Trump GLP-1 Pilot Program Could Boost Novo Nordisk & Eli Lilly

Key Points

President Trump’s threat of 250% tariffs on imported drugs rattled the health care sector, but a proposed Medicare and Medicaid policy could be a major long-term tailwind for Eli Lilly and Novo Nordisk.
Despite narrowly missing on earnings, Novo Nordisk is well-positioned to continue its market dominance with Ozempic and Wegovy.
Competitor Eli Lilly, which beat on Q2 earnings and revenue, is seeing increasing demand for its drugs, Mounjaro and Zepbound.

This week, drugmakers had a scare when President Trump threatened to levy tariffs of up to 250% on imported pharmaceuticals. The news jolted the health care sector, which fell by 2.74% over the past five days, compounding its struggles this year, which have resulted in its 5.13% loss—the worst among all 11 sectors in the S&P 500.

On an individual level, some Big Pharma companies experienced more pain than others. Novo Nordisk (NYSE: NVO), which reported disappointing earnings on Aug. 6, fell 5.79% over the past five days before rebounding on weak trial data from Eli Lilly (NYSE: LLY). The latter company’s experimental weight-loss pill fell short of expectations, sending shares down by nearly 11% over the same period while helping Novo Nordisk rebound from subpar earnings and the Trump tariff announcement.

But for buy-and-hold investors looking for health care sector exposure, those two stocks—NVO and LLY—are still poised to profit from a long-term tailwind recently introduced by the Trump administration.

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Trump’s Medicare and Medicaid Plan

While the tariff threat is real, long-term investors may want to look past the short-term volatility. A recently announced Trump administration initiative could be a game-changer for both companies.

On Aug. 1, reports surfaced that the Trump administration is testing a plan to cover costly weight loss drugs like Mounjaro and Ozempic under Medicare and Medicaid. The program, led by the Center for Medicare and Medicaid Innovation (CMMI)—a branch of the Centers for Medicare and Medicaid Services (CMS)—is scheduled to launch in April 2026 for Medicaid and January 2027 for Medicare.

That plan would vastly expand Americans’ access to anti-obesity drugs, including those who currently cannot afford their price tags. Wegovy and Zepbound, for example, cost roughly $1,000 per month before insurance, which carries strict eligibility criteria.

If the plan pans out, it would be an enormous boon to Eli Lilly and Novo Nordisk. Currently, many health insurance plans, as well Medicare, only cover GLP-1 treatment for diabetes. The use of those drugs for obesity treatment is excluded. Additionally, Medicaid coverage of obesity drugs and treatments varies on a state-by-state basis.

But according to the CMS, if the Trump administration’s plan comes to fruition, it would allow Medicare Part D and state Medicaid programs to voluntarily cover Mounjaro, Zepbound, Ozempic, and Wegovy not just for diabetes treatments, but for weight loss management as well.

NVO and LLY: The Pillars of Anti-Obesity Medications

Despite Eli Lilly’s recent woes, when the company reported Q2 earnings on Aug. 7, it was abundantly clear to investors that it has positioned itself alongside Novo Nordisk as the world’s two premier drugmakers for Glucagon-Like Peptide-1 (GLP-1) weight loss treatments. The company beat on earnings while also hiking its 2025 guidance and announcing ongoing strong demand for its anti-obesity drugs, Mounjaro and Zepbound.

Meanwhile, Novo Nordisk just barely missed on revenue, reporting $11.95 billion versus analysts’ expectations of $11.97 billion, while reporting earnings per share of 93 cents versus analysts’ expectations of 95 cents. But lost in those misses was the fact that sales of its diabetes drug Ozempic and its weight loss drug Wegovy saw second-quarter sales increase by 16% from the year-prior period.

Together, these companies have formed a duopoly in the GLP-1 space, similar to Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) in beverages or Home Depot (NYSE: HD) and Lowe’s (NYSE: LOW) in home improvement.

It is increasingly evident that, despite their recent issues, Novo Nordisk and Eli Lilly have established themselves as the two principal pillars of the anti-obesity and diabetes drug industry. And thanks to the current administration's proposal to inject GLP-1 into Medicare and Medicaid plans, the two companies are positioned to see more sales gains from their flagship drugs.

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The Weight Loss Drug Market’s Future Is Bright

Zooming out, the anti-obesity industry is already undergoing explosive growth. According to market research and consultancy firm Grand View Research, the global weight loss drug market is forecast to undergo a noteworthy compound annual growth rate of 31.66% from 2024 to 2030.

However, that market is dominated by North America, which presently accounts for 37.67% of revenue share. In the United States, the anti-obesity drug market size already stands at $6.62 billion, and it is projected to reach $7.13 billion by 2030.

Eli Lilly and Novo Nordisk may be down 14.49% and 44.22%, respectively, this year, but if Trump’s Medicare and Medicaid pilot program takes root, it could serve as the impetus to reverse the two Big Pharma drugmakers’ fortunes this year. Value investors looking for a buy-low opportunity in the health care sector would be wise to keep both stocks on their watchlists.