ZACKS·2025-04-07 14:47Core Insights - The Centers for Medicare & Medicaid Services (CMS) did not finalize coverage for obesity drugs like Eli Lilly's Zepbound and Novo Nordisk's Wegovy under Medicare Part D, meaning Medicare will not cover the costs of these weight-loss medications [1][2] - The decision led to a decline in stock prices for Eli Lilly and Novo Nordisk, with shares dropping 6.5% and 6.8% respectively on the announcement day [2] - Year-to-date performance shows Eli Lilly's stock down 4.2% and Novo Nordisk's stock down 26.4%, compared to a 4.8% decrease in the industry [2] Medicare Coverage Context - Currently, Medicare does not cover Zepbound and Wegovy when prescribed solely for weight loss, as obesity is not classified as a disease and these drugs are seen as cosmetic [4] - The Biden administration had proposed a rule to allow Medicare to cover GLP-1 drugs due to their effectiveness in weight loss and metabolic improvements [4] - Medicare does cover these drugs when prescribed for cardiovascular indications, such as reducing heart attacks and strokes [5] Industry Competition and Challenges - The pharmaceutical sector is facing pressure from uncertainties related to potential tariffs and the shift of drug production back to the U.S., which could increase drug prices and affect profit margins [7][8] - Competition in the weight-loss market is intensifying, with companies like Amgen and Viking Therapeutics developing GLP-1-based candidates that could rival existing products from Eli Lilly and Novo Nordisk [9] - Amgen is set to begin a broad phase III program for its dual GIPR/GLP-1 receptor agonist, MariTide, in 2025, while Viking Therapeutics is developing VK2735 in both oral and subcutaneous forms [10]