Eli Lilly’s First Full Medicare Quarter: Is Volume Still Outrunning Price Cuts?

Key Points

• Eli Lilly posted 39% year-over-year revenue growth in Q3 2026, driven primarily by strong sales of Mounjaro and Zepbound, and raised its full-year guidance.
• Medicare's GLP-1 Bridge program lowered realized prices for Mounjaro and Zepbound, especially internationally, though strong volume growth helped offset the impact on revenue.
• Investors should watch pricing pressures, upcoming retatrutide trial updates, and tougher year-over-year comparisons as one-time gains from earlier quarters fade.

It was a fairly safe bet that Eli Lilly and Co. NYSE: LLY would have another strong quarter, and indeed the company did just that. After raising 2026 revenue guidance to between $85 billion and $87 billion in its Q2 report, the pharma giant boasted 39% year-over-year (YOY) revenue improvement and an earnings surprise of about $1.8 billion for Q3 2026. Earnings per share were also up significantly, beating estimates by $1.80.

Another earnings win for a health care company that has repeatedly blown past forecasts is an easy read. The more helpful information for investors is what prompted this growth. In short, the company's primary GLP-1 agonist products—Mounjaro and Zepbound—were essential drivers of performance this quarter.

But it's not just that these products remain highly popular and in heavy demand. Lilly is adapting to changes in Medicare, and new products could provide ways to expand on its already robust revenue growth. Still, there is a delicate balance between pricing and volume that the company must keep going forward.

Mounjaro and Zepbound Drive Growth as Lilly Raises Guidance

$24.4 billion in net revenue for Q3 included about $900 million of benefit and favorable adjustments to rebate and discount estimates. Still, the bulk of the quarter's sales growth came from Mounjaro and Zepbound. This prompted Lilly to boost the midpoint of its 2026 full-year sales guidance by $5.5 billion; the company now anticipates revenue for the year in the range of $91 billion to $92 billion.

On a more granular level, Mounjaro was the company's best-selling GLP-1 product, with Q3 2026 sales of $10.7 billion, nearly two-thirds higher than those from a year earlier. Mounjaro's revenue growth was strongest outside the United States thanks to increased volume. Zepbound sales increased by 49% to $5.4 billion over the same period. Foundayo, which launched in April 2026, generated $184 million in sales, well behind the multi-billion-dollar quarters for the other products above but growing steadily.

Despite the major success of GLP-1s, investors should not discount other drugs in Lilly's portfolio. Alzheimer's disease drug Kisunla, for instance, came close to tripling YOY revenue, making it the fastest-growing drug Lilly reported for the quarter.

Additionally, Lilly received FDA approval in August 2026 for Mounjaro to reduce cardiovascular risk in adults with type 2 diabetes who are at high risk, while continuing to pursue new indications and advance other drugs through clinical trials.

Medicare's GLP-1 Bridge Changes the Price/Volume Dynamic

Q3 was the first full quarter of Medicare's GLP-1 Bridge program. Beginning July 1, eligible patients could purchase Zepbound or a lesser-known GLP-1 in Lilly's portfolio, Foundayo, for $50 per month, a steep discount compared to typical pricing.

Lilly acknowledged that both Mounjaro and Zepbound revenues were offset by lower realized prices as a result of the Medicare program. Realized prices declined by 29% outside the United States, but only by 7% YOY domestically. The greater decline in Lilly's international price was due in part to Mounjaro's inclusion on China's National Reimbursement Drug List (NRDL).

At the same time, volumes remained strong, particularly in Mounjaro. Gross margins were also healthy, increasing 40% YOY as production costs came down, although this metric was negatively impacted by declining prices.

Looking ahead, investors will want to keep an eye out for updates regarding retatrutide, which recently saw positive Phase 3 trial results in adults with type 2 diabetes. Lilly's earnings report was light on updates about retatrutide and the company's plans to file for approval of the drug, although investors anticipate an update in the coming quarters.

Lilly has plenty of factors driving growth—excellent demand for multiple leading GLP-1 products, strong financials, a robust R&D pipeline, and so on—but investors might expect some turbulence going forward. The company got a major boost in the first half of the year from one-time payments, so it may appear that growth slows in the coming quarters even if demand remains just as strong. The company's Q2 earnings also suffered a hit of $3.03 per share as a result of acquisition costs, making a sequential comparison difficult.

Still, perhaps the biggest issue investors will want to keep an eye on is pricing. So far, Lilly has maintained top- and bottom-line outperformance despite these pressures, but the situation remains in flux, and the challenge will be to continue in the same way going forward.