There's an old rule in the business world that no MBA program teaches you properly:
Companies don't cut prices out of kindness. Companies cut prices because they're losing.
Remember that. It explains everything that happened last Tuesday when Novo Nordisk — the Danish pharma darling that became Wall Street's favorite because of Ozempic and Wegovy — announced it would slash list prices on its GLP-1 drugs in the United States by up to 50%, starting January 2027.
Fifty percent. Half. On drugs pulling in billions.
This isn't philanthropy. This is smoke on the horizon.
The Pretty Circus of the Narrative
Novo's PR team nailed the script. U.S. operations executive Jamey Millar showed up on CNBC talking about "patient access" and "reducing the financial burden" for people on high-deductible health plans.
Beautiful. Really beautiful.
But let's call it what it is: Eli Lilly — Novo's direct rival in the billion-dollar GLP-1 market — is eating their lunch. With a fork, a knife, and dessert on the side.
Lilly moved into the direct-to-consumer market earlier, has drugs widely considered more effective in the fight against obesity, and already controls the biggest slice of a market worth hundreds of billions of dollars. Novo got left behind. And when you get left behind, you have two options: innovate or cut the price.
They chose to cut the price.
What Even Is GLP-1?
For anyone who hasn't been following: GLP-1 is a class of drugs that mimics a natural hormone produced in your gut, regulating insulin and appetite. The result? Significant weight loss, type 2 diabetes control, and a patient waitlist that never seems to end.
Ozempic (injectable semaglutide for diabetes), Wegovy (same molecule, higher dose, indicated for obesity), and Rybelsus (the oral version) are Novo's warhorses in this race.
Current price? Around $1,350 per month for Wegovy. Starting in 2027, it drops to $675.
But hold on — Medicare (the federal health plan for seniors) already negotiated a price of $274 per month for these same drugs with the Trump administration, thanks to the Inflation Reduction Act. In other words, Novo was already being forced to swallow discounts in the public sector. Now it's trying to show goodwill in the private sector before the market forces its hand in an even uglier way.
This is chess, not checkers.
The Real Game Behind the Announcement
Nassim Taleb has a concept that fits perfectly here: skin in the game. Those who truly have something to lose act differently from those who just talk.
Novo has a lot to lose. Its stock has racked up significant losses over the past several months. Its pipeline isn't nearly as robust as Lilly's. And competition is closing in from every direction — from semaglutide generics to new molecules that promise to outperform everything currently on the market.
Cutting the list price is an attempt to hold onto patients with private insurance who were still paying close to full price — especially those on high-deductible plans who were essentially paying out of pocket until they hit their coverage cap. If they can drive up adoption, maybe they compensate in volume what they lost in margin.
It's the classic strategy of whoever's in second place. It works sometimes. It doesn't work when the market leader's product is objectively better.
What the Investor Needs to Understand
Most people don't buy Novo Nordisk stock directly. But plenty of investors have indirect exposure through global ETFs, actively managed funds with healthcare positions, or ADRs.
And the message is simple: the GLP-1 market is real, it's massive, but the price war has already started. That erodes margins. Eroded margins mean weaker financials. Weaker financials mean multiple compression. Multiple compression means anyone who bought in at a high price is going to feel the pain.
It's not the end of the world. It's the market doing its thing. Competition destroys rent. Always has. Always will.
Buffett built his fortune buying businesses with durable competitive advantages — what he calls a moat, the medieval fortress moat that protects the castle. The question you have to ask yourself about Novo Nordisk is: is their moat still wide enough?
Or did Lilly already swim across while everyone was still double-tapping Ozempic posts on Instagram?
