BOSTON — Boston Mayor Michelle Wu said her administration has reached a deal with City Hall unions to limit GLP-1 drug coverage for weight loss that will save the city roughly $10.6 million and curb “skyrocketing” health costs.

Wu and the Public Employee Committee, which bargains health insurance benefits on behalf of City of Boston unions, jointly announced the agreement Wednesday, saying that the city’s proposal to implement a utilization management system for drugs like Ozempic and Wegovy was passed unanimously by the PEC.

“Amid one of the most challenging budget environments in recent years, this agreement reflects the strength of our labor-management partnership and what’s possible when the city and our unions work side by side,” Wu and PEC Chair Elissa Cadillic said in a joint statement.

“Together, we are taking steps to responsibly manage rising costs while protecting the health care coverage that our workforce depends on, and the high-quality core city services that our residents deserve.”

Utilization management will now require city employees to receive prior authorization to receive health insurance coverage for GLP-1 drugs, which treat Type 2 diabetes and obesity. The drugs are increasingly being used as an appetite suppressant by people looking to lose weight.

The mayor’s office said in Wednesday’s announcement that the city’s health care expenses are expected to rise significantly next fiscal year, driven in part by increased use of GLP-1 drugs for weight loss.

Boston’s Chief Financial Officer Ashley Groffenberger said last week that if the city did not receive approval from the PEC to implement a utilization system to limit use of GLP-1 drugs for weight loss, “health insurance rates for non-Medicare plans would increase by 22.6% over FY26.”

Groffenberger said that increase would have been “the highest year-over-year premium increase in recent history,” and that the rate increases would be “deeply felt by the city and across our workforce.” She described health costs as “skyrocketing.”

Exacerbating the city’s budget crunch are “mounting inflationary pressures and significant cost increases heading into FY27” — particularly health care costs — at a time when city revenues are projected to grow only by 1.5% to 2.5% over FY26, the mayor’s office said.

The city’s budget crunch has already driven the Wu administration to freeze some spending and delay hiring for the remainder of this fiscal year, according to a city memo obtained by the Herald last week.

The PEC had initially voted to reject the city’s utilization management proposal on March 9.

Cadillic cited skepticism that the system would result in a significant cost savings to the city and concerns that the prior authorization requirement would be extended to other non-specialty medications beyond GLP-1 drugs.

She also said it was atypical for unions to be asked to negotiate health costs in the middle of an agreement, set to expire on June 30, 2027.

Cadillic had put forward a counter-offer to the city last week that stated the PEC would agree to utilization management for GLP-1 drugs, if implementation was delayed by six months, from July 1 of this year to Jan. 1, 2027, halfway through the fiscal year. The PEC also sought a year-long contract extension for health costs.

Some of the unions weren’t on board with the “hard line” the PEC was seen as taking with the mayor, however, and urged the PEC to take the city’s deal.

Thomas McKeever, SEIU Local 888 president, said bluntly that the PEC does not speak for all unions in taking a “hard line” against the mayor on this matter, despite having the votes.

“If we don’t have those discussions, then the majority of citywide unions will be facing layoffs, and sincerely that would really impact my members, as they are some of the lowest wage workers in the city,” McKeever told the Herald last week.

Speaking specifically to the PEC’s March 9 vote before the counter-offer was made, McKeever said, “We’re not in favor of the decision a small group of leaders across the city had made, as it relates to the PEC.”

“They’re taking a hard line against the mayor and refusing to open the contract,” McKeever said. “I’m saying that we need to open the contract and resume negotiations that will preserve our members to be gainfully employed.”

A city spokesperson said utilization management will go into effect on July 1 under the deal struck this week, as first proposed by the Wu administration.

The mayor’s move comes after the Commonwealth’s Group Insurance Commission voted to eliminate GLP-1 coverage for state employees last month, a route the Wu administration said it did not want to take and sought to instead limit coverage with prior authorization.

The city anticipates the system will save the city roughly $10.6 million. The city’s employer health insurance costs cover roughly 55,000 employees, their families, and retirees.

The mayor’s office said the city is “committed to reinvesting the resulting employer savings to minimize the impacts of any targeted reductions driven by the overall budget challenges facing the city in the upcoming fiscal year.”

Wu administration officials had previously directed department heads to trim their budgets by 2% for next fiscal year, and said the city will look to cut more costs as it prepares the FY27 budget.

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