AM Best Director Joins ‘Pulse of Prevention’ Podcast to Discuss GLP-1 Therapies and Insurance Implications

AM Best Director Joseph Zazzera said accelerating utilization of GLP-1 therapies is increasing pharmacy spending for health insurers. Insurers are weighing these near-term drug-cost pressures against the potential for lower longer-term medical costs from improved patient outcomes. The item is commentary rather than a company-specific financial update and provides no quantified earnings impact.

Analysis

This is not a near-term earnings catalyst by itself, but it reinforces a widening underwriting-duration mismatch for managed-care organizations: GLP-1 drug costs are incurred immediately while reductions in cardiovascular, renal, and obesity-related claims emerge only after sustained adherence over several years. That asymmetry is most unfavorable for members with high churn—particularly Medicaid and ACA exchange books—where insurers may pay the pharmacy cost while a subsequent carrier captures much of the medical-cost benefit. The relevant public read-through is therefore more negative for Medicaid-heavy insurers such as CNC and MOH than for diversified commercial insurers UNH, ELV and CI.

The second-order beneficiary is PBM scale. CVS and CI can use formulary exclusion, rebate aggregation and preferred-product contracting to contain net trend, although rebate economics may obscure whether gross GLP-1 utilization is translating into incremental profit. Novo Nordisk (NVO) and Eli Lilly (LLY) retain pricing power while supply remains constrained, but payer resistance raises the probability that the next leg of volume growth shifts toward tighter prior authorization rather than unconstrained demand.

Over the next 1-3 months, watch third-quarter medical-cost and pharmacy-trend commentary, especially changes to 2027 pricing assumptions and prior-authorization criteria. A material upward revision to pharmacy trend without an offsetting medical-loss-ratio benefit would pressure managed-care multiples, since investors currently tend to value GLP-1 adoption as a long-run cost-offset narrative. The thesis is falsified if insurers demonstrate lower total cost of care in continuously enrolled commercial cohorts, or if net GLP-1 prices fall quickly enough to neutralize utilization growth.

Key Decisions for Investors

• No standalone trade on this podcast item; create an earnings watchlist for CNC and MOH. Consider downside only if either guides pharmacy trend higher or flags ACA/Medicaid GLP-1 utilization without a credible rate-adjustment offset; the catalyst window is the next two reporting cycles.
• Maintain a relative long LLY or NVO versus short CNC basket as a 6-12 month expression of the cost-transfer dynamic, sized modestly because drug-price negotiations, supply expansion and utilization-management changes can reverse the spread. Exit if payer commentary shows net GLP-1 trend decelerating while medical-cost trends improve.
• Prefer CI over Medicaid-heavy managed-care peers on a relative basis over 6-18 months: PBM contracting capability provides a better hedge against gross pharmacy inflation. Verify quarterly that Evernorth margin is benefiting rather than being competed away through client pass-throughs.
• Monitor CMS coverage policy, commercial prior-authorization tightening, and net-price disclosures from LLY/NVO. Broad coverage expansion would deepen the near-term payer cost burden; restrictive coverage or accelerated net-price erosion would weaken the manufacturer-over-payer thesis.