Why Eli Lilly Stock Topped the Market Today

Key Points

• One popular medication in particular might soon receive support from on high.

• A media report stated that the Federal government is planning to launch an experimental program to test subsidies for Medicare and Medicaid obesity patients.

• 10 stocks we like better than Eli Lilly ›

Although mighty American pharmaceutical company Eli Lilly (NYSE: LLY) has a dizzying number of commercialized products, it's a recently approved medication that's attracted outsized attention lately. This is its GLP-1 weight-loss drug, Zepbound. On Friday, thanks to news of a large Federal subsidy program apparently in the works, shares of the drug's maker leaped more than 3% higher in value.

A half-decade experiment

That morning The Washington Post, citing official documents it had obtained from the Centers for Medicare and Medicaid Services (CMS), provided details of that program.

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The agency aims to launch a five-year pilot initiative under which Medicare Part D insurance providers and state Medicaid programs would be permitted to cover the costs of obesity drugs. This would help remove a major hurdle for some otherwise qualifying patients, as expenses for the regularly administered Zepbound can add up significantly.

The report comes a day after President Trump sent a series of letters to top U.S. healthcare company CEOs insisting that they lower the prices of important treatments. If implemented, this apparent experimental program would fit with the White House's recent cost-saving push for the many Americans using medications.

Details wanted

It wasn't much of a surprise that investors cautiously bid up Eli Lilly stock -- and that of its GLP-1 drug making rival, Wegovy developer Novo Nordisk -- following the article's publication. Any such program would certainly be a boon for both products and their manufacturers, although much remains to be parsed when and if more details about the CMS's program become available.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.