Rachel Woods: So we're getting to this point of, "Alright, this is what the landscape of weight management drugs looks like today, and we know it's going to change." Let's talk about the impact on the industry. I wonder if one of you can walk me through a potential patient journey. What should it look like if all of the rules are being followed for a patient to qualify for, get access to and ultimately experience the clinical benefit that these drugs intend, based on FDA's approval?

Kara Marlatt: Yeah, and this is something that Gaby and I have gone back and forth on quite a bit. And if we just pick Ozempic, the ideal candidate for Ozempic would be somebody that has type 2 diabetes that would potentially benefit from weight loss, chronic disease management that could be improved.

And if a doctor identifies a patient or if a provider identifies a patient as potentially having a benefit from going onto Ozempic and that being a good treatment option, the doctor should discuss the benefits and the risks for taking these sort of medications, just like with any medication that they would be taking. And some of the risks include the side effects that go with some of these medications.

A provider could submit a prior authorization for the patient and the payer can either approve or deny it. But what Gaby and I have been hearing in some interviews as of recent is that getting prior authorization for these medications is sometimes more challenging than expected. And so it's creating some medical waste within the system. It's burning through a lot of hours for different providers and their support staff, and it's not as easy to get their hands on these medications.

Woods: And so they could be potentially paying more out of pocket for these medications that even if we say in theory, payers should be covering some or all of the cost.

Marlatt: Payers and PBMs — I want to give Chloe that shout out. And the goal here for this population, I want to be clear, is to induce a clinical change. That is why we're not saying weight loss, even though that might be a outcome or a side effect of these medications. But the goal is more about the underlying chronic disease or diseases that these patients have.

Let's roll the tape forward, let's say that that is repeated across thousands, maybe hundreds of thousands of patients. The good news for those people is that they will have improved health outcomes, that's the whole goal of this. I want to talk about the downside. Most health systems still have a business model that is rooted in fee-for-service. I am thinking about what the impact might be if these drugs mean fewer bariatric surgeries, maybe not even just bariatric surgeries, fewer cardiac procedures, fewer stents or CABGs, fewer orthopedic surgeries. The list kind of goes on. And those are key revenue generating procedures and surgeries for today's health systems. What do these drugs mean for hospitals and health systems today? Gaby, do we actually have numbers on this?

Gaby Marmolejos: We do have numbers on this, but the important takeaway when you're looking at these numbers is we are expecting to see a rise in bariatric procedures over the next few years that is concurrent with the rise in obesity prevalence in the United States. But when we look at the numbers, we know that these volumes wouldn't be catastrophic to the average hospital.

Woods: If the volumes went down because of these medications?

Marmolejos: For sure. But it's really the associated volumes with obesity, thinking about all the different cardiovascular procedures, all of the different procedures that are related to obesity management or weight management. And if those go down, then we could see a dire situation to be dramatic about it.

Woods: And you mentioned that health systems are already in a fragile place. How worried should hospital and health system leaders who are in fee-for-service be of these drugs?

Marmolejos: Well, it depends because we're making a few assumptions here. We're assuming that there would be chronic disease prevention at this point. We don't have long-term data on the effectiveness of these drugs for us to be freaking out quite yet. But in terms of the volume backslide, it would take time to happen, if at all. And it's not like bariatric surgery's going away, and at this point, bariatric surgery is not considered a third line treatment.

So basically, it's not necessarily the case that you would be on these drugs first and then move on to bariatric surgery, and then if the drugs are successful, you move on. Sometimes a physician might just prescribe or suggest bariatric surgery instead of the drugs. And we don't necessarily know that it's going to shift volumes for bariatric surgeries as a whole. We don't know if it would change the need for cardiovascular or orthopedic services moving forward necessarily.

Chloe Bakst: I think one thing to note is that there are certain orthopedic surgeries that can't even be performed unless a person achieves a certain health status. So in some instances, if somebody were to be able to lose weight with these medications or what have you, they would then be able to have an orthopedic procedure.

Woods: That's true. So we're getting at all of the complicating variables and why it's so hard to make a prediction about what these drugs will mean for things like revenues, volumes, and of course the health outcomes of people. But if I'm thinking I'm a hospital leader, that's business models in fee-for-service, and I'm thinking about how the dominoes could fall, this doesn't sound good for me.

Marmolejos: There is a world from the pharmacy side where this isn't necessarily a nightmare scenario. So right now, these medications are not considered specialty medications, which I personally think is a little weird. It's an injectable drug and they're pretty high cost. Those are usually two things that would make a drug a specialty drug.

But right now, perhaps because it's for diabetes patients who have a lot of history with injections, it's not that. If we see that sort of expansion of a patient population, if this now becomes a drug that a patient can take if they have a certain BMI, we might see it move to a specialty classification that would be dispensed by a specialty pharmacy. And if you're a health system and you have a specialty pharmacy that could bring in some revenue, that could help augment maybe some of the losses in different parts of the system.

Woods: We've been talking about the fee-for-service business model, I want to shift to total cost of care business models. We just aid that in most scenarios, maybe specialty pharmacy aside health systems and fee-for-service might be feeling some pain if these drugs lead to an erosion of profitable procedural volumes. But isn't that a good thing for total cost of care?

Marmolejos: Maybe. Like I said, there are a lot of assumptions we're making there. I envision two potential scenarios. There's probably more, but I'm just going to go with two based on a number of assumptions.

So we know these drugs are really expensive, a thousand dollars a month — scenario one assumes that you're on these medications for a short amount of time. The way that the clinical trials were run, were about one to two years for each of the drugs. And then you have clinically meaningful benefits. You stop using the drugs and you maintain those benefits long-term. In that case, then we could see it as potentially being cost-effective.

Woods: Cost-effective because those patients are being treated through a medication as opposed to expensive surgeries and procedures, which again, we would not want in a total cost of care model, even though they are revenue generating in fee-for-service.

Bakst: To jump in here too, Gaby, I think that there is a world, a model that we've floated out. I haven't seen this happen yet, but I could see something potentially happening where there's some sort of value-based payment or capitated model between the manufacturers of these drugs, maybe between clinics or telehealth companies who have those weight management programs where they take on maybe like a capitated risk for patients enrolled and the drug costs get folded in there.

This is again, not something I've seen happen yet, but I could potentially see it happening moving forward. And when we floated this idea on calls with manufacturers, payers, and even providers, everybody seemed really interested and intrigued by it. So I think we'll see a lot of innovation there.

Woods: And the success of that innovation is going to come down to, are we able to lower the cost with switching to this medication and being in a risk-based model as opposed to doing surgeries and procedures. But Gaby, you said that that might not be the only path forward. What's the other scenario?

Marmolejos: The other scenario, the other extreme of this, we have data that shows that people who stop treatment gain the weight back. And so what that means is we're talking about they may not be able to get off the treatment after one to two years. They may stay on the treatment, maybe for the rest of their lives, it depends.

And so if that's the case, we're talking a thousand dollars a month for the rest of someone's life, and that's just one person. So imagine just lots of people. There was a recent analysis that found even if only 10% of Medicare beneficiaries with obesity took we Wegovy, it could cost close to $27 billion a year.

The cost would exceed the entire Part D budget if all Medicare beneficiaries with obesity took Wegovy. And I'll note that in this analysis, they actually assumed a $200 discount on the list price of Wegovy. So that is actually a conservative estimate if we're talking about list price.

Woods: And something that ultimately would actually increase the total cost of care, the opposite of what your first scenario suggested?

Marmolejos: Yes. So it depends.