Shares of Apple Inc.AAPL 0.29% hit the $1-trillion valuation markThursday, and investors may be underappreciating how important this milestone is.
What Happened
CNBC’s Jim Cramer highlighted 10 notable takeaways from Apple’s milestone during his daily “Mad Money” show Thursday evening:
The concept of a single company being worth $1 trillion was once considered to be “dangerous, foolhardy, seditious, maybe the sign of a pending crash.” Even after crossing the milestone, Apple’s stock remains attractive on a valuation basis, Cramer said.
Apple crossed the $1-trillion mark with an ecosystem including Services that was once “misunderstood” by the Street.
Apple remains the clear global winner in terms of customer loyalty, and the path toward $300 per share is realistic, the CNBC host said.
The valuation came despite Apple ranking as the third-largest cellphone company in the world by volume.
Apple CFO Luca Maestri told Cramer the stock is still “undervalued,” and the company’s $243 billion cash hoard implies it can buy back stock whenever it wants.
CEO Tim Cook continues to care “more about the quality of Apple’s products” than the “quality of the stock price.”
Great companies like Apple are able to navigate global concerns, price points and supply chain problems.
Apple’s accomplishment will pave the way for other giants to cross the $1-trillion mark, Cramer said.
Inflation will help other companies hit the same valuation as Apple, as the $1-trillion figure doesn’t mean what it once did.
Microsoft CorporationMSFT 0.44% and Amazon.com, Inc.AMZN 0.6% will join Apple in the $1-trillion club soon, in Cramer’s view.
DowDuPont IncDWDP 0.63%, one of the world’s largest producers of plastics and packaging, is very much aware of the existence of the “plastic waste problem” and is taking action, according to the chemical company’s CEO.
What Happened
Plastic products is the “most sustainable” form of packaging in the world, but of the 400 million metric tons the plastic industry produces annually, 8 million metric tons winds up as waste, Dow Chemical Company CEO Jim Fitterling told CNBC’s Jim Cramer Thursday. The industry is aware of the problem, which could worsen if rising aluminum costs forces packaged goods companies to seek out cheaper plastic alternatives, Fitterling said.
Plastic makers are unified in tackling the problem, the CEO said: Dow is working on a “very big initiative” that will be rolled out in the next few months. While details are short at this time, the objective is to “go after this plastic waste issue,” Fitterling said.
Why It’s Important
“We’re working on a joint program which can bring in our other value chain partners, bring in NGOs, bring in private money, work with governments to try to develop signature projects and solutions that are actually going to tackle this issue,” Fitterling said.
What’s Next
The “good news” is the plastic industry has many “solutions” to the problem and over the coming months companies will address it, he said.
Aside from the plastic conversation, Fitterling told Cramer that Dow Chemical’s previously announced plan to split from its parent company is scheduled to occur in the first quarter of 2019.
Tobacco use remains the number one preventable cause of morbidity and mortality in the U.S. and worldwide. Overall, cigarette smoking among U.S. adults (age ≥18 years) declined from 20.9% in 2005 to 15.5% in 2016. Still, nearly 38 million American adults smoked cigarettes in 2016, according to the CDC. Smoking remains the leading cause of cancer, heart disease, stroke, lung diseases, diabetes, and chronic obstructive pulmonary disease (COPD). National efforts have included tobacco taxes and smoking bans, which have both proven effective.
More recently, the prescribing of apps for cessation has been utilized and shown to be effective. We recently reviewed and praised the outstanding QuitMedKit from the University of Texas MD Anderson Cancer Center. The app includes nearly everything the primary provider would want to have to aid patients in tobacco cessation: the “5As” approach, information on medications for cessation, tips on motivational interviewing, graphics to assist in cessation, and links to online resources.
The QuitMedKit app does not include much information tailored to patients regarding personal health and financial goals, however. The SmokerStop app by Titus Brinker, MD, uses personal motivation as its primary smoking-cessation technique. The app uses data input by the patient to calculate health information such as reduction in blood pressure, lung cancer risk, as well as financial goals — such as showing when an ex-smoker will have enough cash for movie tickets, an iPhone, etc. The app also allows patients to put in their own goals. All this information is tracked by the app, and reminders are periodically sent to help keep patients motivated.
This is an excellent motivational tool that providers can prescribe to smokers at the point of care. Although the app lacks a true “quit program,” it does allow smokers to set goals — both health and financial — and track progress over time while receiving reminders on the individual’s progress. For more complete tobacco-cessation apps, we still would recommend QuitMedKit or apps with proven quit rates such as 2MorrowQuit (formerly SmartQuit).
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Simple interface for inputting financial and/or health-related goals
Sends reminders and tracks user progress over time
On August 2, 2018, the Board of Directors of Biogen Inc. (the “Company”) authorized a program to repurchase up to $3.5 billion of the Company’s common stock (the “2018 Share Repurchase Program”). The 2018 Share Repurchase Program does not have an expiration date. All share repurchases under the 2018 Share Repurchase Program will be retired.
There is strong evidence characterizing housing’s relationship to health. Housing stability, quality, safety, and affordability all affect health outcomes, as do physical and social characteristics of neighborhoods.
The impact of housing on health is now being widely considered by policy makers. Housing is one of the best-researched social determinants of health, and selected housing interventions for low-income people have been found to improve health outcomes and decrease health care costs. As a result, many health care systems, payers, and government entities are seeking to better understand the totality of the health and housing literature to determine where they might intervene effectively. This brief outlines the literature and provides high-level direction for future research and policy agendas.
Four Pathways
Existing evidence on housing and health can be understood as supporting the existence of four pathways by which the former affects the latter (exhibit 1). First, there are papers describing the health impacts of not having a stable home (the stability pathway). Second, there are papers describing the health impacts of conditions inside the home (the safety and quality pathway). A third, smaller set of papers describes the health impacts of the financial burdens resulting from high-cost housing (the affordability pathway). Lastly, a rapidly growing literature describes the health impacts of neighborhoods, including both the environmental and social characteristics of where people live (the neighborhood pathway).
Exhibit 1: Four Pathways Connecting Housing And Health
This brief reviews each of the pathways in turn, including examples of both observational studies of housing deficits and interventional studies of possible solutions.
THE STABILITY PATHWAY
Observational studies have shown that being without a stable home is detrimental to one’s health. People who are chronically homeless face substantially higher morbidity in terms of both physical and mental health and of increased mortality. Many people experience traumas on the streets or in shelters, which has long-standing adverse impacts on psychological well-being. These and other challenges can result in persistently high health care expenditures due to emergency department and inpatient hospital use. Even children who experienced homelessness only while in utero are more likely to be hospitalized or suffer worse health, compared to their peers.
People who are not chronically homeless but face housing instability (in the form of moving frequently, falling behind on rent, or couch surfing) are more likely to experience poor health in comparison to their stably housed peers. Residential instability is associated with health problems among youth, including increased risks of teen pregnancy, early drug use, and depression. A review of twenty-five studies that examined the impact of foreclosure on mental health and health behaviors (including substance abuse) found that all of the studies reported that foreclosure was associated with worsened outcomes, including depression, anxiety, increased alcohol use, psychological distress, and suicide. Matthew Desmond’s recent ethnography, Evicted, illustrates how the stress of unstable housing can result in disruptions to employment, social networks, education, and the receipt of social service benefits. The lack of stable housing can also decrease the effectiveness of health care by making proper storage of medications difficult or impossible.
In contrast, providing access to stable housing can improve health and reduce health care costs. Within a population of nearly 10,000 people in Oregon with unstable housing, the provision of affordable housing decreased Medicaid expenditures by 12 percent. At the same time, use of outpatient primary care increased by 20 percent and emergency department use declined by 18 percent for this group. The health impacts of other means of stabilizing housing, including rental and foreclosure assistance, have also been rigorously studied in relation to mental health outcomes.
Housing the homeless has consistently been shown to improve health outcomes. In one of several randomized controlled trials of interventions to address homelessness, long-term housing subsidies had positive impacts on measures of psychological distress and intimate partner violence. Particularly among chronically homeless people, having a safe place to stay can both improve health and decrease health care costs. The extent to which the reductions in health care costs fully offset the costs of housing continues to be a subject of debate. The Housing First model, in which chronically homeless people with a diagnosis of a behavioral health condition receive supportive housing, has been shown to be particularly cost-effective, with one study finding that the provision of housing generated cost offsets of up to $29,000 per person per year, after accounting for housing costs.
THE SAFETY AND QUALITY PATHWAY
A number of environmental factors within homes are correlated with poor health. In-home exposure to lead irreversibly damages the brains and nervous systems of children. Substandard housing conditions such as water leaks, poor ventilation, dirty carpets, and pest infestation have been associated with poor health outcomes, most notably those related to asthma. Additionally, exposure to high or low temperatures is correlated with adverse health events, including cardiovascular events—particularly among the elderly. Residential crowding has also been linked to both physical illness (for example, infectious disease) and psychological distress.
A large number of interventional studies demonstrate the potential for improving health through improved housing quality and safety. Studies in which asthma triggers are removed have repeatedly demonstrated health improvements and cost reductions among both children and adults (see also here and here). Research on smoking bans in public and affordable housing has found reductions in the number of smokers, the number of cigarettes smoked per smoker, and secondhand smoke exposure among nonsmokers. Children in families participating in the federally funded Low Income Home Energy Assistance Program (LIHEAP), which provides financial assistance for home heating, medically necessary home cooling, and emergencies due to weather-related fuel shortages, were at a healthier weight and at less nutritional risk, compared to their nonparticipant peers. Among community-dwelling older adults, home modifications can reduce falls by 39 percent when delivered by occupational therapists, and a randomized controlled trial of a standardized package of home safety improvements to decrease fall risk is ongoing.
THE AFFORDABILITY PATHWAY
In 2015, 38.9 million American families spent more than 30 percent of their income on housing, earning them the designation of being “cost burdened” and inhibiting their ability to invest in health-generating goods. In the same year, 18.8 million households were “severely cost-burdened” because they spent more than 50 percent of their income on housing, with much of this burden falling on renters rather than owners. If both rents and incomes rise at the rate of inflation, the number of American households that are severely cost-burdened because of rent is expected to reach 13.1 million in 2025, an 11 percent increase from 2015.
In some cases, Americans may choose to spend substantially on housing to live in neighborhoods that provide access to health-promoting features such as schools and parks. However, a lack of affordable housing options can affect families’ ability to make other essential expenses and can create serious financial strains. Low-income families with difficulty paying their rent or mortgage or their utility bills are less likely to have a usual source of medical care and more likely to postpone needed treatment than those who enjoy more-affordable housing. Severely cost-burdened renters are 23 percent more likely than those with less severe burdens to face difficulty purchasing food. Homeowners who are behind in their mortgage payments are also more likely to lack a sufficient supply of food and to go without prescribed medications, compared to those who do not fall behind on payments. Conversely, New York City families with affordable rent payments were found to increase their discretionary income by 77 percent, freeing up funds to spend on health insurance, food, and education or to save for a future down payment on a home.
THE NEIGHBORHOOD PATHWAY
Research on the influence of physical surroundings on health has been ongoing since John Snow’s investigation of the Broad Street pump. In the modern era, researchers have found that the availability of resources such as public transportation to one’s job, grocery stores with nutritious foods, and safe spaces to exercise are all correlated with improved health outcomes. Living in close proximity to high-volume roads, in contrast, is a danger to health and can result in increased rates of respiratory diseases such as asthma and bronchitis and increased use of health care. In one study of neighborhood blight remediation, even walking past a vacant lot that had been “greened” decreased heart rate significantly, in comparison to walking past a nongreened vacant lot. The same authors also found that abandoned building and lot remediation significantly reduced firearm violence. Researchers evaluating the creation of a Safe Routes to School program in Texas found that the addition of sidewalks, bike lanes, and safe crossings reduced pedestrian and bicyclist injuries 43 percent among children ages 5–19.
Less visible but potentially even more important are neighborhoods’ social characteristics, including measures of segregation, crime, and social capital. Sociologists have conducted crucial research that describes the health impacts of social and institutional dynamics of communities. David Williams and Chiquita Collins, in particular, have documented the impact of neighborhood segregation on health, suggesting that segregation widens health disparities by determining access to schools, jobs, and health care; influencing health behaviors; and increasing crime rates in neighborhoods of color. Although the preponderance of evidence suggests that racial segregation has negative impacts on health, some researchers have reported health-protective effects among blacks living in “clustered black neighborhoods.”
An analysis of the Moving to Opportunity for Fair Housing Demonstration Program has offered some of most compelling data on the impact of neighborhoods on health. Under this landmark federally funded experiment, people were randomly assigned to groups that either did or did not receive financial and other assistance in moving to lower-poverty areas—a research design that overcame unobservable selection effects inherent in many previous studies. Adults who moved experienced improvements in long-term mental health and some aspects of physical health (for example, reductions in the prevalence of obesity and diabetes) in comparison to peers who remained in high-poverty areas. Nearly two decades after the experiment concluded, Raj Chetty and colleagues found that when children were younger than age thirteen when they moved to a low-poverty neighborhood, their likelihood of attending college and projected lifetime earnings were significantly improved.
Evaluation Of Available Research
The weight of evidence is unevenly distributed among the four pathways. There is a great deal of evidence in both the stability and the safety and quality pathways of the risks associated with housing deficits and the potential health gains of providing housing or improving conditions inside the home. However, much of this research is concentrated in urban areas, and suburban and rural areas are frequently neglected. In addition, many of the studied interventions targeted people who were extremely high utilizers of health care without including a control group, which leaves the findings vulnerable to questions about regression to the mean. Finally, researchers reported health impacts more frequently than cost impacts for health systems, payers, or society. More financial analyses of housing interventions are therefore warranted, including examinations of costs related to social services and the criminal justice system.
The affordability pathway may have the least evidence to offer researchers and policy makers. At first blush, the pathway seems intuitive: As economists constantly point out, everything has an opportunity cost. Particularly among Americans with little disposable income, it is not surprising that people skimp on investments in other areas to make housing payments. However, additional studies of how people set priorities among basic needs and make decisions in conditions of scarcity may be useful in informing program and policy design.
Observational research about the neighborhood pathway has made a strong case that individual-level analyses of risk factors are insufficient for predicting health outcomes. However, even well-designed studies of community-level interventions remain vulnerable to questions about whether causal inference can be established. The Moving to Opportunity evaluations were groundbreaking, in terms of both the randomized approach and the longer time periods used in the research. However, the question of how to address the social dynamics of neighborhoods (including inequality, segregation, and social capital deficits) appears ripe for further research. This will likely require an examination of how US housing policies have contributed to social inequality and residential segregation.
Finally, the literature would be strengthened by more natural experiment study designs, which require less active manipulation than randomized controlled trials and can isolate the impact of an intervention better than standard regression techniques.
Policy Implications
The evidence on the relationship between housing and health is complex but compelling. The health care sector, businesses, community-based organizations, foundations, and government each have unique roles to play in improving housing conditions in the United States.
Private-sector businesses, lenders, and investors can play a variety of roles, particularly via the neighborhood pathway. Banks have long invested in affordable housing as part of their obligations under the Community Reinvestment Act of 1977. Community development financial institutions have a track rec-ord of investing in housing as part of comprehensive neighborhood development. Other commercial entities should consider themselves potential anchors for community revitalization (or market opening) projects. The work of the Healthy Neighborhoods Equity Fund and Build Healthy Places Network may be especially instructive.
Community development corporations, housing alliances, and neighborhood initiatives will no doubt continue to be the main channels for making the voices of low-income neighborhood residents heard. These entities may be particularly well suited to take on the redevelopment of blighted spaces, organize support for new local policies in public and affordable housing units (such as smoking bans and rent control ordinances), create community-led interventions to lessen social isolation, and lobby policy makers to remain committed to the development of low-income housing.
Health-related foundations must continue to ensure that housing opportunities are distributed equitably. In their role as funders of research, foundations could help create return-on-investment analyses of housing interventions. However, researchers and policy makers alike should be careful in assessing and interpreting such analyses. There may be investments that do not produce a positive return on investment to the health care sector but that are nevertheless socially desirable. Foundations can and should continue to support the development of affordable housing on the ground that it is an essential contributor to good health.
Despite the best efforts of these actors, the role of the government in improving the stability, safety, quality, and affordability of housing cannot be minimized. Critically, the supply of available housing for low-income families must be increased. Expanding access to Low-Income Housing Tax Credits is one way in which the government should provide a stimulus to private developers and managers, while the expansion of rental assistance and mobility programs may provide more immediate relief for families facing housing instability. Federal assistance programs such as LIHEAP and other subsidies for household necessities should also be continued. In particular, new policies to support seniors’ aging in place may be needed to prevent large-scale institutionalization of aging baby boomers. Finally, federal, state, and local housing policies must be used to combat the persistence of income inequality and racial segregation as urban populations grow and neighborhoods are revitalized.
Prescription drugs could account for nearly 15% of all money spent on healthcare in the U.S., according to a new report published in Health Affairs July 31 that offers a counterpoint to the frequent industry claim only 10% of spending goes toward pharmaceuticals.
Three researchers from Memorial Sloan Kettering’s Center for Health Policy and Outcomes approximated revenues retained at each step in the drug supply chain to place total U.S. spending on pharmaceuticals at $480 billion in 2016.
Drug manufacturers “captured” $323 billion, or two-thirds, of that total. Pharmacy benefit managers — most recently the target of criticism over their role in rising drug costs — retained only $23 billion in gross profits, suggesting reforms targeted only at PBMs may have limited impact on prices and overall spending.
Estimating the total money spent on drugs in the U.S. isn’t an easy task due to a convoluted distribution system and limited transparency into contracts between the intermediaries that bring a medicine from drugmaker to patient.
The result is a wide range of approximations, each of which counts spending in a different way. Iqvia, a consulting and contract research group, publishes widely cited estimates of both gross spending on drugs at invoice prices and revenue reported by drugmakers after adjusting for rebates.
In 2016, those figures came to $450 billion and $323 billion, respectively. The researchers from Memorial Sloan Kettering used the latter total as a starting point for retained revenue by drugmakers, and then estimated gross profits for each of the other players in the drug supply chain.
Yu, Atteberry, and Bach. “Spending On Prescription Drugs In The US: Where Does All The Money Go?”
The result is what the researchers contend to be a better picture of the overall market size for drugs, including purchase, distribution and payment.
Measuring their figure against the Centers for Medicare and Medicaid Services’ estimate of $3.3 trillion in national health expenditures for 2016 brought the researchers to their conclusion that drugs account for nearer to 15% of spending, rather than 10%.
In publishing their findings, the researchers don’t draw any conclusions around where reforms to reduce spending may be best aimed. They do, however, hint that breaking down spending by each market player could help inform policy.
“A recent policy focus on the supply chain suggests that understanding those consequences will be important—particularly in light of recent calls by Food and Drug Administration Commissioner Scott Gottlieb for greater transparency in price negotiations involving PBMs, distributors, drug stores, and payers; appeals by the pharmaceutical industry and government to limit the scope of the 340B program; and deliberations by CMS to begin instituting point-of-sale rebates to reduce the out-of-pocket burden on patients,” they write.
The Trump administration has recently focused on the role played by rebates in increasing drug prices and, by consequence, drug spending. Health and Human Services Secretary Alex Azar has made rebates the target of recent speeches, and a proposed rule filed by the White House appears to seek elimination of a legal exemption under which rebates don’t fall afoul of anti-kickback statutes.
Recent comments from top executives at pharma companies, including Pfizer and AbbVie, have made clear that the pharma industry is currently contemplating a world in which rebates might play a reduced role. Pfizer CEO Ian Read, for example, said on a recent earnings call that he believed the U.S. would eventually move away from rebates completely.
But, as the new research suggests, reducing the role played by PBMs — and targeting the money they collect as supply chain middlemen — might not make as much of a dent on drug spending as imagined.
A few simple steps could cut way down on the administrative costs involved in healthcare, several experts said Tuesday at a Senate hearing on reducing healthcare costs.
“There is a good deal that can be done on standardization,” said David Cutler, PhD, professor of applied economics at Harvard University in Boston. “The … complexity of coding is a clear example of this, where an insurer will require additional codes before they’ll pay a higher amount, and that requires additional people to code those additional codes, and then seeing codes going up, insurers will put in more requirements, so standardizing this will make a lot of sense because you don’t have to get into an arms race over that.”
Additionally, standardizing preauthorization requirements (which can vary among insurers), and integrating billing and medical records systems could reduce costs, he continued. By law, the federal government is responsible for standardization but has not done so, Cutler said. “I think that’s been a lost opportunity so far.”
High Administrative Costs
Cutler spoke at hearing called by the Senate Health, Education, Labor, and Pensions (HELP) Committee, the third in a series of hearings on cutting healthcare costs. “Administrative costs are much higher in the United States than in other countries,” noted Sen. Lamar Alexander (R-Tenn.), HELP committee chairman, in his opening statement. “According to Dr. Ashish Jha, a witness at our first hearing, administrative costs accounted for 8% of all healthcare spending in the U.S. — roughly $264 billion — compared to only 1% to 3% for other countries.”
Sen. Patty Murray (D-Wash.), the committee’s ranking member, took the opportunity to slam the Trump administration for selling what she called “junk” health plans with skimpy benefits and lots of paperwork.
“An analysis from the National Association of Insurance Commissioners shows the most popular short-term junk plans — like the ones President Trump wants to expand — spend, on average, half of their revenue on things that have nothing to do with customers’ healthcare needs,” she said. “I think we can all agree we should be looking for steps to reduce administrative costs to make healthcare more affordable — and this idea from President Trump I believe moves us in exactly the wrong direction.”
Cost Estimates Vary
Matt Eyles, president and CEO of America’s Health Insurance Plans (AHIP), a trade group here for health insurers, defended the progress his industry was making in this area. “The vast majority of every healthcare dollar goes to pay for medical treatment and services,” he said. “With prior authorization, our members analyze whether a treatment is safe and effective for the patient based on the best available clinical evidence … AHIP is working with many others … to improve prior authorization by making it fully electronic so we can improve efficiency.”
One witness whose testimony engendered some controversy was Robert Book, PhD, an advisor to the American Action Forum, a right-leaning think tank here. He took issue with many cost estimates that examine administrative costs as a percentage of total healthcare spending. Looked at in that light, several studies have estimated that Medicare spends much less on administrative costs — around 2% to 5% — compared with private health plans, which spend 10% to 20%.
However, Medicare has patients who are ages ≥65, are disabled, or have end-stage renal disease, while private insurance mostly covers those age <65 and not disabled, so they require less healthcare. “The result is that Medicare spends a lot more per patient on direct healthcare, which means administrative costs as a percent of healthcare costs is almost guaranteed to be lower,” he said.
But Book looked at administrative costs on a per-beneficiary basis, and found that they averaged $509 per beneficiary compared with $453 for those in private health plans.
Sen. Elizabeth Warren (D-Mass.) disagreed with Book’s reasoning, noting that he included in his cost estimate the cost of running the government such as electricity and security costs. “I’m all for trying to use the best data possible, but this approach doesn’t have any credibility at all; this is just a game to inflate the numbers.”
Warren also noted that private insurers reported profits of $20 billion last year, while Medicare is obviously a not-for-profit entity. “I think it’s time to crack down on shady practices insurers use to juice their profits and time to ramp up [calls for] ‘Medicare for All,'” she said.
But Sen. Bill Cassidy, MD, (R-La.) had the opposite take. “Dr. Book, your analysis has total credibility to me!” he said.
Health Records a “Hindrance”
Electronic health records (EHR) came in for heavy criticism at the hearing. “Technology can be a help, but right now it sometimes is a hindrance,” said Becky Hultberg, president and CEO of the Alaska State Hospital and Nursing Home Association. She mentioned one small Alaska medical center that is going to need to spend $65,000 to upgrade its EHR system to comply with requirements of the federal Meaningful Use program. “They are not going to see a patient benefit, and they are purchasing software that has functionality they don’t need,” she said.
Cassidy also sang the praises of “reference pricing” — a system used by the CalPERS, the pension system for state employees in California. Under that system, the state establishes a set price that it will pay for a particular procedure and gives patients price and quality information for each facility that performs it; if patients want to use a facility that charges more, they will have to pay the difference.
“Turns out everybody lowers their prices and we end up paying the same across the board; it seems to have worked,” Cassidy said. “Can we have more of it?”
“I think there is interest in using innovative pricing models to make sure we’re getting the most value,” said Eyles. “But anything providing greater transparency to the patient is a good thing.”
Hultberg reminded Cassidy that California is dealing with a large market in terms of covered lives, but “as we look at competition and price transparency, we need to [make sure] we don’t lose our safety net.”
