On November 6, President Donald Trump announced that the government will refrain from tariffs on Eli Lilly’s and Novo Nordisk’s imported products and active pharmaceutical ingredients and that Medicare and Medicaid will subsidize the use of their drugs. In exchange, the pharmaceutical companies will significantly cut prices for their GLP‑1 weight-loss medications, Zepbound and Wegovy. Medicare and Medicaid will pay approximately $245 per month to the companies for the products, and Medicare Part D beneficiaries will have a $50 co-pay.
Because Medicare and Medicaid don’t currently pay for GLP-1s prescribed for weight loss, this new deal will likely lead to increased government spending.
While the list prices of these drugs are $ 1,000 per month, both Lilly and Novo Nordisk have already been selling them to cash-paying patients at lower prices. Lilly intends to sell the product to cash-paying patients over its website, LillyDirect, for $299 per month. Novo Nordisk already sells Wegovy to cash-paying patients for $499 per month through NovoCare. This shows what happens when third-party payers don’t distort the market’s natural price feedback loop.
The deal also requires the US Food and Drug Administration (FDA) to fast-track the approval of the companies’ forthcoming oral GLP-1s, which the companies intend to sell for $149 per month.
I have mixed feelings about today’s announcement. On one hand, lower prices will reduce the subsidies taxpayers provide to Medicare beneficiaries and demonstrate the value of allowing Medicare and Medicaid to negotiate directly. On the other hand, using tariffs as a threat—a sword of Damocles hanging over the companies—is not negotiation; it’s extortion. Skill in extortion isn’t the same as skill in dealmaking.
I’m also glad the agreement includes the FDA fast-tracking new weight-loss drugs. But the agency shouldn’t make patients needing other therapies wait. If faster approvals are justified here, they’re justified across the board.
Of course, it would be even better if the FDA ended its prescription requirement for GLP-1s so consumers could access them over the counter. As Michael F. Cannon, Charles M. Silver, and I argued here,
Drugs tend to be dramatically less expensive when they are available OTC [over the counter]. For example, the per-milligram price of prescription ibuprofen is 28 times higher than that of OTC ibuprofen. The per‐milligram price of prescription naproxen sodium is 3.3–4.2 times higher than for OTC naproxen sodium. The Consumer Healthcare Products Association estimates OTC drugs save consumers $51.6 billion a year relative to higher-priced prescription medicines, plus another $94.8 billion on unnecessary doctor’s office visits and diagnostic tests.
Prescription drugs often cost more than their OTC counterparts in part because insurance usually covers them, while consumers pay out of pocket for OTC products. When people spend their own money, they naturally look for value and drive price competition. But when an insurer foots the bill, patients lose that incentive to compare costs—giving drug makers room to raise prices without much pushback.
Market competition and consumers’ comparison shopping can make GLP-1s more affordable and accessible than Medicare and Medicaid subsidies can.
Today’s bargain may offer short-term relief, but it still keeps Washington in the driver’s seat, deciding who pays, who profits, and which drugs get fast-tracked. Real affordability won’t come from political deals or tariff threats; it will come from empowering patients to make their own choices in a genuinely competitive market. When consumers, not bureaucrats, control the purse strings, prices fall and access improves naturally—no swords and no subsidies required.