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- Weekly Health Tech Reads | 9/10/23
Weekly Health Tech Reads | 9/10/23
Walmart/ChenMed acquisition talks, CEO departures, weird Medicare spending trends, and more!
Amanda DiTrolio & Kevin O'Leary
September 10, 2023
Welcome to this week’s free weekly newsletter, where we share our perspectives on some of the key healthcare related news of the week.
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NEWS OF THE WEEK
Sharing our perspective on the news, opinions, and data that made us think the most this week
News
HTN Slack Convo (h/t Michael Ceballos)
Summary: A Bloomberg report suggests that Walmart is in talks to acquire a majority stake in ChenMed, valuing ChenMed at "several billion" dollars. It reports a deal could still be weeks away, and another buyer could still emerge for ChenMed. This news comes less than two months after ChenMed announced Steve Nelson as its new president.
Kevin's Take:
Obviously we'll need to see if this deal materializes over the coming weeks. Assuming for a second that it does, the timing of this move is a bit of a head scratcher for Walmart. Why now?? Presumably, Walmart leadership sees the same general strategic opportunity that CVS and Walgreens both have as well. So in that sense, I suppose the deal makes sense. ChenMed is one of a dwindling list of MA primary care assets that can still be acquired, and Walmart might not want to be boxed out. But at the same time, if you're Walmart, why make this move now after sitting on the sidelines the last few years? You've just watched Walgreens part ways with its CEO and CFO over major operational challenges integrating its healthcare business. CVS also has undergone a major restructuring. It doesn't make a ton of sense to me that you'd look at those organizations' struggles, coupled with your own internal struggles to commit to scaling healthcare initiatives (i.e. Walmart clinics), and say hey, let's buy a majority stake in a MA primary care business right now.
News
HTN Slack Convo (h/t David Kolacny)
Summary: After just over two years at the helm, Walgreen's CEO is out and the Board has an external search firm looking for a new CEO with "deep healthcare experience". This comes about a month ahead of its Fiscal Year 2023 earnings announcement, and only a few months after a FYQ3 2023 earnings announcement that underscored the challenges it was having in the healthcare business.
Kevin's Take:
After FYQ3 2023 earnings showed clear evidence of major issues in Walgreens' strategic shift into healthcare (see our Slack convo here), this seems to underscore the magnitude of the issue at hand. The sequence of events here seems to indicate the problem is getting worse internally, not better. In the last quarterly earnings call, Walgreens shared a high level mitigation plan designed to get the healthcare business closer to profitability. That plan felt akin to the old adage about throwing spaghetti against the wall and seeing what might stick. Will be worth watching what is shared in Walgreens upcoming earnings call as to what progress is being made on that plan and how Walgreens is moving the business closer to profitability. They have a massive task in front of them integrating VillageMD, Summit, and CityMD and demonstrating to Wall St that they can manage a FFS and VBC care delivery business in a profitable way.
Opinions
HTN Slack Convo (h/t Ryan Gallagher)
Summary: A Business Insider deep dive highlights issues that Calibrate is facing in the direct-to-consumer market, reporting that Calibrate paid out 60% of its D2C revenue in refunds in March of this year. The core issue among many is that patients are complaining to the Better Business Bureau after not receiving access to GLP-1s within 90 days. It reports Calibrate is turning to the employer market for growth, highlighting a deal Calibrate recently won with FedEx via a partnership with Optum.
Kevin's Take:
This article makes me think of the post about the "Jobs to be Done" mentality for consumers in healthcare (articulated well in this post). In many ways, the underlying issue here is that the JTBD many consumers in signing up for Calibrate is wanting access to GLP1s. The problem for Calibrate it appears is they've very much struggled meeting that demand, leading to a rash of customer complaints and ultimately refunds. It underscores the challenges in the D2C market. But what's more interesting to me here in the article is the mention of Calibrate entering the B2B space, working with Fedex via Optum. Strategically, it seems like Calibrate needs to do the exact opposite job in the B2B market that it does in the D2C market. Employers are actually looking to curtail access to these medications to employees. It's a really tangible example of the conflicting incentives between what employers want and what employees want, and it'll be interesting to see how Calibrate and others going after this space navigate that. Given the challenges in the D2C market, it would make sense they'll focus increasingly on meeting the needs of employers.
CHART(S) OF THE WEEK
Sharing a visual or two from the week that made us think
Source: New York Times analysis of data from the Congressional Budget Office, the White House Office of Management and Budget, and the Medicare board of trustees.
A recent article from the New York Times digs into a rather surprising trend – Medicare spending, which has been on a tear in recent decades, has instead flattened out in the last ten years, resulting in a whopping $3.9 trillion gap between the projected trend and actual spending. The piece presents multiple hypotheses on the potential cause, from Congress' changes in Medicare policy to the introduction of the ACA to budget cuts. However, it seems the majority of savings cannot be clearly attributed to any one policy shift, which has resulted in health policy folks arguing about it for several years.
It's worth calling out, $3.9 trillion is A LOT of money. To put into perspective just how much money, below is a pretty wild graphic comparing the Medicare spending gap to some of the other largest line items for the federal government.
Sources: New York Times analysis of data from the Congressional Budget Office, the White House Office of Management and Budget, and the departments of defense and education.
HTN Slack Convo (h/t Steven Lee)
OTHER NEWS
A round-up of other newsworthy items we noticed during the week
In the first round of its drug price negotiation program, Medicare announced 10 drugs it will negotiate prices for - including Eliquis and Xarelto (blood thinners), Jardiance, Januvia, and Farxiga (diabetes medication), Entresto (heart failure treatment), among others.
Link / Slack (h/t Bryce Platt)
EHR software company, NextGen Healthcare, is set to be acquired by PE-giant Thomas Bravo in a take-private deal valued at $1.6 billion. The deal follows a spat of legal trouble for the company earlier this year, when NextGen agree to pay $31 million to the federal government in a whistleblower lawsuit addressing a violation of the False Claims Act.
Link
Virtual opioid use disorder treatment startup Bicycle Health has partnered with supermarket chain Albertsons. The company's telehealth providers will now be able to prescribe and fill buprenorphine injections at Albertsons' pharmacies across 17 states.
Link
A recent WSJ report highlighted how health insurance costs have surged in recent years - with employer costs for coverage projected to jump about 6.5% for 2024 according to analysis from Mercer and Willis Towers Watson.
Link / Slack (h/t Khang Vuong)
Abbott is set to acquire smart insulin management company Bigfoot Biomedical to advance their existing work together in continuous glucose monitoring and insulin dosing support space.
Link / Slack (h/t Evan Benkert)
Following Vyvanse's expiration of its patent, the FDA has approved several generics of the popular ADHD medication.
Link / Slack (h/t Bryce Platt)
FUNDING
A collection of notable startup financing rounds across the industry
Bladder tech company Jude raised $4.2 million in Seed financing to expand into the US market, with plans to launch its DTC business at the start of 2024. To date, the company has served 16,000 customers with a range of bladder health services - including diagnostics and treatment.
Link
QuantHealth raised $15 million in Series A financing to expand its AI-enabled drug discovery platform.
Link
NeuroFlow, a behavioral health analytics platform, raised an undisclosed amount from Concord Health Partners.
Link / Slack
Ibex Analytics raised $55 million in Series C financing to expand its AI-enabled cancer diagnostics platform.
Link / Slack
Aging in-place startup, Blooming Health, raised $4.2 million in Seed financing. The fresh capital will help the company build out its tech-enabled platform to support community based aging care providers and expand operations into four new states by the end of 2024.
Link
WRITERS GUILD
A round-up of posts from the broader health tech community this week that made us think
Four Ways to Land Your First Health Plan Customer by Halle Tecco
This was a great breakdown of how to land your first health plan customer across various business models (e.g. D2C, B2C2B, B2B, etc.). Halle collects perspective on lessons from founder / CEOs from Amino, Brightside, Cityblock, and Omada to share best practices on winning that first deal.
It isn't a mystery that the signal to noise ratio around Chat-GPT isn't great. In the article, Evan addresses where the tech sits on the hype cycle and makes the case for how folks can ensure they are building LLM products that go the long haul and don't fizzle out in the short term.
Following the news that Oregon's governor signed into effect the second-ever comprehensive nurse-to-patient hospital ratio law in the US, Ari dives into the history of such laws, why they are important, what this means for the ongoing nurse shortages moving forward, and more.
The Convergence of Consumer Wearables & Medical Devices, Part 1: Understanding the Convergence by Kit Cangardel and Darya Volgina
This was a helpful look at the increasing convergence of medical devices and consumer wearables, which historically have looked and had very different purposes. The article unpacks the history of each category, the convergence of the two, and a brief case study of the consumerization of CGMs.
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