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Why There's More Money in Maintaining the Obesity Crisis Than Ending It

By Jim Edwards

Updated on: August 10, 2011 / 9:52 PM EDT / MoneyWatch

Ending the obesity epidemic is turning out to be a bust for the drug business. The FDA has nixed all recent attempts to launch three new weight-loss pills and removed an existing drug, Meridia, from the market. Three companies -- GlaxoSmithKline (GSK), Medicis (MRX) and Allergan (AGN) -- are either trying to exit the market or are seeing declining sales of their already marginal obesity products.

It's a far cry from just two years ago, when analysts forecast a gold rush in the obesity market, with products estimated to make up to $10 billion a year in revenues. But there's still money to be made from obesity, as long as most people don't actually lose weight.

Here's the recent history:

Allergan's Q2 2011 earnings revealed that sales of its Lap-Band gastric banding device declined again, by 7.5 percent to $54.5 million. The company blamed lack of government reimbursement and hefty copays with private insurance. The sales decline came despite a campaign by Allergan that threw money at doctors to get their endorsement of the product. Allergan previously discontinued the Easyband, a different gastric banding product.
Medicis, in its Q2, reported that its LipoSonix fat reduction business, acquired only in 2008, was now considered a discontinued business and the company was looking to sell it.
Likewise, GSK is trying to sell Alli, the over-the-counter diet drug that works as long as you can live with its infamous smelly side effects. GSK poured millions into Alli, but the product never became a significant earner of revenues.
And the FDA decided not to approve three new weight-loss pills from Arena (ARNA), Orexigen Therapeutics (OREX) and Vivus (VVUS).

As America gets fatter, many in the health business assumed there would be huge sums to be made trying to get people to lose weight. Counter-intuitively, though, the only companies making serious money in the obesity business aren't treating obesity -- they're treating the symptoms and side effects of obesity. Novo Nordisk (NVO), for instance, is devoted almost entirely to selling drugs for diabetes. Its sales of diabetes products increased 10 percent in the first half of the year to $4.6 billion. You could add in the billions made on cholesterol and high blood pressure drugs, by dozens of companies, too.

There is much more money to be made in keeping America fat than there is in reducing its weight, a notion that ought to tantalize conspiracy theorists everywhere.

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Image by Ed Yourdon, CC.

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