The high cost of weight reduction medications is prompting employers to hunt dietary advice, giving startups a lift

When Virta Health founder and CEO Sami Inkinen approached employers a number of years ago about using the corporate's nutrition-focused digital diabetes program for obesity-related weight reduction, most firms weren't willing to take it.

More and more employers are actually turning to dietary advice and training as they struggle with rising costs for diabetes and weight reduction medications Novo Nordisks Ozempic and Wegovy and Eli Lilly's Mounjaro and Zepbound.

“Our goal is not to drive maximum GLP-1 prescriptions, but we are the telemedicine company of choice for many employers to use these medications responsibly and then also keep members off these medications and maintain weight loss nutritionally.” Inkinen said.

The company released a Peer-reviewed study a yr ago, which found that patients who participated in Virta's dietary counseling programs continued to drop a few pounds even a yr after stopping GLP-1. But Inkinen says fewer than 10% of the corporate's weight-loss participants take the favored medications – most opt ​​for dietary counseling alone and still lose a median of 13% of their weight over the course of a yr.

“Frankly, despite the message that the drug companies may be putting out, no one really wants to take these drugs forever if you have the choice and the tools,” he said.

For Virta, demand for such services led to record revenue growth of 60% in 2024 to over $100 million, in keeping with Inkinen.

He said the 10-year-old startup is on course to be profitable within the second half of this yr.

From the corporate surveyed Health Buyer Group said glucagon-like peptide drugs, commonly generally known as GLP-1 drugs, are actually a significant driver of employer plan drug costs, with 96% of respondents expressing concerns in regards to the long-term cost impact.

For this reason, increasingly employers are turning to utilization management strategies comparable to dietary advice and training.

“Most employers want their plan members to have access to weight control medications, such as: B. GLP-1. “But you also want to ensure that these are clinically appropriate and accompanied by medical tools and lifestyle modification support to ensure long-term safety and effectiveness for the individual,” said Randa Deaton, vice president of buyer engagement at Purchaser Business Group on Health .

Still, the use of these programs sometimes creates new headwinds when it comes to pricing GLP-1 in their pharmacy benefit plans, Deaton notes.

“We have seen PBMs and drug manufacturers reduce their rebates when employers required a lifestyle management intervention as part of the drug criteria. “It has therefore been challenging for employers to put the right programs in place to support their employees and families,” she said.

One of Virta Health's competitors, Omada Health, can also be seeing strong demand for its GLP-1 weight reduction program after partnering with Virta Health Cignas Evernorth Pharmacy advantages from a program called EncircleRx. Program enrollment increased from 2 million covered lives within the second quarter of 2024 to eight million within the third quarter, in keeping with Cigna CEO David Cordani.

“The market continues to address the affordability challenges” of GLP-1 drugs and seek a more value-driven approach, Cordani told analysts on the corporate's third-quarter earnings call.

“Clients are watching, and physicians are watching, the start-and-stop dynamic that plays out in some patients and also doesn’t produce the desired or intended outcome,” he said.

For each Virta and Omada, the GLP-1 growth momentum is fueling speculation that the startups, each over a decade old, could go public this yr – if market conditions are right.

Omada Health reportedly filed a confidential IPO registration with the Securities and Exchange Commission last summer. in keeping with Business Insider. The company declined to comment on the report.

Virta Health was valued at $2 billion following its latest funding round in 2021. It is Inkinen's second startup. He was a co-founder of online real estate company Trulia, which went public in 2012 and was later acquired by a competitor Zillow.

As for Virta's IPO plans, Inkinen says he's focused on growing the corporate for now.

“When you have something that works, it’s a thousand times easier to just scale your thing, your team, your culture,” he said.