US Markets – February 20, 2018

Healthcare Policy

US Healthcare Policy Highlights

  • CMS Office of the Actuary announces the report on the projections of national health expenditures for 2017-2026. Key findings (1/3):
    • Total national health spending growth:
      • Total national healthcare spending in 2018 is projected to grow by 5.3%, driven partly by growth in personal healthcare prices
      • Growth in personal healthcare prices is projected to rise to 2.2% in 2018 from 1.4% in 2017, reflecting rising prices of medical goods and services and higher Medicaid costs
      • National health expenditure is projected to average 5.5% for 2019-2020 mainly due to expected faster average growth in Medicare partially offset by slower average growth in private health insurance spending
      • For 2021-2026, average national health spending is projected to increase by an average of 5.7% and to reach USD 5.7 trillion by 2026. During this timeframe, Medicare spending growth is projected to continue to outpace growth in private health insurance spending, mostly due to enrollment growth (as baby boomers continue to age out of private insurance and into the Medicare program) (CMS, Health Affairs)
  • CMS Office of the Actuary announces the report on projections of national health expenditures for 2017-2026. Key findings (2/3):
    • Medicare: During 2017-2026, Medicare is projected to experience an annual growth of 7.4%, mainly driven by enrollment growth and faster growth in utilization from recent near-historically low rates
    • Private health insurance: During 2017-20126, private health insurance spending growth is projected to average 4.7%, reflecting low enrollment growth and downward pressure on utilization growth influenced by: lagged impact of slowing growth in income in 2016 and 2017, increasing prevalence of high-deductible health plans, and to a lesser extent, repeal of the penalty associated with individual mandate
    • Medicaid: Medicaid is projected to average 5.8% annual growth over 2017-2026, which is slower than the average observed for 2014-2016 of 8.3%, when the major impacts from the Affordable Care Act’s expansion took place (CMS, Health Affairs)
  • CMS Office of the Actuary announces the report on projections of national health expenditures for 2017-2026. Key findings (3/3):
    • Personal healthcare spending: During 2017-26, personal healthcare spending growth is projected to average 5.5%. Personal healthcare price growth is anticipated to be the largest factor at 2.5 percentage points, growth in the use and intensity of goods and services is expected to contribute 1.7 percentage points of total growth, and population growth (0.9 percentage point) and changing demographics (0.5 percentage point) account for the remaining growth
    • Prescription drug spending: Spending growth is projected to be fastest for prescription drugs among all the major sectors of healthcare, averaging 6.3% for 2017-26 partly because of faster-projected drug price growth, particularly by the end of the period, influenced by trends in relatively costlier specialty drugs
    • Insured share of the population: The proportion of the population with health insurance is projected to decrease from 91.1% in 2016 to 89.3% in 2026, partly due to the elimination of the penalty payments associated with the individual mandate and also to a continuation of a downward trend in the offering and take-up of employer-sponsored health insurance (CMS, Health Affairs)
  • FDA Commissioner Scott Gottlieb reveals a budget action plan with initiatives to modernize drug and device production, ways to implement innovation to the process and minimize costs and advance public health priorities in the process. Key initiatives:
    • Use clinical data to inform product reviews, from medical devices to biologics
    • Create a framework for post-market oversight for digital health
    • Establish Center of Excellence in Digital Health
    • Advance small-footprint, high-technology manufacturing platforms
    • Create voluntary program for revamping device manufacturing
    • Modernize generic drug review (MedCity News)

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Healthcare Economy

US Healthcare Economy Highlights

  • The American Journal of Accountable Care (AJAC) investigates the accountable care organization (ACO) quality improvement over the first 4 Medicare Shared Savings Program (MSSP) years. Key findings:

    • ACO quality appears to be broadly improving, highlighting the potential success of the MSSP model
    • Though ACO size was positively correlated with quality, ACOs experienced some quality challenges while growing
    • Postacute care (PAC) expenditures increased then decreased, which was associated with quality changes (AJMC)
  • Change Healthcare releases results of 8th annual Industry Pulse survey. The survey included responses from more than 2,000 healthcare leaders, 52% VP and above, including Change Healthcare customers, HCEG members, and Health Plan Alliance members: Key findings w.r.t to payers:
    • More than 80% of payers are integrating social determinants of health into their member programs
    • Only 3.4% of respondents identified high-deductible health plans as the best approach for converting passive patients into active healthcare consumers (PR News Wire)

Technology Briefs

  • Cybersecurity related update from 2019 Budget:
    • The budget allocates USD 68 million to ensure HHS is able to protect sensitive and critical information in an ever-changing threat landscape. This investment will continue operations to detect, manage, and remediate cybersecurity risks
    • HHS will also enhance its support and coordination within the health care and public health sectors through the Healthcare Cybersecurity Communications and Integration Center. The Center, in close coordination with the Department of Homeland Security, will share information across HHS and Federal Government partners; state, territorial, and local public health authorities; and the private sector to facilitate information and resource sharing and provide guidance in response to cyber threats (HHS)
  • Change Healthcare releases results of 8th annual Industry Pulse survey. The survey included responses from more than 2,000 healthcare leaders, 52% VP and above, including Change Healthcare customers, HCEG members, and Health Plan Alliance members: Key findings w.r.t to technologies:
    • Adoption of mobile/digital health is not just about functionality and interoperability, but more about trust, with nearly 50% of respondents indicating that digital health tools are not more widely embraced due to security and privacy concerns
    • While blockchain, artificial intelligence, robotic process automation, and other advanced technologies gaining the attention of the industry, 63% of respondents pointed to clinical data integration as a leading factor supporting administrative cost efficiencies (PR News Wire)
  • Three of the four phase 1 winners of ONC’s (Office of the National Coordinator) Data Provenance Challenge are leveraging blockchain technology to address the accountability, privacy and security issues associated with sharing electronic health information:
    • Emrify’s solution uses a blockchain application stack to enhance data provenance through the use of personal health record (PHR) smart contracts on the public Ethereum blockchain network, a distributed computing platform and operating system featuring smart contract (scripting) functionality
    • 1UpHealth to use its partner’s provider application to surface provenance information and help providers find aggregated data from various sources using HL7’s Fast Healthcare Interoperability Resources (FHIR) application programming interface, along with proposed improvements afforded by smart contracts on the blockchain’s public ledger
    • Hyper E-Health’s proposal builds on existing standards such as the Sequoia Project and the Nationwide Health Information Network (NwHIN) and builds upon them using blockchain technology for the security and immutability of records (Health Data Management)

Market Segments

Oncology/Genomics

  • Roche to acquire Flatiron Health to bolster industry-wide development and delivery of breakthrough medicines for patients with cancer.
    • Roche will pay USD 1.9 billion to Flatiron Health on a fully diluted basis, and the transaction is expected to close in the first half this year
    • Following the closing of transaction, Flatiron Health will continue its current business model, network of partnerships and overall objectives (Roche)

Life Sciences

  • IQVIA reports fourth quarter and full-year 2017 results:
    • Q4 revenue reaches to USD 2,161 million with increase of 10.7% on a reported basis, and 8.4 % on a constant currency basis, compared to the fourth quarter of 2016
    • Full-year revenue reaches to USD 8,060 million with increase of 4.3% on a reported basis and 4.2% on a constant currency basis, compared to the combined company results in 2016
    • Adjusted EBITDA of USD 582 million for Q4 and USD 2,047 million for the full year (IQVIA)

Imaging

  • Agfa-Gevaert Group appoints Dirk De Man as Chief Financial Officer. Dirk De Man has joined Agfa-Gevaert on February 1, 2018, and will become Chief Financial Officer of Agfa-Gevaert as of May 9, 2018. During the period between February 1 and May 8, 2018, Dirk De Man will assist the CEO and the Executive Committee in the definition of the Group’s future strategy and will prepare the hand-over with current CFO (AGFA)

Watson Platform for Health

  • Providence St. Joseph Health selects Oracle Cloud Applications to advance its critical business systems and streamline operational processes. With Oracle Enterprise Resource Planning (ERP) Cloud, Oracle Enterprise Performance Management (EPM) Cloud, Oracle Human Capital (HCM) Cloud, and Oracle Supply Chain Management (SCM) Cloud, Providence St. Joseph Health will be able to combine finance, employee, and supplier data help to improve productivity, reduce costs, and enhance visibility within the organization (Business Insider)

VBC - Providers

  • Allscripts sells it’s OneContent business to Hyland Software, Inc., a content services solutions provider to the healthcare industry. The OneContent specializes in content and image management tools for healthcare. The deal is likely to close in the second quarter (Allscripts)
  • Allscripts reports fourth quarter and full-year 2017 results:
    • Q4 GAAP revenue reached USD 517 million representing growth of 22% year-over-year
    • Full-year GAAP revenue totaled USD 1,806 million, an increase of 17% year-over-year
    • Q4 GAAP net income totaled at USD6 million compared with net loss of USD 7 million in the fourth quarter of 2016 (Allscripts)
  • The former CEO of Practice Fusion joins as CEO of Payer & Life Sciences Business Unit of Allscripts. Allscripts acquired Practice Fusion for USD 100 million in cash last month (LinkedIn, Allscripts)
  • Advanced ICU Care extends its collaboration with Philips by signing a new 12-year agreement. Advanced ICU Care will leverage Philips' tele-ICU technology to help power nine virtual care hubs, monitoring nearly 1,000 ICU beds across the US (PR News Wire)
  • The AAMC (Association of American Medical Colleges) and Vizient renew their partnership, which includes a commitment to both expand the capabilities of the Faculty Practice Solutions Center (FPSC) and develop new products and services together (Vizient)