Novo Nordisk stock tumbled Friday after its weight-loss drug Wegovy and diabetes medicine Ozempic landed on Medicare's next list of drugs to face price negotiations.
Under the Inflation Reduction Act, the Centers for Medicare and Medicaid Services will negotiate the price the agency will pay for a group of 15 drugs. The negotiation will take place this year with the new prices going into effect in 2027.
The list includes semaglutide, the active ingredient behind Wegovy, Ozempic and Rybelsus. The latter is a pill that treats type 2 diabetes. Also on the list are Pfizer's cancer blockbuster Ibrance, Teva Pharmaceutical's Austedo, a treatment for movement disorder, and Merck's diabetes treatment Janumet.
"Last year, we proved that negotiating for lower drug prices works," Health and Human Services Secretary Xavier Becerra said in a statement. "Now we plan to build on that record by negotiating for lower prices for 15 additional important drugs for seniors."
Novo Nordisk stock skidded 5.3%, closing at 78.69.
Novo Nordisk's Semaglutide Setback
The news is a major blow to Novo Nordisk, whose semaglutide products are expected to generate $28.19 billion in 2024 sales. That accounts for more than 70% of Novo's projected sales for the year.
Wegovy is the costliest of the three drugs. Patients without insurance or insurance coverage can pay up to $1,350 for a 28-day supply. Behind that, Ozempic and Rybelsus have list prices near $1,000.
Evercore ISI analyst Umer Raffat noted investors were closely tracking semaglutide and Teva's Austedo — a treatment for tardive dyskinesia and chorea associated with Huntington's disease — heading into the 2027 list.
"As a base case, investors (and the respective companies) were expecting them to be included," Raffat said in a client note.
Still, Novo Nordisk continued the slump it began last June.
$41 Billion In Drug Costs
In its news release, the Department of Health and Human Services said 5.3 million people with Medicare Part D coverage used these drugs from November 2023 to October 2024. The drugs accounted for about $41 billion in total gross covered prescription drug costs under Part D coverage — or about 14% during that time period.
The list is "mostly as expected but some surprises," Piper Sandler analyst Christopher Raymond said in a report.
The inclusion of Austedo could bolster Neurocrine Biosciences, which makes a competitor drug called Ingrezza. Bausch Health Companies' Xifaxan, which treats gastrointestinal issues, also landed on the list as did Trelegy Ellipta, an inhaler from GSK that treats chronic obstructive pulmonary disease, or COPD.
Raffat of Evercore expected AstraZeneca's lung cancer drug Tagrisso and Creon, an AbbVie treatment for a pancreatic condition, to make the list. But they didn't. He didn't expect Vraylar, an antipsychotic from AbbVie to make the list. But it did.
A 'Wash' For AbbVie
Piper Sandler's Raymond says the news is a wash for AbbVie. He expected leukemia treatment Venclexta to be on the list. Instead, it's Vraylar. For 2027, he expects $2 billion from Venclexta in the U.S., while he calls for Vraylar to generate more than double that at $4.8 billion.
But the exclusion of Pfizer's Xeljanz could benefit AbbVie's Rinvoq. Both belong to the same drug class, blocking a specific kinase tied to immunologic diseases. Now, a key player won't have a lower reference price, forcing competitors to lower their prices.
Leerink Partners analyst Faisal Khurshid noted the inclusion of Linzess, which Ironwood Pharmaceuticals co-markets with AbbVie.
"The impact of price negotiations is uncertain given the Linzess is already high discounted," he said in a report. "The bigger question for Linzess revenues in 2025 is the impact of Medicare Part D changes, and we remain on the sidelines given these uncertainties."
Ironwood stock, which trades around 4, fell 3.2%.
Most of the bigger names traded up or down a fraction on the news. But Novo Nordisk stock hit its lowest point since August 2023.
Follow Allison Gatlin on X/Twitter at @IBD_AGatlin.
