‘We Don’t Believe This Is Right’: Lilly Bristles as CMS Leaves Obesity Drugs Out of Medicare

Eli Lilly has criticized the Centers for Medicare and Medicaid Services (CMS) for its decision to exclude anti-obesity medications like Zepbound and Novo Nordisk’s Wegovy from Medicare Part D coverage starting in 2026, arguing that this restricts patient access and undermines healthcare providers' treatment decisions. Lilly highlights that Medicare's long-standing refusal to cover weight-loss drugs, coupled with limited Medicaid coverage, disrupts care for obesity and related conditions. While the CMS acknowledges the potential for future policy changes based on cost-benefit analysis, the Congressional Budget Office estimates that covering these drugs could cost Medicare $35 billion from 2026 to 2034 with limited offsetting savings.

Analysis

Eli Lilly has publicly criticized the Centers for Medicare and Medicaid Services (CMS) for its decision to exclude anti-obesity medications, such as Lilly's Zepbound and Novo Nordisk's Wegovy, from Medicare Part D coverage in its final ruling for 2026, a decision carrying a moderately negative sentiment (-0.5 overall; -0.6 for LLY and NVO specifically) and an uncertain market tone. Lilly contends this move, effective January 1, 2026, restricts patient access to appropriate medical care and allows coverage decisions to dictate healthcare management for obesity, highlighting that Medicare's historical refusal to cover drugs explicitly for weight-loss, alongside limited Medicaid coverage, disrupts care for obesity and related conditions like sleep apnea. Drug manufacturers have previously sought approvals for alternative indications to gain coverage, such as Zepbound for obstructive sleep apnea, which CMS did cover. While a November 2024 Biden administration proposal aimed to facilitate Medicare coverage for anti-obesity treatments by recognizing obesity as a chronic disease, the recent CMS ruling maintains the exclusion, citing the need to evaluate the cost-benefit balance. CMS has indicated it 'may consider future policy options,' but the financial implications are substantial: a Congressional Budget Office report from October 2024 estimated Medicare coverage for these drugs could cost approximately $35 billion between 2026 and 2034, with projected offsetting health savings being 'small,' a key factor underpinning CMS's current cautious stance.

Key Decisions for Investors

• Investors in Eli Lilly and Novo Nordisk should closely monitor future CMS pronouncements and any evolving cost-benefit analyses regarding anti-obesity medications, as these will be critical determinants for Medicare market access.
• The current exclusion from Medicare Part D coverage for 2026 presents a material headwind to the full market potential of Zepbound and Wegovy, potentially impacting revenue growth forecasts in the medium term if the policy remains unchanged.
• Given the Congressional Budget Office's significant cost projections ($35 billion from 2026-2034) for coverage and its assessment of 'small' offsetting savings, the path to widespread Medicare reimbursement for these therapies may be protracted, warranting a cautious outlook on the pace of adoption within this specific patient segment.