Eli Lilly’s hottest drugs face a quiet new threat

Eli Lilly (LLY) became the first pharmaceutical company to cross a $1 trillion market valuation in November last year, carried largely by its highly lucrative obesity and diabetes medications, such as Mounjaro and Zepbound.

Now the same demand that built that fortune is creating friction with the employers who pay for it.

A survey released this month shows a meaningful share of large employers are reconsidering whether they will keep covering GLP-1 drugs for weight loss once 2027 arrives.

Lilly shares dipped on the news on June 12 and remain under pressure, down about 2.45% over the past five trading days and closing Monday at $1,129.35.

Why some employers are ready to drop coverage in 2027

Two surveys signal the same shift in employer coverage, but with different magnitudes.

The Business Group on Health surveyed 105 large employers and found 67% cover GLP-1s for weight management, with 72% planning to continue in 2027 and 10% planning to drop it, according to Reuters.

Mercer’s survey found a smaller pullback, about 5% of large employers, with adoption at 44%.

Health insurer Cigna (CI) already acted: It dropped GLP-1 coverage for its 67,700 employees starting July 1, Reuters first reported.

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Lilly wins elsewhere as CVS Caremark restores Zepbound

The employer pullback lands right after Lilly celebrated other wins.

CVS Caremark, the nation’s largest pharmacy benefit manager, said in late May it will restore Zepbound to its formulary on October 1 and add Foundayo coverage, effective June 1, CNBC reported.

That reverses a decision last year that dropped Zepbound in favor of exclusive coverage for Novo Nordisk’s Wegovy.

Related: Eli Lilly makes surprising retreat from major market

On the federal side, CMS is launching the Medicare GLP-1 Bridge on July 1, letting eligible Part D beneficiaries access Zepbound for a flat $50 monthly copay.

Those moves were designed to widen the pool of people who can actually use Lilly’s drugs.

Why falling GLP-1 prices haven’t lowered employer bills

Employers aren’t upset about drug price tags alone. They are reacting to how many more people are now filling prescriptions.

Foundayo, Lilly’s once-daily pill, launched in April and gave needle-averse patients an easy way in. Novo Nordisk’s oral Wegovy did the same months earlier, and that convenience is straining budgets.

Even as competition between Lilly and Novo Nordisk pushes per-dose prices lower, the population taking the drugs keeps expanding.

Three numbers explain the squeeze:

• Nearly eight in 10 employers say GLP-1 drugs are already driving up their company’s health care costs, Business Group on Health found.
• 87% expect demand to climb as oral pills go mainstream, while just 9% expect prices to drop, the survey found.
• Employers keeping coverage are leaning on new limits, like proof of clinical eligibility and restricted prescriber lists, to control costs.

What Lilly investors should watch next

None of this changes Lilly’s current numbers.

First-quarter revenue jumped 56% year over year to $19.8 billion, and management raised full-year guidance to between $82 billion and $85 billion, Lilly’s earnings report showed.

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The risk sits further out.

If more self-funded employers follow Cigna into 2027, a slice of Lilly’s growth would depend more on cash-pay sales and the Medicare Bridge, a temporary program set to expire at the end of 2027.

Wall Street’s consensus price target sits well above current levels, near $1,215, according to a recent analyst tally.

How Lilly is working around risk of employers dropping GLP-1 coverage

Lilly isn’t just waiting to see what employers decide.

According to 24/7 Wall St, its Employer Connect platform partners with more than 15 administrators, including GoodRx and Cost Plus Drugs, to sign up employers who don’t currently cover the drugs at all.

Investors have three things worth tracking over the next two quarters.

What to watch next:

• How many employers confirm their 2027 coverage decisions
• Whether Foundayo’s prescription volume keeps climbing
• Whether the Medicare Bridge offsets any employer pullback

The bigger picture hasn’t changed. Lilly still controls the most in-demand obesity drugs on the market, but even the strongest demand story can run into a budget problem on the payer side.

Related: Goldman Sachs doubles down on Novo stock target after key event