Obesity as an epidemic is at a tipping point around the world. Health care companies and governments around the world are taking more action to fight obesity due to its association with chronic diseases, and the high societal and economic costs of managing those problems. Some companies are poised to benefit.
Faced with growing demand for improved delivery of health services at lower costs, the U.S. health care industry is transitioning away from a traditional fee-for-service (FFS) system towards more risk-based payment models. As such, managing the costs of chronic conditions has become high priority for health care providers and employers. After all, chronic illnesses are the biggest strain on the industry, accounting for more than 80% of the $3.5 trillion spent in annual health care costs. By 2026, U.S. health spending is projected to reach $5.7 trillion, with prescription drugs seeing the fastest annual growth during that time.
One area receiving greater attention from health care professionals and payers is the fight against obesity. That's because of the many chronic (and expensive) diseases associated with it, including heart disease and stroke, high blood pressure, diabetes, some cancers, and the list goes on. In fact, the World Health Organization (WHO) deems obesity one of the leading preventable causes of death.
The world is seeing an escalation of obesity, which is the result of excess fat deposition in the body. Typically, a person with a body mass index (BMI) of 30 or higher is considered obese. Energy sparing technology, packaged or fast food, and the proliferation of desk jobs are partly to blame. Humans have become less active physically, and are consuming a lot more sugar, salt, additives, and processed foods than ever before.
In America, the obesity rate is on the rise again after briefly leveling off in recent years. At this point, more than a third of rural residents qualify as obese while the rate in metropolitan areas is about 28.7%. The highest obesity rates are in Southern states; in rural Louisiana and Texas, the number of obese residents approaches 40%. In general, 75% of men in the U.S. are overweight. The same is true for 69% of U.S. women. Things are not looking great for kids either. In 2016, the obesity rate for boys and girls was already 21% and 18%, respectively. If nothing changes, half of all U.S. teenagers will be overweight or obese by 2030 -- as will one-third of kids between 6 and 11 years old. This is a major problem because a child with obesity is five to seven times more likely to be obese as an adult than one who is not obese.
It's not just an American issue. Three in five Britons are overweight or obese, according to a 2017 report by the Organization for Economic Co-operation and Development (OECD). And just last month, the WHO reported that, about one in five boys (18%-21%) was found to be obese in Cyprus, Greece, Italy, Malta and Spain. The obestiy rate for girls was only slightly lower. The paradox is that the region gave birth to the Mediterranean Diet, a way of eating that is known to have positive effects on cardiovascular and metabolic health. Yet, childhood obesity in southern European countries was twice as prevalent than in northern European countries such as Denmark, Ireland and Norway, where rates of obesity in boys and girls ranged between 5% and 9%.
In Scotland, where almost 29% of children are at risk of being overweight and 14% are likely to become obese, the government has resorted to banning fruit juices and smoothies from school canteens across the country, with strict weekly portion limits also placed on unhealthy foods. Lower sugar limits on breakfast foods, snacks and baked products are also being proposed nationally.
A similar tactic is being adopted by some health care providers who are starting to advocate food-as-medicine, even in cases of a chronic disease. One example is US-based Geisinger Health Systems which launched its “Fresh Food Farmacy” on the rationale that a prescription for fresh food can help treat diabetes. Instead of relying solely on drugs to manage the disease, doctors are writing prescriptions for certain patients to enter the Fresh Food Farmacy program, which entails 15 hours of education about diabetes and healthier living, followed by 10 free nutritious meals a week for participants and their families.
After a year, patients in the program have seen their A1C levels drop to the point where diabetes medication usage was down 48%, and body weight was down 12%. With operational costs of $2,400 per patient each year, early findings show costs for patients in Geisinger Health Plan dropped by 80%: from an average of $240,000 per member per year, to $48,000 per member per year (even with free food!) The Geisinger model is replicable and other health systems are considering this approach to manage obese patients.
With obesity rates rising around the world, companies dedicated to treating and servicing obese patients are positioned to benefit. On that basis, MRP is adding Obesity as a Long Theme. Investor can get exposure to the theme via the Obesity ETF (SLIM).
SLIM invests globally in biotech, drug makers, health care and medical device companies whose businesses are focused on obesity & obesity related disease, as well as companies focused on weight loss programs, weight loss supplements, or plus-sized apparel. The fund invests at least 80% of its net assets in the stocks that comprise the Solactive Obesity Index.