The Stalwart

Flu Vaccine

Want to order some flu vaccine, for next year?  It may already be too late.

They went on sale at 12:00 PM EST today, from the website, www.vaccineshoppe.com which at the moment is completely inaccessible.  Now you know what it's like being a teenager, dialing Ticketmaster to ducats the Arcade Fire show, only, their life actually depends on it.

Doctors Vs. Quick Clinics

We've voiced our enthusiasm for quick in-and-out, retail-format clinics such as Minuteclinic before.  Here's Medpundit, a doctor, voicing his concerns:

My local grocery store is opening a QuickClinic. For $39 they'll take care of colds, flu, minor injuries, pink eye, and the like. They'll also take out your sutures and clean your ears. They'll screen for diabetes, anemia, and cholesterol, among other things. And they'll give you your immunizations, too, but their brochure doesn't say how much those cost.

I know my office can't compete with $39 visits. I'd go bankrupt. But then, I'm not just a walk-in clinic. I'm expected to do a lot more than just "treat and street," and rightly so. I know quite a few doctors who are more than a little upset about the competition. There's no sense fighting it, though. They exist because there's a perceived demand for them. They're also a natural outgrowth of the influenza vaccine clinics that have been held these past several years in drug stores and grocery stores throughout the country.

It should be interesting to see how they pan out, though. They're still more expensive than most people's co-pays. And I'm not entirely convinced that the volume of uninsured patients (or HSA plans, for that matter) is high enough to sustain a practice based solely on cash payment. I know one doctor who tried it here, and ended up closing his practice after a year. (He had other personal issues, though, so he might not be a good example.) Then, too, these aren't standard practices. They're subsidized by the retailers who think of them as a means to bring customers to their store (and pharmacy). They're like an interactive advertisement.

First of all, given the spiraling cost of care, it'd be great if retail stores started subsidizing this stuff to get people in the door, though I don't think that's what's going on.  As for the $39 fee being more expensive than most people's co-pay, that may be true, but given the hassle and headache of going through insurance (when people even have it), a few dollars more seems like a good idea.

If these new kind of clinics do start making a dent in doctors' receipts, I see no other scenario, than for the AMA to start lobbying hard against them, saying they pose various risks to patient's health.  Doctors enjoy unusual barriers to entry to keep their fees high, and this undermines that in many of the most common cases.

Does the VC Model Work for Biotech?

Here's some more interesting stuff that relates to the discussion of web startups and biotech startups from OpenNorthVC:

Biotech VC is a very expensive game. When betting on molecules (as opposed to devices) the game is even more expensive: years of testing, delivery considerations, partnerships, and…clinical trials. A molecule in theory may not behave as predicted clinically. Even if it looks promising in early phase trials, later failures, other drug interactions, or significant side effects can destroy the clinical potential.

What amazes me is the number of companies that are founded based on a single molecule. I would be very interested if someone could point me to the ROI of these types of investments (average, not the blockbusters).

To me it just doesn’t fit the VC model well - where is their added value? The scientist will know more about the research than anyone else. Clinical trials decide if it will be successful or not. Exit strategies must consider the years and years of work to bring a molecule to market. I think the recent funding of biotech companies focused on drug discovery and early drug efficacy evaluations indirectly support this. There is a huge market for providing early clues to companies wanting to know what their molecule is going to do, how to improve it, and whether to scrap the molecule.

more:

That’s why I think the current formula of scientist + new molecule + IP + VC = startup company will change. I believe it will change because of the rise of groups such as Intellectual Ventures.

Intellectual Ventures has a lot of buzz based as much on their team as their secrecy. They are described as either patent troll, invention company, or venture firm, and their “what we do visual” suggests they are asked quite frequently to clarify.

I think they represent a new possibility for the approach of VC, specific to biotech. My reasoning is simple and unscientific: if I spent years at the bench and came up with what I believed to be a winning pharmaceutical molecule, I would want to go to a group like theirs. I would want to take my IP and deliver it to their doorstep and ask them to take it to big biotech. Big biotech, Genentech, Amgen, etc is built to rapidly identify new drugs, new delivery systems, and has the clinical trial infrastructure in place to move things quickly from bench to bedside. My molecule will work clinically or it wont. No amount of blogging or marketing will change that.

That last point is really good.  It seems that among tech VC's, cheerleading for their company is becoming a bigger and bigger part of the job; hence the proliferation of VC bloggers (Last week, job search engine Indeed.com, got blog-hype in part because investor and blogger Fred Wilson decided to talk about it, and show off some fancy new features.).  And since so much of what makes a modern web startup  successful is buzz and the community it fosters, it makes sense for VCs to do this.  On the other hand, this blogger is absolutely right, either the molecule is valuable or it isn't.  Even with terrible marketing, a valuable molecule should become profitable if it gets to the right people.

This also touches on a theme we've discussed, that big pharmaceutical companies are resembling, more and more, Hollywood movie studios.  Their expertise lies less and less in developing drugs (or movies) but in performing trials, marketing, getting them approved etc.  On the other hand, companies such as Pfizer have become unwieldy bloated behemoths from buying out one-drug companies over the years, as Derek Lowe has pointed out, so perhaps biotech would be smart to simply buy the molecule and not the whole company.

I'd like to get the take of some biotech VC's out there.  Carlos N. Velez, I'm looking in your direction.

Winner's Curse: Stent Wars Edition

Boston Scientific (NYSE: BSX) upped their buyout offer for Guidant (NYSE: GDT) once again in hopes of wresting the company away from Johnson & Johnson (NYSE: JNJ).  The new bid is higher than the original J&J offer, which had been lowered when Guidant's regulatory problems became a concern for J&J.  Confused?  Well, here's a timeline of the whole affair to bring you up to speed.  I suspect we haven't seen the last chapter of this DVD quite yet.

By the way, if Boston Scientific pulls this off, it will be quite an accomplishment. Their latest buyout offer is for over $25 billion but their market cap is only around $19 billion.

The Long Tail of Medicine

Doctors may have found a breakthrough in the battle against chronic hiccups.

Third-Party Healthcare

Nobody seems to like the system by which employers pay for health care in this country.  Employers don't like the spiraling costs, and consumers don't like being tied to their job to keep their insurance, or worse, not being able to get it without getting certain jobs (a real problem for the legions of freelancers, artists, designers, bloggers, etc. whose employment may be deemed nontraditional).  A recent New York Times piece looked at this system, and health-care in general:

Next year, the federal government expects to provide about $130 billion for Americans to buy health insurance. The amount is substantial: it is equivalent to about 11 percent of all federal income tax revenue and more than a fifth of federal spending on Medicare and Medicaid. And it is growing fast: the bill is expected to surpass $180 billion in 2010.

Nonetheless, this financing remains under the political radar because it is provided indirectly - not as direct spending but as a tax break that allows workers to receive health insurance coverage from their employers without having to pay income taxes on whatever it costs.

This provides a powerful incentive to businesses all over the country. The subsidy - supplemented by an additional $11 billion in deductions for medical expenses and billions more in similar tax breaks for health insurance from states and municipalities - helps to explain why 64 percent of Americans under 65 get health insurance through their employers.

Although subsidizing health insurance may seem a worthy effort, a positive contribution to the goal of universal coverage, it is among the most inefficient spending in the nation's fiscal arsenal.

Although we may quibble with the Times' parlance (tax breaks=subsidy=spending) the point is well taken.  There are perverse aspects to this system, that do just the opposite of helping more people become insured.  A serious discussion of ending this particular tax break might be a good start.  Of course, the transition to a different system will be unpopular as health care analyst Matthew Holt notes:

Of course, this was recently proposed  by the same panel that suggested getting rid of tax deductibility of mortgages, and immediately disowned by the politicians who set up said panel.  But linking this to the issue of the uninsured and showing that it’s unbelievably regressive on those people who buy their own insurance and don’t get the tax break can’t be a bad meme for us wonks to pursue.

On a related subject, Professor James Hamilton breaks down the effect that health-insurance and other job-benefits have on total wages.  While it is true that hourly monetary wages have been on a long-term decline, this ignores the effect that benefits have on compensation.

This, as he points out is good and bad.  On the one hand, it's refreshing to see that actual compensation is not on a downtrend, though again, does this simply exacerbate the compensation of the insured vs. the uninsured.  The whole entry is worth reading.

The problem with these discussions, from our perspective is that while many good ideas get thrown out, it's hard to imagine our politicians having the political will to make the tough decisions.  Sadly, it will remain academic for some time.

 

Health Insurance & Risk

We've talked a lot lately about ignorance towards risk, or the discounting of sound risk-management.  Arnold Kling, writes for Tech Central Station that one problem with the health-insurance market is that people simply don't want to pay for it:

...What we are left with, then, is that people do not want real health insurance. I would gladly take a health insurance policy with a $10,000 deductible per individual, and I suspect that many of my wise, risk-averse TCS readers would, too. But we are in a tiny minority! Most people do not want to be responsible for the first $10,000 in medical expenses, and most people believe that an insurance policy that is expected to pay no claims 95 percent of the time is a bad deal.

I am willing to claim that no insurance market in history ever arose because of spontaneous demand on the part of consumers. Maritime insurance, which was one of the first forms of insurance, was demanded by creditors as a condition for lending money to shippers. Life insurance also initially arose to meet the needs of creditors who were lending money to pensioners.

Kling argues that the best solution to our health care problems is for the government to demand that everyone buy catastrophe (high-deductable) insurance, an odd idea, but one which The Stalwart finds compelling.

The fact is is that insurance should cover the rare not the expected, else it ceases to be insurance.  When someone calls the Social Security program a form of insurance for the elderly and retired, it's nonsense since every single worker in America will one day be old and retired.  Even life insurance doesn't insure against death, merely unexpected death.

As usual, read the whole thing.

A Deflationary Force For Healthcare

While China's huge labor pool provides a nice deflationary force for many of the hard products we buy, and Indian IT prowess does the same for many business services, let's not forget that healthcare too can benefit from emerging market deflationary forces. India, in addition to many countries around the world, is opening its vast pool of underpaid doctors to the needs of developed nations:

With a large pool of highly trained doctors, well equipped facilities and minimal wait time at dramatically low prices, India aims to expand its outsourcing campaign to include the healthcare sector. Each year, 20-30,000 newly qualified medical professionals are available to offer their expertise in India. Foreign patients are exceptionally well cared for by a large staff of medical professionals, most of whom received training in the US and Europe.

Emphasis added. That's a lot of doctors and nurses. Hopefully more and more people will be able to take advantage of outsourced healthcare. What we need is for US healthcare companies to team up with a large foreign, low-cost, hospital company. Currently most patients are required to search online for their own answers to crippling costs at home.

Unfortunately there aren't many large, low-cost, players yet. Apollo Hospitals  (Yahoo: APLH.BO) of India is the largest we know of, with 7,200 beds (though we're not sure how many beds are in world-class hospitals).  Bangkok Dusit Medical (Yahoo: BGH.bk) and Bumrungrad Hospital (Yahoo: BH.bk), both of Thailand, are the next two in line but already are much smaller with well under 1,000 "world-class" beds each.

While nothing has been hammered out, in the UK there have been talks of sub-contracting treatments from the National Healthcare System to Apollo. This would be a huge win for Apollo, and would also set a good precedent. US companies could be sub-contracting services as well... but perhaps it would also make sense for them to start buying stakes in the foreign hospital operations they plan to outsource to.

Nursing Auctions

Hospitals faced with nursing shortages are auctioning shifts to the lowest bidder. Nursing Bids is a service that allows hospitals to electronically "auction" off available shifts to nurses.  When a shift comes open, pre-approved nurses can offer to take the shift, at a given per-hour rate.  Presumably, the shift will be awarded to whichever nurse offers their services at the lowest cost.  Here's an article about how the service works in practice.

Concepts like shift auctioning or just in time tend to make people squeamish when it comes to the healthcare industry, which, it is said, function best when there is a longstanding personal relationship between doctor and patient.  However, much of this benefit must be merely be from familiarity with a patient's history, something that could be accomplished by better (electronic) data collection.  Furthermore, as I've long felt, doctors are unnecessary for a lot of routine care.  A nurse and a piece of diagnostics equipment could probably satisfy most people's need most of the time.  Hopefully, services like MinuteClinic will take off.

Chart: Medical Tourism

Just found this interesting graphic (albeit from 2004 admittedly) showing countries which compete for medical tourists- i.e. those who go abroad for high end medical services at cut rate prices. Some 2004 numbers just to lick the chops: Partial hip replacement in India: $4,500. In the US: $18,000.

And the Indian government even considers these services exports! That's sophisticated thinking.

India's National Health Policy declares that treatment of foreign patients is legally an "export" and deemed "eligible for all fiscal incentives extended to export earnings." Government and private sector studies in India estimate that medical tourism could bring between $1 billion and $2 billion US into the country by 2012. The reports estimate that medical tourism to India is growing by 30 per cent a year.

But there are actually a lot of competitors these days, emerging in all sorts of countries. Is it all that hard to set up a decent hospital which can do the 90% standard services which most of us need, nowadays? Doesn't seem to hard to set up. Sounds good for us. Now highly educated doctors in developed countries can spend more time developing cutting edge medical breakthroughs rather than just sewing stitches all day.