Joe Biden's term as President of the United States is set to end on January 20, 2025. In his rest of his time, his administration proposed a new rule to mitigate the obesity epidemic that hit the U.S. by expanding the coverage of weight-loss drugs Ozempic and Mounjaro under Medicare and Medicaid.
Ozempic is manufactured by Novo Nordisk (NOVO B), while Mounjaro is manufactured by Eli Lilly (LLY, Financial).
The proposed rule successfully lifted the prices of both stocks on Tuesday. The proposal was aimed to make the meds more accessible for millions of obese Americans. The CDC data shows that at least one of five adults in every state is living with obesity.
About the Meds
Ozempic and Mounjaro are both injectable medications used to treat type 2 diabetes. Lose weight is a preliminary symptom for people with type 2 diabetes as body become resistant to insulin so the glucose cannot be used as a good energy resource. But some of the patients retain their weight or even gain weight due to several factors and here are the medications play the role.
Ozempic works by increasing insulin production and reducing appetite while at the same time slowing stomach emptying. Similarly, Mounjaro works by enhancing insulin release and helps regulate blood sugar levels more
comprehensively leading to weight loss.
The Coverage
The proposal suggested Medicare and Medicaid cover these weight-loss drugs to lower the cost that can be as high as $1,000 per month without insurance.
The Implications
The Centers for Medicaid and Medicare Services estimated that the proposal could cost the U.S. taxpayers $24.8 billion for Medicare and $14.8 billion for Medicaid in the course of next 10 years.
For Novo Nordisk and Eli Lily, if the proposed rules are approved the sales volume would definitely much higher but the profits of both companies are likely to be slashed. The government is looking ways to reduce the cost to make the drugs more accessible, the negotiation of bulk buying by the government would potentially lower the price of the meds.
The proposal gained strong supports from many parties, but the final approval is still not guaranteed. The proposal is still in preliminary step of multiple steps to be approved by the authorities, not to mention the revisions, and potential legal challenges.
