Plumping up profits
Companies of all sizes are rushing to market products aimed at an increasingly obese population
Further giving weight to the obesity market was the decision in July that Medicare would consider covering obesity treatments on a case-by-case basis. Medicare already covers gastric bypass, but the move could eliminate the need for patients to demonstrate that they suffer from other conditions, such as diabetes or heart disease, to qualify for the surgery. And while Medicare excluded antiobesity medications from the outpatient prescription drug benefit that takes effect in 2006, the approval of new weight-loss medicines could force federal officials to reconsider.
Private insurers have taken a mixed approach to paying for obesity treatments. A number of insurers, such as Blue Cross and Blue Shield of Florida, have decided to drop coverage of bariatric surgery, citing cost and safety concerns. But North Carolina's Blue Cross and Blue Shield plan, a rare exception, is adding an obesity program in April that includes bariatric surgery. Large employers are trying to decide what to do. "It's a topic of hot, hot discussion and concern," says LuAnn Heinen, director of the Institute on the Costs and Health Effects of Obesity, a project of the National Business Group on Health.
As for drugs, neither Meridia nor Xenical, the top antiobesity agents now on the market, has lived up to initial hype, and health plan coverage remains limited. Sales of each drug have declined steadily since 2001, according to IMS Health, a pharmaceutical information company. But the prospect of new antiobesity treatments creates a new coverage dilemma: If payers foot the bill, they might save money in the long run; on the other hand, they don't want to be saddled with drug costs for every person with an extra 10 pounds to lose.
But the lure of a blockbuster drug is hard to resist. "Clearly, if you can come up with something that treats obesity and doesn't have a lot of side effects, patients are going to beat a path to your door," says Scott Henry, a pharmaceutical analyst with Oppenheimer & Co. in Boston. And the investing public is likely to be standing in line right alongside.
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