In June 2021, the insurance plan for North Carolina state employees was paying for 2,800 people to take weight-loss drugs.
Last year, it paid for nearly 25,000. Medications like Wegovy cost the North Carolina State Health Plan $100 million last year, rising seemingly out of nowhere to represent 10 percent of its spending on prescription drugs.
“This is something we never anticipated,” said Dale Folwell, the state treasurer, whose office runs the health plan.
Alarmed by the ballooning costs, the health plan’s governing board voted on Thursday to end all coverage of medications for weight loss, including Wegovy, which accounts for the vast majority of its spending on obesity drugs. The plan will continue covering versions of the drugs for people with diabetes.
In the past few years, appetite-suppressing drugs have surged in popularity because they are extraordinarily effective in helping patients lose weight. Research suggests the medications may pay for themselves or even save money in the long run, by preventing heart attacks and strokes that lead to huge hospital bills.
But for the employers and health plans that cover most of the cost of prescription drugs, the bill for these medications is overwhelming — and now coming due. In recent months, the University of Texas system and the hospital chain Ascension have stopped paying for the drugs for their workers. Those that continue to cover the drugs are imposing new restrictions meant to cut costs. The Mayo Clinic, for example, will now provide a lifetime benefit of only $20,000 for the drugs for its employees.
Medicare, by comparison, does not cover medications prescribed for weight loss, but does cover weight-loss surgery.
In North Carolina, the vote on Thursday to end coverage appeared to be the first in the country by a state health plan. The plan uses state funds to pay most prescription drug costs for 740,000 public workers, teachers, retirees and their family members.
The state health plan is in financial distress. Last year, its cash position declined $250 million. The trustees who voted to end coverage said they had a duty to do the most good for the most people.
“Our responsibility as fiduciaries is to the state health plan,” said Rusty Duke, a trustee. “This is a small number of people that we’re talking about relative to all the members.”
Coverage of the medications for weight loss will end on April 1 unless a last-ditch deal can be reached to reduce costs.
To continue taking the drugs for weight loss, patients will have to pay out of pocket. The medications can cost more than $16,000 a year without insurance coverage — a daunting prospect for workers whose average annual salary is $56,000. Most patients regain the weight they have lost if they stop taking the drugs.
In recent weeks, state health plan officials explored whether they could cut costs by placing restrictions on who could get the drugs, but they were told they could not do so without losing $54 million in discounts this year from the drugs’ manufacturers.
Jessica Uhrick-Rieger, a 44-year-old state employee, started taking Wegovy in October 2022. She has since lost 103 pounds and no longer has pre-diabetes. But she will not be able to afford Wegovy’s sticker price of $1,349 per month.
“That’s more than my mortgage,” she said.
Mr. Folwell, the chair of the health plan’s governing board, who did not vote on Thursday, has been outspoken about the plan’s unsustainable spending on weight-loss drugs. (Outside of his day job, he is running as a Republican for North Carolina’s governor on a substance-over-style policy platform.)
He talks about the dilemma facing the health plan in easy-to-understand terms: For example, had the plan covered the medications without limits this year, the cost would be enough to pay for a 0.5 percent pay raise for all state employees. And he has sharply criticized Novo Nordisk, Wegovy’s manufacturer, for what he calls price gouging. The plan has been spending about $800 per month per patient for Wegovy, while patients are responsible for an average $37 monthly co-pay.
“I’m not questioning the efficacy of this,” he said. “I’m questioning what we’re being charged.”
Allison Schneider, a spokeswoman for Novo Nordisk, called the trustees’ decision to end coverage “irresponsible,” adding that the company had been working with state health plan officials to address concerns about cost. “We do not support insurers or bureaucrats inserting their judgment in these medically driven decisions,” she said.
Some in North Carolina see a bitter irony in the fact that Novo Nordisk manufactures and packages Wegovy in Clayton, N.C. — just a short drive from the government offices where state health plan officials try to figure out how to pay for the drug.
The company’s critics have called attention to the tens of millions of dollars in incentives that Novo Nordisk has received from the state as well as from the county where its plants sit.
“It certainly adds insult to injury,” said Ardis Watkins, executive director of the State Employees Association of North Carolina, a group that lobbies on behalf of state health plan members. “Our economic climate that has been made so attractive to businesses to locate here is being used to manufacture a drug that is wildly marked up.”
Ms. Schneider said Novo Nordisk employs more than 2,500 North Carolinians and has poured more than $5 billion in capital spending into the state.
State health plan staff have been closely monitoring the growth in Wegovy spending. About a year ago, it became the most costly medication for the health plan, outpacing the plan’s longstanding top expense, the blockbuster anti-inflammatory drug Humira.
“Wegovy all of a sudden was just running loose,” said Sonya Dunn, a manager for the health plan who routinely reviews reports showing the plan’s prescription drug spending hitting new highs.
The North Carolina State Health Plan has been more lax than other employers and insurance programs in how it covered the obesity drugs. Until recently, patients could get coverage without supplying documentation that they had the body mass index or certain medical conditions that the Food and Drug Administration has approved for eligibility for the medications.
Employees on the plan pay monthly premiums ranging from $25 for an individual to $720 for a family. The plan has not raised premiums for members for seven years — a priority, Mr. Folwell said, to recruit young workers to join and stay in state government. Had coverage of the weight-loss drugs continued without limits, health plan officials had forecast that premiums would increase by $50 per month next year.
Meghan Ray, a state employee who takes Wegovy, said she was disappointed by the trustees’ vote. She started Wegovy two years ago because of a medical condition that could jeopardize her eyesight if she weighs too much. Since then, she has lost 32 pounds and stopped taking a blood-pressure medication.
Ms. Ray, 41, who spoke at the board meeting on Thursday, said she feared she would have to eventually undergo another stomach-reduction surgery that would be costly for the state health plan because she did not have the money to pay out of pocket for Wegovy.
“The state does not pay me well enough for me to be able to afford that,” she said in an interview. “It’s more important that I can afford gas to get to work, or food to feed my family.”
The board voted narrowly, 4 to 3, to end coverage of the drugs.
Wayne Fish, a trustee who voted against ending the coverage, is himself a state employee, working in food service in corrections. He said he agonized about the trade-offs.
“These are hard decisions,” he said. “We see the solvency of the plan and so forth, but these are people’s lives, also. I don’t know if there’s a way to balance this.”