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Hospitals and Lap Band makers stand to gain from teen surgeries

Despite the reports of misconduct, the NYU Langone Weight Management Program has retained its status as a "Center of Excellence," a designation conferred by the Surgical Review Corp, an entity created by the American Society for Bariatric and Metabolic Surgery.

Surgical Review Corp CEO Gary Pratt said that he was unaware of the incidents and the NYSHD report. He said the corporation's reviews maintain the highest standards with the goal of advancing the safety and efficacy of bariatric surgery.

The company intends to put out a new list of approved bariatric clinics that treat teens later this year - which may coincide with the FDA granting approval, or not.

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If the FDA does greenlight it, insurers would be more likely to pay for the procedure, which costs the insured patient $2,000 to $4,000. The uninsured, making up about a third of patients who have the surgery in the United States, pay about $15,000 for the surgery.

Some health professionals worry that band manufacturers will target teens with direct-to-consumer (DTC) ads on television and radio or in subway stations that have proven effective at luring people to doctors' offices. The FDA said there is no guidance or regulation on DTC ads to young users.

For Allergan, based in Irvine, California, the implications are significant. And the company is acting accordingly. It recently launched a campaign with bariatric surgeons to invite their patients to enter an essay contest and win a chance to go to Washington, D.C. to "share their personal stories with legislators and media."

Allergan has seen its stock underperform the S&P 500 year to date. Botox remains its key product and has weathered increased competition amid the recession, while obesity intervention was hit hardest by the economy.

At the same time, Lap-Band has also been slowly losing market share to Johnson & Johnson's competing device called Realize. In 2009, Allergan's obesity products generated revenue of $258-million, down 13 per cent from 2008.

Management is betting that continued investment in direct-to-consumer advertising will stimulate growth in the obesity segment, said Gleacher & Co analyst Amit Hazan. He estimates there will be 83,500 gastric band procedures in the United States in 2010, up 6 per cent from 2009.

Sanford Bernstein analyst Aaron Gal said FDA approval of the Lap-Band for teens could increase sales by as much as $20-million for Allergan.

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