OPINION:
Last month, President Trump struck a deal with Lilly, a manufacturer of drugs such as obesity medication Mounjaro, and its primary competitor, Novo Nordisk, which produces Wegovy. After intense negotiations, the White House announced a “historic” agreement that makes this medicine more affordable for hundreds of thousands of people.
Mr. Trump’s agreement is ambitious, but because it depends on regulatory timelines, such as Food and Drug Administration approval for certain products, its impact could be years away.
Luckily for those who need to lose weight, the private sector doesn’t wait.
Earlier this year, CVS Caremark, one of the nation’s largest pharmacy benefit managers, used its market power to force price reductions from those same companies. It negotiated a lower price for Wegovy and then removed Lilly’s competing medicine from its preferred formulary because it was too expensive.
That move put immediate pressure on Lilly. Within weeks, the company announced that it had found a cheaper way to manufacture Zepbound, another anti-obesity drug, as part of a broader effort to lower costs and expand access through partnerships with employers and insurers.
The market once again did what it does best.
Demand for obesity drugs has created one of the fastest-growing pharmaceutical markets in America. Sales of products such as Mounjaro enabled Lilly to become the first pharmaceutical company ever to reach a trillion-dollar market valuation. That surge explains why the Trump and CVS news mattered so much in a market that has not had meaningful price competition for years.
The speed of the price cut was a clear demonstration of the basic economic principle that is rarely acknowledged in debates about drug pricing: Companies lower prices when the market demands it, not when they are asked politely.
Price relief does not always require sweeping legislation or years of federal rulemaking. In the time it takes Washington to hold a hearing, private actors have restructured a market segment that had previously looked untouchable. The contrast with public sector sluggishness could not be more striking.
None of this turns pharmacy benefit managers into heroes. Pharmacy benefit managers deserve much of the criticism they face for opaque practices and confusing pricing structures. They have contributed to a system that often leaves patients guessing why medications cost what they do.
However, in this case, CVS leveraged its scale to secure genuine price concessions. The standoff between the pharmacy benefit manager and drugmakers resulted in a tangible drop in costs within weeks, as both sides had something to lose. Doing nothing would have meant higher costs for CVS’s clients.
This episode should challenge a common assumption in national health care debates: that federal intervention is the only way to meaningfully reduce drug prices. In fact, when competing firms fear losing market share, they innovate, cut costs and sharpen their pricing.
Mr. Trump’s deal may eventually save taxpayers money, and if it does, his contribution should be noted. He correctly recognized the political urgency around obesity drugs and the financial burden their current costs place on households and public programs. Still, the win came from market forces that pushed drugmakers to act now, not later.
For years, Americans have been told that obesity treatments are destined to remain expensive because research is costly, manufacturing is complex, and insurers resist broad coverage. Those factors are real, but they are not the whole story. When CVS pitted Lilly and Novo Nordisk against each other, it proved that even the most powerful pharmaceutical companies can’t resist market realities.
• Mike Feuz is an economic consultant by day and a research associate for the think tank Free the People by night. He has a master’s degree in economics from George Mason University.
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