Novo Nordisk and Eli Lilly Stocks Drop After Biden Calls for Lower Drug Prices

Novo Nordisk

Shares of Novo Nordisk A/S (NYSE:NVO) and Eli Lilly & Co. (NYSE:LLY) declined on Tuesday after President Joe Biden urged them to lower the prices of their popular weight loss and diabetes medications. Biden, in collaboration with Vermont Senator Bernie Sanders, criticized the companies in an editorial published in USA Today, accusing them of charging “unconscionably high prices” compared to other countries.

“If pharmaceutical companies refuse to substantially lower prescription drug prices in our country and end their greed, we will do everything within our power to end it for them,” Biden and Sanders wrote.

Market Reaction and Industry Impact

Novo Nordisk’s shares fell as much as 3.7% in Copenhagen, while Eli Lilly’s shares dropped by 3.9% at the opening of the New York market. Neither company has responded to the comments.

The market for these injectable medications, particularly in combating obesity, is expected to reach $130 billion annually by the end of the decade. Companies such as Pfizer Inc. (NYSE:PFE), AstraZeneca Plc (NASDAQ:AZN), Amgen Inc. (NASDAQ:AMGN), and smaller biotech firms are actively developing competing products.

Analysts’ Perspectives

Mizuho analyst Jared Holz suggested that Biden’s comments may be an attempt to appeal to certain voters. He noted that given the benefits of these drugs in treating diabetes, heart disease, and other conditions, the current price of around $1,000 per month “actually seems very inexpensive.”

Novo Nordisk has attributed the high list prices of its drugs Ozempic and Wegovy in the US to systemic issues, expressing willingness to collaborate with lawmakers to address these concerns. In May, the company indicated its preparedness to work with legislators in a letter to Sanders. CEO Lars Fruergaard Jorgensen is scheduled to testify before a Senate committee chaired by Sanders in September to discuss the drugs’ pricing.

Future Outlook for Drug Pricing

Novo Nordisk anticipates increasing discounts on both drugs, especially as more insurers cover Wegovy. While Lilly has faced less scrutiny compared to Novo, it remains under the spotlight as the market for obesity and diabetes treatments continues to expand.

Optimism about soaring sales of Novo Nordisk’s Wegovy for obesity and Ozempic for diabetes has driven its market capitalization beyond $600 billion this year, making it Europe’s most valuable listed company. The stock has risen more than 80% over the past year and has quintupled since the start of 2020.