Obesity Drugs' Low-Hanging Fruit

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With 30% of patients abandoning their prescriptions for VIVUS' (Nasdaq: VVUS  ) Qsymia because of the high cost of the drug, it's pretty clear that increasing insurance coverage is a necessary step to get the drug to blockbuster status.

The process is getting started, but I wouldn't get too excited just yet.

Aetna (NYSE: AET  ) posted a revision to its Clinical Policy Bulletin, including Qsymia and Arena Pharmaceuticals' (Nasdaq: ARNA  ) Belviq as "medically necessary" weight reduction medications. Some plans can specifically exclude services and supplies related to obesity, so not all Aetna-run plans will necessarily cover the drugs.

The policy requires doctors to prescribe a low calorie diet, increased exercise, and changes in behavior, but that doesn't seem like that big of a deal; considering the lack of side effects -- grumbling stomachs aside -- most doctors are going to tell their patients to diet and exercise to shed pounds before prescribing drugs to treat obesity.

Aetna's clinical policy already covered Roche's Xenical and appears to have covered Abbott Labs' (NYSE: ABT  ) Meridia -- a December 2010 revision, shortly after the announcement by Abbott, notes that a drug withdrawn from the market was removed from the bulletin.

Neither drug has ever hit the magical $1 billion in annual sales; Qsymia offers better weight loss and Belviq's side effect profile is cleaner, but it seems safe to assume that Aetna's addition in and of itself probably isn't going to be enough to push the drugs to blockbuster status.

Before the launch, VIVUS noted that about one-third of prescriptions for weight management drugs were reimbursed by private payers. Some of Aetna's plans were presumably included in those prescriptions.

Aetna's change, as far as I can tell, was a low hanging fruit. While certainly a healthy move, what VIVUS, Arena, and the third, yet-to-be-approved player, Orexigen (Nasdaq: OREX  ) , need to do is convince the other two-thirds of private insurance plans to cover the drugs. How challenging that will be is yet to be determined.

For more information on VIVUS and Arena, including the market opportunity, risks, and reasons to buy and sell each of them, check out the Fool's premium research report on Arena Pharmaceuticals and a separate one covering the full story behind VIVUS.

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  • Report this Comment On November 23, 2012, at 11:19 AM, SamFreedom wrote:

    Docs might recommend exercise but at a bypass seminar they cited studies that showed 95% of obese ppl did not keep off weight loss from drugs and exercise. However, these new drugs weren't around for that study.

  • Report this Comment On November 23, 2012, at 12:13 PM, SaraW946 wrote:

    I would strongly advise people to stay as far away from VIVUS and related companies as possible. There is no drug, nor will there ever be one, that fights obesity effectively. There are two reasons: one is human metabolism. It is impossible to affect it enough to give up enough of the fat to make the risks worth it. The stuff about no side-effects is total nonsense. These drugs are new and largely untested. Secondly, drugs like Vivus and Xenical (which is extremely dangerous) are mostly prescribed to women who are mostly morbidly obese. In order for a person to reach this state, i.e. morbid obesity, one needs to be suffering from binge eating disorder, the most difficult to treat of all. The failure rate in successfully treating binge eating disorder is 95% and it's not falling any time soon. Recovery can only be possible through long-term behavioral modification, and successful individuals have usually been treated with certain anti-depressants and undergone at least two years of cognitive behavioral therapy, intensive work on changing the neurology of their brain, and repeated psychiatric evaluations. The drugs therefore do absolutely nothing but aggravate an already difficult situation. The weight loss is minimal and patients get discouraged, not to mention that they cannot change without a lot of work which is often not covered by health insurance. Companies will much prefer to prescribe a pill, of course, rather than cover long and extensive mental health treatments, but this still won't solve the problem.

    I am extremely well acquainted with the above situation because a) my best friend is a psychiatrist and we have discussed this thoroughly, and b) there is tons of information out there. If you are ever interested in the latest on successful treatments of the obesity epidemic, do visit the National Weight Control Registry website which will tell you more, including provide peer-reviewed studies. When I look into investing in pharmaceuticals, I always get acquainted with the companies and their drugs very well before handing over my money. It is my strong belief that weight-loss drugs will not only not make you rich, you will rather lose money in the long run. None of them has been successful to date, and given human physiology and the neurological manifestation of addiction, which is what Binge Eating Disorder, a little studied and less understood condition, is, drugs won't work.

    Or think about this as follows: have you ever seen any of the world's most successful investors invest in companies because of the weight-loss drugs they developed? No, they don't and yet obesity in America has reached epidemic proportions. The fact that it's not treated successfully has obviously led said investors to look for good companies whose bottom-line is based on their sales of drugs for the more mainstream conditions like cancer, diabetes, depression, and related. Conditions that are well-studied, straight-forward to treat, relatively simple to manage, and which affect a very very large segment of the population. Finally, think that there is a reason that most commercial weight-loss programs, however successful, are always subsidiaries of large food companies. People are not expected to recover long-term but rather relapse.

    So please stay as far away from obesity drugs as possible because the companies that produce them, especially when they become their flagship, are not a good investment.

  • Report this Comment On November 25, 2012, at 11:41 PM, FitnessExpert wrote:

    This article acknowledges a problem in America: Instant gratification.

    (I write this response with 10 years experience in the personal training industry - over 3,300 hours first hand experience)

    I believe many Americans are accustomed to a fast-paced world full of technology and convenience foods. This lifestyle causes us to eat more and move less! As a previous comment noted; you cannot modify long-term behavior change with a pill. Less than 5% of the population can't help their genetic disorders that cause obesity. The other 95% of us CHOOSE a sedentary lifestyle and over consumption of calories. We can not expect a miracle drug to wipe away 30 years of bad behavior! The supplement industry makes billions of dollars a year promising to have the "cure" to melt fat and trim pounds instantly. We can not keep falling for this madness!

    Many people can continue to lay around, waiting for cures to be delivered in the form of Vivus or Orexigen. The more enlightened of us can wake up, smell the coffee, and take responsibility for our lifestyle and change it! There is no magical pill, never has been, never will be. We have to wonder what these pharmaceutical companies are getting out of this "for sure" cure to fat. ???

    I atually left the fitness industry to start my own website to explain the financial ills of the fitness industry. See why only 2% of people train in most gyms! exists to educate and motivate people to a healthier lifestyle!

    Does anybody really think a pill will cure obesity? Maybe the FDA can invent a pill that cures debt? A pill that cures spending problems? A pill to stop people from texting and driving? .... You see the point....

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