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Behold the Ozempic effect on business

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

They were there to hear the news that Wegovy, one of a new group of massively popular weight-loss medications, could not only make patients a lot thinner and cut their risk of diabetes, but also reduce the chance of death from heart attack or stroke by 20 per cent.

Not since the rise of cholesterol-reducing statins, or perhaps even pain medications like Advil, has a group of pharmaceuticals so captured the public imagination. Wegovy, and its better known cousin Ozempic, are “semaglutides,” a class of drugs that slow digestion and mimic the effects of natural appetite-reducing hormones. First commercialised by Danish insulin maker NovoNordisk, they are now being developed and rolled out by many major pharmaceutical companies. Not only do they lead to an average 15-20 per cent weight loss in obese patients, they also appear to protect the heart, liver and kidneys, organs which are often put under strain by excess weight.

Prescriptions for these drugs are up a whopping 300 per cent in the US since 2020, despite the fact that they can cost between $300 and $1,300 per month. Bank of America expects 48mn Americans (about one-seventh of the population) to be on the meds by 2030.

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

Pre-diabetic patients are going on them to avoid more serious illness. Psychiatrists are doling out prescriptions to patients whose antidepressants have caused them to put on weight. WeightWatchers has acquired a telemedicine company to start prescribing semaglutides via Zoom.

Any number of other companies in industries ranging from fast food to insurance to health and fitness are seeing their core business models disrupted by drugs that seem to fundamentally change how much people want to eat.

Let’s start with the pharmaceutical firms themselves. If you don’t have an Ozempic knock-off in the development pipeline, your share price may take a hit. Novo Nordisk now has a market capitalisation that is higher than the entire gross domestic product of Denmark, and Eli Lilly’s share price is up 40 per cent since it rolled out its own weight-loss copycat Mounjaro. But both Pfizer and Moderna — neither of which have a successful semaglutide on the market — have seen their share prices plummet in recent months.  

And it’s not only companies in the weight-loss business that are being affected. In early October, when Novo Nordisk announced that Ozempic was so effective against kidney disease that it was stopping a trial early, shares in some dialysis providers tanked.

Now, healthcare analysts say that the $250bn cardiovascular disease market could be reduced by 10 per cent by 2050, and hundreds of billions-worth of additional business in treatments for diabetes, kidney and liver disease and other weight related illnesses could be disrupted. 

The Ozempic effect doesn’t stop there. Analysts have downgraded doughnut maker Krispy Kreme recently amid worries that Americans on semaglutides just won’t reach for as many sweet treats as they have in the past.

Last month, Walmart chief executive John Furner said that customers on obesity drugs weren’t buying as many groceries, which led to a brief sell-off in consumer staple stocks such as Mondelez and PepsiCo. No wonder Coca-Cola’s chief financial officer John Murphy tried to get out ahead of the issue earlier later last month, emphasising that more than two-thirds of his company’s portfolio was made up of low and no-calorie products.

The new weight-loss drugs will also disrupt the US healthcare system — the only question is how. Semaglutides are expensive, but so is obesity.

One study found that obesity adds $1,861 in annual healthcare costs per American. But if the government decided that Medicare should reimburse for weight-loss drugs (it currently doesn’t) that would create huge costs, too. Insurance companies have long complained about obesity-related costs, but also don’t like the idea of tens of millions of Americans suddenly going on semaglutides. Analysts say the jury is out on whether costs for the system as a whole would decline, but it seems likely if you take into account the possible reductions in conditions such as kidney failure, blindness, heart disease and liver complaints.

Of course, the new miracle weight-loss drugs do nothing to address many of the underlying causes of American obesity, from an out-of-date farm subsidy system that encourages the overproduction of unhealthy food, to sprawling suburbs where people are forced to spend large swaths of their time in their cars. You can’t fix any of that with a pill. We also don’t yet know what the long-term heath ramifications of taking these pills for years or even decades will be. What we do know is that they are already transforming fortunes as well as waistlines across America.  


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