Obesity Drugs' Low-Hanging Fruit
With 30% of patients abandoning their prescriptions for VIVUS' (NAS: VVUS) Qsymia because of the high cost of the drug, it's pretty clear that increasing insurance coverage is a necessary step to get the drug to blockbuster status.
The process is getting started, but I wouldn't get too excited just yet.
Aetna (NYS: AET) posted a revision to its Clinical Policy Bulletin, including Qsymia and Arena Pharmaceuticals' (NAS: ARNA) Belviq as "medically necessary" weight reduction medications. Some plans can specifically exclude services and supplies related to obesity, so not all Aetna-run plans will necessarily cover the drugs.
The policy requires doctors to prescribe a low calorie diet, increased exercise, and changes in behavior, but that doesn't seem like that big of a deal; considering the lack of side effects -- grumbling stomachs aside -- most doctors are going to tell their patients to diet and exercise to shed pounds before prescribing drugs to treat obesity.
Aetna's clinical policy already covered Roche's Xenical and appears to have covered Abbott Labs' (NYS: ABT) Meridia -- a December 2010 revision, shortly after the announcement by Abbott, notes that a drug withdrawn from the market was removed from the bulletin.
Neither drug has ever hit the magical $1 billion in annual sales; Qsymia offers better weight loss and Belviq's side effect profile is cleaner, but it seems safe to assume that Aetna's addition in and of itself probably isn't going to be enough to push the drugs to blockbuster status.
Before the launch, VIVUS noted that about one-third of prescriptions for weight management drugs were reimbursed by private payers. Some of Aetna's plans were presumably included in those prescriptions.
Aetna's change, as far as I can tell, was a low hanging fruit. While certainly a healthy move, what VIVUS, Arena, and the third, yet-to-be-approved player, Orexigen (NAS: OREX) , need to do is convince the other two-thirds of private insurance plans to cover the drugs. How challenging that will be is yet to be determined.
For more information on VIVUS and Arena, including the market opportunity, risks, and reasons to buy and sell each of them, check out the Fool's premium research report on Arena Pharmaceuticals and a separate one covering the full story behind VIVUS.
The article Obesity Drugs' Low-Hanging Fruit originally appeared on Fool.com.Fool contributor Brian Orelli has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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