Vivus Scores Insurance Win

| About: Vivus, Inc. (VVUS)

Vivus (NASDAQ:VVUS) has had many challenges when it comes to the anti-obesity drug Qsymia. The drug has been on the market for almost 16 months and has weekly sales of about 10,000 prescriptions, a level that has been pretty flat over the last three months. Unlike competitor Arena Pharmaceuticals (NASDAQ:ARNA), Vivus does not have a big pharma marketing partner. This leaves "selling the drug" up to Vivus itself.

Vivus announced today that it inked a rebate deal with CareMark PCS Health, LLC that promises to make Qsymia more affordable for consumers. Under the terms of the deal, the anti-obesity drug will be available as a preferred tier 2 drug in some plans and a non-preferred brand in tier 3 in other plans. In essence, CareMark consumers will have to pay between $15 and $75 for Qsymia.

Insurance coverage has been a major issue with anti-obesity drugs. It is estimated that about 40% of covered lives have some form of anti-obesity benefits, meaning that 60% of consumers must pay the full cost out of pocket.

For sector watchers, this news is quite positive. Getting insurers to cover is the first step. Getting better tier coverage is the second. It is likely that once an insurer covers one anti-obesity drug that it will cover the other as well. Thus, what is good for Vivus is good for Arena and vice versa. A third player in the sector, Orexigen (NASDAQ:OREX), will also likely benefit should it gain FDA approval for its anti-obesity drug Contrave.

Insurance coverage news can and will be the type of news that can move these stocks. The more affordable a drug is to consumers, the more likely they are to seek out treatment. While this single deal may not seem like much, it gets the coverage of anti-obesity products closer to a tipping point that will have other insurers following suit. This particular deal does not cover all CareMark patients. It is applicable in plans that already have an anti-obesity benefit. Coverage varies from state to state and plan to plan.

Caremark PCS is a benefits provider tied to the pharmacy chain CVS (NYSE:CVS). The company manages benefits for some 60 million people nationally.

Vivus is also getting ready to launch an erectile dysfunction drug Stendra this year. Vivus has partners already lined up for that drug. If the company can get sales of Qsymia moving and also get Stendra into the marketplace, it could start off 2014 on better footing than it did 2013. Stay Tuned!

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus, Orexigen, or CVS