Eli Lilly Zepbound Returns to CVS Formulary, Pre-Market Shares Rise as Much as 2%

TradingKey - Before the U.S. market opened on Thursday, Eli Lilly ( LLY) shares rose nearly 2% at one point as the market focused on a major decision by U.S. healthcare giant CVS Health ( CVS) on Thursday—reinstating insurance coverage for its weight-loss drug Zepbound and including the newly approved oral weight-loss drug Foundayo in its standard drug plan.

This move not only provides a boost for Eli Lilly's competition in the GLP-1 weight-loss drug market but also offers more treatment options for millions of American patients.

CVS's pharmacy benefit manager, Caremark, announced that Zepbound will return to its commercial formulary on October 1, while Foundayo was added to the list as early as June 1. This adjustment covers 25 million to 30 million Americans; under insurance plans using Caremark's standard formulary, out-of-pocket costs for patients using these two drugs are expected to be as low as $25 per month.

CVS expects the move to drive an additional 10% to 15% reduction in the price of weight management drugs, further improving the accessibility of these high-priced medications.

"We are creating access and choice that would not exist without our leadership in the marketplace," Ed DeVaney, president of CVS Caremark, said in a press release. "We are boldly addressing the affordability and access issues for our clients and their members through active communication and negotiation with our pharmaceutical manufacturer partners."

Last year, Caremark removed Zepbound from its insurance coverage list, retaining only Novo Nordisk's ( NVO) Wegovy as the preferred weight-loss drug, triggering strong dissatisfaction among patients.

At the time, approximately 70% of Caremark's standard formulary users were forced to switch medications. Some patients who relied on Zepbound to treat complications such as sleep apnea faced the risk of medication discontinuation, which even led to class-action lawsuits.

Following this policy adjustment, GLP-1 drugs from both Eli Lilly and Novo Nordisk will become preferred drugs on Caremark's standard formulary, ending a year-long "either-or" situation.

Market analysis suggests that the reversal of CVS's policy is the result of multiple factors. Eli Lilly significantly reduced the supply price of Zepbound through active negotiations, giving it a cost advantage to compete with Wegovy. Meanwhile, with the launch of new products such as Novo Nordisk's oral Wegovy and Eli Lilly's Foundayo, the GLP-1 market competition landscape has changed. CVS needs to balance its relationships with the two pharmaceutical giants, and continuous patient complaints and public pressure also pushed CVS to re-evaluate its drug coverage strategy.

For Eli Lilly, the return to CVS's insurance system is expected to further solidify Zepbound's market position and pave the way for the promotion of the oral drug Foundayo.

According to Eli Lilly CEO David A. Ricks, Foundayo, as a small-molecule oral drug, has the advantage of large-scale production without the need for cold chain transportation and can quickly cover the global market. Analysts generally predict that Foundayo's sales could reach $14.8 billion to $21 billion by 2030.

However, not all patients will benefit immediately. Employers and insurers using Caremark formularies can still choose not to cover GLP-1 drugs for weight loss, and some specific indications such as sleep apnea have not yet been included in insurance coverage.

In addition, uncertainty remains regarding insurance coverage for Zepbound, which awaits final approval from the Centers for Medicare & Medicaid Services (CMS). Nevertheless, CVS's policy adjustment undoubtedly brings new competitive vitality to the GLP-1 weight-loss drug market and offers more hope to patients.