GLP-1 Drugs
One major factor driving rising health care costs is the growing demand for glucagon-like peptide-1 (GLP-1) drugs. These drugs, typically costing around $1,000 per month, are intended for long-term use to maintain health benefits. Initially approved for type 2 diabetes, GLP-1 drugs such as Mounjaro, Ozempic, and Rybelsus are also used off-label for weight loss. They have gained popularity due to their effectiveness in combination with diet and exercise.
Newer drugs, such as Zepbound and Wegovy, are approved specifically for obesity treatment. Besides diabetes and obesity, these medications show promise in treating other conditions, such as Alzheimer’s, heart disease, and sleep apnea. GLP-1 usage is widespread and growing—around 1 in 8 Americans have used these drugs, and this figure is expected to rise.
General Pharmacy Spend
Apart from GLP-1s, other high-cost drugs and advanced therapies are also contributing to the overall increase in health care spending.
Existing Drug Cost Increases
Several commonly used drugs, including demosumab, pembrolizumab, and empagliflozin, are expected to see price increases of 4%-10% or more in 2025. Increased utilization of these drugs will further drive up spending.
Cell and Gene Therapies
Advanced treatments, such as cell and gene therapies (CGT), are designed to treat severe conditions like cancer and spinal muscular atrophy. These therapies, while groundbreaking, are incredibly costly—some can reach between $250,000 and $4.25 million for a single dose. By 2025, around 100,000 patients in the U.S. are expected to be eligible for CGT, potentially costing $25 billion.
Biologics and Biosimilars
Biologics, medications derived from living organisms, are another major factor in rising pharmacy spending. They account for only 2% of prescriptions but represent 37% of net drug spending. Biosimilars, which are lower-cost versions of biologics, are entering the market, creating potential savings. As of October 2024, 62 biosimilars have been approved, and this trend is expected to continue.
Health Care Labor Costs
Rising employment, higher salaries, and general inflation in the health care sector directly impact overall costs. The current supply of health care workers does not meet the growing demand, which is largely driven by an aging population and the burnout of health care professionals. This labor shortage is one of the key factors driving costs higher in 2025.
Chronic Health Conditions
Around 90% of U.S. health care spending is linked to chronic and mental health conditions. Cardiovascular diseases, in particular, are significant contributors to health care expenses, with related costs expected to reach $1.8 trillion by 2050. Other chronic issues, such as obesity, also contribute heavily to overall spending, with obesity-related care alone costing nearly $173 billion annually.
Aging Population
The aging U.S. population is another contributor to rising costs. Health care spending per person for those over 65 is much higher compared to children or working-age individuals. With an increasing number of Americans entering retirement age, the costs associated with caring for older adults are expected to rise steadily.
Employer Takeaway
Offering quality health care to employees is becoming an increasingly costly challenge for organizations. Rising health care costs may be unavoidable, but employers who understand these trends can make more informed decisions. Contact us today for more resources on managing health care costs.
Sources
- Business Group Health
- KFF Health Tracking Poll
- JPMorgan Obesity Drugs Research
- Vizient Pharmacy Market Outlook
- JAMA Report on Biologics
- IQVIA Biosimilars Report
- Mercer Health Care Cost Report
- CDC Chronic Disease Facts
This Benefits Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. © 2024 Zywave, Inc. All rights reserved.