Shares of Novo Nordisk (NVO -2.88%) were slipping 1.7% lower as of 10:57 a.m. ET on Tuesday, after falling as much as 4.4% earlier in the day. The decline came after USA Today published an opinion piece in which President Joe Biden and independent Senator Bernie Sanders of Vermont called for Novo Nordisk and Eli Lilly to reduce the prices for their diabetes and obesity drugs.
In the USA Today article, Biden and Sanders said they are working together on legislation to expand the number of prescription drugs subject to price negotiation by Medicare to at least 50 per year. They warned, "Prescription drug companies also must stop ripping off the American people." Biden and Sanders specifically called out Novo Nordisk for charging "unconscionably high prices" for blockbuster drugs Ozempic and Wegovy.
What does this mean for Novo Nordisk?
There's no immediate impact for Novo Nordisk. The proposed legislation referenced by Biden and Sanders could be an uphill challenge to pass in a divided Congress. The upcoming November elections could further reduce the chances that the bill becomes law. However, big pharma companies are frequent targets on Capitol Hill -- and not just from one political party. Novo Nordisk could be forced to lower its prices for Ozempic and Wegovy down the road.
Is Novo Nordisk stock a buy on the dip?
I expect the current pullback for Novo Nordisk to be only temporary. Demand for the company's diabetes and obesity drugs should continue to increase. Novo also has a promising late-stage pipeline. Although its valuation is high, with shares trading at 43 times forward earnings, I think Novo Nordisk is still a good pick for long-term investors.
