Trump announces deals with Eli Lilly, Novo Nordisk to slash weight loss drug prices, offer some Medicare coverage
News Summary
On November 6, 2025, President Donald Trump announced landmark deals with Eli Lilly and Novo Nordisk to significantly reduce the prices of their GLP-1 obesity drugs, including upcoming oral versions. These agreements aim to expand access to the costly blockbuster treatments and will implement price cuts for Medicare and Medicaid beneficiaries starting in 2026. Under the agreements, Medicare will begin covering obesity drugs for eligible patients for the first time, with some patients paying a $50 monthly copay. The Trump administration will also launch TrumpRx.gov, a website offering discounted drug prices directly to consumers. Starting doses of new oral obesity pills from Eli Lilly and Novo Nordisk will be $145 per month, while existing injections like Wegovy and Zepbound will start at $350 per month on TrumpRx, trending down to $245 over two years. These actions are part of the Trump administration's "most favored nation" policy, aimed at reining in high U.S. drug costs by tying them to the lowest prices abroad.
Background
GLP-1 drugs, such as Novo Nordisk's Wegovy and Eli Lilly's Zepbound, have become blockbuster treatments due to their significant efficacy in weight management and related health complications. However, their list prices, often exceeding $1,000 per month, have been a major barrier to patient access. Historically, Medicare has not covered weight loss drugs, and Medicaid coverage has been rare. The Trump administration has been actively pursuing policies, including its "most favored nation" policy, to lower U.S. drug prices. This policy requires pharmaceutical companies to sell certain drugs at prices tied to the lowest prices abroad in exchange for exemptions from planned pharmaceutical tariffs. Former President Joe Biden had proposed Medicare coverage for obesity drugs at the end of his term, but the Trump administration declined to finalize that measure in April 2025, opting for its own initiative. This deal comes as GLP-1 drugs like semaglutide are already included in the next round of Medicare drug price negotiations under the Inflation Reduction Act.
In-Depth AI Insights
What does this deal signify for the long-term profitability of the pharmaceutical industry? - While short-term sales might increase due to expanded coverage, this agreement signals a fundamental shift in the U.S. pharmaceutical pricing model. Establishing a precedent for government price intervention could lead to more drugs being subjected to negotiations, eroding pharmaceutical companies' pricing power on high-margin drugs. - Eli Lilly and Novo Nordisk might offset lower per-unit prices with increased volume, but the long-term sustainability of this model is questionable. Given the immense market potential of GLP-1 drugs, the government may view this as a blueprint for lowering prices of other blockbuster medications, especially as the Trump administration continues its "most favored nation" policy. - In the future, pharmaceutical companies may need to focus more on cost-effectiveness in R&D and market strategies, and rely on expanding global markets rather than solely the high-price U.S. market to sustain growth. What are the deeper political and economic considerations behind the Trump administration's move? - Politically, this move is a critical step for Trump, following his re-election in 2024, to deliver on his promise of lowering drug prices, aiming to solidify public support and potentially leave a positive policy legacy for the Republican party in the 2028 elections. By direct negotiation and expanding Medicare coverage, the administration demonstrates responsiveness to public health concerns. - Economically, while Medicare and Medicaid spending will increase in the short term, broad GLP-1 drug adoption could significantly reduce long-term healthcare costs associated with obesity-related chronic conditions (e.g., cardiovascular disease, diabetes), thereby easing the overall healthcare system's burden. This represents a potential "preventative" investment. - Furthermore, the launch of TrumpRx.gov provides the government with a tool to bypass traditional distribution channels and directly influence drug prices, potentially impacting the pharmaceutical retail and distribution sectors. How should investors evaluate Eli Lilly and Novo Nordisk's strategic responses and potential risks? - Investors need to closely monitor how these two companies balance volume growth against margin pressure. While expanded market access is positive, price controls could compress profitability on their core products. Both companies are already accelerating manufacturing capacity expansion to meet surging demand, but the ROI on this expansion could be affected by price reductions. - Potential risks include other countries emulating the U.S. in demanding lower drug prices, and the possibility of future U.S. government expansion of price negotiation scope. Crucially, whether Eli Lilly and Novo Nordisk can continuously introduce new, differentiated drugs in their pipelines to offset the impact of price reductions on existing products will be key. - In the long run, these companies will need to demonstrate their innovation capabilities and may seek to diversify their product portfolios or enter non-U.S. markets to mitigate risk.