Weight Loss Isn't Just for Looking Good Anymore

It wasn't that long ago that obesity drugs were considered a lifestyle drug. Doctors, the Food and Drug Administration, and insurers believed losing weight was a vanity issue. Doctors were reluctant to prescribe them, the FDA wouldn't approve them unless they had squeaky-clean safety records, and insurers wouldn't pay for them.

The tides appear to be changing.

After getting rejected once, Arena Pharmaceuticals' (NASDAQ: ARNA  ) Belviq and VIVUS'  (NASDAQ: VVUS  ) Qsymia were both approved by the FDA last year. And the FDA seems open to approving a third drug, Orexigen's (NASDAQ: OREX  ) Contrave.

Getting FDA approval is a necessary step, but it isn't sufficient to gain blockbuster sales. VIVUS and Arena's marketing partner Eisai have to convince doctors to prescribe the drugs and insurers to cover them.

VIVUS is making progress. On its first-quarter conference call, the company said 34% of privately insured lives cover Qsymia. Its goal is to have coverage for half of privately insured patients by the end of the year.

Endocrinologist endorsed
Obesity drugs are included in the latest version of the American Association of Clinical Endocrinologist Comprehensive Diabetes Management Algorithm, which endocrinologists and general practitioners use as a guide to determine how to treat diabetics and those who may become diabetic.

Listed after lifestyle modifications -- eating less and working out more -- the algorithm suggests using Belviq, Qsymia, Roche's Xenical, or phentermine, the safer part of phen-fen that's available as a generic. The association clearly sees a connection between obesity and type 2 diabetes, with weight loss being an important method for controlling diabetes.

Spending money to save more
From an insurer's perspective, it only makes sense to cover obesity medications if patients are willing to cover the added expense with higher premiums or if the expense now can help lower medical costs, thus keeping premiums down.

Higher premiums might be an option for some plans, especially for employer-sponsored health insurance, where the employers could benefit from increased productivity from healthier employees.

It's clear insurers could save money by increasing weight loss. According to a study by the Campaign to End Obesity, increases in obesity rates are responsible for $74.6 billion in higher spending by private health insurers.

But those benefits from losing weight are seen years down the line. The study recommends looking out 25 years. How many people are going to have the same insurance now as they will 25 years from now?

Government wild card
The solution could be for the government to require insurers to cover obesity medications like it does with vaccines, which also have pay-now and save-later benefits. If all the insurers are required to cover the drugs, then they'll all be on a level playing field for increased premiums, and they can all benefit down the line no matter who previously insured the patient.

If the government is going to require insurers to cover the drugs, it would have to cover them in the plans it runs, Medicare and Medicaid. I think we're likely to see that as a first step before making it a requirement for private insurers, although it may take awhile given the push to decrease costs now.

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. The reports have all 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.


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  • Report this Comment On May 16, 2013, at 8:15 AM, MRJOSEPHD wrote:

    Here is an email from a wise friend:

    Subject: Why I Believe Belviq is a Likely Candidate to Become a Blockbuster Drug

    From my point of view, there are five features of Belviq that suggest likely blockbuster status: (1) safety in a very large pool of users, (2) efficacy among responders, (3) good and improving insurance coverage, (4) versatility and (5) off-label use.

    (1) Safety appears to be decided. Valvulopathy appears to be a non-concern (http://www.ncbi.nlm.nih.gov/pubmed/23661689; http://www.nejm.org/action/showImage?doi=10.1056%2FNEJMoa090..., with the rate of echocardiographic valvulopathy similar with lorcaserin and placebo and less valvulopathy after two years in the lorcaserin group than in the placebo group.

    Given the unknowable outcomes of use in a very large pool of users, I believe Arena and Eisai will be extremely careful to protect their valuable asset from bad publicity and will try to ensure that the drug is used safely at all stages of the rollout. Expect early marketing emphasis to be on educating specialists on the benefits and the proper use of the drug and long term marketing to emphasize responsible use.

    (2) Efficacy among responders is substantial and impressive. It is very similar to the efficacy of the much more dangerous Qsymia. Moreover, the efficacy (and safety) of the Lorc/Phen combo supposed to be much better than Qsymia.

    (3) Insurance coverage is estimated at 30% at launch and seems likely only to increase over time.

    (4) Versatility is perhaps the most overlooked feature of this new and very promising compound. As an agonist specific for the 5-HT2c receptor, which has a complex and nuanced functionality, the agent appears to be effective on:

    I. Diabetes and pre-diabetes;

    II. Dyslipidemia;

    III. Hypertension;

    IV. Fatty Liver and NASH;

    V. Addictive and unwanted stereotyped behaviors such as smoking (nicotine), alcohol consumption, and nail-biting:

    http://www.ncbi.nlm.nih.gov/pubmed/21636655;

    VI. Fibromyalgia, a psychosomatic and central-sensitive condition:

    http://www.ncbi.nlm.nih.gov/pubmed/23603031;

    VII. Schizophrenia, a profound disturbance of the central nervous system:

    http://www.ncbi.nlm.nih.gov/pubmed/23027415.

    (5) Off-label use. One can be sure that many non-obese people will find ways to try Belviq, and many of these may find it compatible with lifestyle design.

    It should also be noted that Arena Pharmaceuticals has a pipeline of analogous compounds targeting the G-protein coupled receptor that the company believes will be effective in treating an array of medical conditions, including hypertension, thrombosis and autoimmune diseases.

    A compound (and a company) like this appears to be the sort of thing that comes along once a decade.

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