The document discusses the market potential for laparoscopic adjustable gastric banding (LAGB) surgery in the United States. It outlines that over 97 million Americans are overweight or obese, and around 7 million are considered morbidly obese and suitable candidates for LAGB. The financial forecast estimates that the contribution margin from LAGB surgery in the US could reach $1.2 billion within five years, demonstrating the lucrative nature of this market. Partnering with government agencies to increase insurance coverage and media organizations to educate consumers could help more people access LAGB treatment and further grow the market.

1. 2008
LAPAROSCOPIC ADJUSTABLE GASTRIC BANDING (LAGB)
MARKET (USA)
PRITAM DEY
pritam.dey@gmail.com

2. LAGB MARKET PRITAM DEY
ABOUT THE AUTHOR
Pritam Dey has an extensive background in IT and business consultant. He has designed
and developed IT solutions for customers across domains and technology platforms.
Having joined Tata Consultancy Services in 1999, Pritam has handled complex project
assignments for Global Insurance and Financial Services firms. With specialization in
Internet technologies and object-oriented design principles, Pritam has led cross-
functional teams to execute IT projects for clients such as Tata Internet (India), Prudential
Financial (USA), ING Bank (Netherlands) and A.P. Moller-Maersk Group (Denmark).
Pritam has also played a significant role as a business consultant. To maximize his
education during the MBA program, Pritam has led and mentored teams to provide data-
driven business consulting and recommendation to deliver bottom-line results to his
clients. He has executed a wide array of projects on business strategy, market research,
business process analysis, competitive landscape study, new market entry and pricing
strategies. He has consulted for Fortune 500 organizations such as 3M, UnitedHealth
Group, Thomson-Reuters, and Northwest Airlines (now Delta). Post his MBA program,
he has also consulted for a plethora of non-profit and startup organizations and has
created marketing and business development opportunities for the respective
organizations.
Pritam is passionate about playing a major role in creating executable IT strategies and
roadmap that increase the value of IT projects and that strive to reduce the gap between
IT and business objectives. He spends a great amount of time following the latest
technology trends and understanding how technology is going to drive business and
consumer needs in future. He intends to use this knowledge to create effective IT
solutions for his clients.
Pritam holds a BE degree in Electrical Engineering from Maulana Azad National Institute
of Technology at Bhopal (India) and an MBA from University of Minnesota at
Minneapolis.
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3. LAGB MARKET PRITAM DEY
Contents
Background........................................................................................................................................................... 4
Potential Patients ................................................................................................................................................. 4
Sub-Sector of the industry ................................................................................................................................. 4
Geographic Scale of the venture ...................................................................................................................... 5
Partnering Agents ................................................................................................................................................ 5
Financial Forecast ............................................................................................................................................... 6
References............................................................................................................................................................. 7
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4. LAGB MARKET PRITAM DEY
LAPAROSCOPIC ADJUSTABLE GASTRIC BANDING (LAGB)
MARKET IN U.S.A.
Background
The prevalence of obesity has been increasing over the past two decades. The National Health
and Nutrition Examination Survey (NHANES) showed an increase in age-adjusted prevalence of
obesity (body mass index ≥ 30) from 15% in the late 1970s to 30.9% in 2000. Increases have
occurred across age, gender, and ethnic groups. Given the increasing prevalence of obesity and its
medical and societal consequences, the amount of medical and media attention given to obesity
surgery as a promising option for morbidly obese individuals is growing. The most common
method of obesity surgery is Laparoscopic Adjustable Gastric Banding (LAGB). This is
designed for obesity patients with a BMI of 35 or greater. It employs an inflatable silicon band
which is implanted around the top portion of a person’s stomach via laparoscopic surgery.
Obesity surgery procedures increased from 16,000 performed in 1992 to 64,000 performed in
2002, an increase of 300%. With an estimated 13 to 16 million morbidly obese patients in the
United States, the number of patients undergoing bariatric procedures is still small relative to this
estimated market potential.
Potential Patients
LAGB is recommended for people for whom all of the following apply:
• Body Mass Index (BMI): 40+
• Weight: 100 pounds or more above ideal weight
• Age: 18-55 years
• History of obesity: 5 years or more
• Others: Failure of dietary or weight-loss drug therapy
The above is the ideal target market for LAGB.
Sub-Sector of the industry
The key stakeholders that would be engaged in the LAGB procedure are the patients, providers
(hospitals, providers, nurses), and the medical device companies such as those that manufacture
the gastric band. Increasingly, the insurance companies have started responding positively to
weight-loss procedures. In most states, legislation requires insurance companies to benefits for
weight loss surgery when patients meet the (National Institute of Health) NIH criteria.
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5. LAGB MARKET PRITAM DEY
Geographic Scale of the venture
According to the Society of Laparoendoscopic Surgeons, it is estimated that more than 97 million
Americans are overweight or obese. Furthermore, approximately 7 million are considered
morbidly obese with a BMI of 40 or higher and at least 100 pounds over their ideal body weight.
Over the last 10 years, a significant increment has been noted in weight loss procedures
performed in the Unites States per year, reaching more than 175,000 cases in 2005.
The World Health Organization (WHO) estimated in 2003 that over 1.1 billion people are
overweight/obese – almost one-sixth of the size of human population. Asians are found to be
more prone to be overweight/obese as compared to the rest of the world. The extreme form of
obesity is rising even faster than the overall epidemic. In the USA, 6.3% of US women (1 in 16)
are morbidly obese. Morbid obesity has also increased rapidly in Europe; in the UK, 1 in 40 is
morbidly obese, with a threefold rise in the past decade.
Considering the size of the obese population across the world, it is only a matter of time before
more and more people opt for weight-loss surgery procedures such as LAGB. LAGB is the most
effective method for achieving significant weight loss. Therefore, the geographic scale of the
LAGB venture is just huge.
Partnering Agents
For an LAGB venture to be successful, the government can play the role of a big partnering agent.
Generally, markets do a commendable job coordinating economic activity so that resources are
put to their most valued use. From an obesity standpoint, the market-based system has been
playing its part in treating the obesity epidemic. It should be noted that the healthcare providers
(physicians, hospitals, etc) and the medical device companies have been performing a reactive
approach to treating obesity. The government can fill the gap where the market-based system has
failed. In most cases, consumers do not have enough information to make informed choices and
inadvertently consume diets high in calories. Even if they have the information, they cannot bear
all the health cost of their choices. Therefore, government can determine what type of policy
intervention may be best targeted to ameliorating the problem. Secondly, it can pass regulations
that require insurers to cover obesity-related treatment, thereby enabling more people to opt for
LAGB-based treatment.
The media can be another partnering agent in spreading the benefits of LAGB-based treatment.
They can help consumers make informed choices about their obesity-related problems. No
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wonder that websites such as OR-live.com have done a wonderful job in imparting the safety and
efficacy of the LAGB-based treatment.
Financial Forecast
For hospitals, the cost of bariatric without major complication is lower than reimbursement.
Direct costs per case have been reported between $6,500 and $11,200, with reimbursement
between $13,000 and $15,000 per case. Contribution margins per patient day have been reported
between $450 and $1,750. This compares with an average contribution per day of other
procedural cases of about $900. The more coordinated and comprehensive the program is, the
greater the ability to control costs and the more lucrative the bariatric service.
Given the large market, increased media attention, growing demand, and the potential profits for
both surgeons and hospitals, it is no surprise that the number of surgeons and hospitals offering
bariatric services such as LAGB is increasing.
Five-Year Revenue Forecast of LAGB-based surgery
No. of US population who are obese/overweight (2003 estimate) 97,000,000
Percentage of US population who are morbidly obese (good target for LAGB
treatment) 6%
No. of US population (morbidly obese) 5,820,000
Assuming 20% of this population opts for LAGB-based treatment:
Estimated market size 1,164,000
Average direct cost of surgery $8,000
Average contribution margin per surgery $1,100
Total Contribution Margin $1.2 billion
The above table shows that in the next five years, the contribution margin from LAGB surgery in
US will grow to $1.2 billion, further proving how lucrative this venture is.
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References
1. University of Rochester Medical Center. “Is Bariatric Surgery Right For You?”
2. European Medical Tourist. “Lap Band Research”
3. Gandsas, Alex. Schweitzer, Michael. “Bariatric Centers of Excellence as Another Pay-
for-Performance Program”
4. Dietel M. Obesity Surgery 2003. “Overweight and obesity worldwide now estimated to
involve 1.7 billion people”
5. Tarantino, David. Smith, Darlene B. “Bariatric Surgery: Assessing Opportunities for
Value Innovation”
6. Kuchler, Fred. Golan, Elise. “Is There a Role for Government in Reducing the Prevalence
of Overweight and Obesity?”
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