NC State Health Plan wanted to cut spending on obesity drugs. Instead it may pay more
Several proposals to reduce the NC State Health Plan’s spending on popular but expensive weight-loss medications have been met with resistance from the company that negotiates drug prices on the state’s behalf.
Since October, SHP staff have proposed more than 10 ways they could rein in spending on drugs like Wegovy while keeping them available to members who need them the most. Among the proposals:
What if they only covered drugs like Wegovy for patients with the highest body mass indexes?
What if members taking the drugs were required to sign up for nutrition classes?
What if they only covered weight loss drugs prescribed by obesity specialists?
Sam Watts, the SHP director, said the proposals represented the best shot at keeping these obesity drugs accessible to state employees.
Last year, the SHP Board of Trustees debated whether to completely cut coverage of these weight-loss drugs, which they feared would put the plan’s finances “under siege” — the plan spent more on Wegovy than any other medication in 2023.
But Watts said CVS Caremark, the company that negotiates drug prices on behalf of SHP, has responded the same way to each idea: If SHP adopts any of those plans, it will lose its discount on the drugs.
By the SHP staff’s calculation, that would mean spending an extra $539 for every obesity drug prescription.
“If I can’t afford it at the lower price, we really can’t pay for this,” Watts said. “I think it makes it doubtful that we can reach a middle ground.”
How pharmacy benefit managers work
Insurance companies and state health plans rely on middlemen called “pharmacy benefit managers,” or PBMs, to negotiate drug prices with pharmaceutical manufacturers.
PBMs like CVS Caremark and drug manufacturers settle on a discount rate for each drug, which the manufacturer will reimburse every time a prescription is filled. In exchange, PBMs may agree to certain contract terms that are beneficial to drug manufacturers.
Novo Nordisk — the Danish manufacturer of two major weight loss drugs, Wegovy and Saxenda — gave the state a 40% discount on the medications in 2023. That came to $539 off every $1,347 prescription, according to the State Health Plan staff analysis.
Matthew Fiedler, a health policy expert at the Brookings Institute, said it’s possible that the contract between CVS Caremark and Novo Nordisk makes the 40% discount contingent on the State Health Plan putting no limits on how the drug is prescribed or who it is prescribed for.
But he cautioned that it’s impossible to know without seeing the terms of the contract, which are secret even to the State Health Plan.
A spokesperson for CVS Caremark said the company collects discounts from the manufacturer only when the prescriptions meet “certain terms and conditions.”
“If the terms and conditions are not met, CVS Caremark is not able to collect,” the spokesperson said in a statement.
Shortly after the health plan’s last meeting — during which the board decided to temporarily bar new obesity drug prescriptions while it considered options for curtailing spending on the drugs — Watts was informed the plan had already violated some of those terms and conditions.
Because the moratorium limited the number of future prescriptions, CVS Caremark said the plan has lost its discount for the tens of thousands of members already taking the medications, Watts said.
If the plan continues to cover these drugs, Watts said, that means spending on the prescriptions will increase by $54 million.
Fielder said this incident may call into question whether CVS Caremark negotiated the best possible deal for the State Health Plan. That question has not been lost on SHP board members.
“The board has asked me a lot of questions about whether this relationship remains productive,” Watts said.
State Health Plan leadership will discuss coverage of weight loss drugs at the next Board of Trustees meeting on Jan. 25 at 1:30 p.m.
Teddy Rosenbluth covers science and health care for The News & Observer in a position funded by Duke Health and the Burroughs Wellcome Fund. The N&O maintains full editorial control of the work.
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