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Obesity Drugs May Ease Burden on Health Care System

Posted on: Thursday, 28 February 2008, 12:05 CST

The worldwide obesity epidemic threatens to place a heavy burden on government health-care budgets. Yet the burgeoning industry in drugs to treat excessive weight and obesity and the life-threatening diseases they cause could be worth its weight in gold to pharmaceutical companies.

Up to now, the Food & Drug Administration [FDA] and some European regulatory bodies have been reluctant to approve drugs targeted at weight loss for obese patients. This is partly because they are widely considered lifestyle drugs that medicalize a social problem, and partly because recent medical studies have suggested that some drugs currently available or in the pipeline cause unpleasant side effects. The World Health Organization [WHO] defines "overweight" as a BMI [body-mass index, a ratio of height to weight] equal to or more than 25, and "obesity" as a BMI equal to or more than 30.

However drugs to treat diabetes and other obesity-related diseases are already widely accepted and very profitable. Denmark-based pharmaceuticals group Novo Nordisk (NVO; A), one of the world's largest producers of insulin and diabetes treatments, has seen average annual sales growth rates of 13% over the past five years, with profits keeping pace.

A Swelling Market

Standard & Poor's Ratings Services estimates the current global market for prescription drugs to treat obesity and related metabolic syndromes such as diabetes, cardiovascular disorders, hypertension, and high cholesterol, at about $70 billion. But we expect this to double by 2020, assuming this market grows at a compound average of just 5% per year. We consider this a conservative estimate given WHO's projection that the number of overweight adults worldwide will rise to 2.3 billion by 2015 from 1.6 billion today, and obesity levels will rise to 700 million from 400 million.

We consider that, despite the recent regulatory setbacks for some newer drugs, the projected dynamic trend in obesity and the health problems it brings with it offer great sales potential to the global pharmaceutical industry. Companies with a sizable presence or a promising pipeline in diabetes, cholesterol reduction, and weight loss are very likely to generate significant future growth and avoid more negative industry trends in future.

Pharmaceutical companies have been largely unable to capitalize on weight-loss drugs. Few pipeline projects have made it to submission, let alone approval, highlighting the difficulty of finding safe, tolerable, and efficacious obesity treatments. At present there are currently only two established weight-loss drugs approved on some markets. The first is orlistat, marketed under the trade name Xenical by Switzerland's Roche Holding (ROG; AA+), which prevents excess fat being absorbed by the body. This had a compound annual growth rate of 8% between 2004 and 2006 before its annual sales declined by 10% to Swiss francs 632 million in 2007. Roche licensed the drug to GlaxoSmithKline (GSK; A+) for marketing in the U.S. where it is available without prescription under the name Alli.

The second is sibutramine [trade name Meridia/Reductil] from Abbott Laboratories (ABT; AA), which works in the brain to suppress the appetite. The use of both products, however, has been limited by evidence that they could cause adverse side effects.

Reimbursement Hinges on Approvals

French pharmaceutical giant Sanofi-Aventis (SA) has developed a newer class of drug, called Acomplia, that attempts to combine weight-loss and diabetes treatment. Sanofi has blockbuster hopes for Acomplia, which works by blocking cannabinoid receptors in the brain to suppress hunger and was the first drug of this class to market. Although it has been approved in many European markets and by the European Medicines Agency [EMEA], the FDA last year denied U.S. approval because of concerns that the drug increased the risk of depression and suicide. German authorities have denied reimbursement because they characterized Acomplia as a lifestyle drug with an unfavorable cost-benefit ratio.

Consequently, Sanofi has put in a lot of effort to prove that Acomplia combats multiple risk factors of cardiovascular disease and ameliorates existing conditions. The company aims to submit Acomplia for worldwide approval in 2009 as a treatment for type 2 diabetes only, since its former dual targeting of diabetes and weight loss did not get FDA approval. If approval is granted, Acomplia may also be granted reimbursement, at least in diabetic, obese patients.

Illustrating the significance of reimbursement for these drugs, Britain's National Health Service, which reimburses some weight-loss drugs, recently reported that doctors wrote prescriptions for such drugs worth 47.5 million [$93 million] in 2006, up from just 4.9 million in 1999.

Diet Pills as Preventive Care

Decisive for the rapid medical acceptance and commercial success of approved obesity products is reimbursement by health-care payers. We consider that, to be successful in this market, companies will have to develop drugs that have safe benefits beyond weight loss, such as diabetes and heart-disease treatments.

If health education cannot sufficiently slow the alarming rise in obesity and diabetes, medicines could play a part in cutting the ultimate potential burden on health-care budgets. We believe governments may not be able to avoid reimbursing effective diet pills in the long run because, if obesity is left untreated, patients may eventually require costlier surgery or emergency hospitalization. Given increasingly tight health financing, however, health insurance premiums will likely continue to increase, or patients will be required to fund an increasing part of obesity-related medications from their own pockets.

If neglected, obesity will clearly become an increasingly weighty problem. If the pharmaceutical industry can develop safe and tolerable drugs, then shrinking the world's waistlines could help them expand their bottom lines.

Source: Business Week

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