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SEC Filings

OREXIGEN THERAPEUTICS, INC. filed this Form S-1/A on 02/16/2007
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Coverage for obesity drugs by Medicaid, the nation’s public health insurance program for individuals who are poor and meet certain other eligibility criteria, is expanding but is not universal. Each individual state administers its own program within broad federal requirements, and states and the federal government finance the program jointly.
With respect to prescription drug coverage under the Medicaid Rebate Program, states that elect to cover outpatient prescription drugs are required to cover all FDA-approved drugs of every manufacturer that has entered into a rebate agreement with HHS, although states are allowed to exclude certain types of drugs including anorexia, weight loss or weight gain drugs. In 2000, 32 out of 44 Medicaid programs surveyed by the Kaiser Commission excluded these drugs. More recent data suggests that state Medicaid programs may have increased coverage for certain anti-obesity drugs. For example, Meridia (sibutramine) and Xenical (orlistat) are listed on the formularies of 52% and 58% of state Medicaid programs, respectively.
The Medicare program provides health insurance for individuals aged 65 and over and those with serious disability or end-stage renal disease, regardless of income. Until 2004, the Medicare coverage manual stated that obesity itself cannot be considered an illness. In 2004, this language was removed in favor of a policy that opens the door for future requests for coverage of interventions to treat obesity but only for services that are an integral and necessary part of a course of treatment for a medical condition. In February 2006, Medicare began covering certain designated bariatric surgical services for Medicare patients with a BMI equal to or greater than 35, who have at least one co-morbidity and have been previously unsuccessful with the medical treatment of obesity. However, the policy reiterates that treatments for obesity alone are not covered because such treatments are not considered reasonable and necessary. In addition, Medicare’s new prescription drug benefit, which went into effect in January 2006, cannot by statute cover weight loss drugs. Specifically, the Medicare Prescription Drug Improvement and Modernization Act of 2003, prohibits the Medicare program from paying for any drug that was excludable under the Medicaid rebate program, including those for weight loss.
Private Commercial Plans
There is a wide range of coverage by private commercial plans for Meridia and Xenical. Based on data obtained from Fingertip Formulary databases, almost half of commercial plans reviewed (excluding Blue Cross Blue Shield) listed Meridia and Xenical on their formularies. Over 85% of the Blue Cross Blue Shield plans reviewed listed Meridia and over 90% listed Xenical. In addition, over 90% of the pharmacy benefit management companies, or PBMs, reviewed listed both Meridia and Xenical on their formularies. The amount of coverage provided by these commercial plans varies, however, and significant out-of-pocket payments are often still required.
Although third-party payor attitudes regarding obesity-related products and services appear to be changing, as exemplified by Medicare changes and the coverage of Meridia and Xenical by PBMs and Blue Cross Blue Shield plans, our product candidates, if approved, may not achieve broad coverage. Moreover, the amount of any coverage provided under the various plans may be minimal. We do not, however, expect the success of our product candidates to be contingent upon third-party payor coverage and reimbursement, but rather on their acceptance by physicians and by people who want to lose weight and are willing to pay for the drugs out of pocket.
Government Regulation
Prescription drug products are subject to extensive pre- and post-market regulation by the FDA, including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising and promotion of such products under the Federal Food Drug and Cosmetic Act, or FFDCA, and its implementing regulations, and by comparable agencies and laws in foreign countries. Failure to comply