The ITV News headline grabs attention — but are dermatology apps really endangering the public when teledermatology can help diagnose 88 percent of people with skin cancer and 97 percent of those with benign lesions? A University of Birmingham-led research team did a metastudy of the literature and found three failings: “a lack of rigorous published trials to show they work and are safe, a lack of input during the app development from specialists to identify which lesions are suspicious and flaws in how the technology analyses photos” particularly for scaly or non-pigmented melanomas. But did access to these apps encourage early diagnosis which can lead to up to 100 percent five-year survival? Of course review is required as recommended by the study, but this last factor was not really examined at the British Association of Dermatologists’ annual meeting in Edinburgh. University of Birmingham release with study abstract
Care Innovations sells off Validation Institute. But is there more to the story? And a side of Walmart Health action.
The Health Value Institute, part of Woburn, Massachusetts-based conference organizer World Congress, announced late last week the acquisition of the Validation Institute from Care Innovations. Terms were not disclosed. The Health Value Institute and the Validation Institute recently partnered to validate the outcomes for the Health Value Award finalists and awards this past April at the 15th Annual World Health Care Congress. According to both parties, the acquisition will help to expand the membership of validated companies, and the present offerings for HR, broker, and benefit executives. Release.
The Validation Institute was launched with fanfare back in June 2014, when GE still had a chunk of the company and during the 2 1/2 year repositioning (revival? resuscitation?) led by Sean Slovenski from the doldrums of the prior Louis Burns regime. Mr. Slovenski departed in early 2016 to be president of population health at Healthways/Sharecare, which lasted a little over a year. However, this week Mr. Slovenski made headlines as the new SVP Health & Wellness of Walmart, reporting directly to the head of their US business. The hiring of a senior executive with a few years at Humana and a short time at Sharecare, another Walmart partner, coupled with several years in healthcare tech and provider-side is certainly indicative of Walmart’s serious focus on healthcare provision. It’s a fascinating race with Amazon and CVS-Aetna–with the mystery of what Walgreens Boots Alliance will do. Also Healthcare Dive.
But back to Care Innovations. Signs of a new direction–and a loss. The case can be made that the Validation Institute, the Jefferson College of Population Health, and validating individuals and companies was no longer core to their business which is centered around their RPM platform Health Harmony (with QuietCare still hanging in there!) However, this Editor notes the prominent addition of ‘platform-as-a-service’ advisory services for those who are developing health apps, which appears to be a spinoff of their engineering/IT services. Vivify Health, a competitor, already does this. There is a vote of confidence; in June, Roche signed on with a strategic investment (undisclosed) as well as integration of the mySugr integrated diabetes management/app solution (release).
Looking around their recently refreshed website, there is an absence–that of the two or three pages previously dedicated to the Veterans Health Administration (VA) and the press release of the VA award. This tends to lend credence to the rumors that there was a second company that did not pass the Trade Adjustment Act (TAA) requirements that knocked out Iron Bow/Vivify Health from the VA, or for another undisclosed reason CI bowed out of a potentially $258 million five-year contract. If so, that leaves for the VA Medtronic and 1Vision/AMC Health. It’s certainly a limited menu for the supposedly growing numbers of veterans requiring telehealth and a limited choice for their care coordinators–and not quite as presented to the public or the 2015 competitors in the solicitation. Who benefits? Who loses? (Disclosure: This Editor worked for one of the finalists and a VA supplier from 2003, Viterion.) Hat tip to one of our ‘Industry Insiders’, but the opinions expressed here are her own.
Rock Health’s ‘Another record-breaking first half’ in digital health funding is actually–flat. (With a Soapbox Extra!)
The Breathless Tone was the clue. “It’s déjà vu for digital health, with yet another record breaking half for venture funding.” It was déjà vu, but not of the good sort. This Editor hates to assume, so she checked the year-to-year numbers–and first half 2018 versus 2017 broke no records:
- 2018: $3.4 bn invested in 193 digital health deals
- 2017: $3.5 bn invested in 188 digital health companies [TTA 11 July 17]
But ‘flat’ doesn’t make for good headlines. Digging into it, there are trends we should be aware of — and Rock Health does a great job of parsing–but a certain wobbliness carried over from 2017 even though the $5.8 bn year finished 32 percent up over 2016, analyzed here [TTA 5 Apr 18]. Their projection for 2018 full year is $6.9 bn and 386 deals.
Let’s take a look at their trends:
- “The future of healthcare startups is inextricably linked to the strategies of large, enterprise-scale healthcare players—as customers, partners, investors, and even potential acquirers.” It’s no mistake that the big news this week was Amazon acquiring tiny, chronic-conditions specializing prescription supplier PillPack after a bidding war with Walmart for an astounding $1bn, making its 32 year-0ld founder very rich indeed and gaining Amazon pharmacy licenses in 49 states. (Prediction: Walmart will be pleased it lost the war as it will find its own solutions and alliances.)
- Enterprise healthcare players are cautious, even by Rock Health’s admission, but the big money is going into deals that vertically integrate and complement, at least for a time–for example, Roche’s purchase of Flatiron Health. And when it doesn’t work, it tends to end in a whimper–this May’s quiet sale by Aetna of Medicity to Health Catalyst for an undisclosed sum. Back in 2011, Aetna bought it for $500 million. (Notably not included in the Rock Health analysis, even though they track Health Catalyst and the HIE/analytics sector.)
- The market is dependent on big deals getting bigger. If you are well-developed, in the right sector, and mature (as early-stage companies go), you have a better shot at that $100 million B, D, E or Growth funding round. B rounds actually grew a bit, with seed and A rounds dipping below 50 percent for the first time since 2012.
- The Theranos Effect is real. Unvalidated, hyped up claims don’t get $900 million anymore. In fact, there’s real concern that there’s a reluctance to fund innovation versus integration. The wise part of this is that large fundings went to companies validating through clinical trial results, FDA clearance (or closing in on it), and CDC blessing.
- The dabbling investor is rapidly disappearing. 62 percent of investors in first half had made prior investments in digital health including staying with companies in following rounds.
- Digital health companies, like others, are staying private longer and avoiding public markets. Exits remain on par with 2017 at 60. Speculation is that Health Catalyst and Grand Rounds are the next IPOs, but there hasn’t been one since iRhythm in October 2016. The Digital Health public company index is showing a lot less pink these days as well, which may be an encouraging sign.
- Behavioral health is finally getting its due. “Behavioral health startups received more funding this half than in any prior six-month period, with a cumulative $273M for 15 unique companies (nearly double the $137M closed in H1 2016, the previous record half for funding of behavioral health companies). Of these 15 companies, more than half have a virtual or on-demand component.”
Keep in mind that Rock Health tracks deals over $2 million in value from venture capital, excluding government and grant funding. They omit non-US deals, even if heavily US funded.
Their projection for 2018 full year is $6.9 bn and 386 deals. Will their projection pan out? Only the full year will tell!
A Soapbox Extra!
Rock Health, like most Left Coast companies, believes that Vinod Khosla is a semi-deity. This Editor happens to not be convinced, based on predictions that won’t pan out, like machines replacing 80 percent of doctors; making statements such as VCs have less sexual harassment than other areas, and even banning surfers off his beach. He was at a Rock Health forum recently and made this eye-rolling (at least to this Editor) statement:
Is there one area in the last 30 years where the initial innovation was driven by an institution of any sort? I couldn’t think of a single area where innovation—large innovation—came from a big institution. Retailing wasn’t disrupted by Walmart, it was by Amazon. Media wasn’t changed by CBS or NBC, it was by YouTube and Twitter. Cars weren’t transformed by Volkswagen and GM—and people said you can’t do cars in startups—but then came Tesla.
Other than making a point that Clayton Christensen made a decade or more ago, the real nugget to be gained here is that formerly innovative companies that get big don’t grow innovation (though 3M tends to be an exception, and Motorola didn’t do too badly with the cell phone). They can buy it–and always have.
Go back a few more decades and all of these companies were disrupters–and bought out (or bankrupted) other disrupters. CBS and NBC transformed entertainment through popularizing radio and then TV. VW created the small car market in the US and saved the German auto industry. GM innovated both horizontally (acquiring car companies, starting other brands) and integrated vertically (buying DELCO which created the first truly workable self-starting ignition system in 1912).
YouTube? Bought by innovator Google. Twitter? Waiting, wanting to be bought. Innovation? Khosla is off the beam again. Without Walmart, there would be no Amazon–and Amazon’s total lifetime profit fits nicely into one year of Walmart’s. Tesla is not innovative–it is a hyped up version of electric car technology in a styled package that occasionally blows up and remains on the borderline of financial disaster. (Model 3, where art thou?)
I’d argue that Geisinger, Mayo Clinic, and Intermountain Healthcare have been pretty innovative over the last 30 years. Mr. Khosla, read Mr. Christensen again!
CVS and Walgreens‘ clinics have started, in the new model, to become significant, even anchor, tenants of shopping centers, filling up the empty storefronts left by traditional retail. Doctors’ offices, urgent cares like CityMD, and hospital-run outpatient clinics are filling retail spaces and anchoring new developments. Another part of the experience–fitness clubs, which are also converting vacant office spaces–a line extension increasingly popular with health systems. CVS also bought out department store Target’s drugstores and in-store clinics, which is another model (fill a prescription, buy socks or a TV). Another line extension is partnerships with urgent cares or outpatient clinics, not much of a stretch since CVS already has affiliations with health systems in many areas.
Add telemedicine (Aetna’s partnership with Teladoc) to the above: both MinuteClinics and in-home become 24/7 operations. Not mentioned here is that Aetna can add in-person or kiosk services in CVS stores to file claims, answer questions, or sell coverage.
As this model becomes clearer, big supermarket operators like Ahold (Stop & Shop, Giant), Wegmans, Publix, Shop Rite and others, which have pharmacies in most locations, may ally with or merge with insurers or health systems–or partner with CVS-Aetna. There is also the 9,000 lb. elephant called Walmart, which is 2/3 of the way to an experiential model including nutrition, diet, and fitness (ask any WalMartian). Further insights on how this merger is forcing retailers to adapt are in Drug Store News.
CVS-Aetna could very well be a major mover in experiential retail, which may save all those strip malls. But this article points out, as this Editor has already, that the full shape of what could be experiential healthcare will take years to work and shake out, assuming the merger is approved. Our prior coverage is here.
The New York Post’s Beltway sources (for ex-US readers, it’s the mass market News Corp. paper/site) are talking up DOJ:
President Trump’s Department of Justice appears to be the agency that will review CVS Health’s $69 billion merger with Aetna, sources tell The Post. While the decision is not yet final, the move would not be good news for the merging parties, sources said. “I think they would prefer it to be at the Federal Trade Commission,” one Washington, DC, source said.
The article explains that it’s a tossup as to bailiwicks–FTC reviews retail and drugstore mergers, DOJ insurance mergers. A sound but (by CVS) unwelcome reason for DOJ to review the merger is their familiarity with Aetna after DOJ opposing its failed merger with Humana in Federal court less than a year in the past. Their expertise would be wasted and politically, a cup that FTC would wish to pass inasmuch they are also short on commissioners.
As the Third Century Greek philosopher Sextus Empiricus stated, ‘The mills of the gods grind slowly, but they grind small’ (or ‘exceeding fine’ in more modern citations), which means that justice, at least in the Federal definition, will be served eventually.
- The Trump Administration has let DOJ question the AT&T/Time Warner merger on antitrust reasons up, down, and sideways, to the point where it is nearly derailed. Much the same can be expected here.
- The businesses create a new type of healthcare system. Expect HHS to have a say.
- Congress is already demanding hearings, which given the short time to Christmas break will likely be January.
- What may help Aetna’s cause is that the merger with Humana was a friendly one; the decision, at least in the press, was accepted with grace.
But as wags have said for at least two centuries, you can always tell the pioneers by the arrows in their back. When you’re redesigning the Conestoga Wagons, it has to be expected–which is why the experts gathering here in NYC over the past week have had not much to say about it to date.
Certainly it has been a downer for investment pickers, though both companies had significant profitability challenges facing them in the future. We refer here to several articles in Seeking Alpha where it’s predicted that the acquisition will boost CVS’ growth, but saddle it with huge debt: $45B in new debt, $21B in new equity, plus using $4B in available cash. Are they overpaying? Will it reduce internal cost and boost profitability? Will it do what they say they’ll do, which is to bend the cost curve down by start-to-finish engagement with customers? What pieces are missing? And time is a critical factor–how long this will take to realize is not projected. If you like stock and value charts and graphs, here’s the place. Seeking Alpha (by author): Ciura, Arnold, Ward
Other retailers will have their say. We’ve noted earlier that the vast supermarkets like Publix, Wegmans, Shop Rite or Ahold (Stop & Shop, Giant) are likely looking at opportunities with logical alliances or buy-ins to insurers like Oscar, Clover, Bright Health, or the smaller Blues. Target is already allied with CVS for their in-store drugstores. And then there is retail/online giant Walmart. The Wal-Martians need plenty of healthcare and Humana, based on local Louisville-area reports, is in play after not merging with Aetna.
Looming over all this is Amazon. A little-noticed report in Becker’s from July indicated that their 1492 unit has set about extracting data from legacy EHRs and to build a telehealth platform on Amazon hardware such as Echo. Already noted has been their buying of pharmacy licenses in various states. None of which can make any of the usual healthcare suspects happy.
Reimagination or hallucination? In recent weeks, both Glaxo Smith Kline and now Novartis have hired digital analytics and marketing executives out of non-healthcare businesses to lead their digital transformation. For GSK, Karenann Terrell joined in the new position of chief digital and technology officer from six years as chief information officer for Walmart and CIO for pharma Baxter International. From Sainsbury’s Argos, Bertrand Bodson will be assuming the chief digital officer title at Novartis without any previous healthcare experience.
Both are expected to be transformative, disruptive, and ‘reimagine medicine’. Ms. Terrell’s experience and accomplishments appear to be the closest fit to her GSK’s job expectations of integrating digital, data, and analytics strategy with enhancing clinical trials and drug discovery, as well as improving professional and consumer interactions. Novartis’ mission for Mr. Bodson aims even higher. In addition to these, he will be ‘transforming our business model using digital technologies’, ‘reimagine (sic) medicine by leveraging digital on behalf of millions of patients and practitioners’, and ‘leading cultural change’.
Both companies have good starts in advanced technologies–GSK in AI, sensor technologies for managing COPD, and a medical device mobile app; Novartis with ‘smart pill’ Proteus, a pilot with heart medication Entresto tied to monitoring and coaching, and through its Alcon subsidiary with Google, a wired-up contact lens that detects blood glucose [TTA 17 July 14]. However, this last appears to be stalled in trials and Alcon on the block. According to the FT, Novartis is feeling the pressure to develop more digital partnerships, such as Novo Nordisk’s teaming with Glooko and Sanofi with Verily Life, all in diabetic management. Acquisitions may also be the way forward.
A significant impediment to all this integration is consumer and professional trust. If too closely tied to a pharmaceutical company or appearing to be too self-serving, remote monitoring and counseling may not be trusted to be in the patient’s (or doctor’s) best interest or objective as to better approaches. The overuse of analytics, for instance in counseling or patient direction, may be perceived as violating patient privacy–creeping out the patient isn’t helpful. The bottom line: will these digital technologies serve the patient and maintain medical best practices–or best serve the pharmaceutical company’s interests?
This Editor doesn’t question these individuals’ ability, but the organizations’ capability for change. But count this Editor as a skeptic on whether one or two digital execs can marshal the bandwidth and the internal credibility to transform these lumbering, complex, regulated, and long cycle businesses. Big Retail is fast moving by comparison. PMLive 31 July (GSK), 13 Sept (Novartis) Hat tip to TTA alumna Toni Bunting
Ron Hammerle’s comment on Disruptive innovation in healthcare hasn’t begun yet: Christensen (TTA 31 Mar), posted on LinkedIn’s Healthcare Innovation by Design group, made the excellent point that a potentially disruptive and decentralizing healthcare service–retail clinics–has been sidetracked, at least in the US, leaving an open question on their reason for being. This Editor thought it was worthy of a Soapbox. Mr. Hammerle knows of what he speaks because his Tampa, Florida-based company, Health Resources Ltd., works with retail and employer-based clinics to connect them via telemedicine/telehealth systems with medical centers.
When Clayton Christensen first anticipated that retail clinics would be disruptive to the established healthcare industry, their business model was potentially disruptive. What has subsequently happened, however, is a prime example of how potentially disruptive movements can be sidetracked.
After acquiring MinuteClinic and laying the foundation for taking retail clinics national, CVS Caremark chose to make deals with hospitals, which could easily afford to rent, open and operate such clinics without making money on the front end or facing real disruption. Retail clinics were a loss leader to hospitals in exchange for large, downstream revenues, and slightly-enhanced market share for the retailer’s pharmacy.
After CVS shocked Walgreens with one-two punches involving MinuteClinic and Caremark acquisitions, Walgreens came back with three counter-punches of its own:
1. They doubled the number of their clinics (to 700) in less than two years, thwarted AMA opposition, leapfrogged ahead of CVS in clinic count and totally changed the retail clinic model by setting up politically-invisible, broader service, make-your-profit-up-front, employer-based clinics. (more…)