Few drugs have generated as much excitement as Novo Nordisk‘s (NVO -5.27%) Ozempic and Wegovy. The U.S. Food and Drug Administration (FDA) approved Ozempic in December 2017 for treating type 2 diabetes. The drug’s ability to help people lose weight caused demand to skyrocket. In June 2021, Novo Nordisk won FDA approval for Ozempic’s sibling, Wegovy, both of which share the same active ingredient (semaglutide), as a treatment for chronic weight management.
The rest, as they say, is history. Ozempic and Wegovy are now two of the biggest blockbuster drugs on the market. The two drugs are Novo Nordisk’s top growth drivers, and together comprise over 60% of its total revenue.
However, the Centers for Medicare and Medicaid Services (CMS) could soon throw a monkey wrench into Novo Nordisk’s momentum. The agency announced last week that Ozempic and Wegovy, along with Novo’s other semaglutide GLP-1 diabetes drug Rybelsus, are at the top of its list for 2027 Medicare drug price negotiations. Will Medicare end Novo Nordisk’s obesity drug boom?
Behind Medicare’s latest move
It’s not surprising that CMS chose Ozempic, Wegovy, and Rybelsus for Medicare drug price negotiations. Between November 2023 and October 2024, the Medicare Part D prescription drug program paid a whopping $14.4 billion on the three drugs.
The Inflation Reduction Act (IRA) of 2022 empowered Medicare to directly negotiate with pharmaceutical companies to try to secure lower prices for specific high-cost drugs that don’t have generic or biosimilar competition. CMS included 10 drugs on its 2026 list and added another 15 (Ozempic, Wegovy, and Rybelsus are counted as one drug) for 2027.
2026 is the first year Medicare could select Novo Nordisk’s semaglutide products for price negotiation. One of the criteria laid out in the IRA legislation was that drugs must have been approved by the FDA at least seven years earlier (or 11 years for biologics).
CMS will conduct negotiations with drugmakers later this year. The agency will send its final offer on drug prices by Oct. 15, 2025. Drugmakers must accept or reject the final offer by Oct. 31, 2025. CMS will publish the agreed-upon drug prices by Nov. 30, 2025, with the new prices taking effect on Jan. 1, 2027.
How the change could impact Novo Nordisk
The amount Medicare spent on Ozempic, Wegovy, and Rybelsus between November 2023 and October 2024 represents roughly 36% of Wall Street’s consensus estimate for Novo Nordisk’s total revenue in 2024. A significant price cut as a result of Medicare negotiations could hurt the company’s growth prospects.
Investors reacted negatively to the Medicare news on Friday. Novo Nordisk’s stock tumbled more than 5%. This sell-off wiped around $19.5 billion off the big drugmaker’s market cap.
Just how much Medicare price negotiations will negatively impact Novo Nordisk, though, depends on what the final negotiated prices for Ozempic, Wegovy, and Rybelsus will be. In Medicare’s negotiations for 2026, the new prices achieved an average of 22% savings.
How might Medicare price negotiations impact Novo Nordisk’s battle in the marketplace with Eli Lilly? Lilly’s type 2 diabetes drug Mounjaro and obesity drug Zepbound aren’t eligible for Medicare price negotiations yet. However, if Lilly doesn’t lower its prices to be competitive with Novo Nordisk’s negotiated prices, Novo could capture greater market share and partially offset the lower revenue from Medicare.
Why Novo Nordisk investors shouldn’t worry
Medicare drug price negotiations hold the potential to disrupt Novo Nordisk’s momentum to some extent. I don’t think investors should worry too much, though.
Novo Nordisk’s opportunity for Ozempic, Wegovy, and Rybselsus remains huge. The sales of these drugs will almost certainly grow, even if Medicare exacts steep price cuts. Novo also could have other diabetes and obesity drugs on the way, notably including late-stage candidate CagriSema.
Also, President Trump has promised to repeal the IRA — primarily because he disagrees with its clean energy and climate components. If he succeeds in fulfilling this pledge, Medicare price negotiations could go away altogether.
