As long time holders in Eli Lilly, we strongly benefited from the hype surrounding “GLP-1 agonist” drugs … but we can’t help thinking that there could be cheaper solutions to fight obesity.
According to the Center for Disease Control and Prevention, more than four in ten adults are considered obese, up from three in ten a decade ago. With consequences such as heart diseases, strokes, type 2 diabetes and certain types of cancer, the estimated cost of obesity in the United States was nearly $173 bn in 2019, representing an excess spending of $1,861 per overweight individual.
Since these new medications were approved by the FDA, they have been selling so easily that Eli Lilly faces major capacity constraints despite the management’s efforts to boost production. To make things even better, the various drugs currently available from Novo Nordisk or Lilly are selling for $1000 to $1350 per month, and patients seem to regain weight shortly after they suspend their treatment, which suggests prescriptions may need to be continued for life. No wonder that obesity appears to be the new medical Eldorado, attracting many other pharmaceutical companies to the game.
Now, even if we assume that prices will go down, it looks difficult to assume that the cost of treating the disease with this approach will not be significantly higher than the current cost of its consequences. Obviously, the benefit will be in allowing people live a more enjoyable life, but the question is “who pays?” Given that only a minority of obesity cases result only from genetic patterns, and that others reflect the involvement of deliberate diet or lifestyle factors, discussions may go on forever about who should pay for the consequences of individuals’ chosen behaviors. At this stage, neither the Medicare/Medicaid system nor most commercial health insurance players have made the move to reimburse Wegovy, Zepbound and the likes, when they are prescribed for weight loss. However, they will very likely end-up reimbursing them at some stage.
We thus find it interesting that the time and amounts spent on changing behaviors and encouraging the adoption of healthier habits remain ridiculously small. Neither consumers, nor junk food manufacturers need to be worried about being obliged to make an effort to “deserve” the treatment. Eli Lilly even has an agreement in place with Amazon Pharmacy, to deliver Zepbound directly to your home, so that you don’t take the risk of leaving your sofa and taking some exercise on the way to the nearest pharmacy!
ALF – May 14, 2024