The Economics of Obesity – WSJ

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There is an economic explanation for America’s obesity problem. High calorie foods are cheaper than ever and changes in the way we work have created a sedentary nation. Fortunately, the market is generating a solution: medical innovations that can reduce obesity. But insurers and the government are limiting coverage for these treatments due to short-sighted business calculations.

Obesity affects 42% of the American population. Many attribute America’s weight problem to genetics, addiction, or culture, but the analysis that Richard Posner and I began in 1999 demonstrates that the problem is an economic problem driven by technological change. Agricultural innovations have increased production and dramatically reduced the price of food. Historically, it was not possible to produce all the food necessary for such a large obese population, but today we can do it easily and cheaply.

At the same time, innovations that have increased productivity in other areas of the economy, such as automation and computers, have made work sedentary. When more Americans worked manually, they exercised for much of the work week and were paid to do so. Now many Americans sit while they work and have to pay for exercise in gym fees and lost leisure time. The total number of calories burned per year has fallen nationally as more people have turned to white-collar jobs. Even someone who is diligent about going to the gym gets only a few hours of vigorous exercise a week, while a manual laborer rarely stops moving.

These changes have overall been extremely beneficial to the United States and the world, but the side effects on weight gain are unfortunate and difficult to combat through behavior modification. Overall food consumption fell even during certain periods of growth in obesity in the United States, such as the post-war period. It’s not just an American problem. Many economies where food is cheap and work is not physically strenuous face the same problem. The World Health Organization estimates that around 650 million people worldwide were obese in 2016 and the World Obesity Federation predicts that nearly one billion will be obese by 2025.

It’s not hard to see how obesity could become so prevalent. There are strong incentives for Americans to gain weight. But it also means that there is now a large global market for obesity treatments, which has inspired innovation.

Two pharmaceutical companies have recently marketed drugs for obesity and diabetes that regulate hormones to reduce appetite. The Food and Drug Administration has approved Novo Nordiskit is

Wegovy in June 2021. It was associated with an average weight loss of 15%. Eli Lilyit is

Tirzepatide was approved last month to treat diabetes, but trial data shows a 22.5% weight loss after just over 16 months. These results surpass those of many behavioral interventions, which tend to produce only short-lived effects because the same economic incentives persist after weight loss.

But Medicare and many private insurers have stalled on coverage for these new innovations. Wegovy launched with a monthly disbursement of $1,627, and around 140 million Americans could benefit from it. Doctors and insurers tend to view obesity as a preventable disease and treatments as lifestyle drugs. But the use of drugs to fight technically preventable diseases is not unusual. This is how we treat many diseases, from HIV to Covid.

Focusing on increased drug spending is shortsighted. Insurers and the government could see their overall costs drop if these drugs can make a dent in the obesity epidemic. The cost of treating diabetes was $327 billion in 2017, according to the American Diabetes Association. Two-thirds of that was covered by the government through Medicare, Medicaid and military medical benefits, programs that have a big impact on the national debt. Add in the costs of other obesity-related health problems — heart attacks, high blood pressure, strokes, and some cancers — and the cost-benefit analysis is clear.

Prudent insurers should consider the hepatitis C remedy Sovaldi, which entered the market in 2013. The spread of hepatitis C can be prevented through behavioral change, but in practice this does not occur. Hepatitis C was and still is a common chronic infection in the United States. When Sovaldi arrived on the market, insurers had a crisis. A 12-week treatment cost $84,000. But once they started picking it up, modeling showed their overall costs would drop. By covering Sovaldi, insurers have helped patients avoid more expensive treatments such as liver transplants.

These new anti-obesity drugs are also worth it. Extending coverage to Wegovy, Tirzepatide and future obesity drugs will help insurers, the national debt and the country’s health.

Mr. Philipson is an economist at the University of Chicago. He was a member of the President’s Council of Economic Advisers, 2017-20, and its interim chairman, 2019-20.

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