10/18/21 Weekly Update

Summarizing the week that was in the business of healthcare

Oct 18, 2021

Welcome to The Donut Hole’s weekly summary. The news doesn’t stop. Lucky for you, we are here to help you take in the week that was in the business of healthcare.

Medicare, Medicare Advantage enrollees have comparable healthcare experiences

New analysis from the Commonwealth Fund found that similar shares of Medicare Advantage and traditional Medicare enrollees report that their out-of-pocket costs make it difficult to obtain care and that they typically wait more than a month for physician office visits. The results are a little surprising as Medicare Advantage plans are required to place limits on enrollees' out-of-pocket spending and raise questions around the value MA provides. MedPAC estimates that MA plans are paid 4% more than it would cost to cover similar people in traditional Medicare, but rates of hospitalizations and emergency room visits are similar for beneficiaries in Medicare Advantage plans and traditional Medicare.

Commentary: Medicare Advantage is growing like a weed and is seen by some as a model for how to provide a public insurance option for all ages. And the program does have some benefits. MA enrollees are more likely than those in traditional Medicare to have a treatment plan, to have someone who reviews their prescriptions, to have someone they can contact for help, and to receive a response to a health query relatively quickly. But those benefits have not translated to better outcomes or lower costs for enrollees and the U.S. taxpayer. Given the rising popularity of the program, hopefully CMS and the federal government will implement reforms to address its shortcomings sooner rather than later.

Retail giant Best Buy snaps up remote monitoring company Current Health

Best Buy is making another healthcare-focused acquisition. This time, the company is purchasing Current Health, a remote monitoring company that markets a wearable to hospitals and biopharma (for clinical trials) that records respiratory rate, oxygen saturation, mobility and step count, pulse, and body temperature. The company can also integrate third party devices to measure additional data points, such as blood pressure and glucose, depending on the customer’s target condition.

Best Buy previously acquired aging-in-place company GreatCall and remote senior monitoring company Critical Signal Technologies. Best Buy Health’s leader sees Current Health as a natural extension of their current remote monitoring and senior care portfolios.

“The future of consumer technology is directly connected to the future of healthcare,” Deborah Di Sanzo, president of Best Buy Health, said in a statement.
“We have the distinct expertise in helping customers make technology work for them directly in their homes and by combining Current Health’s remote care management platform with our existing health products and services, we can create a holistic care ecosystem that shows up for someone across all of their healthcare needs.”

Commentary: While the deal makes sense based on Best Buy’s clear healthcare focus areas, Current Health takes Best Buy much closer to clinical workflows than its previous acquisitions, which focused more on monitoring technologies such as easy-to-use cell phones, medical alert buttons, and fall detection technologies. Moreover, this deal brings Best Buy into major health systems, including Mayo and Mount Sinai, and biopharma companies, including Amgen and AstraZeneca. The previous acquisitions primarily sold their offerings directly to consumers or to health plans, so it will be interesting to see how well Best Buy does in these new channels. Nevertheless, we are encouraged to see a major non-healthcare player investing in the space and believe further industry consolidation (and reimbursement reform) is needed to truly scale remote patient monitoring. Providers and health plans simply face too much noise and confusion from hundreds of competing solutions today.

Apple Studying Potential of AirPods as Health Device

The Apple healthcare news train continues to roll on. According to The Wall Street Journal, Apple is studying ways to make its popular AirPods into a health device. The potential applications include enhancing hearing, reading body temperature, and monitoring posture. The news indicates an expansion of Apple’s healthcare ambitions to yet another device beyond the iPhone and Apple Watch.

Commentary: This news leak is scarce on details but it’s not a surprising strategy. We expect that at some point Apple will have a fairly comprehensive set of healthcare features spread across its device ecosystem. It’s much more a question of both when and how much regulatory risk the company is willing to take.

CVS Health is about to turn hundreds of its drugstores into health care super-clinics

CVS is continuing its push into primary care delivery. In a call with Fortune, CVS’ CEO detailed a plan to turn hundreds of existing locations into primary care hubs that would provide office visits, basic diagnostics, and pharmacy services. The move fits with CVS’ previously stated ambitions over the past couple of years, including a broader expansion of its MinuteClinic urgent and primary care footprint.

Commentary: As we’ve talked about across issues, healthcare’s “front door” is rapidly changing. Many industry incumbents are moving quickly to broaden access to their physical and virtual primary care services, and those who aren’t risk losing patient volumes and the referrals that come with it. CVS’ expansion also enables Aetna to offer compelling plan designs to consumers and employers. Plans in some markets already include no cost sharing (i.e. no copays) for members at MinuteClinic locations.

Seven in Ten Medicare Beneficiaries Did Not Compare Plans During Past Open Enrollment Period

As discussed above and in previous issues, Medicare Advantage is booming. It continues to attract more enrollees and health plans, expanding so much that in 2021, the average Medicare beneficiaries can choose among 33 Medicare Advantage plans and 30 Part D stand-alone prescription drug plans (PDPs). All that choice is theoretically good. After all, the marketplace of Medicare private plans operates on the premise that people with Medicare will generally compare plans to select the best source of coverage, given their individual needs and circumstances. However, a new study from KFF shows that 68% of current Medicare Advantage and 73% of traditional Medicare enrollees did not compare their plans to other available options in the 2018 open enrollment season. The analysis showed some variation across groups, with minority, older, and lower income individuals less likely to compare plans.

Commentary: This is additional data supporting the conclusion that the Medicare Advantage market may not be functioning as intended. This study and previous KFF analysis suggest that the driving force is not plan satisfaction but rather challenges such as a poor plan comparison tool and fears over new enrollment processes, disruption in coverage, and learning new plan rules and requirements. With solid, bipartisan political support, the MA market is unlikely to experience significant changes, but perhaps CMS can invest more into simplifying the plan comparison process and meeting seniors where they are to increase the percentage of those who annually assess which plan is best for them.

Merck to buy Acceleron for $11.5B; cardio drug could cushion fall from Keytruda cliff

In news from the pharma and biotech world, industry giant Merck is acquiring a smaller biotech firm, Acceleron. Acceleron focuses on TGF beta, a family of proteins that play a role in regulating cell growth and repair, and its leading candidate, Sotatercept, is in late-stage clinical testing as a treatment for pulmonary arterial hypertension (PAH). Merck is looking for potential new therapies to fill the upcoming revenue impact from blockbuster KEYTRUDA’s patents expiring in seven years, at which point it will face significant competition from biosimilars. For reference, sales of KEYTRUDA totaled $14.4B in 2020 and makes up ~36% of Merck’s total revenue.

Commentary: Pharma receives a lot of negative attention in public discourse over pricing, but it’s worth remembering that, in our current system, these companies are private and have a duty to their shareholders to protect and grow their value. This proposed acquisition reflects the incentives of the industry. Merck is looking to fill an upcoming revenue gap and believes its clinical, medical affairs, and marketing resources can help make Sotatercept a blockbuster. Drug pricing is a major issue for many patients, but any discussions around price controls or other regulatory actions must consider how any changes would impact the industry incentives and the economic thought process behind therapeutic development.

The Donut Hole