Bundles, and Century Cures—What Does 2016 Healthcare Transformation Mean for 2017?

At this year's “Healthcare Investment Trends 2017 Summit” that Grassi & Co. hosted with the NYC Health Business Leaders, an event that was attended by over 140 people, the future of healthcare investment was the main focus. At the Summit, participants were asked to vote on which five segments of healthcare investment were going to be active this year—biopharma, medical devices, diagnostics, healthcare IT, and healthcare services.  A panel of four investors was moderated by NYCHBL president Bunny Ellerin and Grassi & Co.’s leader of Healthcare Transformation Consulting, Joe Tomaino.

Key themes including the one that continues to weigh heavily on everyone’s minds—healthcare reform. 

2016 Healthcare Reform

While 2016 yielded several moves in the right direction for healthcare reform, none came to complete fruition during the year. There was a great deal of concern over the possible elimination of the Affordable Care Act. As the drug price debate rages on, Americans continue to advocate for legislators to curtail the rich margins enjoyed by prescription drug companies. Yet with FDA approval rates at a six year low, there’s little supply to meet burgeoning demand.[1] The 21st Century Cures Act was one of Former President Obama’s final initiatives. This law aims to support funding for medical research for diseases such as cancer and Alzheimer’s – a nice gesture, but whether President Trump puts the law into effect remains unknown.

In 2016, CMS released proposed rules for the expansion of bundled payment programs for Medicare fee-for-service beneficiaries. As these programs start up in 2017, it is incumbent upon hospitals and healthcare organizations to prepare themselves to be part of medically-complex bundles moving forward. It is likely the new era of value-based healthcare this year will bring challenges to providers. Our best advice is to balance the benefits of cost reduction with preservation of the quality of the patient experience. As organizations start to integrate primary care and behavioral health this year, there is no tested methodology to forecast patient participation rates. As this makes staffing and space a challenge for providers, Grassi & Co. professionals have formulated a new strategy to assist our clients with predicting such volumes.

Healthcare Reform Market Impact

While the stock market voted on the Trump presidency with a grand sell-off in the healthcare sector, the private markets told a different story. Oversized mergers abounded (e.g., Shire/Baxalta for $32BB, Abbott/St. Jude for $25BB, Bayer’s thwarted $62BB Monsanto offer) demonstrating the private market’s taste for the medical devices and rare drugs industries.[2] With an estimated CAGR of 11.7% anticipated until the year 2020, orphan drug sales are projected to be nearly twice that of the prescription drug market overall.[3]

2017 Healthcare Transformation Outlook

This will be discussed in the next blog entry, where we will share our take on what to expect in 2017 healthcare transformation, from the 21st Century Cures Act to digital healthcare and the Medicare Access and CHIP Re-authorization Act of 2015. Please stay tuned and feel free to reach out to one of our professionals with any questions.

[1] Hirschler, Ben. “New drug approvals fall to six-year low in 2016.” Reuters. 2 January 2017. Retrieved from http://www.reuters.com/article/us-pharmaceuticals-approvals-idUSKBN14M08R Accessed 1 March 2017.

[2] Shen, Lucinda. “These Are the 12 Biggest Mergers and Acquisitions of 2016.” Fortune. 13 June 2016. http://fortune.com/2016/06/13/12-biggest-mergers-and-acquisitions-of-2016/ Accessed 27 February 2017.

[3] Evaluate Group. “Per Patient Costs for Orphan Drugs is 13.8 Times Higher Than Non-Orphan Drugs.” Press Release.  Evaluate Ltd. 4 November 2015. http://www.evaluategroup.com/public/PressReleases/EvaluatePharma-Per-Patient-Costs-for-Orphan-Drugs-is-13-8-Times-Higher-Than-Non-Orphan-Drugs.aspx Accessed 27 February 2017.