Millions more Americans could access obesity drugs after Trump’s deals with Eli Lilly, Novo Nordisk
News Summary
On November 6, 2025, the Trump administration struck landmark deals with pharmaceutical giants Eli Lilly and Novo Nordisk, significantly expanding access to costly GLP-1 obesity drugs. Under the agreements, Medicare will begin covering GLP-1s for obesity for eligible patients starting mid-2026 through an initial pilot program, transitioning to a mandatory coverage for all Part D plans by 2027. Eli Lilly CEO David Ricks stated this could open access to as many as 40 million new eligible Medicare patients. Additionally, both companies agreed to lower prices for all state Medicaid programs, though states must opt into coverage. The deals also involve offering discounted prices on the Trump administration’s direct-to-consumer website, TrumpRx.gov, potentially reducing monthly out-of-pocket costs to $50-$350 next year. The price for Medicare and Medicaid GLP-1s will be cut to $245 per month, with eligible Medicare patients paying a $50 monthly copay. Eligibility criteria include patients with a BMI of 27 or above with prediabetes or cardiovascular disease, or a BMI of 30 or more with related health conditions, or severe obesity (BMI 35+), covering an estimated 80% of the obese Medicare population.
Background
Obesity is a growing public health crisis in the United States, affecting millions of Americans and linked to numerous chronic conditions such as diabetes and cardiovascular disease. GLP-1 class drugs, like Eli Lilly's Zepbound and Novo Nordisk's Wegovy, have shown significant efficacy in weight management, but their high list prices, often exceeding $1,000 per month, have rendered them inaccessible for many patients due to limited insurance coverage. Despite the substantial benefits of GLP-1s for weight loss and associated health improvements, Medicare has historically been prohibited by law from covering weight loss drugs. The Trump administration's agreements with pharmaceutical companies aim to circumvent or revise these existing barriers through innovative mechanisms and price negotiations to expand access to these critical medications. Currently, approximately 8 to 9 million people in the U.S. are using GLP-1s, yet insurance coverage remains sparse.
In-Depth AI Insights
What are the true strategic motivations behind this deal? - On the surface, this is an initiative aimed at expanding drug accessibility and improving public health. However, in 2025, the Trump administration likely also perceives significant political capital in securing a 'win' in a critical healthcare area, especially during its second term. - For pharmaceutical companies, collaborating with the government, even with some price reductions, unlocks a massive new market (potentially 40 million Medicare patients) and pressures private insurers to expand coverage, leading to substantial volume growth. - This also represents a clever strategy by the administration to advance healthcare reform through executive action and pilot programs without directly repealing existing laws that prohibit Medicare from covering weight loss drugs. What are the long-term implications of this agreement for the pharmaceutical industry and the Medicare system? - Pharmaceutical Industry: The deal provides GLP-1 drug manufacturers (Eli Lilly, Novo Nordisk) with access to an enormous, government-backed market. This could stimulate further R&D investment and accelerate the launch of next-generation obesity drugs, particularly oral formulations. Concurrently, this government pricing and procurement model might set a precedent for other high-priced innovative drugs in the future, increasing pricing negotiation pressure on pharmaceutical companies. - Medicare System: While initial unit prices are lowered, covering tens of millions of new patients will lead to a substantial increase in federal Medicare spending. Although a reduction in obesity-related diseases might yield long-term savings, short-term budgetary pressures will be significant. This could prompt future re-evaluation of Medicare benefit structures and spark further congressional debates on drug coverage and cost control. - Private Insurance Market: Experts suggest that Medicare's coverage will exert immense pressure on private insurers to also expand their GLP-1 coverage, further broadening the market. How should investors assess the valuation impact of this development on companies like Eli Lilly and Novo Nordisk? - Revenue Growth: The significant expansion of the addressable market (40 million new patients) is a direct positive, expected to drive considerable revenue growth, despite some price reductions. Analysts have already flagged the coverage for 80% of the obese Medicare population as a strong positive. - Margin Pressure: The discounted prices agreed with the government ($245 per month) are below existing market rates, which could put some pressure on the average profit margins for these drugs. However, the surge in volume is likely to offset or even exceed the impact of lower unit prices, leading to higher overall profits. - Competitive Moat: Companies that secure early government agreements can solidify their market leadership, especially in the rapidly expanding GLP-1 market. This offers investors a relatively clear growth path and reduced policy uncertainty. - Long-Term Outlook: As obesity gains wider recognition as a chronic disease eligible for insurance coverage, the market potential for GLP-1 drugs will continue to expand, providing robust support for their long-term growth prospects.