Trump’s Weight-Loss Experiment Could Aid Lilly, Novo. Cost Is Still a Problem.

The list price of a year’s worth of Wegovy is more than $16,100. (Shelby Knowles/Bloomberg)

A reported Trump administration proposal to allow Medicare prescription drug plans and state Medicaid programs to pay for obesity drugs could be good news for Eli Lilly and Novo Nordisk, but it wouldn’t erase the problems caused by the high list prices the companies set on the drugs.

The Washington Post reported Friday that the Centers for Medicare and Medicaid Services is considering a plan that could allow Medicare drug plans and state Medicaid plans to opt in to covering Novo and Lilly’s GLP-1 drugs.

Medicare is currently barred by law from paying for drugs prescribed to treat obesity. Medicaid plans don’t need to cover obesity drugs, though some do. The details of the plan remain unclear.

Lilly shares were up 2.6%, and Novo’s American depositary receipt gained 2.2%, while the S&P 500 sagged in response to disappointing news about employment and President Donald Trump’s latest tariffs.

The specifics of the plan, and how it would interact with existing Medicaid and Medicare policies, weren’t detailed in the report. Asked for comment on the Washington Post article, a spokesman for the Department for Health and Human Services said that “CMS does not comment on potential models or coverage.”

The question of what it would mean to have Medicare pay for Lilly’s Zepbound and Novo’s Wegovy has long come down to cost, and there is nothing in the report about the plan that explains how the Trump administration would get around the issue.

While Wegovy and Zepbound are both highly effective, and could improve the health of the more than 100 million American adults with obesity, they are expensive. A year’s worth of Wegovy has a list price of more than $16,100.

The high prevalence of obesity in the U.S. has long led to two conflicting conclusions about the market for Wegovy and Zepbound: On the one hand, sales of the two medicines could be enormous. On the other, spending on the drugs could effectively break the healthcare system.

One widely cited paper published in the New England Journal of Medicine in 2023 estimated that if Medicare were to cover Wegovy for 10% of eligible patients, it would cost $26.8 billion per year. The Congressional Budget Office, in its own October 2024 report, said that Medicare coverage of weight-loss drugs would increase federal spending by $35 billion from 2026 through 2034.

Commercial insurers have so far dealt with the high cost of the obesity drugs by adding onerous requirements to limit how much they need to pay out. That has included restricting coverage of the medicines to the most obese patients.

Government payers have had an easier time. Medicare is barred by law from paying for weight-loss drugs, and state Medicaid plans can opt out of paying for them.

Today, roughly a dozen Medicaid plans pay for Wegovy or Zepbound. Medicare doesn’t pay for Zepbound or Wegovy when prescribed as weight-loss medicines, though it does pay for the versions of the drugs approved to treat Type 2 diabetes. Medicare can also pay for Zepbound when prescribed to treat sleep apnea, and for Wegovy when prescribed to reduce the risk of heart attack and stroke in certain patients.

For obese or overweight patients on Medicare who can’t get the medicines prescribed for other conditions, the only choice has been to pay cash themselves, or to go to one of the telehealth storefronts selling knockoff versions made by compounding pharmacies.

The new plan described by the Washington Post could change that.

It isn’t the first such effort. A bill that would allow Medicare to pay for weight-loss drugs has been stalled in Congress for years. In late 2024, the Biden administration proposed a reinterpretation of federal law that would have allowed Medicare to pay for obesity drugs, and required Medicaid to pay for them. The Trump administration dropped that proposal in April.

The question now is whether the new Trump plan will move forward, and what it would mean for health spending. Investors seem skeptical: Friday’s moves in the stock market were modest, given the magnitude of the potential policy change.

Shares of Hims & Hers Health, which sells compounded GLP-1 drugs to cash-paying patients, were down 5.6% Friday. Medicare patients who can’t get coverage for the branded medicines are likely an important market for Hims’ obesity medicines; expanded Medicare coverage for the weight loss drugs would be a drag on Hims’ sales.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com