The Centres for Medicare and Medicaid Services on Friday said that it did not move forward with a proposal put forward by the administration of former president Joe Biden for Medicare coverage of weight-loss drugs such as Novo Nordisk's Wegovy.
US-listed shares of Novo fell 1.4% in aftermarket trading, while those of Eli Lilly which makes obesity drug Zepbound, were down 3.1%.
The proposal would have enabled more Americans to afford new medications in the GLP-1 class that have been shown to reduce weight by as much as 20% and prevent type 2 diabetes, but cost as much as $1,000 a month without insurance coverage.
Medicare, the government's health insurance program for people aged 65 or older or who have disabilities, currently covers the use of GLP-1 drugs such as Lilly's Mounjaro and Novo's Ozempic for conditions such as diabetes, but not the versions of those drugs that have been approved to treat obesity.
Bernstein analyst Courtney Breen said the dropping of the proposal was "not surprising," adding that with "pharmaceutical tariffs under negotiation, this is not the time for the administration to give without getting."
Lilly said in a statement it was disappointed with the move, and that it "will continue to work with the Trump Administration and Congressional leaders to ensure people living with obesity are covered by Medicare and Medicaid and are no longer left behind."
A Novo Nordisk spokesperson said "today's announcement was limited," but the company hopes the Trump Administration would soon finalise the definition of obesity.
"It is essential that CMS regulations are aligned with current medical science — and that means recognising obesity as a serious chronic disease."
US health secretary, Robert F Kennedy Jr has previously said that America should tackle obesity through healthy eating, not medicine.
The CMS also said it was not moving forward with two other proposals. One that required Medicare providers to analyze their healthcare utilisation policies from a health equity perspective, and another that sought guardrails on artificial intelligence tools amid concerns that they are being used to deny or delay care.
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