Here’s the Ozempian effect on business

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It’s rare for a presentation of medical research results to attract a standing-room-only crowd. But that was the case a few weeks ago in Philadelphia, when medical professionals and media alike packed the ballroom at the American Heart Association meeting.

They were there to hear the news that Wegovy, one of a new class of weight-loss drugs, could not only make patients very thin and reduce their risk of diabetes, but also reduce their chances of dying from a heart attack or stroke. by 20 percent.

Ever since the rise of cholesterol-lowering statins or even painkillers like Advil, a group of pharmaceuticals have captured the public’s imagination so much. Vegovi and its better-known cousin, Ozempic, are “semaglutides,” a class of drugs that slow digestion and mimic the effects of natural appetite-suppressing hormones. First marketed by the Danish insulin manufacturer NovoNordisk, they are now developed and distributed by many major pharmaceutical companies. Not only do they lead to an average weight loss of 15 to 20 percent in obese patients, they also appear to protect the heart, liver, and kidneys, organs that are often strained by excess weight.

Prescriptions for these drugs have increased by a whopping 300 percent in the U.S. since 2020, despite the fact that they can cost anywhere from $300 to $1,300 a month. Bank of America expects that 48 million Americans (about one-seventh of the population) will be without Medicare by 2030.

This reflects not only the fact that three-quarters of the US population is overweight, but also the impact of the media’s intense interest in drugs. They are used not only by the truly overweight and/or diabetics for whom they were developed, but also by Hollywood stars and others who believe that you can never be too rich or too thin.

To avoid more serious diseases, prediabetic patients turn to them. Psychiatrists provide prescriptions to patients whose antidepressants have caused them to gain weight. WeightWatchers acquired a telemedicine company to prescribe semaglutides via Zoom.

Companies in every other industry, from fast food to insurance to health and fitness, are seeing their core business models disrupted by drugs that appear to fundamentally change how people want to eat.

Let’s start with the pharmaceutical companies themselves. If you don’t have Ozempic in the development pipeline, your share price could take a hit. Novo Nordisk now has a market capitalization higher than Denmark’s gross domestic product, and Eli Lilly’s share price has risen 40 percent since it launched its own weight-loss drug Mounjaro. But both Pfizer and Moderna, neither of which has a successful semaglutide on the market, have seen their share prices fall in recent months.

And it’s not just weight loss companies that are suffering. In early October, when Novo Nordisk announced that Ozempic was so effective against kidney disease that it was stopping the trial early, some dialysis providers’ shares were halted.

Health analysts say the $250 billion heart disease market could shrink 10 percent by 2050, and additional business worth hundreds of billions in treatments for diabetes, kidney and liver disease and other weight-related diseases could be disrupted.

The Ozemic effect doesn’t stop there. Analysts recently downgraded donut maker Krispy Kreme over concerns that Americans with semaglutides simply won’t reach for the sweet treats as much as they used to.

Walmart CEO John Ferner said last month that customers taking anti-obesity drugs weren’t buying as much groceries, leading to short selling in consumer staples such as Mondelez and PepsiCo. Unsurprisingly, Coca-Cola’s chief financial officer, John Murphy, tried to wriggle out of the problem late last month, stressing that more than two-thirds of his company’s portfolio consists of low- and low-calorie products.

New weight loss drugs will also disrupt the US health care system, the question is how. Semaglutides are expensive, but so is obesity.

One study found that obesity adds $1,861 in annual health care costs for each American. But if the government decides that Medicare should reimburse for weight-loss drugs (it doesn’t now), that will also create huge costs. Insurance companies have long complained about obesity-related costs, but they don’t like the idea of ​​tens of millions of Americans suddenly taking semaglutide. Analysts say the jury is out on whether the system’s costs will be completely reduced, but it seems likely given potential reductions in conditions such as kidney failure, blindness, heart disease and liver complaints.

Of course, the new wonder weight-loss drugs do nothing to address many of the root causes of American obesity, from an antiquated farm subsidy system that encourages overproduction of unhealthy food to the suburban sprawl where people are forced to spend. large chunks of their time in their cars. None of this can be fixed with a pill. We also don’t yet know what the long-term health effects of taking these pills for years or even decades will be. What we do know is that they are already changing fortunes as well as waistlines across America.

rana.foroohar@ft.com