Your tax dollars are getting spent on weight-loss drugs like Ozempic, and the total is adding up

• As demand for weight loss drugs grows, so too do the costs for some insurance plans.
• That might be weighing on taxpayers, who fund Medicaid and state health plans.
• North Carolina State Treasurer Dale Folwell said the state's health plan is "under financial siege."

The Ozempic craze is continuing to cascade across America — and local governments are worried taxpayers can't afford to fund it much longer.

Over the past year, demand for weight-loss drugs like Ozempic, Wegovy, and similar types of medications known as GLP-1s have surged as Americans fawned over the drugs' quick results to shed some pounds.

At a cost of sometimes over $1,000 a month, some people are not paying for these drugs out of pocket. Instead, they rely on their health insurance plans or, in some cases, state-funded Medicaid to cover them. Some companies are refusing to do so, and the cost is beginning to weigh on state and local governments that fund employee plans.

According to a Bloomberg analysis of 2022 data, Medicaid spent $7.9 billion on GLP-1s in 2022 pre-rebates from manufacturers, and reimbursements are expected to rise this year as more people seek out the drugs.

Connecticut was quick to experience the impact of weight loss drugs on its economy last year. Politico reported in November that the state's employee health plan was set to spend $30 million on drugs like Ozempic and Wegovy. Comptroller Sean Scanlon told BI that that was up from $8 million in 2020.

The drugs were a small but quickly growing percentage of what the plan was doing for pharmacy, accounting for 3% of their pharmacy trend, according to Scanlon. Whenever trend lines are going in the wrong direction, Scanlon said, it's going to come back to the taxpayers in time.

"I try to find solutions that meet both of my statutory obligations to be the watchdog, but also to run a plan that's good and going to actually give people healthcare that's good, because I just fundamentally believe that that is a good thing for us as a society," Scanlon told BI.

Scanlon's office set out to reevaluate and find a potential solution that would ensure people could still access the drugs, but in a way that requires buy-in. Connecticut began testing out a method to offer those seeking weight loss drugs access to a program with online tools for weight management. They can also then meet with providers to discuss any medication that might be necessary, as Politico reported. The program is intended, in part, to ensure that recipients are also making lifestyle changes that will ensure the drugs are effective over time.

"The trend of people seeking these out has continued to get bigger, and that was anticipated. We were not trying to do this to stifle demand," Scanlon said. "We were trying to give people access to drugs so that the drug can actually work."

Meanwhile, other areas and plans are simply just pulling back on coverage. In North Carolina, the State Health Plan has put a moratorium on new users of GLP-1 drugs for weight loss. It was in reaction to their plan "being under financial siege," according to North Carolina Treasurer Dale Folwell.

"We're seeing exponential increases in the amount of money that we're having to pay on this," Folwell told BI.

Folwell said that continuing to cover the drugs would have potentially resulted in premiums doubling on individual coverage. Currently, the drug is costing them $22 a member, he said — while cancer medication comes in at $16 a member, and chemotherapy is $17 a member.

Originally, the Plan was projected to spend over $170 million on Wegovy and Saxenda in 2024. With the new moratorium, it'll come in closer to $130 million this year. If the state's legislature did subsequently provide more funding for the State Health Plan, it could theoretically result in more taxes to offset that cost, should the General Assembly decide that would be the pay-for.

Folwell has previously called on manufacturer Novo Nordisk to price the drugs "fairly," according to a press release, saying that it "defies logic" that Novo Nordisk can sell its product for $296 in the Netherlands and for over $800 a month in the United States.

"I believe as the chair of the state health plan board and the state treasurer, state employees deserve to have the opportunity to buy this drug at the same price as the company that manufactures it sells it to citizens of its own country," Folwell told BI.

Novo Nordisk said in a statement to BI that it "believes the best way to stem the significant cost burden of obesity on our country is to ensure all Americans living with obesity have basic insurance coverage for the full continuum of care."

"There is variability in US employer coverage and reimbursement for anti-obesity medications," the statement said. "Currently, more than 50 million Americans living with obesity have access to this therapy class, which represents a trend of expanded coverage in government healthcare and commercial plans."

Business Insider's Shelby Livingston has previously reported on the negative economic impacts these drugs are having on companies' and governments' budgets. Since the drugs can cost over $1,000 a month — and since they're not cures — many people have to take them for life, which can come at a huge cost to employers. Some employers are cutting the drugs out of their insurance coverage completely due to ballooning costs, as the Wall Street Journal previously reported.

And while the major manufacturers of the drugs, Eli Lilly and Novo Nordisk, have said the drug will pay off over time because it'll save money on expensive procedures, there is no clear data to prove that'll be the case — and states are working in the meantime to bring the costs down.

For instance, the University of Texas System said over the summer that it was moving away from covering weight loss drugs — since continuing to cover the drugs would add $73 million annually to prescription plans, forcing premiums to rise by 2.5% to 3%. The costs of the drugs had risen from $1.5 million per month to $5 million per month over just 18 months, with over 3,000 plan members receiving the drugs, the UT System said in a benefits newsletter.

"Cost analysis on these medications indicates they are currently the costliest prescription drugs paid for by the plan on an annual basis, even more costly than medications for complex conditions like cancer," the benefits newsletter said.

While states battle the costs of GLP-1s, it doesn't look like demand will settle down anytime soon — and it could change the way the broader economy is shaped. Business Insider previously reported that while people are spending less on food as they turn to the drugs, the money is just being reallocated to wellness and lifestyle products.

"Consumers are looking for better-for-you products," Nik Modi, a managing director at RBC Capital Markets who focuses on consumer goods, previously told BI.