Novo Nordisk AS and Eli Lilly plunged during trading hours, congressional agencies warned that weight-loss drugs may push up the US deficit

The Congressional Budget Office (CBO), a non-partisan agency under the United States Congress, has warned of the negative impact of weight-loss drugs on the U.S. government's deficit.

Analysts at the CBO stated that the costs incurred by weight-loss drugs will exceed the estimated surplus for the United States. If weight-loss drugs are included in health insurance, it will increase the U.S. deficit over the next decade.

Following the warning from CBO analysts, on Wednesday, March 20th, during midday trading in the U.S. Eastern Time, shares of U.S. pharmaceutical company Eli Lilly, which develops weight-loss drugs, and European pharmaceutical giant Novo Nordisk AS, known for its celebrity weight-loss drugs, both saw their stock prices decline, hitting new daily lows.

Eli Lilly dropped nearly 2.1% at its daily low, while the U.S.-listed Novo Nordisk AS stock fell over 1.9% at its daily low. However, both stocks saw a significant narrowing of their declines, with Eli Lilly ending roughly flat at less than 0.4% and Novo Nordisk AS stock closing down by less than 0.8%.

In the annual Budget and Economic Outlook report released last month, the CBO had already raised red flags about the U.S. debt issue.

According to the report, the CBO estimates that by 2033, the U.S. public debt will reach $45.7 trillion, accounting for 114% of GDP, slightly lower than the CBO's forecast from a year ago, which projected the public debt to account for 118% of GDP by 2033. The interest payments on U.S. government debt are expected to reach record highs next year and continue to rise thereafter.

The report predicts that the net interest payments as a percentage of GDP will increase from 3% last year to 3.1% next year, reaching the highest level since 1940, and by 2034, this ratio will reach 3.9%.

CBO points out that such a situation where the deficit as a percentage of GDP is high is rare outside of economic crises, especially during times of robust economic growth in the United States. The increase in net interest costs is the main driver of deficit expansion, accounting for about three-quarters of the deficit increase from 2024 to 2034.

In addition to debt interest, mandatory spending related to social welfare is another major driver of deficit growth. The CBO report predicts that by 2034, expenditures on Federal Medicare as a percentage of GDP will increase from 3.1% last year to 4.2%, and Social Security expenditures will increase from 5% to 5.9%