Weight-loss drug wars heat up: Lilly and Novo slash prices to win market share

Key topics:CVS drops Lilly's Zepbound for Novo's Wegovy in rebate-driven dealTelehealth partnerships expand access with cheaper weight-loss optionsInvestors worry as pricing battles threaten drugmaker profit margins.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Robert Langreth, Madison Muller and Ike SwetlitzThe obesity drug price wars are finally starting. After being publicly lambasted for the high cost of their weight-loss shots, two of world’s biggest drugmakers — Eli Lilly & Co. and Novo Nordisk A/S — are racing to lock up deals with drug benefit managers that control which prescriptions many Americans get and popular telehealth companies that sell directly to consumers. Investors are worried about how low prices will go.It’s not the first time the companies are facing off in the byzantine world of drug economics, where list prices often don’t reflect what the consumer pays or even how much the manufacturer makes. Novo’s starting off with a higher price. Its obesity drug Wegovy costs $1,349 for a month’s supply, while Lilly’s Zepbound is $1,086. Contrary to typical consumer economics, that higher price helps Novo compete by giving it more wiggle room to offer discounts. Known as “rebates,” these are the payments drugmakers offer to drug benefit managers in return for wider — or even exclusive — coverage by health plans.That quid pro quo showed up Thursday morning, when CVS Health Corp. dropped Lilly’s Zepbound from its list of preferred drugs in exchange for Novo providing undisclosed price concessions for its competing drug Wegovy that will make it more widely available. It was a step Novo took to boost sales of its medicine, which made it to the market first but was quickly losing share. What’s unclear is the extent of the rebates and their ultimate impact on the bottom lines.“A number of investors are concerned,” Bernstein analyst Courtney Breen told Lilly executives on the company’s quarterly earnings call Thursday morning, where the majority of questions focused on whether the company would fall behind. Lilly’s shares dropped 12%, while Novo’s closed up 2.1% in Denmark..The moves show the continuing power of drug plans like CVS’s Caremark to steer market share in hotly contested, competitive drug categories by snagging massive rebates in exchange for wider distribution. The exclusive nature of the deal with the pharmacy benefit manager is what’s so worrying to investors.“There are clearly some investor concerns about the PBM dynamic in obesity, given what we’ve seen in other big health-care markets in the past where PBMs pit two companies against each other,” Goldman Sachs analyst Asad Haider said on the Lilly call.Read more:.Novo’s insulin pen phase-out sparks CompCom probe as diabetes remains a silent killer among SA women.Shrinking RebatesThe company’s management said it’s been trying to move away from setting high list prices and paying bigger rebates to drug plans for preferential coverage. Instead, it’s trying to set list prices closer to what it expects the plans to pay for its drugs. “In the past, it was really about very high list prices and relatively deep discounts to leverage PBM access, and we have been very vocal about trying to move away from that,” Lilly Chief Executive Officer David Ricks said on the call. The company is disappointed with the decision, which “limits doctors’ choice and patient access,” it said in a statement. “We believe that maintaining the ability for doctors to choose the right medication for patients is crucial to ensure the best patient care.”The pharmacy benefit managers were initially hamstrung when it came to the weight-loss drugs, as shortages meant both companies could sell their entire output at premium prices. As the bottlenecks eased in recent months, new US prescriptions of Lilly’s Zepbound began to eclipse Novo’s Wegovy, according to data from Symphony Health. Novo’s deal with CVS aims to bolster its share of the market. JPMorgan analysts estimated in a note to clients that the CVS change could apply to as many as 26 million people.“Novo needs it more,” said Jeff Jonas, a portfolio manager at Gabelli Funds, which holds shares of both drugmakers and CVS. “They know that they’re losing share, they know that they’re becoming the smaller player,” he said. “They were more aggressive.” It’s impossible to know the exact value of the rebates CVS will be getting in its deal with Novo. Both companies declined to provide that information. Prices could fall further as the drug companies duke it out for access to patients.Rival ReduxLilly and Novo are longtime rivals in diabetes, where they’ve faced off on insulin pricing for decades. For years they charged increasingly higher list prices so they could offer bigger discounts to drug benefit managers like CVS, gaining wider distribution deals in exchange. But the tactic became toxic because patients with poor coverage or significant copays were saddled with high costs.That’s not stopping CVS. Now that the drugmakers have rectified the shortages, CVS’s Caremark unit is pitting one against the other to get the best prices for its members.“Caremark was able to do what PBMs do best: compete clinically similar products against one another, and choose the option that delivers the lowest net cost for our clients,” CVS’s Chief Executive Officer David Joyner told Bloomberg News. “I’m proud we could be first to market with a solution that drives greater affordability.”The cost of weight-loss drugs is one of the “biggest pain points” for companies that pay for prescription medicines, he said.Read more:. Novo Nordisk and Eli Lilly dominate the $150bn weight-loss drug market.When the brand name drugs were in shortage, telehealth companies sold cheaper copycat versions of the drugs under a provision of the law. When the shortages ended, US regulators cracked down on the practice and the compounded versions became harder to get. Lilly and Novo are now piggybacking on the popularity of the telehealth approach to sell the brand name drugs. Lilly moved first in selling directly to the public with its LillyDirect digital health-care platform announced in January 2024, and is now selling Zepbound vials at $349, less than half the price of the standard shots.Earlier this week, Novo reached a deal with Hims & Hers Health Inc., along with two other telehealth medicine providers, to sell a month’s supply of Wegovy starting at $499, before subscriptions fees. Lilly is working with WeightWatchers and other telehealth companies to offer Zepbound vials starting at the lower monthly $349 price.Flat RateNow consumers who want to walk into a pharmacy for the medicine can do that, too. Through its deal with Novo, CVS is offering cash-pay customers a flat price of $499 for Wegovy, a sign that the benefit managers may have learned from the insulin price controversies that they also need to offer discounts to people who don’t have insurance coverage.CVS pioneered the use of exclusive drug distribution deals more than a decade ago in order to get higher rebates from drug companies, said Troyen Brennan, who was chief medical officer of CVS until 2022. Insulin was one of the first drugs subjected to the exclusivity provisions, which were initially controversial and then widely adopted, he said.“It was a big move with a lot of patients affected, and it was really successful,” Brennan said. “The whole reason was to get higher rebates that were then passed on to the clients.”Drugmakers have long argued that high drug prices are the fault of middlemen like CVS, saying the rebate system drives up costs. Even the president is aware of the fight. “Every time I talk to him about drug prices, he sweet talks me,” President Donald Trump said, referring to Lilly’s Ricks, during a White House event they both attended this week. “He tells me about the middlemen. By the time I leave the meetings, I say, gee, he’s giving us a great bargain..© 2025 Bloomberg L.P.

Weight-loss drug wars heat up: Lilly and Novo slash prices to win market share

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