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Do you know someone who needs to lose weight? Helping them do so could end up saving you money over the long run. What's more, even helping a total stranger lose weight could save you money as well. How can this be true? We first need to take a look at Medicare.
Nearly 1.5% of every dollar you make goes to the federal health care program. If you're self-employed, you kick in twice as much because you must pay the employer's portion also. And if you fit in Obamacare's high income classification, you'll tack on another 0.9%.
But you're really paying even more for Medicare. Of the $530 billion received by the federal program in 2011, $223 billion came from the general Treasury fund and only around $196 billion derived from payroll taxes. The government actually spent $550 billion -- more than it received. That total amounts to a little over $12,000 spent per enrollee.
As Medicare spending grows, more money will be needed. Guess who's going to pay up? All of us. However, if the spending could somehow be controlled, taxpayers should be able to hang on to more of their hard-earned dollars. That's where a new study comes into play.
Dr. Kenneth Thorpe -- a former Deputy Assistant Secretary for the U.S. Department of Health and Human Services and current chair of the Department of Health Policy and Management at Emory University's Rollins School of Public Health -- led the research team that conducted a study published recently in Health Economics Review. This study found that more than $12,000 per patient could be saved over a 10-year period by helping Medicare beneficiaries lose weight. That comes to as much as $144 billion.
The problem is in actually achieving that weight loss. Bariatric surgery can cost at least $18,000. That wipes out all of the estimated savings. Intensive behavioral therapy, or IBT, for weight loss is much less expensive, but it isn't enough for many obese individuals. Is there another option? Thorpe and his colleagues suggest that combining IBT with new weight-loss drugs could hold the key to helping Medicare beneficiaries lose weight and thereby reducing spending.
Currently, two weight-loss drugs have been approved by the Food and Drug Administration. VIVUS (NASDAQ: VVUS ) markets Qsymia. Arena Pharmaceuticals (NASDAQ: ARNA ) stands ready to begin selling Belviq once the Drug Enforcement Administration finalizes scheduling of the obesity drug. Another company, Orexigen Therapeutics (NASDAQ: OREX ) , hopes to receive approval for Contrave and launch the drug commercially in 2014. The problem for those who think one or more of these drugs could help with lowering Medicare costs is that the program doesn't reimburse patients for taking any of them. Not a dime.
The FDA agreed that Qsymia and Belviq are safe enough for the public. Clinical studies found both drugs to be effective in helping patients lose weight. Even one of the studies that the government used as a basis for its decision to reimburse for IBT concluded that combining weight-loss drugs with behavioral interventions was a good approach. So why doesn't Medicare provide reimbursement for these drugs?
History gives us the answer. Safety problems in the past have marred the image of weight-loss drugs. However, the newer obesity drugs have had to jump through hoops to prove that they are safe to take. Leading companies like Aetna (NYSE: AET ) and pharmacy benefits manager Express Scripts (NASDAQ: ESRX ) have opted to cover Qsymia. I expect that they -- and others -- will do the same for Belviq and ultimately for Contrave.
Should Medicare follow suit? Yes. While we should note that Thorpe's study was funded by VIVUS, the approach and reasoning used appears to be solid. With so many potential medical complications arising from obesity, significant savings could be attained by helping Medicare beneficiaries lose weight. Clinical studies show that new weight-loss drugs Qsymia and Belviq work and are reasonably safe. My expectation is that the same will hold true for Contrave.
Be glad if part of your tax dollars that go to Medicare are ultimately used to help others lose weight by taking obesity drugs -- or through any other cost-effective way possible, for that matter. Unless something is done differently, the things that will lose the most weight will be our pocketbooks.
Who will win the obesity drug market?
Can VIVUS pick up its lagging sales and fend off the competition, or will Arena Pharmaceuticals reign supreme in the obesity space? If you're in the dark, grab copies of The Motley Fool's premium research reports on VIVUS and Arena Pharmaceuticals to stay up to date. Senior biotech analyst Brian Orelli gives investors the must-know information, including an in-depth look at the obesity market and reasons to buy and sell both stocks. Click now for an exclusive look at Arena and VIVUS -- complete with a full year of free updates -- today.