Any opinions expressed below are those of the authors and do not represent either HCIA or Columbia Business School
Consolidation in the Health Insurer Space
Late last week, Aetna announced that it had agreed to buy Humana using a combination of cash and stock Humana in a deal valued at $37bn, including debt. The final offer represents a 29% premium from Humana’s unaffected stock price in late May. It is believed this deal, as well as the slew of other real and rumored mergers amongst insurers, was driven by the desire to diversify and cut costs, as well as to build the scale necessary to compete. The combined company would command the largest share of the growing Medicare market—but may also attract the scrutiny of antitrust regulators. Though the larger firm will have greater clout in negotiating rates with providers, many consumers and health experts fear that consolidation will reduce consumer choice and lead to higher premiums.
SCOTUS Upholds Subsidies on Federal Exchanges
In a 6-3 ruling, the US Supreme Court upheld Affordable Care Act subsidies in King v. Burwell, indicating that individuals receiving subsidies from the Federal Government are eligible to continue receiving these payments. To recap, this was one of four legal cases that challenged the federal government’s authority to subsidize the cost of public exchange health insurance products on federally administered exchanges. These cases centered around language authorizing subsidies for beneficiaries who enroll in plans “through an Exchange established by the State.” In May 2012, the IRS subsequently issued a rule clarifying this clause, saying that subsidies could be provided to beneficiaries enrolling through federally administered exchanges as well. The legality of this action by the IRS was the key focus of the debate.
Though the long-term ramifications remain to be seen, this ruling was seen as cementing the fate of the Affordable Care Act and providing greater stability for insurers. Furthermore, major healthcare organizations like HCA saw their shares surge in the wake of the ruling.
For further reading, see below:
Landmark King v. Burwell ruling: Industry reacts, looks to future, FierceHealthPayer
A warm HCIA congratulations to our graduating second-years in the Class of 2015! We will miss having you around and wish you the best on all your post-CBS endeavors!
Pictured below—HCIA members at the Second-Year Send-Off
HCIA Places Second in BU Case Competition
Congratulations to the HCIA team for coming in 2nd at the Third Annual Grand Business Challenge in Digital Health!
This invitation-only case competition was co-sponsored by Boston University and Merck, and featured 16 teams from schools around the world. Our team participated in a two-day challenge that asked students to showcase ideas on how information technology could influence and transform global healthcare to create value for the world. Four of the sixteen teams then advanced to the final presentation round on Saturday, March 28th.
Team members Natalie Sutton (’16), Jonathan Lichtinger (’16), and Sagar Shah (’15)—led by Sylvia Qiu (’16) came in 2nd place (winning $15,000 in prize money) with a proposal detailing how Merck could grow their personalized medicine portfolio by strengthening their presence within the genomics space. Please join us in congratulating them!
The Rise of Biologics
The recent progress in biotechnology has fueled the growth of biologics, which are large-molecule drugs that are manufactured inside animal or bacterial cells. A number of biologics for conditions ranging from asthma to rheumatoid arthritis are likely to gain FDA approval in 2015; in a few more years, biologics that utilize viruses to replace disease-causing genes with healthy ones—i.e., gene therapy—are likely to be released.
However, concerns about cost remain at the forefront, since biologics are not only more expensive than conventional drugs, but also more difficult to remake into generic versions—known as biosimilars. However, this may soon change as a group of FDA advisors recently recommended approval of Novartis’ version of filgrastim. Although official approval has yet to come, this move has been hailed as “opening the door to more such biosimilar medicines.” Keep an eye out for further progress in this exciting space!
Key Healthcare Conference Topics Revisited
Thank you to all our speakers, attendees, and volunteers for making the 11th Annual Healthcare Conference a huge success! The event was once again completely sold out and well received by all attendees. The topics discussed during the conference continue to be newsworthy today—here are some recent articles that build on the developments in healthcare reform, medical devices, and healthcare dealmaking:
- In his keynote speech, Dr. Sorenson expressed a positive view of the future impact of healthcare reform; however, Drs. Jerome Groopman and Pamela Hartzband of Beth Israel Deaconess present a different perspective
- Our med tech panelists highlighted how some companies, like Intuitive Surgical, would see greater growth from foreign rather than US markets—recently announced changes in Japanese regulations for medical devices and diagnostics may make that market a promising landscape for device development
- Lastly, as a follow-up to our roundtable on healthcare investing, LBO wire projects that the rise in expenditures in mental health and substance abuse treatments will create new opportunities for dealmaking in the healthcare sector, as PE firms begin to target behavioral health platforms.
A Preview of Topics To Be Covered In Friday’s Healthcare Conference
In preparation for the 11th Annual HCIA Healthcare Conference this Friday, we wanted to share a few articles to get attendees up to speed on the different conference panels. Speaking to the theme of the conference—“Using Data and Technology to Innovate, Value, and Reengineer Healthcare”—the exponential growth in the volume of healthcare data has helped both Accountable Care Organizations and innovative new companies identify target areas and measure success. However, more progress is needed to fully comprehend this data and use it towards creating a more efficient, value-based healthcare system; it is our hope that Friday’s programming will inspire everyone to think of new approaches to tackle and ultimately fix these problems.
10:15am Panel on Provider and Payer Strategies:
- Health Insurers Pressing Down on Drug Prices: Pharmacy benefit managers attempt to exert more control over drug pricing by excluding certain drugs from formularies—unless companies charge less for them
1:45pm Panel on Healthcare Entrepreneurship:
- VC Investing to Heal US Healthcare: In the first quarter of 2014, healthcare companies received 17% of overall venture capital funding, as start-ups—predominantly in healthcare IT—seek to disrupt the space
3:15pm Panel on Healthcare M&A:
- Does Hospital Consolidation Help or Harm Patients?: Experts weighing in on hospital M&A have yet to reach a consensus as to whether it will reduce choices available to patients or facilitate providing integrated, cost-conscious care
- After the Actavis and Allergan merger was announced this week, the Economist assesses the value of this recent M&A frenzy.
See you at the conference!
The HCIA Careers & Education Team
Divestitures in the Pharma Industry
Though recent attention has focused on the wave of mergers across the pharma space, we’d like to highlight another important trend—divestitures. In recent months, pharma giants like UCB, Novartis, and GSK have been conducting strategic reviews of business segments and selling off certain portions. This is part of a growing trend where large pharmaceutical companies undergo “precision M&A.” As Dr. Roch Doliveux, CEO of UCB, reiterated during his talk at CBS on November 13th (part of the Silfen Leadership Series), the industry has begun to focus on a narrower range of specialist fields rather than attempting to compete across a range of diseases and drug categories.
Certain deals are highlighted below; over the next year, which do you think will predominate—mergers or divestitures? What implications will a smaller number of firms competing in each disease category ultimately have on the pharma landscape?
- (11/10/14) UCB sold its specialty generics subsidiary in order to focus on core business areas of neurology and immunology.
- (10/27/14) Novartis sold the final piece of its vaccines business to Australian biopharma company, CSL.
- (4/22/14) Novartis and GSK underwent an “asset swap” with GSK selling its oncology unit to Novartis and buying Novartis’s vaccines business in return. The pair will also combine their consumer health businesses.
Your HCIA Careers & Education Team
Health Care Supercharger Event
Last Tuesday, September 30th, the HCIA held its Annual Healthcare Career Supercharger at Columbia Business School. We were fortunate to have a diverse group of panelists representing multiple sectors of the healthcare industry ranging from healthcare IT and entrepreneurship to management consulting, investment banking, venture capital, biopharmaceuticals, and healthcare services. The panel discussed career paths in their respective fields, industry trends, and career search tips for students. After a lively hour of discussion, we hosted an hour-long networking session for practitioners and HCIA members.
We would like to thank our panelists for their great insights and perspectives:
- Doug Hayes, Blueprint Health
- Kalyan Jonnalagadda, Bain & Company
- Naomi Wender Leslie ’10, Goldman Sachs
- David McIntyre, Apple Tree Partners
- Brooke Raphael ’09, Celgene Corporation
- Ben Wade ’09, Montefiore Medical Center
CBS Attends the Center for Healthcare Innovation’s “Emerging Markets in Life Sciences Symposium”
HCIA members were invited to attend the second annual ‘Emerging Markets in Life Sciences Symposium’ on Thursday, July 24, in midtown Manhattan. The theme of this year’s symposium, presented by the Center for Healthcare Innovation, was “The Power of Partnerships.”
The event consisted of three panel discussions covering many dimensions of product development and launch in emerging markets. Topics included strategy and new market entry, research and development and alliances, and marketing and business development. The symposium also explored how partnerships are key to achieving success in emerging pharmaceutical markets, and how senior management presence is critical to success.
In addition to the informative panel discussions, the event provided a good opportunity for students to network with a variety of life science and healthcare executives and researchers.
CBS Team Stars at MIT Sloan Healthcare War Games
Congratulations to a team of HCIA members for coming in second place at the first-ever MIT Sloan healthcare ‘War Games,’ which took place on April 4, 2014!
The competition tested the balance of power in the healthcare ecosystem amongst four key players: the payer (Harvard), the provider (Carnegie-Mellon), the medical device company (MIT), and the pharmaceutical company (Columbia). In this war game simulation, the topic was the obesity market and each team had to address the following concerns: How to adopt to today’s pricing constraints? How to support innovation while shepherding scarce resources? Is what is best for the individual patient also best for society? What is best for the individual anyway? How to balance the interests of a for-profit provider with those of the patient? Who will pay, and how much, for what outcome?
To win the war game, teams had to convince the audience about what was the best strategy for maximizing value – perhaps for the player or perhaps to the whole ecosystem. What really matters is arguing persuasively, building value and staying one step ahead of the competition.
The Columbia Business School team came in 2nd place (prize winnings of $2000), playing Zafgen, a brand new pharmaceutical company boasting a revolutionary obesity drug with promising phase 3 clinical trial results.
Participants were Priyam Shah, Matthias Bodenstedt, Zahrah Taufique, Shashwat Sharma, Marina Araujo, Jose Henrique Salvador, and Katie Hua.
Cluster F ’15 Leaves it Late to Take the Honors at HCIA Cluster Cup Happy Hour Carnival
This year’s HCIA Cluster Cup Happy Hour Carnival was one for the ages, with record participation levels in a closely fought event. Guess Your BAC, Twister, Sex Ed Trivia, Pin the Organ on the Skeleton and Urine Sample Cup Flipcup were amongst the events that saw the Class of 2015 duke out it out to win the most tickets. Amongst these, Pin the Organ on the Skeleton confirmed that basic biology should be added to the Core; Twister saw some of the 2015 class get to know each other on a whole new level; while, Guess Your BAC proved to be amongst the most popular as students competed to estimate their own levels of inebriation. A record level of 4.3 was blamed on a more-likely equipment failure!
Despite the lack of their usual variety of beer options, Mel’s Burger Bar served some exceptional cuisine, satisfying a ravenous crowd as participants worked up a hunger completing the evening’s various tasks.
The night was not short of drama. Cluster B ’15 held a dominating lead at the halfway point as an early surge of enthusiasm and some accurate pinning of the ‘Organ on the Skeleton’ gave them a deserved lead. A late burst from Cluster F ’15 saw them just push over the line and take the HCIA Cluster Cup crown. Congratulations to them on a well deserved victory.
A special thanks to all HCIA members who volunteered to set-up and run the carnival and ensure it was a night to remember for the entire CBS community.
Until next year…