Only proactive plan sponsors will capture generic GLP-1 savings: Normandin Beaudry

The arrival of generic Ozempic in 2026 could hand plan sponsors a cost reduction of about three per cent on average but only if they act before the window closes. Notably, without the right carrier governance and cost management tools in place, those savings risk evaporating as members shift to newer, pricier molecules.

That's the warning from Jacques-Andre Morin and Jean-Philippe Bernard, consultants at Normandin Beaudry, who say the generic GLP-1 landscape this year demands a level of proactivity that many plan sponsors still lack.

"The main focus should be on the generic of Ozempic that will arrive during the year 2026, because it will really help to reduce the pressure on cost increases for plan sponsors," Morin said. "We definitely need to realize these savings. We really need to avoid a shift from Ozempic to other molecules that are newer or more expensive,” adding carriers will need to deploy tools such as step therapy and maximum allowable cost provisions to keep members on the lowest-priced drug within a given class.

"Insurers should be prepared to help plan sponsors on that matter," he added.

The fear isn't hypothetical as Bernard points to a pattern the industry has seen before.

"Many years ago, there was Lipitor and Crestor, and when the generic of the Lipitor arrived, we saw a shift to Crestor... And this has happened with many other molecules over the years," he noted.

So what should plan sponsors be doing now? Morin emphaszied it starts with the basics, pointing to generic substitution, a managed drug list, and choosing a carrier with tight management features. Morin underscored that generic substitution should be a given for any plan, yet some still lack it. Beyond that, he recommends moving away from open drug lists and choosing a provider with tight management controls such as step therapy and prior authorization.

He also points to maximum allowable cost as a tool that remains underused across the industry, with many insurers still not applying it consistently or broadly enough.

Bernard notes that for most plan sponsors, generic substitution is already standard. The real differentiator now is how strong and timely their carrier’s governance is. Looking back to the 2023 Ozempic surge, he acknowledged that some carriers had prior authorization and tighter controls in place from the outset, while others were nearly a year behind.

That 12-month gap translated into real dollars. Plan sponsors whose carriers were slow to react absorbed the full cost shock while waiting for controls to catch up, he noted.

He argues that sponsors should be challenging carriers now on their strategy for upcoming generics and ultra generics - including how they will use tools such as price listing agreements, plan design, tiered formularies, maximum allowable cost and step therapy - and making sure those strategies are explicitly designed so that savings are captured quickly and flow directly back to the plan.

"Plan sponsors should be aware of the strategy from their carrier before generics come to the market, because you need to have the strategy in place before the generics are there, or the ultra generic, to make sure that the savings will be there day-one," he said.

For weight loss drugs specifically, he argues prior authorization is essential, and while he doesn’t always recommend imposing a hard maximum on weight loss coverage, that kind of cap can help contain spending.

The priority, in his view, is making sure carriers have best-in-class prior authorization criteria in place, because there are wide differences in how tightly they manage these drugs. Some carriers apply more restrictive criteria than Health Canada’s own approvals for Wegovy and Zepbound, and that narrower eligibility helps certain plan sponsors limit the number of members who qualify and, in turn, reduce cost growth.

Morin says prior authorization has become a central lever for controlling drug costs. Over time, carriers have shifted from a single broad formulary to more personalized formularies by drug type, tightening criteria and improving cost management. He doesn’t expect major structural changes to prior authorization now, but he thinks criteria should be further tightened for certain drugs, such as GLP-1s, to prevent members from being switched from Ozempic to newer, more expensive options like Mounjaro purely on convenience or marketing rather than clinical need.

Bernard adds that some carriers have already improved the efficiency of prior authorization by automating parts of the process at the pharmacy level. For certain drugs, pharmacists can use claims history to confirm diagnoses and prior therapies, then approve coverage on the spot instead of sending paper forms back and forth between physicians and insurers.

However, Morin cautions that current prior authorization processes are often confusing and burdensome for employees and their doctors. Members may not know which formulary applies, and prescribers may not understand what criteria must be met, leading to frustrating back-and-forth between physician, patient, and insurer. He would like to see a more seamless experience and even suggests that a single, standardized formulary or common forms across carriers could reduce friction, especially if carriers are willing to accept provincial or other carriers’ formularies in practice.

Bernard points out that the industry already has a precedent on the disability side: CLHIA has created standard disability forms that all carriers can use, and adoption has grown over the past year. He argues that a similar standardized prior authorization form for certain high-impact drugs could bring more consistency and efficiency across carriers and make the process easier for all parties.

And with Eli Lilly's Mounjaro and Zepbound gaining ground, the competitive dynamics between the two pharmaceutical giants will shape pricing and access in the near future.

"If you don't have a strategy, you just won't have all the savings opportunities available for you," said Bernard.