Will Lilly report that Medicare/government channel tirzepatide volume growth exceeds the pricing discount impact in Q2 2026?

At a ~90% discount ($50 vs ~$500), volume needs to multiply ~10x in the government channel just to break even on revenue. Q4 2025 commercial showed +50% volume offsetting -7% price — a 1.4x multiplier offsetting 0.93x price. Government channel requires a fundamentally different magnitude of volume response. Prior to the deal, some Medicare patients accessed tirzepatide at higher negotiated Part D rates; the repricing of existing patients is a headwind. While Lilly's $80-83B guidance presumably incorporates this deal, 'manageable' doesn't necessarily mean 'government channel revenue positive.' The IRA precedent (Novo at 71% discount to $274/month) is less steep, providing limited analogy. The extreme discount level represents genuinely untested territory.

The resolution asks if total government channel revenue grew YoY. Before April 2026, Medicare access to tirzepatide was constrained by cost barriers and prior authorization. Medicare covers ~65M people with very high obesity/diabetes prevalence. At $50/month, the access barrier essentially disappears, unlocking massive pent-up demand. The pre-deal government channel base was constrained, meaning the denominator for YoY comparison is relatively small. Lilly proactively accepted this deal AND raised FY2026 guidance to $80-83B (+23-27%) afterward — management doesn't voluntarily accept massive price cuts unless they model net positive or neutral outcomes. The $50B manufacturing investment ensures supply can meet demand surge.

The committee flagged this as genuinely unresolved — 'no analyst quantified the specific government channel revenue trajectory.' Lilly proactively accepted the deal, suggesting management modeled it as net positive or neutral. The tariff exemption alone has significant strategic value. However, the specific question asks about government channel revenue, not total company economics. If prior government channel was 10-15% of tirzepatide revenue and restricted by access barriers, removing those barriers at $50/month could lead to explosive adoption. But the repricing of existing government patients works against YES, and Q2 2026 is the first full quarter — ramp-up dynamics create uncertainty about whether full volume materializes immediately.

The question is about YoY government channel revenue growth, not per-unit economics. Pre-deal, government channel tirzepatide access was heavily constrained — high copays, prior authorizations, formulary restrictions. At $50/month, these barriers collapse. The GLP-1 market has consistently shown demand exceeds supply. Medicare obesity prevalence is roughly 40%+ in the 65+ population. Even at $50/month, if the patient count multiplies 15-20x (plausible given access democratization), total revenue grows despite per-unit pricing collapse. Lilly proactively chose this deal AND raised total company guidance — this is the strongest signal that management's internal models show net positive channel economics.

The key dynamic the committee didn't resolve: existing patient repricing vs. new patient volume. Medicare Part D already covered some tirzepatide with higher copays and negotiated rates. The pre-deal base isn't tiny — it was constrained but existing. At $50/month, per-prescription revenue drops enormously for patients already in the system. New patients must outnumber the revenue lost from repricing existing patients. Given massive pent-up demand in Medicare population and Lilly's manufacturing readiness, the new patient effect likely dominates, but the magnitude is genuinely uncertain. The Regulatory Reader's cautious framing ('regulatory pressure crystallizing into economic impact') deserves weight alongside the Gravy Gauge's more optimistic read.

The IRA precedent is instructive: Novo semaglutide was negotiated at 71% discount to $274/month. Lilly went further at ~90% to ~$50/month — a much steeper discount. This suggests either enormous volume confidence or greater political pressure. The voluntary nature (avoiding IRA negotiation) points toward strategic calculation. However, Q2 2026 is only the first full quarter under new pricing. Ramp-up may be slower than expected due to provider capacity constraints, prior authorization legacy systems, and patient awareness lag. Medicare beneficiaries may not immediately know about $50/month access. The resolution date is August 15, 2026, requiring clear evidence from Q2 reporting — timing is tight for a full ramp effect.

Commercial channel demonstrated volume-for-price works at small discount levels (+50% volume vs -7% price). Government channel requires ~10x volume offset at ~90% discount — entirely different magnitude. But pent-up Medicare demand is massive and Lilly raised guidance post-deal, signaling management confidence. Coin-flip uncertainty reflects genuinely untested territory.

Government channel revenue must grow YoY. Pre-deal base was constrained but not zero — repricing existing patients at $50 from higher Part D rates crushes existing revenue. New patient flood must overcome this headwind. Q2 2026 is the ramp quarter with awareness and provider capacity constraints. First-quarter execution risk is real. Lean slightly toward NO given ramp-up timing.

Lilly proactively chose $50/month deal AND raised FY guidance — management doesn't accept ~90% discount without modeling net positive outcomes. $50B manufacturing capacity supports volume surge. Medicare obesity prevalence is high providing large addressable population. But first-quarter ramp may be slower than steady state. Slight lean toward YES based on management's revealed preference.