Eli Lilly Faces Setback as CVS Drops Zepbound Coverage

Eli Lilly’s obesity drug Zepbound loses CVS coverage, raising concerns over sales momentum as competition with Novo Nordisk’s Wegovy intensifies.

Eli Lilly Faces Fresh Hurdles as CVS Cuts Zepbound from Coverage: Can Market Dominance Hold?

In a surprising turn for Eli Lilly, one of the world’s most valuable healthcare companies, the pharmaceutical giant found itself under pressure Thursday after CVS Health announced plans to remove coverage for its flagship obesity drug, Zepbound, from select insurance formularies. Despite Lilly’s efforts to downplay the news, the company’s stock slid nearly 10%, signaling investor jitters over whether its market momentum in the booming weight-loss sector might slow.

At the heart of the controversy lies a high-stakes battle in the global obesity drug market—a sector projected to soar beyond $150 billion annually by the next decade. Eli Lilly, already riding high on strong demand for Zepbound, now faces a direct pricing challenge from its Danish rival, Novo Nordisk, maker of Wegovy. With CVS opting to continue coverage for Wegovy while excluding Zepbound starting July 1, questions are mounting about how the shake-up will affect patient access, prescribing trends, and, crucially, Lilly’s bottom line.

Why CVS Dropped Zepbound—and What It Means

The decision by CVS’s pharmacy benefit management (PBM) arm, the largest PBM in the U.S., was driven by pricing negotiations. CVS secured more favorable terms from Novo Nordisk, prompting it to favor Wegovy on its reimbursement lists. For patients, this move could limit treatment choices, while for Lilly, it signals potential hurdles in maintaining prescription growth.

Dave Ricks, Lilly’s CEO, struck a cautious yet optimistic tone. “It seems like the wrong idea to reduce choice,” Ricks told reporters, noting that most customers affected would be smaller employers who traditionally don’t cover obesity drugs anyway. “We’ll be watching closely to see how the market responds.”

But even as Lilly worked to reassure stakeholders, the market’s response was swift—and sharp. Shares tumbled as investors worried the CVS move could trigger a domino effect across other PBMs, potentially weakening Zepbound’s impressive sales trajectory.

Zepbound vs. Wegovy: A Fierce Rivalry

Until now, Zepbound had enjoyed remarkable momentum. In the week ending April 18, it logged nearly 339,000 prescriptions in the U.S., outpacing Wegovy by more than 127,000 scripts, according to IQVIA data. That translated into a commanding market share—53.3% by Lilly’s estimate, with some analysts placing it closer to 62%.

This rapid uptake came despite earlier supply constraints for Novo’s Wegovy, which U.S. regulators only officially declared resolved in February. While Wegovy’s weekly prescription numbers have since plateaued, Zepbound had surged ahead, raising investor hopes that Lilly would solidify its dominance in the GLP-1 receptor agonist space.

Analysts, however, caution that CVS’s decision could temper that growth. “This will hurt Zepbound’s momentum, no doubt,” said David Risinger, a healthcare analyst at Leerink Partners. “But Lilly’s clinical data and market share leadership aren’t going away. I expect them to deepen relationships with other PBMs.”

Investor Perspectives: A Temporary Headwind or a Lasting Blow?

While Thursday’s stock dip reflected immediate market anxiety, some investors argue the reaction was overblown. Daniel Barasa, a portfolio manager at Gabelli Funds, pointed out that many large employers manage their own drug coverage independently from PBMs like CVS. “I don’t see a material dent in Zepbound’s long-term sales outlook,” Barasa said. “Doctors and patients still see Zepbound as the more effective option.”

Indeed, Eli Lilly’s first-quarter results underscored that demand remains strong. Despite trimming Zepbound’s price earlier this year to counter competition from compounding pharmacies and Novo, the drug still delivered $2.31 billion in sales for the quarter—just shy of analyst estimates of $2.33 billion. Overall, Lilly’s revenue beat Wall Street expectations, hitting $12.73 billion for the period.

Pricing Wars Heat Up as PBMs Play Kingmaker

At the core of the battle is a familiar pharmaceutical industry dynamic: PBMs wield enormous influence over which drugs get prioritized on insurance formularies. By negotiating steep discounts in exchange for preferred placement, PBMs can effectively make or break a drug’s commercial success.

For Lilly, securing inclusion on key PBM lists is critical. CVS’s pivot toward Wegovy raises fears that other PBMs—like UnitedHealth’s OptumRx or Cigna’s Express Scripts—could follow suit. Both companies declined to comment when asked if they were considering similar changes.

Meanwhile, CVS’s own leadership acknowledged that price wasn’t the only factor in play. “I’m not sure the negotiated price will automatically lead to more plans covering weight-loss drugs,” CVS CEO David Joyner admitted in an interview. “But by lowering the cost, we can certainly attract more clients into offering the benefit.”

The Bigger Picture: A Market Still in Expansion Mode

Despite the headwinds, analysts maintain a bullish long-term outlook for both Zepbound and Wegovy. According to LSEG data, combined annual sales of the two drugs are forecast to surpass $20 billion by 2029. With obesity affecting over 40% of U.S. adults, demand for effective weight-loss treatments is unlikely to wane anytime soon.

Lilly’s other flagship product, Mounjaro—approved for diabetes but also prescribed off-label for weight loss internationally—continued to post strong numbers, bringing in $3.84 billion in quarterly sales and exceeding analyst estimates.

However, the company did issue a slight downward revision to its full-year profit forecast, citing deal-related charges. Lilly now expects adjusted earnings between $20.78 and $22.28 per share, down from its earlier estimate of $22.50 to $24.00.

Navigating a Shifting Landscape

Eli Lilly’s tussle with CVS marks the latest chapter in a rapidly evolving obesity drug market where pricing power, access, and physician preferences intersect in complex ways. While Thursday’s selloff reflects legitimate concerns over near-term access disruptions, the fundamental demand drivers for GLP-1 weight-loss therapies remain intact.

The key question now is whether other PBMs will follow CVS’s lead—or whether Lilly can shore up its partnerships and pricing to maintain its competitive edge. Either way, the battle for obesity drug supremacy is far from over, and the stakes—both financial and clinical—couldn’t be higher.

As employers, insurers, and policymakers grapple with the broader implications of covering expensive yet highly effective weight-loss drugs, patients could ultimately find themselves at the center of a shifting tug-of-war over cost, access, and choice.

Source:  (Reuters)

(Disclaimer:  This article is for informational purposes only and does not constitute medical, financial, or investment advice. Readers should consult with healthcare professionals or financial advisors regarding individual circumstances.)

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