Shares of MiMedx are plunging after the U.S. Attorney’s Office of the District of South Carolina reported that a grand jury indicted three health care providers for the Department of Veterans Affairs on allegations that they “cultivated relationships with MiMedx sales representatives and other officials” and conspired to cause the “excessive use of MiMedx products on VA patients in South Carolina.” Shares of MiMedx are down 19%, or $1.54, to $6.47 after the indictment, dated May 8, was circulated
Wednesday, May 9, 2018
Portola beats views
Portola Pharmaceuticals reports Q1 EPS ($1.28), consensus ($1.54) Reports Q1 revenue $6.6M, consensus $3.9M. Cash, cash equivalents and investments at March 31, 2018 totaled $451.1M, compared with cash, cash equivalents and investments of $534.2M as of December 31, 2017. Based on the FDA approval of Andexxa in May 2018, the company earned an additional $100M milestone payment from its royalty-based financing with Health Care Royalty Partners.
Dominant hospitals dictate price and contract terms: Commonwealth Fund
Different insurers pay widely varying prices for the same procedures at the same hospitals, indicating that insurers’ bargaining leverage influences healthcare prices, according to an updated healthcare economics paper.
That was one of the new takeaways from a Commonwealth Fund-backed paper that used actual claims data from three national insurers to explain how hospitals get paid. Spending on U.S. hospital care represents about 6% of the entire economy and providers continue to consolidate throughout the country, which underlines the importance of understanding healthcare pricing dynamics.
The variation of prices within hospitals could be related to closely guarded exclusivity provisions and other contract clauses, said Martin Gaynor, co-author of the paper and an economics and health policy professor at Carnegie Mellon University.
Hospitals with significant market power can dictate how much they will get paid—about 12.5% higher prices for monopoly hospitals than those in markets with four or more competitors—and the form of their contracts with insurers.
Providers in concentrated hospital markets can obtain contracts that shift more risk to insurers, which would slow the industry’s already gradual transition to new payment models that are expected to rein in prices, according to the researchers.
“When we talk about consolidation of mergers there is a lot of focus on price levels,” said Zack Cooper, a co-author and assistant professor of health policy and economics at Yale University. “But it is also important to think of the long-term impact of negotiating payment terms, which could have more impact than negotiating higher prices.”
The two main types of contracts use prospectively set prices that pay a fixed dollar amount based on the DRG classification code, or a model that sets payments as a percentage of hospital charges.
Hospitals are likely to prefer the latter because they get paid for every service they provide, and thus bear less risk. This drives prices up and also places less pressure on the hospital to reduce costs.
The economists found that about 23% of hospitals’ inpatient cases have prices set as a share of hospitals’ charges, and dominant hospitals likely use their power to demand these terms. No more than 57% of cases are based on contracts where prices are prospectively set as a percentage of Medicare payment rates.
Payment reform on the private side can’t happen without competition because dominant hospitals will refuse payment types they don’t like, Gaynor said.
The findings tie in with insurers like Anthem, which are clamping down on what they will pay for in the hospital setting. Anthem and hospitals are pitted in a legal battle over who ultimately has the power to determine where care should be delivered.
“These payers are having their medical expenses go up and up, and a lot of that is about prices,” Gaynor said. “It’s all about the relative negotiating position.”
“These payers are having their medical expenses go up and up, and a lot of that is about prices,” Gaynor said. “It’s all about the relative negotiating position.”
Researchers also found that prices increased by more than 6% when merging hospitals were less than 5 miles apart. They didn’t find significant price impact when the hospitals were separated by at least 25 miles.
Antitrust enforcement needs to take a look at proposed hospital mergers and understand that they may have anticompetitive effects, Cooper said.
But dealing with already consolidated markets is a much more difficult proposition, he said.
“I don’t really have an answer there,” Cooper said, adding that it’s hard to unwind mergers. “Figuring out what to do in those areas is going to be one of the biggest challenges going forward.”
Glaxo rings in more change as CFO heads for exit in 2019
GlaxoSmithKline Plc, Britain’s biggest drugmaker, faces more top management change with Chief Financial Officer Simon Dingemans set to retire next year.
The former Goldman Sachs investment banker, who joined in 2011, will step down from the board in May 2019, the company said on Wednesday. As his departure is voluntary he will not receive any severance payment.
GSK said it planned to look both internally and externally to identify a successor.
Dingemans’ departure provides a further opportunity for Chief Executive Emma Walmsley to stamp her imprint on the group as she tries to boost sales and improve productivity in the core pharmaceuticals division.
Walmsley, who took over in April 2017, has already appointed a new head of pharmaceuticals in Luke Miels and a new head of drug research in Hal Barron, as well as making Karenann Terrell head of digital operations, an area within Dingemans’s orbit.
In his time at GSK, Dingemans has helped oversee two transformational deals with Novartis – the first, in 2015, involving a major swap of assets and the second, in March, in which GSK bought Novartis out of their consumer healthcare joint venture for $13 billion (9.6 billion pounds).
Prior to joining the drugmaker, Dingemans also helped as a Goldman adviser in establishing GSK’s ViiV Healthcare joint venture in HIV medicine with Pfizer.
Dingemans said he believed he was leaving GSK at a time when it had established “strong foundations” to deliver improved financial performance.
The company has faced a difficult few years, marred by a lack of new blockbuster drugs emerging from its research labs, dwindling sales of its ageing lung drug Advair and a corruption scandal in China.
But Walmsley said earlier in 2018 she was increasingly confident the company would be able to drive sales and profit growth over the next few years, helped by newer products such as its successful new shingles vaccine Shingrix.
Still, even with a renewed sense of urgency about R&D productivity, GSK’s transformation will take time, with its next batch of new medicines not ready to reach the market before 2020.
Meanwhile, big challenges loom in two key areas, with a new drug from Gilead Sciencesthreatening the HIV business and U.S. generic competition to Advair possible by mid-2018.
Former CMS administrator Andy Slavitt starts venture capital firm
Former Center for Medicare and Medicaid Services Acting Administrator Andy Slavitt is launching a new venture capital firm called Town Hall Ventures.
Starting the firm with fellow health business veterans Trevor Price and David Whelan, the group said they are looking to invest in healthcare technology and services companies that impact care delivery for vulnerable populations that don’t always benefit from innovation.
In particular, the group said, they want to target care improvements for Medicare and Medicaid patients—a population that represents more than 120 million people and $1.2 trillion worth of health care spending, they said.
“There’s a significant underinvestment on the part of innovation for the care of certain populations,” Slavitt told FierceHealthcare. “We think we’re at the beginning of a wave of great companies being built that really focus on serving these patients.”
Slavitt declined to discuss certain financial details such as how large a fund the firm intended to build. He said they plan to be an opportunity-driven fund that will back deals anywhere from the earliest stages of business development through late stage.
Already, the firm has four companies in its portfolio, including joining an $11 million fund raise for kidney-care company Somatus Inc. Somatus was started by a DaVita alum in Virginia and New York-based Cityblock Health Inc., created in partnership with Alphabet Inc.’s Sidewalk Labs to provide primary care, behavioral health and social needs in urban populations.
Town Hall also made investments in Menlo Park, California-based Welbe Health LLC, a provider of integrated services to frail seniors who qualify for CMS’ PACE programs, and New York-based Aetion Inc., a company offering real-world analytics to drug companies and payors. Each investment has been between $1 million and $5 million.
Slavitt said the team believes the time is right to target the gap in innovation because CMS payment incentives have changed.
Slavitt served as CMS acting administrator from March 2015 to January 2017 under the Obama administration and was former group executive vice president at UnitedHealth Group that led a troubleshooting team for Healthcare.gov. He’s gone on to form health policy nonprofit United States of Care and is an avid health policy opiner on social media.
Price, who is the founder of executive search and investment firm Oxeon Holdings. Whelan is managing general partner Oxeon’s investment arm Oxeon Ventures and former general partner of Accretive LLC.
They named the firm Town Hall because it addresses the local nature of health care issue and the idea that town halls are most often the meeting place in a community where the private and public sector meet to solve problems, Slavitt said.
Price said Town Hall is trying to position itself at the epicenter of trying to do well by doing good.
“We really are looking to drive generational change with these companies. Every day the aging population is growing. Every day, there are growing gaps in health equity and in the quality and access to care,” Price said. “We would love to hear from entrepreneurs who want to play a role in changing that dynamic and building long-term, value-creating, sustainable businesses that also fulfill the mission.”
Verma unlikely to save struggling nonrisk Accountable Care Organizations
Coordinated care groups that are struggling to take on financial risk are unlikely to find a saving grace from the Trump administration.
Early this week, Centers for Medicare & Medicare Services (CMS) Administrator Seema Verma made it clear that nonrisk-based ACOs aren’t saving enough money and a greater push to take on risk is necessary.
“The majority of ACOs, while receiving many waivers of federal rules and requirements, have yet to move to any downside risk,” Verma said Monday at the American Hospital Association annual membership meeting. “And even more concerning, these ACOs are actually increasing Medicare spending, and the presence of these ‘upside-only’ tracks may be encouraging consolidation in the marketplace, reducing competition and choice for our beneficiaries.”
She added, “While we understand that systems need time to adjust, our system cannot afford to continue with models that are not producing results.”
The National Association of Accountable Care Organizations, along with other groups, have pleaded to the agency that some providers are not yet ready to enter risk-based arrangements.
Verma’s comment follows a recent survey that found 71% of ACOs that will be forced into risk-based tracks due to contract limits are likely to leave the program starting next year.
Verma appeared to either be calling their bluff or suggesting ACOs won’t be helpful in moving the healthcare sector towards more value-based care.
A proposed rule on the program still waits for review at the Office of Budget and Management. It appears increasingly unlikely that it will be a saving grace for struggling ACOs.
Lodo Therapeutics, Genentech Ink Deal Potentially Worth $1B or More
Lodo Therapeutics, based in New York, formed a strategic drug discovery collaboration with Genentech, a Roche company in a deal potentially worth more than $1 billion.
Under the terms of the deal, Genentech will use Lodo’s proprietary genome mining and biosynthetic cluster assembly platform to identify potential therapeutic novels against multiple disease targets. Genentech is paying Lodo an undisclosed upfront payment. Lodo is also eligible for various milestone payments up to $969 million. Lodo will also be eligible for tiered-royalties on any products that come out of the collaboration.
Lodo’s platform identifies and produces bioactive natural products directly from the microbial DNA sequence information contained in dirt. The information in the organisms’ genomes drive the company’s discovery programs. The company was founded on the scientific work of Sean Brady, head of The Rockefeller University’s Laboratory of Genetically Encoded Small Molecules.
“Lodo Therapeutics’ proprietary drug discovery platform is a powerful engine for identifying novel compounds with important therapeutic potential,” said Thong Q. Le, Lodo’s chief executive officer in a statement. “We are incredibly excited to work with Genentech, and we look forward to demonstrating the power and utility of Lodo’s unique technology for the benefit of global human health.”
Lodo launched in January 2016 out of Accelerator Corporation, a life science investment and management firm. It had a $17 million series A financing that included Accelerator’s New York investment syndicate partners, including AbbVie, Alexandria Venture Investments, ARCH Venture Partners, Eli Lilly and Company, Harris & Harris Group, Innovate NY Fund, Johnson & Johnson Innovation-JJDC, The Partnership Fund for New York City, Pfizer Venture Investments, Watson Fund and WuXi PharmaTech. It also included participation by The Bill & Melinda Gates Foundation.
At its launch, Brady said, “More than half of all small molecule drugs for cancer, infections and type 2 diabetes today are derived from natural products, representing significant promise of this approach for patients. Our genome-based, culture-independent approach exploits the power of microbial evolution to identify therapeutically valuable natural products. With the support of Accelerator, we can tap this rich, natural source of small molecule diversity to develop new therapies for emerging bacteria and drug resistant bacteria, critical needs in today’s global healthcare environment.”
Lodo’s approach is to collect soil samples from around the U.S, and analyze it for naturally-occurring compounds that might already have biological effects. Volunteers send in their own soil samples in exchange for an Amazon gift card. From this, they often identify DNA or novel molecular scaffolds that were too complicated to modify or manufacture.
“Some of the drug targets that companies are interested in might be difficult to approach—such as protein-protein interactions that are typically difficult to drug by small molecules,” David Pompliano, the company’s co-founder and chief scientific officer, told FierceBiotech. “Natural products are larger and more architecturally complex molecules, so the thinking is that they would have a better chance of interfering with those types of difficult targets.”
James Sabry, senior vice president and global head of Genentech Partnering, stated, “Genentech is committed to accessing innovative technologies and we are excited to collaborate with Lodo Therapeutics to apply their Metagenomics Technology Platform to potentially discover therapeutics for difficult drug targets.”
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