Rising pharmacy costs cause pain for employers: survey

Employers are bracing for the largest surge in healthcare costs in more than a decade as pharmacy spending is expected to continue accelerating next year.

Growing demand for pricey medications, including glucagon-like peptide-1 agonists, cancer treatments, and cell and gene therapies, has employers budgeting for a 7.8% increase in healthcare costs in 2025, according to the Business Group on Health’s annual survey, published Tuesday.

For 2024, employers estimated the total cost of healthcare per employee to be $18,639, versus $17,201 last year. Employers are considering changes to utilization management and vendor partnerships next year to better control costs in the long term, according to the survey of 125 businesses covering about 17 million people. The Business Group on Health is an industry organization representing large employers, including American Express, Morgan Stanley and Nestle.

“The foreboding cost landscape has accelerated the need for bold transformation, and employers seek partners who will make that happen,” Ellen Kelsay, president and CEO of the Business Group on Health, said in a news release. “These are challenging times for benefits professionals.”

Pharmacy costs continue to climb as new medications enter the market. The median amount employers spent on pharmacy was 27% last year, up 6 percentage points over two years, according to the report. More than three-fourths of respondents said they were “very concerned” about overall pharmacy costs this year.

Related: Employer health plan costs expected to rise 9% in 2025: Aon

Employer concern is also driven by increasing demand for blockbuster weight loss and diabetes medications. Nearly 80% of employers reported greater interest among workers this year in drugs such as such as Wegovy and Zepbound.

Nearly all survey respondents indicated they cover GLP-1s for Type 2 diabetes, 67% cover them for obesity, and one-third cover them for cardiovascular diseases. Within the next three years, 16% of employers are considering covering the medications for obesity and one-third are considering adding coverage for cardiovascular conditions.

Employers remain worried about whether people are appropriately using the medications, and payers have been looking for ways to control access to them. Most employers said they will use prior authorization next year to control utilization. To cover the drugs for weight loss, about half of respondents will require employees to participate in weight management programs, and half will also require employees to meet a specific body mass index or have additional comorbidities

Respondents also indicated concerns about a lack of transparency in contracts with pharmacy benefit managers. While 6% of employers plan to change PBMs next year, nearly one-third said they will reassess their partnerships next year.

Roughly seven in 10 employers reported a higher prevalence of cancers among workers this year and are looking to offer additional screenings to improve prevention efforts and increase the chances for early diagnosis. Musculoskeletal and cardiovascular conditions were also leading drivers of elevated healthcare costs for employers this year, the survey showed.