Drug giant Eli Lilly (LLY +1.24%) now has the best-selling drug on the planet. It's a GLP-1 dual receptor agonist called tirzepatide, which Lilly sells as Mounjaro for treating type 2 diabetes and Zepbound for weight loss. Tirzepatide became the world's best-selling drug in the third quarter with year-to-date sales of $24.8 billion (Keytruda, a blockbuster cancer immunotherapy drug made by pharmaceutical giant Merck is now No. 2).
Still, the market has known this bit of news since Lilly released third-quarter financial results back on Oct. 30. Why should investors buy Lilly stock now, in mid-November?
NYSE: LLY
Key Data Points
Government insurance programs are a market all their own
One big reason Lilly stock has potential is Medicare, the government-run health insurance program for seniors that is the single largest healthcare payer in the U.S.
Last week (Nov. 6), Eli Lilly and competitor Novo Nordisk (NVO 0.90%) announced a deal with the Trump administration that called for the pharmaceutical giants to provide their popular GLP-1 weight loss drugs -- Lilly's Zepbound and Novo Nordisk's Wegovy -- at greatly discounted prices to Medicare recipients. In exchange, the U.S. would expand its Medicare coverage of the medications (as long as they are purchased through TrumpRx, a Trump family-run business venture). Both companies would also get most-favored nation status with the government, which provides exemptions from some tariffs.
Image source: Getty Images.
The deal will expand access to millions of Medicare recipients who currently pay out of pocket for the drugs. Trump administration officials estimate that 1-in-10 Medicare recipients will qualify based on their height, weight, and underlying medical conditions. Currently, there are about 68 million people enrolled in Medicare, so the significance of getting the massive program to (at least partially) cover a medication's cost cannot be overstated.
In addition, people enrolled in Medicaid -- the government health insurance program for lower-income Americans -- could also become eligible for lower prices for the weight loss drugs by 2027. There are about 71 million people enrolled in Medicaid.
Rising prescriptions can lead to rising revenue
The current cash price for Zepbound is about $500 for an average monthly dose. The new deal with Trump will lower that to as little as $150 for Lilly's forthcoming weight loss pill, orforglipron, which is expected to soon be approved by the Food and Drug Administration. The Trump administration says the drugs will be offered (on a new "TrumpRx" website, when it launches next year) for an average of $350 a month.
It's still unknown how many of those eligible enrollees in both insurance programs will take advantage of much lower prices for the drugs. The overall number of patients in the U.S. alone starting GLP-1 treatments for nondiabetic purposes has increased by 700% since 2019. And GLP-1 drugs are reported to be considered for other potential uses, including treatment for Parkinson's disease and Alzheimer's disease, as well as arthritis and addiction.
To be clear, the agreement with the Trump administration should help both Eli Lilly and Novo Nordisk. But Lilly is the leader in this market, with a 57% market share for weight-loss drugs. And the weight-loss market is forecast to skyrocket and exceed $200 billion in annual sales by 2031, from about $52 billion last year.
Medicare will be one way to access that growing market, and right now Eli Lilly has a major head start in capturing share there.
