Novo's Ozempic, Wegovy targeted for medicare price cuts

The U.S. plans to slash the price it pays for the Novo Nordisk A/S blockbusters Ozempic and Wegovy, the latest drugs to be targeted under legislation that's expected to save the government more than $200 billion over a decade. 

Novo's treatments for obesity and diabetes headline the government's list of medicines that will be subject to price negotiations over the next year as part of a Biden administration effort to reduce drug costs for the Medicare health program for seniors.

Novo's American depositary receipts briefly fell as much as 4.2% in premarket U.S. trading.

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With list prices of about $1,000 a month, Novo's treatments are among the biggest products in pharmaceutical history, bringing in nearly $30 billion a year. Their prices have brought Congressional scrutiny. Sales to Medicare, the U.S. health program for seniors, account for about 10% of Novo's annual revenue, according to an analysis by Leerink Partners. 

The negotiated price, set to take effect in 2027, could have a marked impact on Novo's business. The last round of IRA negotiations gave Medicare an average 22% price reduction for affected drugs. Novo's diabetes drug Rybelsus, which has the same main ingredient as Ozempic, is also on the government's list.

A spokesperson for Novo said the company "remains opposed to governments price setting through the IRA and has significant concerns about how the law is being implemented by this administration," like including three drugs at the same time because they all have the same main ingredient.

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Eli Lilly competing Mounjaro and Zepbound won't be eligible for negotiation until 2029 at the earliest. However, price changes for Novo's drugs could affect others in the same class. 

Lilly's shares were little changed early Friday.

Drugmakers have fought the negotiations with suits and claims that the lower prices deplete them of incentives to develop new drugs. Bloomberg News reported earlier this week that a group of companies, including Lilly, are asking for a pause in the negotiations. 

The announcement was released weeks ahead of a Feb. 1 deadline as President Joe Biden looks to claim a parting political victory before President-elect Donald Trump's inauguration. Other drugs up for 2027 price decreases also include cancer drugs Ibrance, made by Pfizer Inc., Xtandi, made by Pfizer and Astellas, Pomalyst, made by Bristol Myers Squibb, and the psoriasis drug Otezla, made by Amgen.

Pfizer said in a statement that the negotiation process discourages the development of new medicines. The company said it will work to protect patients' access to Ibrance.

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Representatives for Amgen, Bristol Myers and Astellas were not immediately available to comment. 

The price-cutting talks are part of Biden's signature Inflation Reduction Act. Ten drugs were designated for price negotiations last year, and the law is estimated to save the government $237 billion over a decade as more join the list.

The newly added drugs made up 14% of Medicare Part D drug spending, or $41 billion, between November 2023 and October 2024, according to the government.