Eli Lilly's Zepbound Faces Coverage Challenges

Eli Lilly's stock price wavered on Thursday after a looming coverage challenge was detailed for its blockbuster weight-loss drug Zepbound. The issue stems from CVS Health's decision to exclude Zepbound from its standard formulary, replacing it with rival Novo Nordisk's Wegovy and Saxenda.

As of July 1, the preferred options on CVS Health's list of covered drugs will be Wegovy and Saxenda, making it more difficult for patients who rely on these medications to access them. Employers and insurers use this formulary to decide which drugs receive coverage, leaving room for customization to include Zepbound.

However, most employers opt for the standard formulary due to the discounts negotiated for them, according to CVS Health spokesman David Whitrap. He noted that patients taking Zepbound will be able to switch to Wegovy if their coverage excludes Lilly's drug.

In a bid to make these medications more accessible, CVS Health announced that it will start selling Wegovy at a discounted price of about $500 monthly at thousands of drugstores for people without coverage. This move follows Novo's announcement last month of its new lower price.

Zepbound and Wegovy are part of the wave of obesity medications known as GLP-1 receptor agonists that have gained popularity due to their effectiveness in weight loss. However, coverage of these drugs has been patchy due to their high cost and wide applicability.

"Lilly may have to make some price cuts to restore formulary access," said Daniel Barasa, who follows the company for Gabelli Funds. "But I think big employers will still include both treatments on their lists of covered drugs, leaving the choice on what to use up to patients and doctors."

Late last year, Lilly announced a head-to-head study showing that Zepbound helped patients drop more pounds than Wegovy. Zepbound has emerged as one of Lilly's top sellers, with sales jumping to $2.3 billion in the recently completed first quarter.

Lilly shares fell nearly 11% to $804.06 on Thursday afternoon, while broader indexes rose slightly.