Eli Lilly (LLY) and Novo Nordisk (NVO) shares rose Tuesday after the Biden administration proposed expanding coverage of the companies' popular weight-loss drugs in government-backed healthcare plans including Medicare and Medicaid.
Current rules limit weight-loss drugs from being covered by the programs, and the proposed changes would classify drugs like Ozempic and Mounjaro as medications to treat obesity, with the reasoning that it can cause ailments like diabetes and heart disease, which are covered under the rules.
Changing the classification would make the popular drugs available to millions of new patients across the U.S. starting in 2026, and raise costs for government healthcare programs. Over a 10-year period, the Centers for Medicaid and Medicare Services (CMS) estimates that the change would cost $24.8 billion for Medicare and $14.8 billion for Medicaid.
The CMS said it is proposing the change because of the growing consensus that obesity is a chronic health condition, and the health risks presented by the other issues obesity can cause. The proposal will be opened to public commentary for medical professionals to give their opinions to lawmakers on the proposal, the New York Times reported Tuesday.
The White House said the rule could reduce costs of the drugs, which can run over $1,000 for a month's supply, by up to 95%. Officials said they also expect prices of the drugs to decline over time as more drugs enter the space and competition increases, the Times reported.
Eli Lilly shares were up close to 6% in intraday trading Tuesday following the news, while Novo Nordisk's U.S.-listed shares rose 2%.
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