Eli Lilly and Company (LLY) saw its shares surge on Tuesday, fueled by the Biden-Harris Administration’s announcement of a new rule dramatically expanding access to anti-obesity medications for Medicare and Medicaid beneficiaries. This significant policy shift is expected to have a substantial impact on the pharmaceutical giant and the broader healthcare landscape.
The proposed rule aims to significantly reduce out-of-pocket costs for eligible individuals. The White House stated that Medicare coverage could slash these costs by as much as 95% for some enrollees. Furthermore, an estimated 4 million Medicaid recipients would gain access to these life-altering medications for the first time. This proactive measure is a cornerstone of the Biden-Harris Administration’s comprehensive national strategy targeting hunger, nutrition, and health, with a specific focus on combating diet-related diseases like obesity.
This initiative is particularly relevant to Eli Lilly, a leading player in the burgeoning anti-obesity drug market. The company’s blockbuster drug, Mounjaro, and its recently launched Zepbound have been instrumental in driving growth. While the company reported that third-quarter sales of Mounjaro and Zepbound were temporarily impacted by inventory adjustments in the wholesaler channel, this new policy offers a powerful catalyst for future sales growth. Zepbound alone generated a remarkable $1.26 billion in revenue for Eli Lilly during the most recent quarter, showcasing the significant market potential. The high cost of these medications, often nearing $1,000 per month without insurance, has previously been a barrier for many patients.
The Biden administration’s strategy recognizes the multi-faceted nature of obesity, emphasizing the importance of a comprehensive approach. This includes not only expanding access to medication but also providing access to nutritious foods, obesity counseling, and other crucial nutrition-related services through Medicare and Medicaid. The White House underscored this approach by stating, “Obesity is a multi-faceted disease and we need to work on all levels from prevention to treatment to address this persistent challenge.” The expanded access afforded by the proposed rule is a major step toward achieving these goals.
The market reacted swiftly to this news. Eli Lilly’s stock price experienced a significant increase, rising 3.58% to $782.00 per share by the close of trading on Tuesday. This surge reflects investor confidence in the potential for substantially increased demand for Eli Lilly’s anti-obesity medications, driven by the greatly improved affordability facilitated by the proposed policy changes. The long-term impact of this policy on Eli Lilly and the broader fight against obesity remains to be seen, but the immediate market response suggests a significant positive outlook for the company’s future growth.
