Welcome back to the Weekly Muse – the latest trending healthcare stories and news articles from the last 7 days. Today’s edition covers the week of January 11, 2019. If you’re interested in getting these delivered straight to your inbox, go here.
Happen to miss last week’s stories? Get caught up here.
5 Big Stories
1. The Super Bowl of Healthcare
The “Superbowl of Healthcare,” or the 37th annual JP Morgan Healthcare conference, kicked off this week, and there’s always a plethora of information to cover while companies hit their flex as much as they can. Bear with me here.
Major Highlights from the conference included Johnson & Johnson calling for companies to self-govern with regard to drug pricing and the transparency of those prices, a message that fellow drug-maker (and $8 billion buy-out target Eli Lilly is taking to heart. That didn’t stop good ole J&J from raising their prices for the year, though…whoops. One company went as far to suggest installment plans for the priciest drug therapies.
CVS Health. Other big news came from CVS, as the newly invigorated company outlined its gung-ho plan to transform healthcare with Aetna now under its wing. It’s a pretty neat CVS store concept: a portion (about a fifth) of the store will be replaced with an expanded version of the current MinuteClinics, expected to include new health services and treatment for chronic diseases. The first ‘concept’ store opens in Houston, and is expected to expand quickly from there.
Guidance Updates. Companies at the conference took full advantage of their allotted time to update investors and peers on financial and operational performance. Tenet Healthcare, a hospital operator, killed it by touting future cost savings, unveiling a plan to pay down their existing debt quickly, and listing their pipeline of opportunities for growth. They saw their stock rise 7% over the course of the second day.
Encompass, a huge post-acute (think home health, hospice) provider saw gains of 2% after announcing strong expected operational performance and a plan to grow its home health and hospice line by up to $100 million over the course of 2019.
Not all presentations were as rosy, though.Select Medical, another post-acute care operator, saw share prices decline up to 5% as the co. announced weaker than expected growth for 2019.
And struggling hospital operator Community Health isn’t faring well either, after letting investors know they were falling short of their divestiture target for 2018 as the co. sells its under-performing hospitals to get out of debt.
Not for Profit. Not to be outdone by their for-profit bros, not for profit health systems came out in full force.
2. Healthcare Hiring Explodes
Known as one of the most stable industries, Healthcare job hiring vastly outpaced every other industry, adding over 50,000 new jobs in December and almost 350,000 in 2018, according to a Bureau of Labor Statistics report.
Over 75% of the new jobs were added in the ambulatory (think outpatient) sector, which includes jobs like home health, dentist offices, and physician offices. Not only is healthcare hiring a ton of people, the jobs are apparently pretty decent, too.
3. Civica Rx gains clout & latest on drug pricing
In case you missed it, several not for profit health systems banded together late last year to form Civica Rx, a joint venture designed to (ding ding) reduce drug costs for hospitals included in the partnership. Drug prices (think morphine, anesthesia) make up a big chunk of hospital expenses, and the formation of Civica is largely in response to rising prices.
The Plan. Civica aims to keep drug prices low mainly through preferring generic drugs over more costly (but sometimes more effective) brand-name specialty drugs. The company continues to gain steam as 12 new health systems with 250 hospitals, eager to jump in on the cost savings, announced their partnership with the not for profit initiative. Civica Rx is gaining some serious clout, and could actually pose a significant threat to the generic drug business.
Pivoting to Capitol Hill: Drug Overload. The newly-crowned Democratic led House of Reps is wasting no time with its healthcare agenda, especially when it comes to drug prices.
What to know. Big Pharma is finding itself under bi-partisan scrutiny as its pricing practices come into the public eye. These companies don’t have a very good track record with keeping prices low, especially on highly effective, life saving drugs (think insulin). In fact, most companies raise their portfolio of drugs on average between three to five percent, with their top selling specialty drugs sometimes seeing double digit price growth. Keep in mind, though; that sticker price isn’t typically the amount that patients pay, since insurers and pharmacy benefit managers (PBMs: think CVS, Walgreens, Express Scripts) negotiate that price down.
So, what now? Given that the whole industry and its pricing practices are largely veiled in unknown “trade secrets” and drugs are seen as a huge cost to Medicare, most of the gov seems to be on the same page (surprising) when it comes to pulling the rug out from under the pharma industry. Many reps are calling for price control measures, regulation, and transparency. Senator Collins wants the department of Health and Human Services to reform the system surrounding the rebates that PBMs get. California is even playing some offense when it comes to regulation (but what’s new there?).
The Pharma Defense. The recent push has caused Big Pharma to put their defense and lobbying efforts on hyper drive. Proponents of the free market argue for less regulation, because they think it would stifle drug innovation and the potential for future cures to diseases like Alzheimer’s. The drug pricing system is so ingrained into healthcare at this point, that many generics (which should, in theory, lower prices) are struggling to penetrate the market once patents expire on brand name drugs, and many potential competitors, like Samsung (who knew), can’t even break into the industry at all. Did you hear? Big Pharma is pretty influential.
4. Healthcare Marketing Dough
Big Biz. A recent report published this week studied the major sources and destinations of healthcare marketing spending over the last 20 years (1997 – 2016), and some interesting trends came to light. As it turns out, the healthcare industry as a whole spends an estimated $30 billion on marketing. Of that $30 billy, most goes to doctors through the form of visiting sales reps, providing MDs with potential benefits and perks, or giving MDs drug samples. But the most telling data point showed that increases in direct-to-consumer marketing (think drug ads on television) increased $7.5 billion over the 20 year period.
What this means. Patients will learn about a new drug, therapy, or treatment through a source like an advertisement, rather than traditionally through a doctor. The study highlights that both patients and doctors may be influenced by the marketing of drugs in the healthcare system.
The Final Claim: The study concludes that despite the rampant increase in marketing spending over the past 20 years, regulatory oversight of this spending hasn’t grown in congruence with it, meaning that regulatory oversight remains limited and potentially puts patients and doctors at risk.
5. Gov Shutdown & the latest from Capitol Hill
As if you thought the top 4 stories were enough to keep you toasty, there’s been plenty going on around Capitol Hill too. Unless you’ve been living under a rock, we’re all aware of the government shutdown. Fun fact! It’s now the longest one in history, as the current administration is at an impasse with the House Democrats mainly over immigration issues. The prolonged shutdown affects healthcare less than some other parts of government (sorry if you’re traveling – shout-out to the TSA), but there are still some important implications.
The Latest. For one, the Obamacare ruling currently tied up in court was put on pause. Maybe a bigger issue for us common folk is the fact that the FDA is severely limiting its food inspections. Hope there aren’t any more romaine outbreaks.
Other ramifications include the potential slowing of the CVS-Aetna merger as it stays tied up in court (but don’t worry, that definitely won’t slow them down) along with the delay of several potential IPOs this year.
Finally, the shutdown is pressing pause on all potential drug approvals too, putting Pharma in a holding pattern until we can sort this all out, which…might not happen any time soon and could even end in a national emergency declaration.
Divided Government. Meanwhile, the shutdown hasn’t stopped the Democratic charge for glory, as the expected push for single payer healthcare (think ‘Medicare for All’) has bloomed to fruition. Top agenda items for the Dems include the expansion of Medicaid in all states, with parallel Medicaid expansion efforts at the state legislative level, too. With the current divided government, many aren’t expecting much to get passed in 2019, especially as Republicans push back on any single-payer proposals that could potentially up-end the entire healthcare system. Still, keep an eye on the Democratic push for continued healthcare reform in 2020.
DSH Payment Reboot. Alongside these proposals, a rare bi-partisan effort championed by Marco Rubio intends to reform the disproportionate share (DSH) payment model for hospitals.
What’s DSH? In a nutshell, DSH subsidizes hospitals that treat a larger number of Medicaid and un-insured patients so these hospitals can continue operations and keep the lights on (as these types patients typically are considered charity cases).
Why change it? The current payment formula hasn’t been updated since 1992, and legislation intends to revise the payment model to give block grants to each state based on the proportion of citizens living below the poverty line.
What would happen? This proposed payment structures would have sweeping ramifications for hospitals across the nation, as some would receive significantly less (or more) payments. Many hospitals rely on these payments for financial solvency. Keep an eye on any legislative proposals, as many have been calling for changes to DSH payments.
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