Big Pharma could affect Big Food with obesity drugs, says Big Finance

The increasing uptake of anti-obesity drugs could have “long term impacts” for the food industry as people eat less and “shun” unhealthy fare, according to a recent report by Morgan Stanley.

“The latest hunger-suppressing weight-loss drugs are transforming the way obesity is treated,” the American investment bank said, with the industry attaining “blockbuster status” over the past year (2023).

The price-sensitive food industry could be hit hard as use of the drugs expands.

The sector has been hit by inflation over the past two years, benefitting in part from high prices in grocery stores, but also seeing margins squeezed at the other end by soaring costs such as fuel, transport and labour.

Anti-obesity medication could cut sales “particularly for unhealthier foods and high-fat, sweet and salty options”, said Morgan Stanley tobacco and packaged food analyst Pamela Kaufman.

Left as it is, obesity could shave US$4 trillion (RM18.7 trillion) – roughly the same as Germany’s gross domestic product (GDP) – off global economic output by 2035, as healthcare costs, time taken off work and reduced productivity are factored in.

In another recent assessment of the anti-obesity medication business, American investment bank Goldman Sachs speculated it could “transform the state of healthcare” in the United States, where two in five people are obese.

The drugs work “by decreasing appetite, and in turn, can reduce calorie intake by 20% to 30% daily”, according to Morgan Stanley, which in a survey of users found that people cut intakes of sugar and fat – findings that are likely to have ramifications for what food retailers stock and in what quantities.

Previous versions of the drugs have been pricey and have not seen US health insurers ditch their reluctance to cover overweight people.

But that could be about to change, if the latest drugs can in turn, reduce the incidence of deadly related conditions.

“By fighting obesity, these drugs seem to be fighting heart disease, which is the leading cause of death,” said Goldman Sachs Asset Management portfolio manager Jenny Chang.

This could mean less payouts in the long term for health insurers. – dpa