How Blockbuster Weight-Loss Drugs Threaten the Diet Industry

Prominent diet companies are re-calibrating their businesses as blockbuster drugs Ozempic and Wegovy disrupt the weight-loss industry.

Ozempic is intended to treat diabetes and Wegovy is a weight-loss drug. Both are found to reduce food cravings and help users lose weight.

As the drugs disrupt the diet industry, Weight Watchers and Noom are shifting gears. In March, Weight Watchers bought the telehealth company Sequence, which offers prescriptions for weight-loss drugs. And Noom, an app that tracks meals and exercise habits, is starting its own telehealth service, according to NBC News.

Meanwhile, earnings for diet companies are plummeting. Medifast — which sells nutrition and weight loss products — reported revenues were down 34.7% compared with the previous year in its most recent earnings report, according to The New York Times.

And in its most recent report, supplement company Herbalife reported revenue that was down nearly 6% year over year, and net income that was down more than 30% year over year.

CEO Michael Johnson tried to reassure investors on Herbalife's earnings call, according to the Times. “We will continue to study this,” he said. “And when we see an opportunity to capitalize on it.”

The chief financial officer of Intuitive Surgical — which makes medical devices used in bariatric surgery — said weight-loss drugs are already hurting demand.

“We have some input from customers that the level of patient interest is such that patients are now considering drugs versus surgery,” CFO Jamie Samath said in July, according to The Wall Street Journal.

The possible ramifications extend beyond the weight-loss industry.

Ozempic and Wegovy could soften demand at restaurants, particularly at fast-food outlets like McDonald's, the Journal reported.

The drugs — if widely prescribed — might reduce incidents of type 2 diabetes, also lowering the need for insulin pumps and sleep apnea machines, the Journal said.

However, before these drugs can truly disrupt the industry, they must be widely prescribed. Paying for one of the drugs is a daunting prospect for patients without good health insurance.

A monthly dose of Ozempic costs more than $900, according to Healthline.

But as the price falls and more Americans are prescribed weight-loss drugs, other industries will need to make changes, Morgan Stanley analyst Brian Harbour told the Journal.

“The reality is that many chains will evolve over time with consumer tastes,” said Harbour. “If McDonald’s needs to serve more chicken sandwiches and carrot sticks to retain business, it can probably do so over time.”