Posts in Healthcare
Targeting Biotech Innovations To Empower Patients

Let’s take a macro look at healthcare politics and economics as a backdrop for biotech innovation. But first, by way of personal introduction, I’m a Zoic Senior Advisor and practicing emergency physician with more than 20 years of clinical, administrative, and healthcare advocacy experience. I also currently lecture on healthcare policy and advocacy as an adjunct professor at the University of Tennessee Haslam College of Business. And now, let’s talk politics.

As the 2020 presidential campaign ramps up, news and social media are abuzz with talk of Medicare-For-All in the United States. Were this to occur, it could dramatically change the biotech landscape, but it’s not likely any time soon.

Even among proponents, there’s no consensus what “Medicare-For-All” means. Some proposals are incremental expansions of Medicare or Medicaid, others create a new public option through the existing Affordable Care Act (ACA) marketplace, and still, others propose a compulsory single national health insurance program for all U.S. residents. These divergent proposals make legislative compromise difficult even among supporters, to say nothing of the intense opposition they will encounter from critics.

Even if proponents align, legislative math stands in the way. To become law, a bill must achieve 218 votes in the house, 60 votes in the Senate, and 1 signature from the president. A simple majority in the senate is insufficient because senate rules of procedure require a 60-vote supermajority to start and stop debate. As long as no single political party controls all three magic numbers, i.e. 218-60-1, the minority party in the senate can obstruct items with which it disagrees. And, though political analysis is often inconsistent, there is no likely 2020 scenario in which either party will achieve this level of control. Though there will be plenty of political fearmongering, there will not be any near-term switch to single-payer healthcare in the United States.

For the foreseeable future, even with private sector consolidation, the U.S. will maintain a massive, fragmented, and growing health sector that in 2017 consumed >$3.5 trillion, roughly 17.9% of GDP In fact, if the U.S. health sector were a nation, it would be the 5thlargest GDP in the world. That’s a lot of economic activity and it’s very unevenly distributed. In a typical year, the top 5% of healthcare consumers account for roughly 50% of total costs while the lower 50% only accounts for 3% of expenditures. Persistently high-utilizers tend to have low-frequency, high-cost conditions such as HIV, cystic fibrosis, multiple sclerosis, inflammatory bowel disease, arthritis, etc. Patients with these high-cost, chronic, and debilitating conditions need biotech innovations that improve care while lowering total cost. Better diagnostics, more effective therapeutics and enhanced monitoring tools to manage these diseases offer countless opportunities for targeted innovation.

Alternatively, tens of millions of Americans have high-frequency, moderate cost diseases such as hypertension and diabetes that result in impaired health and hundreds of billions of dollars of annual costs. Targeted biotech innovations that empower patients to better manage these diseases and their complications (i.e. heart failure, kidney disease, vascular complications, etc.) at home or at a distance are in high demand. There are >300,000 mobile healthcare apps promoted to facilitate self-monitoring, self-diagnosing, treatment compliance, etc. Opportunities abound to connect directly with consumers or to help clinicians and hospitals better engage with patients to lower total costs through remote monitoring and better coordinated care. And, for the biotech innovator with a novel diagnostic or therapeutic approach, wrapping their innovation with an engaging mobile app offers the opportunity to expand the reach of their IP to simultaneously serve multiple customers (i.e. patients, clinicians, hospitals, health plans, etc.) and enlarge their addressable market.

With this much economic activity and so many innovations, it takes a large deal-flow funnel and disciplined approach to identify successful and sustainable solutions in the healthcare marketplace. Each year at Zoic, we review more than 1,000 early-stage companies to identify the small handful that possess the differentiated IP, substantial platform potential, and exceptional management teams necessary for success.

Healthcare, Innovation, BlogSteven Stack
Healthcare: High Profile Collaborations

In early 2018, the announced collaboration between Jeff Bezos (Amazon), Warren Buffet (Berkshire Hathaway), and Jamie Dimon (JPMorgan Chase) set the health and financial sectors abuzz with speculation over what they might (or might not) be able to accomplish in health sector innovation. And, it should. Any collaboration between 2 of the three wealthiest people on the planet and 3 CEOs presiding over some of the largest companies both in their industries and in the world has transformational implications. Healthcare finance and delivery reform in the U.S., however, has claimed more failed efforts than the metaphorical Bermuda Triangle has planes, so a generous dose of skepticism seems in order. So, what might the collaboration reliably yield?

1) Delivery

Radical delivery transformation is certainly possible.

Amazon computing power and technology is well-poised to create a robust telemedicine platform supported by AI-assisted clinicians providing maintenance care at a distance for patients with chronic conditions. This could dramatically lower clinician cost, eliminate travel time/expense, and expand telemedicine access to not only acute care, but also routine maintenance care to 24 hours a day, 365 days per year availability. Such services could be both Amazon-provided and branded or the platform infrastructure could be provided at lower marginal cost to health systems and provider groups who contract for them much like Amazon Web Services provides affordable platform technology to a host of industries.

It would also be easier through this collaborative than in the general public to leverage Amazon’s tech (or to fund startups with the technology) that can provide patients low-cost, in-home, point-of-care monitoring solutions (i.e. Bluetooth scales, glucometers, blood pressure monitors, cardiac rhythm monitors, etc.) to a) collect real-time data, b) apply AI to analyze and predictively model the data, and c) intervene for patients with high cost disease states (i.e. CHF, COPD, diabetes) to prevent or substantially minimize decompensation through more rapid interventions to prevent decompensation and avert preventable hospitalizations.

2) Financing

A large collaborative like this, with the aggregate financial acumen of the three companies plus the large healthcare budgets they already deploy, could make profound inroads into healthcare for their own combined >1.2 million employees. With sufficient coordination, the three corporations could adopt a much more wholistic approach with the result that it becomes single-payer and single-provider for routine preventive, maintenance, and remote monitoring of care for most common conditions using tools as described above. The companies would then only contract out for acute procedural and in-hospital services. Doing this, they would save substantial expense by eliminating 3rd-party health insurer and numerous outsourced provider expenditures. These savings could be sufficient to provide all their own employees much lower or no-cost healthcare coverage for all employees who consent to use the prescribed services and comply with the in-house delivery system requirements as a condition of receiving the no-cost health coverage option. There may even be enough money left to pay these employees some modest incentive to choose this path.

Extending the scenario above, the pricing system for contracted provider services, pharmaceuticals, and devices has been irretrievably broken. Long ago, it ceased to be a fee charged and paid in return for a discrete product or service provided. It is now an opaque web of wildly inflated charges, insanely discounted rates, rebate/refund programs as complex as collateralized debt obligations (CDOs), a tangled knot of distributors, etc., etc. This collaborative might have enough scale to strip out much of this of this waste and return to a cleaner model of cash exchanged for goods without so much tangled mess in the middle.

3) The Big Picture

Improving the healthcare value proposition requires at least a handful of key events to occur:

i) Sufficient aggregation of financing layers is required to eliminate as many intermediary costs as possible. If done at scale, this could effectively wipe-out the entire private health insurance industry, most of the revenue-cycle industry, much of the bricks & mortar pharmacy industry (why would we need so many drugstores if Amazon can home-deliver medication within 2 hours), etc., etc. This alone would be transformative to healthcare financing and delivery.

ii) Nearly compulsory leveraging of telemedicine, in-home monitoring, AI-enhanced predictive analytics, and rapid interventions by lower cost clinicians or team members would be essential. The pseudo-compulsory aspect would be facilitated by corporations offering employees incentives (no- cost healthcare plus cash or other positive incentives) to use these preferred services rather than bricks & mortar physician offices, hospitals, pharmacies, etc. unless the company delivery system advises and authorizes it (or in case of acute injury / emergency).

iii) Facilitated and/or mandated patient compliance with treatments and/or requirements. Remote monitoring and review of use patterns would reveal employees who repeatedly fail to comply or who use non-preferred care avenues. Repeated non-compliance could result in imposition of employee cost-sharing for healthcare coverage/services and/or other interventions.

Many of the above items are industry-transforming – every bit as much as iTunes was for music and Amazon has been for retail. Some of the above is easy to model and deliver, but other parts are much more difficult and would be a daunting challenge to scale outside the captive employee base of the three collaborating companies. It’s far from impossible, though. Amazon is the key to much of this because it can leverage its tech, scale, and razor-thin margins (tiny cut of a massive amount) to make its profit while still saving money for others. Initially, Berkshire and JPMorgan appear less critical, but their size and scope undeniably add to the potential experimental pool (i.e. employees) and could be helpful enlisting other corporations to join in if these initiatives show early signs of success.

These concepts could radically transform healthcare delivery and financing. Though it’s anyone’s guess how much of it they can accomplish and in what timeframe, being the CEO atop such a collaboration would be a fascinating job!