'What we'll see is tirzepatide being used first but it's also two and a half times more expensive than what we expect the cost of generic semaglutide to be,' says Yoni Freedhoff
When generic versions of semaglutide - currently sold under brand names like Mounjaro, Ozempic,and Wegovy - hit the Canadian market next year, it won’t just mark a shift in obesity treatment. Rather, it’ll force a reckoning for benefits plans grappling with how to balance cost, access, and outcomes, according to one obesity expert.
Dr. Yoni Freedhoff describes the current state of GLP-1 drug coverage as inconsistent and unpredictable across benefit plans, though he notes the situation is gradually improving. He attributes this shift to two key factors: the increasing clinical effectiveness of the medications and growing momentum in public and private sector coverage.
“It’s a bit of a crapshoot right now in terms of who has coverage and who doesn’t,” said Dr. Freedhoff, founder and medical director of the Bariatric Medical Institute, who’s also an associate professor at the University of Ottawa. “In part, that’s because the medications have gotten better over the years. And in part, because there’s been some momentum in terms of coverage.”
He noted that public plans in Ontario, including municipal, provincial and federal government programs, already cover semaglutide in some form, and many employer-sponsored plans are following suit. But as generic semaglutide will likely cost just $1,300 to $1,500 annually, Freedhoff argues that coverage should no longer be a question of if, but how.
And that's where things get complicated as one of the biggest challenges for plan sponsors is designing a benefits structure that allows for broad access to these drugs without opening the floodgates to escalating long-term costs.
Freedhoff sees opportunity in that challenge, advocating for a more strategic approach.
“If the goal is to save the most money possible, what I’d be recommending is covering generic semaglutide without prior authorization forms,” he said, instead reserving more expensive treatments, like tirzepatide, for patients who don’t achieve a defined level of weight loss on semaglutide.
This step-therapy model, he argues, reduces administrative burden and helps plans avoid the higher cost of newer drugs unless clinically necessary. Without it, plans risk patients defaulting to more expensive medications upfront, driving up overall spending. That strategy could help plans avoid unnecessary use of more expensive drugs.
“If it’s not done that way, then all obesity medications could be covered uniformly. I think what we’ll see is tirzepatide being used first because it’s better but it’s also two and a half times more expensive than what we expect the cost of generic semaglutide to be," he said.
Freedhoff believes the financial impact of generic semaglutide in benefits plans will ultimately hinge on how coverage is structured. While there will be upfront costs for plans that choose to include the drug, he pointed to US data that already suggests broader use of GLP-1s leads to significant reductions in other healthcare expenses by the second year of treatment. As a result, he anticipates a rise in demand, even among those without insurance, due to the expected drop in price.
He also sees managing access efficiently to also be a key challenge for employers and HR leaders. While some might lean toward requiring pre-authorization to control use, he warns this may be both costly and counterproductive. Because generic semaglutide will only be approved for type 2 diabetes - due to a patent lapse - many physicians are expected to prescribe it off-label for obesity. If strict authorization requirements remain in place, plans could lose a chance to capture savings.
Among the current GLP-1 options, however, tirzepatide stands out for delivering greater weight loss than semaglutide in direct comparisons, according to Freedhoff. While early observations suggest tirzepatide may also be easier for patients to tolerate, the primary distinction is its superior effectiveness.
However, he emphasized that even more potent drugs are on the horizon. One example is retatrutide, which is expected to produce weight loss levels comparable to bariatric surgery for a large share of patients, but a breakthrough could likely come with a high price tag.
For plan sponsors, the emergence of increasingly effective but expensive drugs underscores the need for a structured coverage model. Freedhoff believes employers with step-therapy protocols already in place will be better positioned to manage costs when drugs like retatrutide enter the market. In many cases, he noted, patients already doing well on semaglutide won’t need to switch medications just because something newer is available. He also argued that treatment decisions should be based on medical need, not simply on the existence of a stronger option.
Still, he acknowledged the economic tension facing employers. While the cost of generic semaglutide (expected to be around $150 a month) can likely be justified by health savings and productivity gains, the same can’t easily be said for pricier drugs like tirzepatide or retatrutide, which could run $500 to $700 monthly.
While Freedhoff acknowledges that wider use of obesity medications like semaglutide could extend life expectancy, which, from a purely financial standpoint, might increase long-term pension liabilities for employers, he views the issue as more complex than simple cost-benefit math.
He acknowledged longer lifespans could create added expenses, while early intervention with GLP-1s might offset those costs by preventing a host of chronic conditions and improving workforce productivity. He suggests that fewer sick days and less time off due to obesity-related illnesses could, in the end, balance or even outweigh the additional financial burden.
For employers focused strictly on ROI, making the economic case for these newer therapies will be much tougher, even if the clinical benefits are clear, said Freedhoff.
“In an ideal world, we would not purely care about the economics of these decisions. Like, here is a drug that we know will extend life's quantity and improve life's quality while reducing the risk of a whole host of problems and so we should just cover it because it's amazing. But I appreciate there are other realities for employers to consider,” said Freedoff.
