Best’s Commentary: Health Insurers Evaluating Balance Between Pharmacy Costs and Long-Term Value of GLP-1 Therapies

AM Best said health insurers are weighing rising pharmacy costs for GLP-1 therapies against potential long-term reductions in morbidity and improvements in mortality outcomes. The commentary highlights uncertainty over whether the therapies' clinical benefits ultimately justify significant insurer investment, creating a cost-management challenge for health plans.

Analysis

The investable issue is not headline GLP-1 demand but the lag between pharmacy spend and any measurable reduction in high-cost events. Commercial payers can push much of the near-term burden into tighter prior authorization, step therapy and higher member cost sharing; Medicaid-focused managed-care organizations (CNC, MOH) have less flexibility once state formularies expand coverage. That makes medical-loss-ratio pressure a more credible 2026-27 risk for Medicaid MCOs than for UNH, ELV or CI, which have greater scale, data and rebate leverage.

CVS and CI are comparatively insulated at the enterprise level because PBM economics can capture part of manufacturer rebate and utilization-management value, although heightened scrutiny of PBM spread pricing limits how much of that benefit should command a multiple premium. The more important second-order risk is adverse selection: employers with high obesity prevalence may migrate toward plans with broader coverage, raising claims intensity before risk-adjustment mechanisms catch up. Any morbidity benefit is likely to emerge over 3-5 years, while pharmacy-cost recognition is immediate.

Consensus may be too quick to treat lower cardiovascular events as a payer margin catalyst. Real-world persistence, dose titration, discontinuation and the share of use outside tightly defined high-risk populations determine whether avoided admissions offset drug expense; those data remain insufficient for underwriting a near-term MLR benefit. The near-term catalyst is 2026 formulary and employer-benefit design, while the structural upside requires sustained adherence and independently reported reductions in total cost of care.

Key Decisions for Investors

• Maintain a 1-3 month watch rather than initiate a broad health-insurer trade; this commentary alone does not change earnings estimates. Trigger a defensive review of CNC and MOH if 2026 state Medicaid formulary updates broaden anti-obesity-drug coverage without explicit rate-adjustment provisions.
• Prefer a relative long UNH or ELV versus short CNC or MOH over a 6-12 month horizon only after guidance quantifies GLP-1 pharmacy trend; larger commercial books and pharmacy-services capabilities should absorb utilization better. Falsify if UNH/ELV guide to MLR deterioration comparable to Medicaid peers or if states provide prompt actuarially adequate reimbursement.
• Watch CVS and CI for evidence that rebate retention and utilization-management fees offset incremental dispensing volume; favor long CVS/short a Medicaid-MCO basket if pharmacy-services segment margins remain stable through two reporting periods. Avoid the pair if PBM regulatory action targets rebate economics or segment margins fall despite rising GLP-1 scripts.
• Do not chase LLY or NVO on payer-cost commentary. A more actionable 6-18 month signal would be broad employer coverage expansion combined with persistence data above current expectations; the key downside trigger is payer restrictions that slow net prescription growth despite continued demand.