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Category: The Business of Health Care

Aetion raises $36m, Carolyn Magill interview

It’s not every day that an analytics firm focusing on improving the efficacy and value of drugs has a big raise in the health tech world–especially one I don’t know much about. This morning Aetion raised $36m to add onto $11m they raised last year. Their new round is led by famed venture firm NEA and includes Amgen Ventures. I spoke to CEO and part-time extreme skier Carolyn Magill to find out what Aetion does and why big pharma and major payers need their help in the brave new world of value-based care.

The Conflicted-Disruption Complex

Elizabeth Holmes, the founder and chief executive of the controversial company Theranos, has been charged with an “elaborate, years-long fraud” by the Securities and Exchange Commission. The SEC alleges that Holmes and former company president Ramesh “Sunny” Balwani deceived investors into believing that its key product — a portable blood analyzer —was capable of using drops of blood to do the kinds of workups that now require much more blood—up to ten milliters per test.  Holmes fooled many people including the Theranos board of board of directors, high-powered investors and high ranking members of the military including General James Mattis, a huge fan, who left the Theranos board to become President Trump’s Secretary of Defense.

Things don’t look good for the Theranos leadership in terms of the SEC charges. The company already saw a three-year partnership with Walgreen’s collapse leaving many customers wondering if they had been deceived. The technology, which Holmes and her company touted as disruptive and revolutionary, never worked. So what happened to permit so much enthusiasm and money to be spent on a useless technology?

First, the company never published on its technology. The promise of small volume blood testing sounded great and indeed is great for many reasons not the least of which a lot less misery for patients who need to get a lot of painful blood drawn for tests. But no publication, no data driven presentations at professional society meetings, a lack of transparency turned Theranos into an 8 billion dollar Dutch tulip bubble.

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2018 Forecast: Another Theranos, Hospital Hiring Slows & Successful HIT Exits

For what is now an annual tradition, we are once again attempting to be healthcare soothsayers. We are proud to share with you our 10 healthcare predictions for 2018. In 2017, amaz-ingly, eight of our predictions came true.

For 2018, we are betting on the following:

1. Another Theranos

We think at least one healthcare information technology company with an enterprise value of more than $1 billion (not including Outcome Health, which we could not have predicted tanking so spectacularly quickly) will be exposed as not having product results to support their hype. It will also expose embarrassed investors who did not do careful diligence and founders with poor integrity.

2. Hospital hiring slows

After a decade of sustained hiring every month, hospitals will stop. Many will downsize their administrative staffs as admissions continue to slowdown and reimbursement pressures intensify. We expect multiple months with net healthcare job losses which would be the first time this has occurred since the Bureau of Labor Statistics started tracking the data.

3. Successful HCIT exits

After a long wait, and more than $10 billion of venture capital invested in startups over the past five years, we will begin to see successful IPO and M&A exits. These will reassure growth investors to keep pouring money into companies with traction.

4. Amazon does not disrupt PBMs

Despite daily rumors, we think Amazon will not shake up the PBM sector. Instead, Amazon will limit its healthcare market footprint to its existing consumer products and distributing non- regulated healthcare goods to healthcare providers (adopting a B2B and not B2C strategy).

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Will Amazon Eat the Market?

Last Tuesday, a trio of corporate heavy weights announced they were joining forces to fix the U.S. healthcare system. The CEOs of the three—Jeff Bezos of Amazon, Warren Buffet of Berkshire Hathaway, and Jamie Dimon of JP Morgan, vowed to create “an independent company that is free from profit-making incentives and constraints..to provide simplified, high-quality and transparent healthcare at a reasonable cost.”

Details about the proposed venture are limited but it nonetheless sent shock waves across the industry. Stocks for industry mainstays like United Health, CVS, Express Scripts, Mylan and others plummeted. And, on the heals of mega-deals like CVS’ $69 billion acquisition of Aetna two months ago, speculators theorized it might be Armageddon for healthcare as we have known it in the U.S.

First, what we know for sure:

The new venture will focus on the collective buying power as employers of healthcare for the 1.15 million employees in their organizations. Their approach features five strategies widely. widely used by large self-insured employers to contain their employee health costs. This one is expected to leverage technology in a unique way:

  • Primary care gatekeepers: Large employers vest considerable responsibility in primary care services that appropriate preventive health, manage chronic populations and control referrals to specialists and hospitals. Promotion of healthiness and wellbeing, the integration of physical and behavioral health and alternatives therapies that reduce dependence on unnecessary access prescription drugs are mainstays of the primary care gatekeeping model.
  • Narrow networks: The networks of hospitals, allied health professionals, hospitals and others will be tight. Those providing high quality, low cost services will be contracted, and employees will be empowered with data to monitor their performance.
  • Supply chain management: Every line item fixed and direct cost will be lean. Prescription drug use, for instance, will be accessed through a restrictive formulary, and so on. Amazon is known to be hyper-efficient in its operating budget: employees are expected to fly economy class and office opulence is a no no.
  • Employee choice & risk sharing: A key to the venture’s uniqueness will be the tools and responsibility given employees to select plan options that align with their needs and preferences. High deductible plans will be options, but technologies that equip them to make informed choices of doctors, treatments, hospitals, drugs and others will be a central feature.
  • Technology: Technologies that allow employees to own their medical records, interact with Alexa for information and counsel, integrate smart devices and engage with their providers are the backbone of the venture. Knowing treatment options, their costs and where the highest and best value is accessible in the employee’s provider network is central to the venture’s success.

None of these five is new, but together, they’re powerful IF implemented aggressively and at scale.

Let’s face it. Healthcare’s ripe for disruption: we cost too much, hide prices that bear faint resemblance to their underlying costs, avoid accountability for outcomes, complain we’re underpaid and over-regulated, protect our silo’s so each gets a piece of the pie, mark everything up and pass-it-through and declare we’re the best system in the world.

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A Whiff of Market-Based Health Care Change

Tuesday’s announcement about Amazon, Berkshire Hathaway and JPMorgan (A/BH/JPM) was short on details. The three mega-firms will form an independent company that develops solutions, first, for their own companies’ health plans and then, almost certainly, for the larger health care marketplace. But the news reverberated throughout the health care industry as thoroughly as any in recent memory.

Health care organizations were shaken. Bloomberg Markets reported that:

Pharmacy-benefit manager Express Scripts Holding Co. fell as much as 11 percent, the most intraday since April, at the open of U.S. trading Tuesday, while rival CVS Health Corp. dropped as much as 6.4 percent. Health insurers also fell, with Anthem Inc. losing as much as 6.5 percent and Aetna, which is being bought by CVS, sliding as much as 4.3 percent.

As expected, these firms’ stock prices rebounded the next day. But you could interpret the drops as reflections of the perceived fragility of health care companies’ dominance, and traders’ confidence in the potential power of Amazon’s newly announced entity. Legacy health care firms, with their well-earned reputations for relentlessly opaque arrangements and egregious pricing, are vulnerable, especially to proven disruptors who believe that taming health care’s excesses is achievable. Meanwhile, many Americans have come to believe in Amazon’s ability to deliver.

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Ambergan = Amazon + Berkshire Hathaway + JPMorgan

Dear primary care doctor, Jeff Bezos is about to devour your lunch.

All of it. And then he’ll eat the table, the plates, the napkins and the utensils too, so you’ll never have lunch ever again. Oh yeah, and they’ll also finally disrupt and fix health care once and for all, because enough is enough already. Mr. Bezos, it seems, got together with two of his innovator buddies, Warren Buffet from Berkshire Hathaway and Jamie Dimon from J.P. Morgan, and they are fixing up to serve us some freshly yummy and healthy concoction.

Let’s call it Ambergan for now.

This is big. This is huge. It comes from outside the sclerotic “industry”.

And it’s all about technology. The founders are no doubt well versed in the latest disruption theories and Ambergan will be a classic Christensen stealth destroyer of existing markets. When the greatest investor that ever-lived combines forces with the greatest banker in recent memory and the premier markets slayer of all times, who happens to be the richest man on earth, all to bring good things to life (sorry GE), nothing but goodness will certainly ensue.

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To Err is Homicide in Britain – The Case of Dr. Hadiza Bawa-Garba  

By SAURABH JHA, MD

The good that doctors do is oft interred by a single error. The case of Dr. Hadiza Bawa-Garba, a trainee pediatrician in the NHS, convicted for homicide for the death of a child from sepsis, and hounded by the General Medical Council, is every junior doctor’s primal fear.

An atypical Friday

Though far from usual, Friday February 18th, 2011 was not a typically unusual day in a British hospital. Dr. Bawa-Garba had just returned from a thirteen-month maternity break. She was the on-call pediatric registrar – the second in command for the care of sick children at Leicester Royal Infirmary. As a “registrar” she was both a master and an apprentice – a juxtaposition of roles necessary for the survival of acute care in the NHS. Because there aren’t enough commanders, or consultants (attendings), in the NHS trainees must fill their shoes or else the NHS will collapse.

The captain of the ship and Dr. Bawa-Garba’s supervisor, Dr. O’ Riordan, was not in the hospital but teaching in a nearby city. As horrendous as “attending not being in the hospital” sounds this, too, is not atypical in the NHS. Dr. Bawa-Garba’s colleagues, i.e. other registrars, were also away, on educational leave. Normally, a registrar each is assigned to cover the wards, the emergency department and the Children’s Assessment Unit (CAU). On that day, Dr. Bawa-Garba covered all three. She was new to the hospital, but with no formal induction – i.e. no explanation where things are and how stuff gets done in the hospital – she was expected to get along with the call and find her way around the hospital.

As anyone who has been a junior doctor in NHS can attest – the normal, the optimal, is unusual, and what is usual in British hospitals is remitting and relapsing chronic understaffing. The abnormal eventually becomes normal. You work through the anarchy. The anarchy is both the old normal and the new normal.

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NEJM Blasts “Crusade,” Omits that Its Former Editor Launched It

A blistering attack by the national editor of the New England Journal of Medicine against the “less is more” movement in medicine omitted that the publication’s former editor-in-chief played a foundational role in popularizing the idea of widespread medical waste.

The commentary in late December by Dr. Lisa Rosenbaum, “The Less-Is-More Crusade – Are We Overmedicalizing or Oversimplifying?” has attracted intense attention.  Rosenbaum berates a “missionary zeal” to reduce putative overtreatment that she says is putting dangerous pressure on physicians to abstain from recommending some helpful treatments. She also asserts that the research by Dartmouth investigators and others who claim 30 percent waste in U.S. health care, in which she once fervently believed, is actually based on suspect methodology.

What Rosenbaum fails to mention is that the policy consensus she seeks to puncture – that the sheer magnitude of wasted dollars in U.S. health care offers “the promise of a solution without trade-offs” – originated in the speeches, articles and editorials of the late Dr. Arnold Relman, the New England Journal’s editor from 1977 to 1991.Continue reading…

Your Ticket to an Intimate Chat With Health Tech VCs

There’s so much news from media outlets and bloggers about the next Health Tech investment treads that its difficult to pin point where to focus or what will materialize.

Its much easier when you can actually hear the treads from the investors who are shaping the industry – well Health 2.0 got you covered! At next week’s WinterTech conference, we’re featuring the 4 CEOs and Their VCs panel session.

A spin-off of the popular 3 CEOs session from the Fall Conference, the 4 CEOs and Their VCs session is made up of four, back-to-back interviews between digital health CEOs and the VCs who believe in them. Hear exclusive insight into what’s happening in health tech investments with conversations between:
  • Venrock and Robin: Robin is a brand new digital assistant for doctors. Hear Venrock Partner Bryan Roberts and Robin CEO Punit Son discuss the opportunities Venrock sees in Robin.
  • 415 and Lemonaid: Patient experience has gotten easier with Lemonaid’s accessible online platform. Lemonaid CEO Paul Johnson sits with investment firm 415 to talk about their business strategy.
  • Thrive Capital and Honor: An online service that connects in-home caregivers, seniors and their families, Honor sits down with its investor Thrive Capital to discuss the purpose of their investment.
  • Grandrounds and Venrock: Owen Tripp of Grandrounds and Bob Kocher of Venrock discuss their working partnership, and give insight into what those closed-door meetings look like.
From Seed to Series C, don’t miss the opportunity to join the session that is representing each unique stage of the investment cycle. Tickets are selling fast so register today!

Will CVS-Aetna Merger Lead to “Separate But Unequal” Healthcare?

Last week, pharmacy giant CVS agreed to purchase Aetna this week for an astounding $69 billion dollar sum. The company allegedly plans to reduce health spending by developing an integrated system touted as “a new front door for health care in America.” This merger is actually an acquisition, entailing transfer of ownership. The central aim of an acquisition is to increase market share, expand the scope of services provided, and improve financial stability. CVS hit the jackpot on all three objectives. While Wall Street investors celebrate, many of us knowledgeable in the delivery of healthcare services are wondering who will bear the responsibility for the patients harmed by this experiment?

Aetna has compiled vast amounts of data from 22 million health plan members. CVS provides pharmacy benefits management to nearly 90 million consumers. Together, with 10,000 stores and 1,100-minute clinics already in the CVS network, this acquisition will create a ‘Walmart for Healthcare’. Applying bulk-purchase business strategies to the sale of merchandise is one thing, while providing healthcare services by ‘trial and error’ to human beings is another matter entirely. Bypassing physicians to deliver healthcare by protocol categorically jeopardizes patient safety.

Executives at Aetna-CVS plan to utilize pharmacists and nurses in the evaluation of acute illness and management of chronic disease. If an insurer, drugstore, and pharmacy benefit manager unite as one, it will usher in an era of medical “segregation,” with segregation defined as the isolation or separation of a race, class, or group by enforced or voluntary restriction, by barriers to social intercourse, by separate educational facilities, or by other discriminatory means.

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