U.S. health insurance announced price cuts for 15 drugs, with semaglutide slashed by 71%.

The U.S. Centers for Medicare & Medicaid Services (CMS) officially announced on Tuesday that new price agreements have been reached for several billion dollars’ worth of prescription drugs, lowering the prices of 15 medications including the popular weight loss and diabetes drug Ozempic (semaglutide) from Novo Nordisk.

This marks the second round of drug price negotiations authorized under the Inflation Reduction Act passed during the Biden administration, aimed at curbing the rising costs of healthcare.

According to data released by Bloomberg and CMS, the most notable aspect of this negotiation is the price reduction for Novo Nordisk’s blockbuster drugs Ozempic and Wegovy. The government and pharmaceutical companies agreed to cut the monthly price of these two drugs by 71% from the listed 2024 price to $274.

This new pricing mechanism is scheduled to take effect in 2027. U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. stated that President Trump has instructed the government to do everything possible to lower healthcare costs, using all available tools to provide affordable medical services for seniors.

Despite the steep reductions, the capital markets reacted rather calmly, with shares of the relevant pharmaceutical giants experiencing little volatility. Market analysts pointed out that the result had largely been absorbed by the market, and the final negotiated price is not far from the current actual net price.

The 15 drugs covered by these negotiations accounted for 15% of total U.S. Medicare Part D spending in 2024, involving $42.5 billion. CMS estimates that these price reductions will save taxpayers about $12 billion and that by 2027, insured patients will save $685 million in out-of-pocket costs.

This announcement comes at a time of policy transition and contest between the new and old U.S. administrations. Although this negotiation mechanism originated from legislation during the Biden era, the Trump administration is now advancing it as part of the “Make America Healthy Again” agenda. Meanwhile, industry organizations and companies such as Novo Nordisk still strongly oppose the government's “price-setting” actions and have filed lawsuits, indicating that the tug-of-war between policymakers and the pharmaceutical industry over lowering drug prices will persist.

Maximum Price Cut Reaches 85%

According to the detailed list published by CMS, the 15 drugs targeted in these negotiations are mostly high-priced medications for treating diabetes, cancer, and heart disease. For Ozempic and Wegovy, which treat type 2 diabetes and facilitate weight loss, the negotiated price is set at $274, far below the $959 list price (the high-dose version of Wegovy is set at $385).

Aside from the much-discussed semaglutide, other drugs are experiencing varying degrees of discounts. GSK’s asthma treatment Trelegy Ellipta will see a 73% reduction, dropping from $654 to $175; Pfizer and Astellas Pharma’s prostate cancer drug Xtandi will drop 48% to $7,004. Moreover, Pfizer’s breast cancer drug Ibrance not only faces a 50% price cut, but its price will drop from $15,741 to $7,871.

Bloomberg reported that the announced discount rates range from 38% to 85%. These negotiated prices refer to the amounts Medicare pays to pharmaceutical companies, not what patients pay directly, but are ultimately expected to be passed on to ease patients’ financial burdens.

Stacie Dusetzina, a professor of health policy at Vanderbilt University, commented that these negotiations seem very reasonable and she hopes they will provide lasting relief for taxpayers and beneficiaries.

Muted Market Reaction; Pricing Meets Expectations

Despite the announcement of significant price cuts, after-hours U.S. trading of Novo Nordisk’s ADRs and Pfizer’s shares remained basically flat, without panic selling.

According to Bloomberg, BMO Capital Markets analyst Evan Seigerman said he was not surprised by the government’s newly announced prices. He noted, “The $274 price for Ozempic is very close to the broader net price level we had anticipated.”

This indicates that while the nominal list prices have been slashed, after accounting for existing rebates and discounts, the impact on pharmaceutical companies’ net prices may be within investors’ expectations.

Novo Nordisk appears to have already adjusted its strategy, seeking to gain market share through price cuts. The company announced this month that it would offer Ozempic and Wegovy directly to consumers at $349 per month, a price intended to undermine competitor Eli Lilly’s market position.

Policy Battles and Industry Resistance

This wave of price cuts highlights the complexity of U.S. pharmaceutical policy. Though the negotiation mechanism is based on legislation signed by Biden, the Trump administration is actively using this tool to showcase its performance.

However, because the plan grants the government the power to set prices, the pharmaceutical industry has responded strongly. According to Bloomberg, a Novo Nordisk spokesperson stated the company still opposes government “price setting” and remains seriously concerned about the implementation of this law.

Alex Schriver, spokesperson for The Pharmaceutical Research and Manufacturers of America (PhRMA), condemned in a statement that government drug pricing is the wrong policy. Novo Nordisk previously sued the federal government over the constitutionality of the plan, but in October this year, an appeals court upheld a lower court ruling that the plan complied with the Constitution.

It is noteworthy that Professor Stacie Dusetzina pointed out that the $274 price agreed upon in these negotiations is actually higher than the $250 price reached through a previous voluntary agreement between Trump and Novo Nordisk.

This suggests that under some policy pathways, taxpayers might have gotten a better deal. As the new prices are set to take effect in 2027, legal battles, executive orders, and market competition surrounding drug prices will continue to reshape the U.S. pharmaceutical market over the next few years.

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