Although a pall of uncertainty
shrouds the healthcare sector, clear trends are visible in digital health, life
sciences, and med tech investing. In this blog post we pick up where our last article
left off with a discussion of key 2017 issues regarding the replacement or
repair of the Affordable Care Act, the plight of Medicare and Medicaid, the
great drug pricing debate, and the M&A/IPO landscape. We’ll also share
popular views on these subjects as expressed by participants in the recent
“Healthcare Investment Trends 2017 Summit” poll that Grassi & Co. hosted
with the NYC Health Business Leaders.
Our proprietary poll revealed what
the Health Summit audience has on its mind when it comes to healthcare issues in
2017. The ACA and MACRA nearly tied for first place, with healthcare technology
adoption a close runner up. It is dubious that the Trump Administration would want
to be held responsible for the undesirable outcomes of a total ACA takedown. What
we predict, however, is a restructuring of parts of the ACA which are
problematic, such as the astronomically high healthcare premiums. For example,
it would not surprise us to see healthcare linked back to employment with
coverage mandated rather than optional for all employees. This would balance
the playing field by including those healthy workers with a low need for care,
distributing risk more evenly throughout the system.
One key 2017 healthcare proposal is
the renaissance of block granting. Instead of Medicaid funding being covered by
state and federal government together, funds are capped and handed over to the
states who manage it as they see fit, deciding who gets support and what the
money gets spent on.[1]
This spending cut will dramatically impact even those who are not recipients of
Medicaid. Treating the aging Medicaid-funded population could stir up some
troubling budget issues for the large number of nursing homes, hospitals, and
clinics who see these patients.[2]
Medicare reform is on the road
ahead, but the journey may be long. Unlike Obamacare, which permits exchanges
to sell only private insurance plans, public and private plans would be
included under the Ryan policy.[3]
Introducing public/private competition would increase efficiency and reduce
overall cost. As with the Medicare Advantage system currently in place, navigating
through such a complex arrangement could challenge functionally impaired
beneficiaries.[4]
Despite healthcare legislation uncertainty,
there are clear trends for what investment dollars are likely to be chasing
this year. A little over a third of the Healthcare Summit audience surveyed
predicts that venture capital and private equity investing in life sciences and
medical tech will decline in 2017, while slightly less believed it will
increase or remain the same. We see the market staying hungry for med tech,
life sciences and orphan drug M&A and IPO deals as the astronomically high
growth rate in this sector is not likely to abate anytime soon. Will drug
pricing controls put a cap on this trend? Trump doesn’t seem to be chomping at
the bit to incite the ire of the pharma giants. More likely to materialize is a
movement towards more transparency for doctors and patients namely in areas
such as pharmacy reimbursement rates.
Interestingly, over half the Health
Summit audience sees digital health investing on the rise, a view with which we
concur. As the mobile phone takes over the world, digital healthcare trends
we’re likely to include digital interventions (e.g., companies who use data
such as glucose levels to improve diabetes treatments), workflow solutions,
data analytics, behavioral health, and alternative insurance companies.[5]
Regardless of what happens with legislation, one thing is for sure: the digital
revolution game is clearly in town and startups, whose profitability ratios in the areas
mentioned above, will win the prize.
While the future of healthcare in
the United States is a murky subject, the lack of clarity has not sidelined the
progress of innovation. We predict legislative changes to be slow but that
investors keep their eyes peeled for opportunities. For further clarification
on any of the topics discussed here, please contact Joe Tomaino at Tomaino@grassicpas.com, or John Pellitteri at jpellitteri@grassicpas.com.
[1] “What you need to know about
Medicaid block grants.” Kaiser Health
News, 25 January 2017,
http://www.healthcarefinancenews.com/news/what-you-need-know-about-medicaid-block-grants.
[2]
Ibid.
[3] Kodjak, Alison. “Paul Ryan's Plan to
Change Medicare Looks A Lot Like Obamacare.” NPR. 26 November 2016, http://www.npr.org/sections/health-shots/2016/11/26/503158039/paul-ryans-plan-to-change-medicare-looks-a-lot-like-obamacare.
[4]
Ibid.
[5] Fleshman, Skip. “Five digital health
trends investors are watching in 2017.” MobiHealthNews,
16 February 2017, http://www.mobihealthnews.com/content/five-digital-health-trends-investors-are-watching-2017.
