Do GLP-1 Medications Pay for Themselves?

Glucagon-like peptide-1 receptor agonists (GLP-1s) represent a major improvement in treatment of diabetes, obesity, and cardiovascular risk reduction, but they are also among the most expensive drugs in widespread use and the subject of significant policy debate. The high price of these drugs may overstate their net cost if the health improvements they produce lead to reduced downstream health care use and medical spending, that is, cost offsets. We estimate such offsets using insurance claims data, examining the effects of GLP-1 initiation on subsequent GLP-1 use and spending, and on other non-GLP-1 spending. We use a stacked difference-in-differences design, comparing patients initiating GLP-1 medication to not-yet-treated controls who initiate GLP-1s several months or years later, allowing us to control for underlying time trends and baseline characteristics. Overall, we do not find a reduction in downstream medical spending. Although GLP-1 initiation reduces spending on other diabetes medications, total non-GLP-1 spending increases, driven by higher outpatient health care use; GLP- 1 drug spending rises mechanically. For health care payers, the relevant cost of GLP-1 initiation therefore extends beyond the sticker price of the drug. We find similar results across subgroups of GLP1 initiators including those with prior cardiovascular disease and those without diabetes (consistent with obesity indication). Our main results examine spending responses over the first year after initiation. However, we also estimate longer run effects in a smaller sample and find no cost offsets even five years after GLP-1 initiation. Taken together, these results suggest that payers facing the costs of GLP-1 coverage are unlikely to see large savings from reduced spending on other care. If GLP-1 therapies ultimately yield cost savings, they are likely to occur only over longer horizons or through non-medical channels.