for obesity and related comorbidities beginning as early as mid-2026, subject to enactment and regulatory implementation. Under negotiated agreements with manufacturers, there could be a $50 monthly copay for beneficiaries and negotiated reference pricing for the government,¹⁸ marking a potential reversal of the long-standing prohibition.
• Medicaid. Weight loss drugs are one of the drug categories that can be excluded from Medicaid coverage.¹⁹ As such, each state can decide whether to cover GLP‑1 drug prescriptions to treat obesity. Currently, only a handful of states cover GLP‑1 medication for weight loss, while more states cover those drugs for type 2 diabetes.²⁰ States and current Medicaid coverage can be grouped into the following categories:
  • Coverage pullback. Several states (e.g., North Carolina, California, Connecticut, Rhode Island, Michigan) have paused or proposed ending Medicaid coverage for GLP‑1 drugs for weight loss due to escalating costs, while continuing coverage for diabetes or cardiovascular risk indications.
  • Keep coverage or expansion with controls. Some states (e.g., Washington, Oregon, South Carolina) still allow coverage for obesity treatment but impose strict prior authorization, indication limits and step therapy.
  • Diverging state employer plan and Medicaid coverage. Some states restrict Medicaid coverage but allow limited access through state employee health plans or vice versa. For example, Florida excludes weight-loss GLP‑1 drugs from Medicaid coverage but offers a capped wellness-linked program for state employees; Colorado ended Medicaid coverage access in its employee plans; Massachusetts maintains Medicaid coverage but plans to eliminate state employee coverage beginning in 2026.
  • Policy shift. States can opt into discounted GLP‑1 pricing for Medicaid starting in 2026 under new negotiated pricing, potentially easing cost barriers and encouraging broader adoption. But participation remains voluntary and subject to state-level decisions. In addition, the Centers for Medicare and Medicaid Services (CMS) implemented the recent initiative GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) model²¹ in January 2026, which will run for five years. This voluntary model allows manufacturers to enter negotiated agreements with CMS to provide set pricing on their portfolio of covered outpatient drugs using the MFN pricing.

The differences in coverage across types of health insurance have led to disparities in patient access and variability in out-of-pocket costs. To allow access for those without insurance coverage, manufacturers have introduced direct-to-consumer pharmacy programs offering GLP‑1 medications at a reduced cash price, but affordability remains a challenge for many, while the pricing is lower than typical annual costs paid by insurers.²²

Meanwhile, GLP‑1 medications made and distributed by compounding pharmacies became popular during FDA-declared shortages due to lower cost and easier access. Even after shortages ended, compounding persists for patients needing nonstandard doses or formulations, and some are drawn to these options for their flexibility, convenience or lower price. Despite increased restrictions and safety warnings from the FDA and medical organizations, the appeal of personalized dosing and alternative delivery forms continues to attract certain patients.²³

As demand for GLP‑1 drugs surges, payers are proactively containing the cost. Some analyses estimate that manufacturing costs for GLP‑1 therapies may be significantly lower than list prices, which in some cases exceed $1,000 per month. However, list prices do not reflect confidential rebates, research and development costs, distribution expenses or negotiated net prices.²⁴ Even with recent changes in Medicare and Medicaid that have lowered overall costs, prices would still remain well above the actual production cost.

Employer health plans and ACA insurers that have opted to cover GLP‑1 drugs have largely adopted cost containment measures such as prior authorization, step therapy, mandatory lifestyle programs and formulary exclusions to manage the financial impact. Some states have rolled back coverage entirely, while others require enrollees to participate in structured weight management or telehealth programs to maintain access.²⁵ These measures reflect growing concern over the sustainability of widespread GLP‑1 use, especially as off-label demand continues to rise.

COST CONTAINMENT STRATEGIES AND EVOLVING COVERAGES

Given the substantial cost of the GLP‑1 drugs and rising demand, strategies have emerged to contain costs and optimize patient outcomes:

• Patient identification. Implementing systems to accurately identify patients with urgent need for therapy can allow limited resources to be deployed effectively. GLP‑1 medications are not a one-size-fits-all solution for obesity or related conditions. States and health plans are increasingly integrating these drugs into comprehensive weight management programs that also include nutritional counseling and behavioral therapy.
• Patient education. It is important to equip patients with knowledge about potential side effects and to integrate GLP‑1 therapy into holistic programs that include nutritional counseling and weight management support.
• Utilization controls and medical necessity criteria: Ongoing monitoring of prescribing patterns and outcomes can guide refinements in policy and practice. For example, under Medicaid, most states that reported coverage of GLP‑1s also reported that utilization control applied, with the most common being prior authorization and/or BMI requirements.²⁶

In addition, patent expirations and the introduction of generic or biosimilar versions may ultimately drive prices down, improving access and generating long-term cost savings, especially if population-level obesity rates decline as a result of effective therapy.

Despite cost-containment measures, GLP‑1 coverage continues to evolve. The potential of GLP‑1 medications extends beyond diabetes and obesity, as their effectiveness is also recognized in other comorbidities such as cardiovascular and renal diseases,²⁷ which can bring long-term cost savings and improved public health. Certain GLP‑1 drugs have received FDA approval for cardiovascular disease use and MASH, signaling a potential expansion in the eligible patient population.²⁸ Several states aim to expand Medicaid access for GLP‑1 coverage, although none of the proposals passed in 2025, and employer health plans are exploring innovative vendor partnerships and behavioral health integration to monitor usage.²⁹

Meanwhile, recent federal initiatives negotiated manufacturer agreements, and the CMS GENEROUS model introduced lower pricing, allowing states and plans to potentially broaden coverage. Additionally, if the U.S. Preventive Services Task Force (USPSTF) recommends weight-loss drugs as preventive care, ACA plans may be required to cover them. While current access remains uneven, the recent changes suggest a gradual shift toward broader acceptance of GLP‑1 drugs, despite the efforts to control utilization and cost. Weighing the potential savings from reducing comorbidity against the competitive landscape of GLP‑1 drugs, the combination of lower upfront costs and improved wellness could contribute to broader acceptance of GLP‑1 use by health plans and policymakers.

NAVIGATING THE FUTURE OF GLP‑1 MEDICATIONS

GLP‑1 medications represent a transformative advance in managing diabetes, obesity and related comorbidities. Their rapid rise in use and cost highlights both their clinical promise and the strain they place on healthcare systems. While there is potential for long-term savings by reducing obesity-related complications, the immediate financial impact took a toll on payers. A core challenge is that the entity bearing the cost of treatment today may not be the one to realize future savings, as patients frequently change insurers or transition between health plans. This misalignment of incentives is a long-standing issue in the US healthcare system; the high upfront costs and expanding indications for GLP‑1 drugs have made this more visible.

If GLP‑1s gain FDA approval for more causes, it may become more challenging to measure their direct financial impact, given the complicated nature of obesity and its comorbidities. I believe the evolving policy environment will need to address not only access and affordability, but also the misaligned incentives that discourage investment in long-term health outcomes.

I believe realizing the full potential of GLP‑1 therapies will require ongoing research, innovative policy approaches, and collaboration among stakeholders to balance immediate financial pressures and future health gains in a sustainable way.

Statements of fact and opinions expressed herein are those of the individual authors and
are not necessarily those of the Society of Actuaries or the respective authors’ employers.

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