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Medicare coverage will cut obesity-drug prices but open the door to millions of new patients

Companies don’t generally cut prices out of generosity.

For most of Big Pharma, drug discounts have largely been about damage control. After months of tariff threats and talk of tougher pricing rules that weighed on their shares, several chief executives have made their way to the White House to announce drug-pricing deals in exchange for regulatory relief.

For Eli Lilly’s LLY 4.57%increase; green up pointing triangle David Ricks and Novo Nordisk’s NOVO.B 2.51%increase; green up pointing triangle Mike Doustdar, who paid their own visit to the White House last week, the calculus is different. The deal they struck didn’t just broker a truce. It bought the promise of market growth. In exchange for trimming prices on drugs like Wegovy and Zepbound, they secured expanded Medicare coverage for obesity, opening the door to millions of new patients.

By trading price for volume, they are also building a moat: Newcomers won’t be able to charge the sky-high launch prices that defined the early GLP-1 boom. It is now a scale game. For drugmakers including Pfizer PFE -0.16%decrease; red down pointing triangle—fresh off its bruising fight with Novo Nordisk over obesity-drug upstart Metsera MTSR -14.80%decrease; red down pointing triangle—that means potentially joining a market defined by thinner margins and enormous manufacturing costs upfront.

The crux of the White House deal announced Thursday centers on Medicare. While the details—like most President Trump drug agreements—remain murky, the big picture is clear: The companies offer discounts to the net price of their drugs, and in return the administration extends coverage under a government program for seniors. Similar terms could apply to Medicaid, though coverage will depend on decisions made at the state level. For context, Medicare and Medicaid together cover more than 130 million people, roughly 50 million of whom could theoretically fall into the category of having obesity or excess weight.

At first glance, the discount looks steep. Eli Lilly and Novo Nordisk will make their GLP-1 drugs available under Medicare for about $245 a month, with patients paying a $50 copay starting as early as April 2026. That is a sharp drop from list prices that not long ago topped $1,000 a month. In reality, the net price, which reflects what pharma companies take home after rebates and discounts to pharmacy-benefit managers and others, is much lower. Leerink Partners analyst David Risinger says the effective price is only about 20% to 35% below what Medicare currently pays for Mounjaro, which is prescribed for diabetes.

In exchange, the companies could roughly double their pool of covered patients, moving beyond Americans who currently buy the drugs out of pocket or through generous private insurance. In other words, the obesity market is shifting from the Upper East Side, where the drugs are wildly popular, to Main Street America. Bernstein estimates that the Medicare deal opens up a market of about 30 million people, which represents an opportunity of about $27 billion in annual sales.

Trump hailed the deal as a major win while Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, claimed that Americans could lose billions of pounds by the midterm elections. But the dirty little secret is that, Trump deal or not, Lilly and Novo Nordisk knew that expanding to the masses would mean trading some price for volume. Drugmakers routinely model the price point that maximizes overall profit rather than margin per prescription, and both companies likely see this deal as pushing forward the inevitable.

The timing is favorable, too. Both Novo Nordisk and Lilly are preparing to launch oral versions of their drugs, and the Trump administration is granting both companies special “priority review” vouchers through the Food and Drug Administration. Those are intended to speed up the agency’s decision process. As part of the deal, the lowest dose of Lilly’s pill is expected to be sold directly to the consumer at $149 a month.

The deal also has competitive ripple effects. It pressures future entrants such as Pfizer, Roche and Amgen AMGN 1.08%increase; green up pointing triangle. By lowering the price floor, Lilly and Novo Nordisk make it much harder for rivals—who must spend billions to build manufacturing capacity—to compete profitably.

Lower prices could also squeeze the compounders that make knockoff GLP-1s. More than a million people buy compounded versions through telehealth companies such as Hims & Hers Health HIMS 0.05%increase; green up pointing triangle at lower prices. These alternatives are unlikely to disappear, but falling prices for the branded drugs will make copycats less appealing to consumers hunting for savings.

Less clear is the impact on the commercial market, where insurers negotiate prices on behalf of employers. Outside government programs, both companies have committed as part of the deal to selling their injectable drugs directly to consumers for about $350 a month. They say this won’t affect employer-sponsored insurance prices, though some spillover is likely. Pharmacy-benefit managers will now have a clear anchor price to point to when negotiating prices.

Falling prices are rarely good news for sellers—but when they come with millions of new patients and a bigger moat against competitors, the pain is worth it.

Record-high luxury hotel rates did little to dull traveler demand for exclusive ocean resorts and grand hotels

The average daily room rate at a U.S. luxury hotel reached a record high of $394 this year, $168 more than the next-priciest tier.

Bookings for luxury properties increased by 2.5% through September this year, while demand for lower and midtier hotels slightly decreased.

Luxury hoteliers like Montage International plan to expand, with Montage aiming to double its size in the next three to five years.

America’s increasingly polarized economy is leaving its mark on the lodging business, where luxury hotels are charging a record-high premium.

Luxury-room prices have defied a drop-off in foreign tourists to the U.S. and a job slump among white-collar workers. Affluent travelers, made wealthier in recent years by stock-market rallies and real-estate gains, have splurged on their stays with abandon.

The wealthy traveler “seems to be making choices based on, ‘I want this when I want it, and I’m willing to pay for it,’” said Jan Freitag, national director for hospitality-market analytics at data firm CoStar.

The average daily room rate at a U.S. luxury hotel is a record high at $394 this year. It is also $168 more than the average cost for a room in the next-priciest tier, according to CoStar. The divide has been widening since 2008, when the difference was $60, but it has grown sharply in recent years to its largest ever.

Higher room rates did little to dull demand for oceanside resorts, exclusive mountaintop inns and city-center grand hotels. Bookings for luxury properties were up 2.5% this year through September, according to CoStar. Demand for lower-scale and midtier hotels, by contrast, was slightly lower than last year for that period.

New Orleans resident Gene Dry took four trips this year, including a 10-day vacation in the southern Italian region of Puglia with his wife to celebrate their 30th anniversary last month.

“Some people have fishing camps, big boats,” said Dry, who owns a cloud-communications company. “We like to travel.”

The seemingly unshakable demand for luxury travel is prompting high-end hoteliers like Montage International to expand. The company, which owns 15 hotels under the Montage and Pendry brands, plans to double in size over the next three to five years, said Chief Executive Alan Fuerstman.

Much of Montage’s expansion will happen overseas, but the company expects most of its guests will be American. Revenue this year is up 8% year over year, and groups are booking 2026 travel at a stronger pace than previous years, Fuerstman said.

The higher up the luxury ladder, the steeper the price gains. The daily room rate of the 10 most expensive hotels in major markets worldwide is often more than double the typical luxury hotel, said Freitag. He calls this group ultraluxury.

In Paris, where a luxury room runs nearly $1,000 a night, the average price at the most expensive hotels is $2,600. In New York, ultraluxury hotels cost $1,560 a night compared with the average luxury-room rate of $472, according to CoStar.

“Thank God for luxury and ultraluxury,” said Albert Herrera, an executive vice president at the travel-services company Internova Travel Group. “That’s what’s keeping our business thriving.”

Having already accumulated a stash of fancy cars and watches, wealthy Americans today are spending even more on experiences, including travel. Multigenerational trips are more popular than in the past, with grandparents paying for accommodations large enough to include their children and grandchildren.

“They don’t want the two-bedroom suite,” Herrera said. “They want the villa. They want the yacht.”

Trade policy, global economic uncertainty and the increased cost-of-living have started to pressure room rates for some luxury hoteliers, including Corinthia Hotels, which owns a dozen properties and manages an additional five. Profitability, in turn, is flat year-over-year across the portfolio, said CEO Simon Casson.

But the U.S. is bucking that trend. Corinthia’s Surrey hotel, which reopened a year ago on Manhattan’s Upper East Side after an extensive renovation, is currently charging more than $2,000 a night, with a two-night minimum, for weekends in December.

The hotel’s 100 rooms offer personalized butler services and deep-soak bathtubs. The hotel’s restaurant, the high-end Italian eatery Casa Tua, includes a private members’ club.

Corinthia staff are trained to open the car door within 15 seconds of it arriving at the curb, pick up the front-desk phone after no more than three rings and address guests by name.

“Employees who anticipate, who go out of the way to meet a need,” said Casson. “That directly translates into rates.”

Turing Award winner seeks to depart as Mark Zuckerberg makes ‘superintelligence’ push

Meta’s chief artificial intelligence scientist Yann LeCun is planning to leave the social media giant to found his own start-up, as Mark Zuckerberg seeks to radically overhaul the company’s AI operations.

LeCun, a Turing Award winner who is considered one of the pioneers of modern AI, has told associates he will leave the Silicon Valley group in the coming months, according to people familiar with the conversations.

The French-US scientist is also in early talks to raise funds for a new venture, one of the people said. LeCun declined to comment. Meta did not immediately respond to requests for comment.

The impending departure comes as Meta’s founder shakes up its AI strategy in order to challenge rivals such as OpenAI and Google in developing more powerful forms of AI.

Zuckerberg has pivoted away from the longer-term research work of Meta’s Fundamental AI Research Lab (Fair), which LeCun has headed since 2013, to focus on more rapidly rolling out models and AI products after deciding that Meta had fallen behind the competition.

Over the summer, Zuckerberg hired Alexandr Wang to lead a new “superintelligence” team at Meta, paying $14.3bn to hire the 28-year-old founder of data-labelling start-up Scale AI and acquire a 49 per cent interest in his company.

Within those wider AI efforts, Zuckerberg also personally handpicked an exclusive team, called TBD Lab, to propel development of the next iteration of its large language models, luring staff from rivals such as OpenAI and Google with $100mn pay packages.

As a result, LeCun, who had previously reported to chief product officer Chris Cox, is now reporting to Wang.

Zuckerberg’s pivot followed the botched release of Meta’s most recent Llama 4 model, which performed worse than the most advanced offerings from Google, OpenAI and Anthropic, while its Meta AI chatbot has failed to gain traction with consumers.

LeCun, however, has long argued that the LLMs that Zuckerberg has put at the centre of his strategy are “useful” but will never be able to reason and plan like humans, increasingly appearing at odds with his boss’s AI vision.

Within Fair, LeCun has instead focused on developing an entirely new generation of AI systems that he hopes will power machines with human-level intelligence, known as “world models”.

These systems aim to understand the physical world by learning from videos and spatial data rather than just language, though LeCun has said it could take a decade to fully develop the architecture.

LeCun’s next endeavour is focused on furthering his work on world models, according to two people familiar with the matter. 

Zuckerberg has come under growing pressure from Wall Street to show that his multibillion-dollar investment in becoming an “AI leader” will pay off and boost revenue.

Meta’s shares plunged 12.6 per cent — wiping out almost $240bn from its valuation — in late October after the chief executive signalled higher AI spending ahead, which could top $100bn next year.

LeCun’s departure marks the latest in a string of exits and leadership and organisational reshuffles at Meta in what has been a tumultuous year for the $1.6tn company.

In May, vice-president of AI research Joelle Pineau left and recently joined Canadian AI start-up Cohere. Last month, the company also laid off about 600 people from its AI research unit in a bid to cut costs, eliminate bureaucracy and release products more quickly. 

Zuckerberg has also brought in new AI leaders on high salaries of hundreds of millions of dollars, irking some of the old guard. In July, Shengjia Zhao, co-creator of OpenAI’s ChatGPT, was hired as the chief scientist of Meta’s Superintelligence Lab.