Why NVO and LLY Are Dropping Today

The shares of Danish weight-loss drug maker Novo Nordisk (NVO) are retreating 5% today, while Eli Lilly (LLY), which makes a similar treatment, is giving back 2.5%.

Medicare Selected Novo’s Weight-Loss Drugs for Price Negotiations

Novo’s Ozempic and Wegovy drugs have been selected for potential Medicare price negotiations, the Center for Medicare and Medicaid Services disclosed today. Price reductions resulting from the process would take effect in 2027. Both drugs are used as treatments for diabetes and obesity.

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In order to keep the treatments covered by Medicare, Novo will either have to take part in the talks or pay a large tax. It must make that call by Feb. 28.

Medicare spent more than $14 billion on Novo’s weight-loss drugs in the fiscal year that ended last October.

The Biden administration has said that the last round of talks lowered the amount that Medicare paid for some drugs by 40% to 80% versus their official prices.

Novo has launched a lawsuit against Medicare’s negotiation of drug prices. The practice was established by the 2022 Inflation Reduction Act.

LLY Appears to Fall in Sympathy

LLY, which sells its own weight loss drug, Zepbound, seems to be falling in sympathy with NVO today. Investors may believe that Zepbound’s prices will also have to eventually be negotiated with Medicare.

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Disclosure: None. This article is originally published at Insider Monkey.