IE 11 is not supported. For an optimal experience visit our site on another browser.

Obesity disease status could hurt insurance, help pharma

The American Medical Association's recent recognition of obesity as a disease rather than a condition could dent insurers' bottom lines—at least in the short-term—but boost profits for makers of weight-loss drugs.

In the long term, health care experts said, more treatment for obesity could end up significantly cutting high costs from diseases associated with being severely overweight, including diabetes and cardiovascular diseases.

"We want to reduce and prevent Type 2 diabetes. We want to reduce the impact of cardiovascular disease," said Dr. Patrice Harris, an AMA board member. "Obesity is so interrelated to both of those."

"I think everyone's goal is improving the health of the citizens of this country."

The AMA's resolution to recognize obesity as a disease has no legal or regulatory power to compel insurers to cover treatment or medication for the condition.

The move by the nation's largest physicians' group could pressure insurers to cover costs for preventive treatments—such as bariatric bypass surgery—and possibly set in motion legal requirements to do so.

"Many private insurers, employers and state health plans specifically exclude the treatment of obesity and severe obesity from their coverage policies," noted Dr. Jaime Ponce, president of the American Society for Metabolic and Bariatric Surgery.

"Recognition of obesity as a disease by the AMA sends a powerful message that access to evidence-based treatments across the spectrum of the disease are medically necessary, and should be treated in similar fashion to treatments for Type 2 diabetes, heart disease or high blood pressure," Ponce said.

(Read More:Setting a Price on Weight Loss)

Dr. Caroline Apovian, director of Boston Medical Center's Weight Loss and Nutrition Center, said the step was necessary to prompt insurance companies to treat obesity earlier.

"The decision by the AMA to mandate that obesity is a disease is going to change the way that we as providers can treat people with weight issues," Apovian said. "We'll probably be able to bill for our services. Most doctors right now cannot afford to spend the time that it takes to teach patients how to eat better, how to exercise better, and the patient cannot afford the medications that we have available to treat obesity."

In the near term, that could dent the profits of insurance companies, despite the potential cost savings for obesity-related conditions, said Mike Thompson, a principal in the global human resources practice of PwC, the professional services firm.

"You're going to see more claims for treatment of obesity," Thompson said. "You would expect over time that that would have a positive impact, but certainly in the short term it's going to increase costs that get reimbursed."

"We know that there are higher costs associated with people who are obese or morbidly obese," he said. "The question is, by covering treatment of obesity, would we influence and change that prevalence enough to more than offset the additional costs associated with treatment?"

Dr. Shawn Garber, a New York physician who has performed more than 3,500 laparoscopic gastric bypasses and more than 3,000 Lap-Band procedures, said insurers would be wise to start willingly cover such treatments because of the long-term savings of having fewer obese people to treat for associated conditions.

"I think that in the long term, they're definitively going to save," Garber said. "But most insurance companies don't look in the long term."

In addition to the potential for more insurance coverage of obesity-related surgery, the AMA's resolution could fuel already increasing interest in developing medication for obesity itself, an area that had long languished among pharmaceutical companies.

"This decision might change decisions to cover the drugs related to obesity," said Paul Fronstin of the Employee Benefit Research Institute. "It could give pharmaceutical companies more incentive to start investing money in obesity-related drugs if they think that coverage for those drugs is going to increase."

Dave Fox, a lawyer who specializes in new drug regulation at the firm Hogan Lovells, said the AMA's move is "a strong message from a credible source" that could "pressure" the Food and Drug Administration to focus more on the benefits of a potential new drug than on the risks, as it considers drugs for approval.

Fox noted that the AMA's announcement comes as two new drugs targeting obesity—Belviq by Arena Pharmaceuticals and Qsymia by Vivus—have begun sales recently.

(Watch:Most Undervalued Pharma Stock Is Merck: Pro)

Before that, Fox said, "We had a tremendous deficit, lag or delay in the development of obesity drugs." Weight loss drugs in the past sometimes increased the risk of cardiovascular conditions.

"There's always worry that the cure is worse than the disease," said Fox, who formerly worked for the FDA as associate chief counsel for drugs.

While noting the AMA's disease classification of obesity doesn't technically change the FDA's approach to approval of new drugs, Fox said it's symbolically important in the context of "the positive momentum that's been generated in the past couple of years of approval of some weight-management drugs."

"The FDA has to weigh benefits against risks, and you're hearing from a voice in the community that is saying treating obesity as a disease is itself a benefit," Fox said. "That's how things change over time in government."

More business news:

Follow business onTwitter and Facebook