Omada Health CEO Sean Duffy

Payors

CVS Overhauls Drug Costs, Healthspire Rebrand

CVS Health’s recent investor day brought an avalanche of announcements that buried a strong performance update with major overhauls to its pharmacy and services segments.

The CVS CostVantage drug pricing model stole the show, with CVS making the shift away from complex pricing formulas to a “cost plus” markup that’s far more transparent.

• Credit where credit’s due, Mark Cuban’s Cost Plus Drug Company put a ton of attention on the opaque pricing models used by most PBMs, prompting others like Cigna and CVS to reconsider their strategies (not to mention MCCPDC beat out CVS for Blue Shield of California back in August).

• We’ll now have to wait and see how much CVS CostVantage actually helps consumers, but given that CVS is vertically integrated with 9k+ retail pharmacies and the nation’s largest PBM in Caremark, the early verdict is that it might just reshuffle where revenue ends up. “It’s squeezing the balloon in one place and it gets bigger in another.”

The launch of the CVS Healthspire brand was a close runner-up, and the new moniker now encompasses the entire health services business that includes MinuteClinic, Caremark, Oak Street Health, Signify Health, and its recently formed biosimilar company Cordavis.

• The rebranding was probably overdue given CVS’ recent acquisition spree, and follows the lead of payor competitors with separate services arms like UnitedHealth Group (Optum), Cigna (Evernorth), and Elevance (Carelon).

• Expect CVS’ future investor presentations to have more cohesive reporting between the Healthspire businesses and Aetna, currently the third largest payor in the US with over 25M health plan members.

An upcoming smartphone app was also teased as a way to give patients a central hub for CVS services, such as prescription refills, information on deductibles, and MinuteClinic appointment scheduling. This well-narrated hype video has the quick overview.

The Takeaway

CVS is going all-in on unlocking the synergies between its core care delivery, pharmacy, and payor businesses. Given the sheer size of its footprint and breadth of its assets, CVS has plenty of ability to cross-promote services and increase the lifetime value of its customers. The question now is execution, but CVS’ grand plan seems to be gaining momentum following a full year of major moves.

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The Wire

• Cigna-Humana Falls Through: The blockbuster merger between Cigna and Humana has reportedly been called off after the two parties weren’t able to reach an agreement on financial terms. That apparently might not mean the saga ends there, with a hawkeyed research firm noticing that Humana’s corporate jet just flew to Rogers, Arkansas, stirring up rumors that Walmart might be reviving its own failed acquisition talks from 2018. As for Cigna, it decided that its capital could be put to better use acquiring… more Cigna, so it implemented a $10B share repurchase program.

• The Kids Are On Melatonin: The use of melatonin among school-aged children has skyrocketed in recent years, with nearly 1 in 5 children now taking the hormone to help them sleep. That’s a dramatic spike from just 1.3% of children five years ago. Melatonin-related incidents reported to poison control centers increased 530% from 2012 to 2021, leading to growing concern over the supplement’s lack of FDA regulation and increasing availability as kid-friendly gummies. 

• Hims & Hers Weight Loss: Hims & Hers officially launched its much-anticipated holistic Weight Loss program that combines personalized treatment plans from licensed providers with app-based progress trackers, educational content, and medication management (Bupropion, Metformin, Naltrexone, Topiramate). The obvious exclusion here is GLP-1s, which Hims & Hers is apparently holding off on until it can “control the supply chain” and get costs to a level that’s better suited to its DTC model.

• Cybersecurity Tops Provider Priorities: Another provider survey showed that tactical investments in operations are a higher priority than flashy AI tools. The Healthcare Financial Management Association poll of 144 health system execs found that nearly half expect a moderate-to-significant jump in Digital/IT budgets next year, which will be deployed in cybersecurity (55%), EHR modernization (46%), and AI (31%). That order isn’t too surprising considering that Ardent took until last Wednesday to regain access to Epic following a ransomware attack on Thanksgiving.

• Incredible Adds GenAI for Hiring: Incredible Health is implementing several generative AI features geared toward streamlining the hiring process for both sides of its career marketplace. Nurses now have access to a Resume Wizard that quickly builds high-quality resumes optimized for their target roles, while health system recruiters have new tools to help review applications and generate customized outreach highlighting why candidates are a good fit.

• AI Determines Organ Age From Blood: Stanford researchers developed an AI model that allows the age of individual organs to be determined by analyzing blood proteins, a breakthrough that could pave the way for a new generation of diagnostics. Results published in Nature demonstrated the model’s performance, finding that nearly 20% of the 5,676 adult participants had accelerated aging in at least one organ (confers 20-50% higher mortality risk). Accelerated heart aging was especially problematic, and was associated with a 250% increased risk of heart failure.

• Maia Oncology Seed Funding: Maia Oncology landed $4.25M in seed funding to reimagine cancer treatment by “stitching together oncology and primary care.” The round was co-led by Takeda Digital Ventures and Yosemite, the oncology-focused venture firm launched by Reed Jobs. The funding will go toward the launch of its virtual clinic where Maia’s PCPs will work alongside oncology teams to ensure that patients’ pre-existing comorbidities and family history are better integrated into treatments.

• Roe v. Wade Fallout: Over twice as many people crossed state lines for abortion care in the first half of 2023 compared to the same period in 2020 before the overturning of Roe v. Wade. That amounts to over 92k patients through the first six months of the year (~20% of all patients seeking abortion care), sending “safe haven states” scrambling to address appointment bottlenecks. With 20 states having already moved to ban or restrict abortion, states like Illinois have seen an eye-popping 54% increase in abortion patients.

• Culmination Bio Raises $10M: Intermountain spinoff Culmination Bio raised $10M in funding to advance its disease-agnostic patient data platform that accelerates clinical trials and therapeutic development. Culmination Bio maintains exclusive rights to a growing library of over 5M patient biospecimen samples and accompanying health records, covering over 40 years of longitudinal insights and representing the largest resource of its kind.

• Two Sides to Text-Based HF Care: A MESSAGE-HF study showed the pros and cons of text message-based heart failure telemonitoring. Among 699 recently discharged HF patients, those who received daily text-based advice to reinforce care plans and inform early interventions were satisfied with the program (78.5 net promoter score) and had better HF self-care scores after 180 days. However, the program didn’t translate to a reduction in NT-proBNP levels (the primary endpoint) or a reduction in CV-deaths/hospitalizations relative to standard care.

• Advocate Expands Virtual Nursing: North Carolina-based Advocate Health scaled its virtual nursing program to 12 hospitals and 10k patients throughout 2023, which the system credits with helping improve RN turnover by 60% and decreasing RN vacancies by 46%. Advocate has two distinct virtual nursing care models: One where virtual nurses are available around-the-clock to assist patients and caregivers, and another where they help with admissions/discharges for inpatients and the ED.

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