You can’t find a hotter topic in health care than obesity. From its impact on public health and quality of life to its long-term costs to advanced economies, rising obesity rates across the world are one of the most polarizing trends for the future. It’s no surprise then that Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) and VIVUS Inc. (NASDAQ:VVUS) — rivals squaring off with their FDA-approved obesity drugs Belviq and Qsymia, respectively — capture the hearts and opinions of investors everywhere.
While the FDA has been happy to welcome Belviq and Qsymia to the market, Europe hasn’t been so kind. The European Medicines Agency’s Committee for Medicinal Products for Human Use, or CHMP, rejected VIVUS’ appeal for approval last month and has also raised questions this year about Belviq’s approval. While Arena’s European fate hasn’t been decided yet, what are these companies missing out on if Europe rejects both obesity drugs? Let’s go inside the obesity crisis across the Atlantic to see just how damaging a rejection could be.
Lower obesity rates, but no less a crisis
It’s easy to point to the U.S. as the capital of the obesity revolution, but Europe’s not at all skinny by comparison. The U.K.’s Academy of Medical Royal Colleges has raised concerns that Britain’s obesity crisis could soon become “unresolvable,” and rates are on the rise across the continent.
According to the World Health Organization, between 2% an 8% of all health care costs can be attributed to obesity in Europe, depending on country and region. That’s considerably less than the U.S., where 17% of all health care costs come back to obesity; then again, European obesity rates are considerably less than in America.
15% of French citizens were obese as of 2012, according to a study sponsored by ObEpi-Roche — while Romania reported obesity rates of just 8% in women and 7.6% in men. The U.K. reported the top obesity rate among European women at 24%, while Malta reported the highest male rate at 22%. Both are still considerably less than the U.S.’s astronomical 35.7% adult obesity rate in 2012, as measured by the CDC.
That’s not to say that obesity drug companies like Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) don’t have an opportunity in Europe. Obesity rates have been rising fast — France’s 2012 statistic included a 35% increase in obesity in 18 to 24 year-olds in just the prior three years. By comparison, only 11.2% of French citizens were obese in 2008; total obesity rates for the nation climbed almost 34% between 2008 and 2012. Europe’s problem is growing fast, but America’s obesity crisis still tops the charts among advanced economies.
However, with health care budgets under attack in Europe due to the continent’s ongoing fiscal crisis, Europe’s ability to pay for obesity drugs is under fire.
Budgets under fire
France’s 2012 obesity study showed that poorer people had a higher likelihood of being obese than their wealthier counterparts. While Arena Pharmaceuticals, Inc. (NASDAQ:ARNA)’s Belviq isn’t a very expensive drug by pharmaceutical standards — the company set its wholesale price in the U.S. at $200 for a one-month supply — the poor in Europe can hardly afford yet another bill as the Eurozone struggles to remain intact.
That crisis has forced health care spending down across the continent. European health care spending dipped 0.6% in 2010, the first decline since 1975. Nations hit the worst by the economic crisis showed the biggest losses; Greece’s spending per person fell 6.7%, while Ireland’s spending plunged 7.9%. If that trend continues, especially since Europe doesn’t look like it’s escaping from the storm clouds of austerity any time soon, Arena could find its opportunity lessened by the impact of the recession.