US plans to test Medicare, Medicaid coverage for weight-loss drugs, Washington Post reports

The Trump administration is reportedly considering a five-year pilot program to cover expensive weight-loss drugs like Wegovy, Ozempic, Zepbound, and Mounjaro under Medicare and Medicaid, signaling a significant policy shift from earlier rejections. This initiative, outlined in CMS documents, could expand access to over 135 million beneficiaries starting in 2026/2027, despite the drugs' high annual cost of $5,000-$7,000, which raises long-term affordability concerns. The news drove up shares of key drug manufacturers Eli Lilly (+2%) and Novo Nordisk (+1.2%), while telehealth platform Hims & Hers Health (-6%) declined on expectations of reduced demand for compounded alternatives.

Analysis

A potential five-year pilot program by the Trump administration to cover GLP-1 weight-loss drugs under Medicare and Medicaid marks a significant reversal in U.S. healthcare policy, signaling a major tailwind for manufacturers Eli Lilly and Novo Nordisk. This initiative could grant access to drugs like Wegovy and Zepbound for over 135 million beneficiaries, a vast market segment previously excluded from coverage for weight-loss indications. Despite the high annual cost of these therapies, estimated at $5,000 to $7,000, the proposal has driven immediate positive market reaction, with Eli Lilly's shares rising over 2% and Novo Nordisk's up 1.2%. Conversely, the news represents a direct competitive threat to companies like Hims & Hers Health, whose stock fell 6% on the prospect that government coverage for branded drugs would erode demand for its compounded alternatives. The proposed timelines, with a Medicaid pilot in April 2026 and Medicare in January 2027, suggest a long-term catalyst, but the move underscores a fundamental shift in viewing obesity as a treatable chronic disease with insured medical solutions.

Key Decisions for Investors

• Investors should recognize the material long-term upside for Eli Lilly (LLY) and Novo Nordisk (NVO), as the proposed pilot program could vastly expand their addressable market to over 135 million government-insured individuals, potentially justifying a re-rating of their long-term growth forecasts.
• Positions in companies reliant on compounded GLP-1s, such as Hims & Hers Health (HIMS), face a significant headwind, and the viability of this business model should be reassessed if branded, government-reimbursed drugs become widely accessible.
• It is critical to monitor for official confirmation and details from the Centers for Medicare & Medicaid Services, as the program remains a proposal with a distant 2026-2027 timeline and faces considerable fiscal and political hurdles that could alter the outcome.