Employers aren't overhauling drug plan design for GLP-1 generics just yet as savings still remain out of reach, say insurers
While Canada has become the first G7 country to approve a generic version of semaglutide, plan sponsors have yet to overhaul their drug plans, according to several group insurers.
The transition to GLP-1 generics has instead prompted a quieter recalibration, one shaped by supply constraints, cost uncertainty and the familiar tension between access and affordability.
Generic adoption among sponsors remains ‘status quo’
“It's been pretty status quo,” said Sunil Hirjee, vice-president of group sales and partner experience at Beneva. “The concept of generic substitution is not new. The value proposition [of generics] and the reality that there's an effective plan design strategy to utilize a generic substitution plan has been something that's been in place for more than 20 years. When you set your plans up with generic substitution in place, it's not specific to indication or drug therapy, it's generic substitution.”
Because the generics currently available are limited to GLP-1s used for type 2 diabetes - a condition that has long been covered in group benefits plans, there has been no new coverage decision for sponsors to make, he said.
For Erika Hatherly, pharmacist and strategic leader of drug programs at iA Financial Group, the GLP-1 generic rollout isn’t following the same playbook as earlier blockbuster transitions like Lipitor. She noted how product shortages have slowed the expected savings, and that disconnect has dominated her conversations with plan sponsors.
"Plan sponsors believe that once a drug comes onto market or is approved by Health Canada, the savings is immediate. But what actually happens is that there's few steps that have to occur before those savings can accumulate," she said.
Supply challenges remain critical to generic adoption
Chief among those steps is supply. At Beneva, Hirjee said the insurer has held off on enforcing generic substitution for Ozempic claimants because availability has been inconsistent.
"We haven't yet fully implemented the fact that if your plan is generic substitution and you are being dispensed Ozempic, we're cutting it back to a generic because the generic wasn't. It's not steadily available yet," he said. "The demand has outweighed supplies of generics hitting the market.”
Hatherly pointed to interchangeability rules as another friction point. She noted how some provinces have had to add the generic to their formularies before pharmacists could dispense it, creating a lag between Health Canada approval and pharmacy-level access.
In Ontario, that created a delay between Health Canada's approval and the point at which a pharmacy could actually make the switch. The result, Hatherly said, has been a steady stream of questions from sponsors asking when the savings they were promised will start showing up.
Cost questions complicate the coverage case
Alex Carducci, assistant vice president of pharmacy benefit management at Equitable, acknowledged plan sponsors understand what GLP-1s represent. They recognize the clinical value of these therapies and the shift they mark in the treatment of type 2 diabetes and obesity, but they also see the cost pressures showing up in their claims data.
The generic rollout, he noted, has introduced a rare counterweight to that spending trajectory.
"Often within the drug space, we're always talking about increasing spend for new specialty drugs. Now we get to talk about some relief with the generics coming to market," he said, adding while most plans have adopted mandatory generic pricing, a number still have yet to and the GLP-1 rollout makes that gap harder to ignore.
"That is an opportunity for advisors and for sponsors to now consider that as a way to drive out additional savings," he said.
Even where the clinical case is understood, he said sponsors face a practical funding question. Covering obesity drugs means directing plan dollars away from other priorities, like mental health, and the cost exposure is still uncertain.
To that end, he frames the conversation around benefits philosophy: does coverage align with what a sponsor is trying to achieve, and are they prepared for the financial risk that comes with a new, high-cost therapeutic category?
Meanwhile, Jarred French, senior benefits consultant at BFL CANADA, said the shift became tangible once claims data started reflecting GLP-1 utilization.
"We all knew Ozempic was coming and that there would be an impact to it for plan sponsors, but I think as plan sponsors started to see the claims come through, it became more real," he said, noting the firm has been advising clients to examine step therapy and therapeutic alternative approaches to lock in savings before members migrate to branded competitors like Mounjaro.
When savings do arrive, Hirjee believes they should be significant. Beneva estimates roughly 60 per cent savings from the originator price with two generics on the market and expects that figure to climb to about 65 per cent once a third enters.
On the obesity side, coverage remains optional, and generics for that indication are not expected until 2027 or 2028. Hirjee said the experience with diabetes generics will shape how sponsors evaluate the case for adding anti-obesity coverage down the line.
With obesity prevalence rising and plan members pulling benefits in multiple directions, employers also face a hard allocation decision, particularly as the ability to prove return on investment has not kept pace with the clinical evidence.
"Plan sponsors are asking whether that’s a cost I'm taking off of the public health care system or am I taking it off of my plan expense? Those are things that have not been able to be clearly articulated … They could then realize a lower upfront cost and they might be able to rationalize a little more that the mid- and long-term savings are now definitely worth it for them," said Hirjee.
According to Carducci, the priority right now is monitoring the rollout. With the generic rollout still in its early stages and a limited number of manufacturers in the market, sponsors need to track both uptake trends and supply stability in real time.
“We’ll be monitoring for supply shortages. We want to make sure that our member experience is still a good one for groups that have mandatory generic pricing and ensuring that if there's disruptions, we want to be nimble and ensure there's no negative plan member implications,” he said.
What sponsors can expect in the pipeline of generic rollout
Looking further ahead, Carducci emphasized the GLP-1 category itself is set to expand. Notably, newer drugs -including triple agonists targeting different parts of the obesity and diabetes pathways - are already advancing in the U.S. and will reach Canada in time.
Moreover, Hatherly believes the industry risks getting tunnel vision on Ozempic when the GLP-1 category is about to look very different, particularly as Mounjaro is already the next drug in line, and dozens more molecules are in development.
"There's so much evolution that's going to happen and that really changes the conversation in terms of just trying to get through the next day and managing this generic transition to how can I overall manage this category of drugs," she said, noting with five or six more therapies expected in the near term alone, sponsors who treat the current generic transition as an isolated event risk being caught flat-footed by what follows.
"It’s about changing that conversation from one that just looks at a black and white price to more of a therapeutic value of where these drugs are falling and ultimately like long term potential as well," she added.
In many cases, French underscored, the generic version of a brand offers an opportunity to deliver the same health outcomes at a lower cost, which then “creates opportunities to enhance spend in other areas of importance," he said.
