BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON Economic Impact of the Clinical Benefits of Bariatric Surgery.

BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON Economic Impact of the Clinical Benefits of Bariatric Surgery in Morbidly Obese Patients with Diabetes: An Observational Study Samuel Klein, M.D.; 1 Arindam Ghosh, PhD; 2 Pierre-Yves Cremieux, PhD; 2,3 Sara Eapen, PhD; 2 Tamara J. McGavock, BA 2 1 Center for Human Nutrition, Washington University School of Medicine in St. Louis 2 Analysis Group, Inc., Boston, Massachusetts, USA 3 Université du Québec à Montréal, Montréal, Québec, Canada Prepared for: First Canadian Summit on Metabolic Surgery for Type II Diabetes May 7, 2010 Preliminary – Do Not Cite Without Permission from Authors

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Disclaimer  Sponsored study funded by Ethicon Endo-Surgery, Inc  Ethicon Endo-Surgery, Inc. has no independent knowledge concerning the information contained in this article, and findings and conclusions expressed are those reached by the authors  This presentation is the work of the author and may not necessarily reflect the views of Ethicon Endo-Surgery, Inc.

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Background  In 2007, the prevalence rate of diabetes in the US was 7.8%, affecting 12 million men and 11.5 million women 1  Estimated yearly costs of managing a diabetes patient ($13,243) are more than five times that of a patient without diabetes ($2,560) 2  The estimated annual total economic cost of diabetes in the US was $174 billion in 2007 – $116 billion in medical expenditures and $58 billion in reduced productivity  Obesity is a major risk factor for type II diabetes,3 and the risk of diabetes increases directly with body mass index (BMI)4  Diabetes-related costs represent a disproportionate share of healthcare costs among the obese 5  Weight loss is an important therapeutic goal in obese patients with type II diabetes, because even moderate weight loss (5%) improves insulin sensitivity6  Bariatric surgery is the most effective weight loss therapy and has considerable beneficial effects on diabetes7,8,9

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Effect of Bariatric Surgery on Comorbidities

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Objective  To estimate the economic impact of the clinical benefits of bariatric surgery on medical costs and return on investment (RoI) of the surgery in morbidly obese diabetes patients

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Data Source  De-identified health insurance and disability claims from approximately 8.5 million employees, spouses, and dependents from 40 large companies throughout the U.S.  Time period covered: January 1, 1999 - December 31, 2007  The database includes: Outpatient medical services (including diagnoses and procedures) Inpatient medical services (including diagnoses and procedures) Outpatient prescription drug dispensing records Demographics Enrollment history Billed charges Insurance payments

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Methods

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Sample Selection  Patients with diabetes at baseline, were identified using the following criteria: At least one bariatric surgery claim (HCPCS codes: 43770, 43644, 43645, 43845, 43846, 43847, 43842, 43843, S2085, S2082, S2083) for surgery patients. No bariatric surgery claim for control patients* The date of the first such claim was identified as the date of surgery (index date) At least one medical claim with the diagnosis of morbid obesity (ICD-9-CM: 278.01) anytime prior to index date At least six months of continuous enrollment prior to the initial date of index and one month following** Age between 18 and 65 as of the index date Diabetes diagnosis prior to index date * For surgery eligible controls, the index date is their matched patient surgery date. ** The average patient length in the sample was 18 months.

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Identifying Patients with Diabetes  Following Pladevall et al., 10 patients were classified as having diabetes if both of these were true in the months five through two prior to index date ≥ 1 medical claim for any of these conditions o Diabetes (ICD-9-CM 250.xx)* o Dyslipidemia (ICD-9-CM 272.xx) o Hypertension (ICD-9-CM 401.xx-405.xx) ≥ 1 drug claim for anti-diabetic medications *Includes type I and II diabetes

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Matching Diabetic Surgery and Control Patients  Each diabetic surgery patient was matched to a diabetic control on the following socio-demographic and comorbid characteristics: Age group (18-30, 31-40, 41-50, and 51-60) as of index date Gender Other Comorbidities (Asthma, Coronary Artery Disease, Gall Stones, Gastroesophageal Reflux, NASH/NAFLD, Sleep Apnea, Urinary Incontinence) State of residence 5-month pre-surgery direct costs (excluding month prior to index date) In case of multiple matches, we randomly selected one

FIRST CANADIAN SUMMIT ■ MAY 7, 2010  The cost associated with bariatric surgery (“investment”) is estimated from the incremental costs incurred during the surgery hospital stay, and, typically, in the month prior to the surgery, and the two months after surgery  Cost savings from bariatric surgery are calculated as the difference in direct costs between bariatric surgery patients and their controls  The ROI is the ratio of cost savings to the initial surgery investment cost  Both the cost associated with bariatric surgery and the associated cost savings are estimated using a multivariate analysis  Monthly medical costs were normalized to December 2008 dollar value by first deflating by the CPI-MC (medical care consumer price index) and discounting by the 3-month T-bill rate of 3.22% Methods: Calculation of ROI

FIRST CANADIAN SUMMIT ■ MAY 7, 2010  The normalized monthly costs were regressed (using a Tobit model with cluster option) on an indicator variable for bariatric surgery interacted with a number of time indicator variables: Three to Six Months Prior to Surgery; Month Prior to Surgery; Time of Surgery; Two Months Post Surgery; Three to Six Months Post Surgery; Seven to Twelve Months Post Surgery; Thirteen to Eighteen Months Post Surgery; Nineteen to Twenty-Four Months Post Surgery; Twenty-Five Months or More Post Surgery  Additionally, the multivariate model also controls for: Age A number of comorbidities which were not used for matching in the first step including breast cancer, congestive heart failure, lymphedema, major depression, osteoarthritis, polycystic ovary syndrome, pseudo tumor cerebri, and venous stasis/leg ulcers Calculating an ROI (contd.)

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Outcome Measures  Three outcome measures were compared between diabetic surgery and control patients post index date Total medical costs Diagnostic claims for diabetes, where diabetes is defined using the definition in Pladevall et al.  Trend in diabetes diagnostic claims was calculated using the percentage of available patients satisfying the diabetes definition post index Frequency and pattern of use of anti-diabetic medication  Non-Insulin medications including Sulfonylureas, Biguanides, Alpha-Glucosidase Inhibitors, Meglitinides, Thiazolidinediones, DPP-4 Inhibitors, Incretin Mimetics, Synthetic Amylin Analogs  Insulin medications Adjusted average total anti-diabetic drug costs including supplies post index date  Calculated as the total of the amounts covered by both insurance and co-pay for each prescription fill  Outcomes between surgery and control patients were compared using chi squared tests for categorical measures and Wilcoxon rank sum tests for continuous measures

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Results

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Results: Baseline Comorbidities (Patients vs. Controls 6 months prior to surgery date) *Significant at the 95% level Baseline Characteristics Surgery Patients Control Patients (N=808) Demographic Characteristics Age on Index Date (Median [IQR])53 (47-57)53 (47-59) Female (%)72.8 Matched Comorbidities (%) Diabetes100 Sleep Apnea 21.7 Coronary Artery Disease 7.8 Gastroesophageal Reflux 6.6 Asthma 3.2 Gall Stones 0.6 NASH/NAFLD 0.1 Urinary Incontinence0.1 Other Comorbidities (Controlled for in Multivariate Analysis) Osteoarthritis10.911.9 Major Depression * 9.3 5.1 Congestive Heart Failure 3.5 4 Lymphedema 0.5 0.2 Polycystic Ovary Syndrome 0.5 Breast Cancer* 0.4 1.7 Venous Stasis and Leg Ulcers 0.2 0.4 Pseudo Tumor Cerebri 0.1

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Results: Baseline Health Care Utilization and Costs (Patients vs. Controls 6 months prior to surgery date) *Significant at the 95% level Cost are calculated based on months -6 to -2. Surgery PatientsControl Patients Health Care Utilization (%)(N=808) Inpatient Visit *23.18.5 ER Visit * 13.2 17.1 Outpatient Hospital Visit * 90.8 67.5 Office Visit99.999.4 Use of Medication for Weight Loss1.51.6 Health Care Costs ($, median [IQR]) Drug Costs *1,231 (680-2,005)1,450 (790-2,656) Medical Costs * 1,579 (585-3,422) 878 (358-2,370) Total Health Care Costs3,209 (1,828-5,192)2,842 (1,516-5,262)

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Results: ROI to Bariatric Surgery, Multivariate Analysis 1 1.The multivariate model controls for age, gender, and the following comorbidities: breast cancer, congestive heart failure, lymphedema, major depression, osteoarthritis, polycystic ovary syndrome, pseudo tumor cerebri, and venous stasis/leg ulcers. 2.There are no procedure codes that break out laparoscopic surgery until 2004. * Significant at the 5% level Dependent Variable: Direct Monthly Costs ($) 2 All SurgeriesOpen Surgeries Laparoscopic 1999-20071999-20032004-2007 (N=808)(N=246)(N=204)(N=358) Months Six to Two Prior to Surgery -199*-199 49-221 Month Prior to Surgery 1,038*1,000* 759*1,157* Time of Surgery 21,247*25,623* 23,148*17,092* Month One and Two Following Surgery 1,516*2,246* 2,469*438* Months Three to Six Following Surgery -500*-416 -615*-464* Months Seven to Twelve Following Surgery -615*-597* -776*-496* Months Thirteen to Eighteen Following Surgery -641*-806* -643*-470 Months Nineteen to Twenty-Four Following Surgery -1,231*-1,286* -1,434*-1,013* Months Twenty-Five and Longer-1,019*-1,095*-1,267*-1,257*

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Results: RoI to Bariatric Surgery for U.S. Diabetes Population, Multivariate Analysis (Mean and 95 Percent Confidence Interval)

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Results: ROI to Bariatric Surgery, All Patients *Total Direct Medical Costs in December 2008 dollars. Inflated to 2008 dollars using CPI-MC (medical care consumer price index) and grown at a rate of 3.22%.

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Diagnostic Claims for Diabetes (Diabetes Diagnosis) Solid Line = Control PatientsDotted Line = Surgery Patients

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Trend of Diabetes Medication Claims (Prescription Fill) Solid Line = Control PatientsDotted Line = Surgery Patients

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Trend of Diabetes Medication Claims Pre-Index Insulin Claimants Black = InsulinStriped Lines = Non-Insulin Medication White = No Medication

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Trend of Diabetes Medication Claims Pre-Index Non-Insulin Medication Claimants Black = InsulinStriped Lines = Non-Insulin Medication White = No Medication

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Adjusted Diabetes Medication and Supply Costs Solid Line = Control PatientsDotted Line = Surgery Patients

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Conclusions

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Conclusion on Economic Outcomes  The initial investment averaged approximately $25,000 for all surgeries 1999- 2007, $31,000 for open surgeries 1999-2003, $29,000 for open surgeries 2004-2007, and $19,000 for laparoscopic surgeries 2004-2007.  When the comorbidities and demographic factors are controlled for, initial investment is returned within: 30 months for patients who undergo any type of bariatric surgery. 29 months for patients who undergo open surgery. 26 months for patients who undergo laparoscopic surgery. Cost savings associated with surgery started accruing at month 3.

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Conclusion on Clinical Benefit Outcomes  For diagnostic claims of diabetes, by the first three-month period after surgery, 40.7% of surgery patients had a diabetes related claim compared to 72.1% of control patients (p<.001). By month 6, only 28.2% of surgery patients reported a claim of diabetes versus 73.5% of control patients (p<.001)  By the first three-month period post-index, 45.6% of surgery patients had filled a prescription for diabetes medication in the previous 3 months, compared to 90.8% of control patients. At month 6, the percentages were 33.5% and 89.7%, respectively (p<.001).  Among patients who had insulin claims prior to index date, insulin claims dropped to 42.8% for surgery patients and remained at 92.4% for control patients at month 3 after index (p<.001).  Among surgery patients who had claims for non-insulin diabetes medications prior to surgery, 37.3% had claims for non-insulin medications at month 3, compared with 86.3% of control patients (p<.001). 84.5% of surgery patients who had claims for non-insulin medication at index had no claims for any diabetes medications by month 36.  By the first three-month period after index, the average total cost of diabetes medications and supplies for surgery patients was $33, compared to $123 for control patients.

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 Conclusions  Bariatric surgery has a large, statistically significant and sustained positive effect on diabetes within six months, in obese patients. Surgery patients appear to have resolution or more durable control of their diabetes compared to controls, as evidenced by their switching patterns of anti- diabetic medications, post index date.  The results of this study demonstrate that the clinical benefits of bariatric surgery in morbidly obese diabetes patients translate into considerable economic benefits.  These data indicate that surgical therapy is clinically more effective and ultimately less expensive than standard therapy for morbidly obese diabetes patients.

FIRST CANADIAN SUMMIT ■ MAY 7, 2010 References 1. National diabetes fact sheet: United States, 2007. CDC Diabetes. 2007. 2. Campbell RK, Martin TM. The chronic burden of diabetes. Am J Manag Care. 2009;15:S248-S254. 3. Ford ES, Williamson DF, Liu S. Weight changes and diabetes incidence: findings from a national cohort of US adults. Am J Epidemiology 1997;146:214-222. 4. Colditz GA, Willett WC, Rotnitzky A, Manson JE. Weight gain as a risk factor for clinical diabetes mellitus in women. Ann Intern Med 1995;122:481-486. 5. Cawley, J, Rizzo, J, Gunnarsson, C, Haas, K. The health care cost effects of diabetes among obese and morbidly obese adults in the United States. Poster presented at International Society of Pharmacoeconomic Outcomes Research (ISPOR) 13th Annual International meeting. Toronto, ON, Canada. 6. Wing RR, Koeske R, Epstein LH, Nowalk MP, Gooding W, Becker D. Long-term effects of modest weight loss in type II diabetic patients. Arch Intern Med 1987;147:1749-1753. 7. Pories WJ, Swanson MS, MacDonald KG, Long SB, Morris PG, Brown BM, Barakat HA, deRamon RA, Israel G, Dolezal JM, Dohm L. Who would have thought it? An operation proves to be the most effective therapy for adult-onset diabetes mellitus. Ann Surg 1995;222(3):339-352. 8. Dixon JB, O’Brien PE, Playfair J, Chapman L, Schachter LM, Skinner S, Proietto J, Bailey M, Anderson M. Adjustable gastric banding and conventional therapy for type 2 diabetes. JAMA 2008; 299(3):316-323. 9. Schauer PR, Ikramuddin S, Gourash W, Ramanathan R, Luketich J. Outcomes of laparoscopic roux-en-Y gastric bypass for morbid obesity. Ann Surg 2000;232(4):515-529. 10. Pladevall M, Williams LK, Potts LA, Divine G, Xi H, Lafata JE. Clinical Outcomes and Adherence to Medications Measured by Claims Data in Patients With Diabetes. Diabetes Care, 2004, Vol 27; Part 12, pages 2800-2805.

BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON Pierre Cremieux Managing Principal Analysis Group, Inc. 111 Huntington Avenue Boston, MA 02199 617-425-8135 pcremieux@analysisgroup.com

BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON Economic Impact of the Clinical Benefits of Bariatric Surgery.

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BOSTON CHICAGO DALLAS DENVER LOS ANGELES MENLO PARK MONTREAL NEW YORK SAN FRANCISCO WASHINGTON Economic Impact of the Clinical Benefits of Bariatric Surgery.

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