The long view was a key theme at the 2018 Forbes Healthcare Summit last week. The transactional and short-term-oriented structure of the U.S. healthcare system creates huge waste and suffering. Entrepreneurs, as benefit plan sponsors and payers, can and must work to unlock long term value.
Behavior as a driver of health was a big topic at this year’s summit, a notable change from the past. Michael Dowling, CEO of Norwell Health, sees an obesity problem with his employees and is driving wellness programs including a revamp of the menus in hospital cafeterias [low-hanging starch?]. Jaewon Ryu, CEO of Geisinger Health System, observed that food and coaching produces twice the drop in A1C (a key diabetes biomarker) that drugs achieve for his customers. Bruce Broussard, CEO of Humana, a payer focused on Medicare Advantage, described how nutrition and depression are major causes of disease for older people, and how Humana makes a large investment in the wellness of its Medicare Advantage members, providing meals at home and transportation to community centers to combat loneliness. He points out that medicine accounts for only 20% [at most] of community health status.
Improving behavior-based health requires time and a relationship with the patient. Medicare Advantage revenue is based on capitation payments (fixed dollars per person), and Broussard observes that Humana’s Medicare Advantage members typically remain members for 7-10 years. This gives Humana both an opportunity to have impact and a business case for making investments in members’ wellness to avoid downstream treatment costs.
Pharmaceutical CEOs described how the current wave of bio-tech based therapies promise “transformational” treatments that cure or dramatically slow progression of many cancers, genetic and viral diseases. Jeff Leiden, Vertex Pharmaceuticals CEO, spoke of “cracking the biology” of Cystic Fibrosis, yielding three approved medicines that help 50% of patients achieve more than a doubling of lifespan, with a path to extending this to 90%. Sarepta Therapeutics’ technology platform has spawned 24 programs addressing rare diseases such as Duchenne Muscular Dystrophy, a disabling childhood disease. Alnylam Pharmaceuticals is developing a Nobel-prize winning technology that produced its first approved drug in 2018 plus three late-stage (Phase III) programs, one of them a vaccine that controls high cholesterol (LDL). As has become a tradition at the Forbes summit, we heard two patients, both ordinary women in the middle of life, speak of their experiences reaching death’s door with cancer, discovering they matched for a targeted therapy, and returning to normal life two or three months later.
Without exception the pharma CEOs argue for value-based pricing: let us charge a price tied to the value our drug creates, and pay us over time as the benefit is realized, or have a payment claw back if the patient does not do well. They see this as by far the best way to realize the revenue they need to continue innovation while providing value for money to customers. They also recognize that the U.S. system is poorly-structured to take this long term view of value.
Artificial Intelligence panelist Bob Nelsen (ARCH Ventures Managing Director) argued that AI will accelerate this trend, roughly doubling the success rate of new drug programs, and increasing the rate of early detection and cure of cancer so much that demand for hospital beds will fall.
The last panel asked the question: can we end cancer? Remission (disappearance of detectable disease) rates and survival time have improved greatly. Cell-based therapies are “knocking on the door of a cure”. But the panel also spoke of the “financial toxicity” of next gen therapies: the cost is so great it threatens to bankrupt health systems. Many of the new therapies cost over $ 100,000 for a course of therapy.
This is where the long view is needed. $ 50,000 for today’s Hep C cures is clearly a good investment on the basis of savings in future medical care alone, not considering the value of future productivity and healthspan (duration of healthy life) of the patient. Many of the other treatments are good investments, and some are not. Panelists pointed to an international organization called ICER (Institute for Clinical and Economic Review) as the accepted standard for judging whether treatments are worth what they cost. Drug companies use this data to justify prices based on value, and many governments (but not the U.S.) use it to negotiate prices and exclude drugs that are not cost effective.
The U.S. healthcare system structure emphasizes the short term. Providers are still mostly paid for performing procedures or prescribing drugs, versus working with patients to achieve long term health goals through healthy eating and behavior. There is often no budget for investing $ 75,000 today in a cure that will save $ 150,000 in care costs over the next five years: government and private health plans struggle to cover the cost of current care. Any many segments of the population experience frequent “churn” from plan to plan. The system foster this: health plans are tied to employers, income levels, age, and location, so that change in these factors can trigger plan change. Poor people on Medicaid have notoriously high churn: a recent study found that 25% change plans each year, and I’ve heard anecdotal evidence that churn is higher. And the exchanges cause churn as insurers enter, leave, and change pricing. If they expect that most members will stay no longer than a couple of years, health plans lack a business case for investment in cures that take time to pay back, or in behavior interventions with long term benefit.
As business owners, entrepreneurs, and leaders, we can and must take the long view wherever possible, and do the right think as much as possible. 1) Redouble efforts to minimize employee churn. This is a good thing for many reasons; add to that the fact that it enables you to make attractive investments that pay off in both savings and employee health. 2) Look at your numbers (healthcare costs, employee longevity) and find the places where you can invest in a treatment or behavior intervention today that pays off on the basis of future savings. There are now a half dozen advanced Hep C cures and the price has come down by two-thirds. Paying up front for a Hep C cure is very likely a good investment today. 3) Pay special attention to behavior-based health interventions for both your high-cost plan members and for all employees. Tech-enabled platforms for diabetes management and nutrition are showing good results and high levels of cost-effectiveness. Food is often the most powerful medicine.