As The Saying Goes…

Submitted by hci3-usr on Friday, January 13, 2017 - 05:15

Newtown, CT – January 13, 2017

As the saying goes, if you want to know what’s really going on, follow the money – Amidst many discouraging signs, there are a few that merit a closer look, because the story they tell shows how much incentives matter in changing behaviors. A Health Affairs blog post by Josh Baltzell and Jamie Robinson highlights an important shift in the early stage funding of some new technologies. While some may believe that venture capital is a game in which people with money place risky bets, that’s not really the way it works. In fact, it’s quite conservative. Most venture capitalists and private equity investors want to know they have a pretty high likelihood of getting their money back, and with a decent return. So when evaluating a new product or service, they’re thinking about the exit strategy, which is almost always about selling to an existing company looking for growth opportunities. Jeff and Jamie provide many examples of new products that are finding private capital because there is a new market for these devices where none existed before. And that new market is being created because of the macro shift from volume to value-based payments. Technologies that neither physicians nor hospitals would ever have considered because they didn’t increase RVUs or boost fee-for-service payments are now being purchased by hospitals because they can reduce episode costs, patient safety issues, or both. And then there’s CIGNA and CVS who have made the decision to switch to a lower priced EpiPen in their formularies and exerting value-based purchasing. These are early signs that the market can work in health care.

What this means to you – With the President-elect appropriately highlighting the mind-numbingly stupid policy that prevents Medicare from using competitive bidding for prescription drugs, on the heels of a disastrous public relations year for Pharma, the heat is on and rightfully so. No one questions the need for companies to make a profit in order to invest in newer and better treatments for complex conditions, but that’s different than extracting abusive rents from taxpayers because of lobby power, or simply charging whatever the heck one wants because of lack of competition. Markets work when normal market mechanisms are combined with transparency and a light regulatory touch to prevent the unfettered use of quasi-monopolistic power. The regulatory touch and transparency hit Mylan like a ton of bricks and forced them to introduce a generic and significantly lower-priced alternative. CVS and CIGNA are using their normal purchasing mechanisms to benefit from lower-priced alternatives. The net result is that consumers are better off. New payment models that are putting physicians, hospitals and other providers at financial risk for poor outcomes are spurring a completely new market for technologies that are geared to reduce costs and improve outcomes, because providers are now creating a demand for these products. As additional market forces get unleashed, in particular that of consumer-patients armed with the right information at the right time and place, the market will work even better and a virtuous cycle of value creation will ensue. To-date it has seemed far-fetched because the money trail was one of waste and low-value care. But the trail has shifted, continues to shift and will keep shifting if we keep our eye on the prize. Field work must go on, relentlessly, to prevent a course reversal.

Regards,

Francois Sig

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