CVS Health Opts Out of Medicare Obesity Drug Coverage, Eli Lilly and Novo Nordisk Shares Drop
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1 day ago
0mins
Shares of Eli Lillyand Novo Nordiskare under pressure on Tuesday after CVS Healthannounced the company's decision regarding Medicare obesity drug coverage. According to a company spokesperson quoted by Bloomberg News, "CVS Health opted out of the Medicare obesity drug coverage model."OPTING OUT:CVS Health said it is steering clear of Medicare's obesity drug coverage model. The company told Bloomberg News that it had "opted out," a stance that pushed the two biggest players in the space – Eli Lilly and Novo Nordisk – into negative territory in morning trading.CHALLENGES:Asked on UnitedHealth'searnings call about the company's plans to participate in the BALANCE Model for GLP-1s and its anticipation of whether the industry thresholds for participation will be met, Bobby Hunter, UnitedHealth's chief of government programs, stated in part, "As it relates to your question about the BALANCE Model, we've been in good active dialogue with both CMS and CMMI on that front. We'd like to find a path to yes there on coverage over time, but there are some notable challenges and outstanding questions with the currently planned structure. We're still working through that process internally, and we look forward to continuing the dialogue with CMS. We've provided some specific recommendations that we believe would serve all stakeholders really well."Medicare insurers had until April 20 to tell the government whether they would participate in the plan to add coverage for weight-loss drugs from Eli Lilly and Novo Nordisk in 2027 and if the Centers for Medicare and Medicaid Services doesn't get most insurers to sign up, the program can't go forward, the agency has said.PRICE ACTION:Shares of Eli Lilly and Novo Nordisk are trading lower on Tuesday by 3% and 4%, respectively.
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Analyst Views on LLY
Wall Street analysts forecast LLY stock price to rise
20 Analyst Rating
18 Buy
2 Hold
0 Sell
Strong Buy
Current: 921.480
Low
950.00
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1192
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Current: 921.480
Low
950.00
Averages
1192
High
1500
About LLY
Eli Lilly and Company is a medicine company, which discovers, develops, manufactures, and market products in a single business segment called human pharmaceutical products. The Company manufacture and distribute its products through facilities in the United States, including Puerto Rico, and in Europe and Asia. The Company’s products are sold in approximately 90 countries. Its Cardiometabolic Health products Basaglar; Humalog, Humalog Mix 75/25, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, and others; Humulin, Humulin 70/30, and others; Jardiance; Mounjaro; Trulicity; Zepbound, and others. Its oncology products include Cyramza, Erbitux, Tyvyt, Verzenio, Retevmo, Jaypirca, and others. Its immunology products include Ebglyss, Olumiant, Omvoh, and Taltz. Its neuroscience products include Emgality and Kisunla. Its LillyDirect, a direct-to-patient digital health care platform, provides delivery of select Lilly medicines dispensed by third-party pharmacies to patients.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- FDA Drug Approvals: The U.S. FDA approved 50 new drugs in 2024 and 46 in 2025, including the first drug class termed 'longevity therapeutics', highlighting a rapid transformation in the biopharmaceutical industry that is driving market demand.
- Avaí Bio's Strategic Shift: Avaí Bio completed its rebranding in February 2026, focusing on developing cellular therapies for diabetes and age-related diseases, leveraging genetically engineered cells and protective encapsulation technology to accelerate progress towards functional cures.
- Aging Population Drives Demand: Adults aged 60 and older represent 17% of the U.S. population but account for 37% of healthcare spending, with the global 60+ population expected to reach 1.4 billion by 2030, underscoring the urgent need for anti-aging treatments.
See More
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- FDA Drug Approvals: The U.S. FDA approved 50 new drugs in 2024 and 46 in 2025, including GLP-1 receptor agonists, recognized as the first class of 'longevity therapeutics,' marking significant advancements in the biopharmaceutical industry.
- Avaí Bio's Strategic Shift: Avaí Bio completed its rebranding in February 2026, focusing on developing cellular therapies for diabetes and age-related diseases, leveraging genetically engineered cell lines and protective encapsulation technologies to accelerate progress toward functional cures.
- Aging Population Drives Demand: Adults aged 60 and older represent 17% of the U.S. population but account for 37% of healthcare spending, with the global 60+ population expected to reach 1.4 billion by 2030, highlighting strong market demand for anti-aging therapies.
See More
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- Significant Market Potential: According to Dexcom, over nine million patients in the U.S. eligible for third-party coverage are not using CGM devices, indicating a substantial untapped market that could significantly boost the company's revenue in the future.
- Clear Technological Advantage: Dexcom's CGM devices offer real-time monitoring capabilities that improve health outcomes for diabetes patients, and as GLP-1 weight-loss drugs gain popularity, the demand for CGMs is expected to rise, enhancing Dexcom's market position.
- High Competitive Barriers: Dexcom has established a strong competitive advantage, with many third-party companies developing devices compatible with its technology, and as its installed base grows, it attracts more patients into its ecosystem, creating a favorable network effect that further solidifies its market leadership.
- Promising Future Growth: Dexcom has seen substantial financial improvement over the past decade, and with the increasing adoption of CGM technology and expansion into new markets, the company is well-positioned to deliver strong returns over the next decade, capitalizing on vast market opportunities.
See More
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- Vast Market Potential: Dexcom's continuous glucose monitoring devices are poised to benefit from the rapid growth of the weight loss drug market, which is expected to attract more diabetes patients to its products, thereby expanding its addressable market and enhancing revenue potential.
- Strong Competitive Advantage: Dexcom has established a robust competitive moat in the medical device sector, with many third-party companies developing devices compatible with its technology, creating a network effect that further enhances its market appeal.
- User Growth Trend: Research indicates that CGM usage grows faster among GLP-1 drug users compared to non-therapy users, suggesting that the proliferation of weight loss drugs will drive demand for Dexcom's products, boosting company performance.
- Underpenetrated Market: In the U.S., over nine million patients eligible for third-party coverage are not using CGM devices, providing Dexcom with opportunities to further expand its market share by entering new territories and launching its over-the-counter product, Stelo.
See More
Three Healthcare Stocks with Durable Competitive Moats
- Eli Lilly's Market Edge: Eli Lilly (LLY) solidifies its market share with popular weight loss drugs like Mounjaro and Zepbound, while the recent approval of the oral weight loss drug Foundayo is expected to drive future earnings growth.
- Vertex Pharmaceuticals' Patent Protection: Vertex Pharmaceuticals (VRTX) leads globally in cystic fibrosis drugs, with patent protection extending into the late 2030s, and ongoing innovation positions it for strong profitability and potential new product launches.
- Intuitive Surgical's Robotic Surgery Dominance: Intuitive Surgical (ISRG) maintains a dominant position with its Da Vinci surgical robots, as hospitals investing in these high-cost devices are likely to continue using them, reinforcing its market position.
- Training Advantage in the Industry: Most surgeons are trained on the Da Vinci system, creating a familiarity that leads hospitals to prefer this platform, thereby strengthening Intuitive Surgical's competitive moat.
See More
Company Moats Support Earnings Growth
- Importance of Moats: Company moats, such as brand strength and patent portfolios, help firms maintain competitive advantages, thereby supporting future earnings growth and attracting investor interest.
- Eli Lilly's Competitive Edge: Eli Lilly's weight loss drugs like Mounjaro and Zepbound benefit from strong physician trust and patient satisfaction, creating a robust market moat, with patent protection extending to 2036, ensuring long-term profitability.
- Vertex Pharmaceuticals' Innovation: Vertex Pharmaceuticals leads in cystic fibrosis drugs, with patent protection lasting into the late 2030s, and its collaboration with Moderna on mRNA therapies could further solidify its market position, potentially treating the entire CF population.
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See More
