Congress Has no Clue About What’s Driving up Drug Prices

A coalition of think tanks and health care organizations – dubbed Lower Drug Prices Now – just launched a campaign to promote price controls on coronavirus treatments in development. Several Democratic House leaders want such language included in future stimulus packages.
Treatment affordability is certainly a laudable goal. But price controls aren’t the right solution.

Currently there are over 70 clinical trials for new medicines for COVID-19, from vaccines to acute therapies for ICU patients. Companies are investing huge resources in hopes of succeeding and getting an adequate return on investment. They know that some won’t succeed or will take a long time to prove effective, like Gilead’s remdesivir.
Price control provisions will attack drug manufacturers and stifle innovation at a time when these new treatments are needed most. And they fail to address the primary reason why Americans feel so much pain at the pharmacy counter – middlemen in the drug supply chain.
The coronavirus pandemic comes at a time when patients are paying more than ever for their prescriptions. In 2018, Americans spent $440 billion at the pharmacy counter. That’s up more than 60 percent from the $269 billion paid in 2013.
Most Americans blame drug makers for this increase in spending. Eight in 10 Americans say drug companies’ profits are a major reason prescription costs are rising.
This sentiment is misguided. A new objective study from the Berkeley Research Group proves as much. According to the report, the slice of drug spending collected by drug manufacturers actually dropped by 12.5 percent between 2013 and 2018. Meanwhile, total annual drug industry revenues rose slightly below 3 percent, which is roughly on pace with inflation.
In other words, patients are paying more out-of-pocket, but drug industry revenues aren’t rising.
So, where is all that money going?
According to the report, other entities – like health insurers and pharmacy benefit managers – absorb roughly $50 for every $100 of U.S. spending on drugs. And this share is up from just 33 percent in 2013. They’ve benefitted off the backs of the manufacturers without providing any of the cures.
Health insurers hire PBMs to do the nitty-gritty work of forming insurer drug formularies, or the list of drugs insurers will cover. PBMs work with drug manufacturers to secure massive rebates and discounts, often knocking 30 percent off a drug’s initial list price.
Patients almost never see those discounts at the pharmacy counter, though. That’s because PBMs keep a portion for themselves and funnel any remaining savings to insurers. While insurers use those savings to lower premiums – typically by a few dollars a month – that does little to cut out-of-pocket spending for patients. Between 2017 and 2018, average out-of-pocket costs increased by 12 percent.
To make matters worse, PBMs don’t disclose the rebates they’ve secured. This allows insurers and PBMs to charge patients based on a drug’s list price, not the negotiated discount they received. So, patients pay more than their fair share for vital prescriptions.
Sadly, this rebate system isn’t the end of the supply chain subterfuge. The Berkeley study also found that hospitals have been profiting off the 340B program, which was intended to help poor patients afford drugs. In essence, 340B requires pharmaceutical firms to provide special rebates to hospitals serving low-income populations.
Those discounts often aren’t making their way to patients either. The 340B program has become a cash cow for middlemen: hospitals purchase cheap drugs in bulk, charge patients the full price, and take home the difference. In fact, the Berkeley study found that provider margins for the 340B program have jumped ninefold between 2013 and 2018.
Congress has identified a real problem but the wrong villain. And policies stemming from that misperception – such as price controls – could have disastrous repercussions for patients.
The U.S. biopharmaceutical industry poured $97 billion into research and development in 2017 – double the federal government’s annual investment.
The results of these investments have been miraculous. Cancer deaths have fallen by a third since the 1990s – a drop largely attributable to the creation of new medicines. And powerful new drug cocktails have turned HIV/AIDS from a death sentence to a manageable condition.
To deliver coronavirus treatments equitably, congress needs to focus on the true cause of patients’ pain: PBMs, insurers and other middlemen siphoning away rebates intended for patients. There’s no good reason one major PBM should have made $113 billion last year, a 12 percent increase. That’s crazy.
Sandip Shah is founder and president of Market Access Solutions, which develops strategies to optimize patient access to life-changing therapies.
https://www.realclearhealth.com/articles/2020/06/04/congress_has_no_clue_about_whats_driving_up_drug_prices_111053.html

Coronavirus Withdrawals From An IRA Or 401(k): Who Can, And Should

Part of the CARES Act allowed individuals to tap IRAs or 401(k) retirement plans if they were impacted by the coronavirus and needed cash. The law permits withdrawals up to $100,000 (or the account balance, if lesser), without penalty. The funds can be paid back, though it’s optional. For struggling business owners and workers, tapping retirement accounts may seem like a good option. But the provisions may not be available to everyone and those who can use retirement funds may be wondering whether they should.

The rules for tapping your IRA or 401(k) in 2020

Here’s a summary of the rules regarding distributions from retirement accounts if you’ve been affected by Covid-19:

• Withdrawals are limited to the lesser of $100,000 or aggregated account balances across all IRA and 401(k)s.
• You (the account owner), your spouse or dependent must have been diagnosed with Coronavirus or impacted financially because of the pandemic. This includes parents who couldn’t work because daycares weren’t open.
• The CARES Act stipulates that while the coronavirus related distribution (CRD) is taxable as ordinary income, you can pay the tax over three years.
• You have the option to pay back the money within three years and can file amended tax returns to recoup the tax already paid.
• CRDs are exempt from the 10% penalty that typically applies to early withdrawals.
• You can use the money for any purpose.
• As of now, coronavirus related distributions are only in effect for 2020.

The IRS CRD FAQ page has further details.

Not all workers with 401(k) or 403(b) plans will qualify for coronavirus related distribution

Employer-sponsored retirement plans are optional benefits that companies can offer their workforce. Obviously, if you don’t have a 401(k), you can’t tap it if you need cash. But even if you do, you might not be able to take a coronavirus related distribution.
The CARES Act gave employers the option allow coronavirus related distributions and/or expand the terms of plan loan provisions to permit workers to take loans up to $100,000 from their 401(k). Until September 22, 2020, 401(k) plans can choose to increase maximum loan size from $50,000 up to the lesser of $100,000 (minus outstanding plan loans of the individual), or the individual’s vested account balance.

Employers decide whether to participate

Before Covid-19, employers could choose to adopt provisions to allow 401(k) loans within certain parameters. The key word here is choose.
Just as companies did not have to offer 401(k) loans pre-Covid-19, they aren’t required to include plan provisions to allow CRDs or expand loan limits. Modifying plan documents costs money, and in a time where employers have been suspending 401(k) matches or even terminating plans, they might not be inclined or able to do so.
Unfortunately, plan rules are one of the downsides to over-saving in a 401(k). If your asset mix is very heavily weighted towards retirement plans, consider broadening your investments to taxable brokerage accounts after you get back on your feet.

Ask your employer about the plan rules

If you’re still working for the company, ask your HR department about the plan rules for CRDs or 401(k) loans. If the plan sponsor doesn’t offer Covid-19 withdrawals, you may be able to take a loan instead.
Before taking a loan, make sure you understand the terms. 401(k) loans are essentially a loan to yourself that must be repaid to your account with interest. But if you leave your job, the full loan can be due immediately. Talk to your plan sponsor to learn more about the pros and cons.

Options for old 401(k) plans

If you have an old 401(k) plan, it could be an opportunity to do a 401(k) rollover to an IRA. The process is quite simple and may have other benefits too.

Should you take money from your 401(k) or IRA if you’ve been impacted by Coronavirus?

Tapping your retirement accounts shouldn’t be considered lightly. But depending on your situation, you may not have many other options. If your emergency fund has been depleted or you don’t have a non-retirement investment account, your IRA or 401(k) could your only liquid asset.

Think long and hard before using home equity

While using home equity could be an option, you may end up adding even more financial risk to your situation and could potentially lose your home if you fall behind. It also takes time and costs money to get a home equity loan or line of credit. If you’re already behind on your mortgage, tapping home equity likely won’t be an option.

What about credit cards?

Making minimum payments on credit cards typically works for a very short period of time. Interest rates are usually over 20% and the debt can compound quickly. Speak with your credit card company to see if there’s any leniency. Unless you just need to bridge a short gap between now and guaranteed future income, you might be better off using money from a retirement account. At least it won’t harm your credit.

Stop saving towards other goals

It may seem obvious, but diligent investors are reluctant to stop saving towards other goals, even when faced with financial uncertainty. Before using money from your retirement accounts, consider temporarily freezing contributions to 529 college savings plans and other non-essential goals. If you have federal student loans, take advantage of deferred payments while they’re still available. Stop over-paying your mortgage.
If you’re in a financial emergency, try to do what you can to only put money towards expenses that must continue to be paid. Conserving now will make it easier to recover and resume good financial habits later.

If you take money from your retirement accounts

If you need to take money from your retirement accounts, make sure you only take what you need. Cut back on any non-essential expenses until you get back on your feet. Keep details records and work with a CPA to help ensure you file your taxes properly.
Tapping retirement funds is generally less risky if you’re confident you can pay it back. Otherwise, it could be a risk to your retirement. That said, if you need money for essentials today and have no other options, it sort of is what it is. Once you’ve recovered, you can work to cut back in other ways to catch up.
https://www.forbes.com/sites/kristinmckenna/2020/06/05/coronavirus-withdrawals-from-an-ira-or-401k-who-can-and-should-tap-retirement-accounts/#586a2a715b08

Coronavirus stalks nation focused on George Floyd protests

The protests over the murder of a black man at the hands of police officers have dominated news headlines for a week, even as the death toll from the deadly coronavirus pandemic continues to mount in the United States and across the world.
Nearly 11,000 Americans have died from COVID-19, the disease caused by the coronavirus, in the 11 days since George Floyd died on a Minneapolis street corner, and more than 200,000 people have tested positive.
There are encouraging signs out of early epicenters like the New York City area, which did not report a coronavirus-related death on Thursday for the first time since March.

And while health experts worried about the potential for super-spreading events over the Memorial Day weekend when tourists jammed the boardwalk in Ocean City, Md., or pool parties in the Lake of the Ozarks, there are few signs so far that those events spread the virus. The country will not know for at least another two weeks whether the protests against police brutality will act as spreading events.
Instead, the spread of the coronavirus has become more diffuse, as case counts rise steadily in places like Arkansas, Florida, North Carolina, South Carolina, Tennessee and in Washington state, where public health officials thought they were increasingly bringing the virus under control.
In Alaska, a state that went 45 days without experiencing a double-digit increase in the number of cases on any one day, about 20 new cases have been confirmed on four of the last five days. Texas has confirmed more than 1,000 new cases a day for each of the last 10 days, and 10,000 new cases this week alone. The number of new cases confirmed this week in Arizona, 5,055, is more than double the number confirmed there last week.
Twenty-three states have seen week-over-week increases in the number of new coronavirus cases. Arizona, Florida, North Carolina, Texas and Vermont all recorded their highest number of new confirmed cases so far in the outbreak in just the last four days.
The nation is still recording about 1,000 new COVID-19 deaths a day, and 20,000 new confirmed cases. Sometime this weekend, the official tallies will record 110,000 deaths in the United States.

The case counts and deaths “seem to be stable there or gradually climbing during what should otherwise be a seasonally low period for transmission,” said Jeremy Konyndyk, a senior fellow at the Center for Global Development who ran USAID’s Office of Foreign Disaster Assistance during the Obama administration.
Public health experts say the coming weeks will provide critical hints about the summer months to come. An antsy populace that has already suffered through months of lockdown is inching back into public, though widespread fear still remains.
“To some degree, you expect to see cases go up, and that’s the price of reopening,” said David Rubin, director of the PolicyLab at the Children’s Hospital of Philadelphia. “There are places that I suspect a lot of people are shrugging their shoulders and just rushing forward.”
Models maintained by Rubin’s team show the number of cases are still rising substantially in Chicago and Minneapolis. The models suggest Houston, Dallas and Phoenix are poised for significant outbreaks. And though the Memorial Day break did not lead to an explosion in cases, Rubin is tracking rising case counts in communities around the Atlantic shore, the Pocono Mountains, Lake Michigan and Southern California.
As the weather grows warmer and more humid, the spread of influenza typically dies down. If the same happens for the coronavirus, states will feel more pressure to loosen restrictions on economic activity. But epidemiologists and health experts warn that lower case counts can quickly spiral out of control if Americans let down their guard.

“People grow tired. It’s very difficult to keep up all of these measures, and we must remain strong and vigilant,” said Maria Van Kerkhove, who leads the technical side of the World Health Organization’s coronavirus response. “That in a sense could make the virus more dangerous because people could become complacent.”
Though the protests have overshadowed the virus in recent days, they have also underscored the disproportionate extent to which the toll of the virus has fallen on black and brown people. In most states where African Americans make up a substantial portion of the population, they also make up a disproportionate number of those who have both contracted the virus and died of the disease.
In many ways, the same systemic racism that has led to the deaths of unarmed black and Hispanic men at the hands of police is responsible for that disparate toll. Minorities are more likely to work in public-facing positions, in grocery stores or convenience stores or long-term care facilities. They are more likely to live in dense urban areas, where bad air quality exacerbates both the number and severity of respiratory illnesses like the coronavirus. And they are less likely to have access to quality health care.
“Both the pandemic and police brutality, along with other forms of violent system racism and inequality, are disproportionately killing Black Americans and they are equally urgent,” Nita Bharti, a biologist at the Center for Infectious Disease Dynamics at Penn State, said in an email. “There may be a resurgence of cases following the many premature re-openings that coincide with local protests. Assigning the cause of transmission will be part of a political message.”
If there is one positive to the protests that might reduce the threat of coronavirus transmission, it may be that they are happening outdoors. Only a small handful of incidents of transmission occurring in open air have been documented by researchers.

“We don’t believe outdoor transmission is a huge vector in this,” Rubin said. “It suggests to us that some of our outdoor activities are safe, as we suspected.”
https://thehill.com/policy/healthcare/501362-coronavirus-stalks-nation-focused-on-george-floyd-protests

Urgency mounts for a contact tracing army

Health experts are signaling increased urgency over the need to build an army of people to trace the spread of coronavirus, as states try to put together a patchwork network in an effort to contain the disease.
Centers for Disease Control and Prevention (CDC) Director Robert Redfield warned Thursday that the country needs between 30,000 and 100,000 people to do contact tracing by September to try to stop a major resurgence of the virus in the fall and winter.
Other estimates have put the need even higher, with former CDC Director Tom Frieden calling for up to 300,000 contact tracers.
There are varying levels of success so far as states and localities take the lead in putting together the workforce, with some places still lacking the manpower to conduct tracing.
“There are communities that don’t have the resources they need to do this work,” said Lori Freeman, CEO of the National Association of County and City Health Officials. “This is the critical component of getting our economy back.”
In combination with widespread testing, contact tracers are used to interview people infected with coronavirus to find out who they have been in close contact with, then reach out to those people and encourage them to quarantine for 14 days to prevent further spread of the disease.
“While testing has gotten a lot of attention and rightly so, and while our country continues to have an insufficient number of tests, what has received less attention has been contact tracing and the importance of contact tracing,” Ashish Jha, the director of the Harvard Global Health Institute, said at a congressional briefing on Thursday.
Congress provided $25 billion for testing in a response bill at the end of April, and that money can also be used for contact tracing. But the Association of State and Territorial Health Officials is calling for $7.6 billion in new federal funding dedicated solely to contact tracing.
Bureaucratic hurdles are also posing a problem in some cases for scaling up contact tracing.
For example, Kansas City, Mo., does not have enough contact tracers and has had trouble accessing funding under the CARES Act passed by Congress because it sits in four different counties and is needing to negotiate for funds with each county, according to Morgan Said, a spokeswoman for Mayor Quinton Lucas (D).
In California, officials are short of the initial goal of 10,000 contact tracers and the ultimate goal of 20,000 set by Gov. Gavin Newsom (D). The Department of Public Health said Friday that the state currently has about 3,000 staff within local health departments and is in the process of training another 3,400 to be contact tracers.
The state is off to a “slow start” in its effort to train current workers to be redeployed as contact tracers, Abby Snay, deputy secretary at the California Labor and Workforce Development Agency, told lawmakers at a briefing on Thursday.
Illinois Gov. JB Pritzker (D) said at the end of May that only about 30 percent of people who should be contacted due to their interaction with infected people are being reached, but said that the state would be working throughout June to hire more people. “It’s a large endeavor,” he said.
Texas also fell short of the goal of 4,000 contact tracers that Gov. Greg Abbott (R) set for June 1, and currently has roughly 2,900, according to the Texas Tribune.
Other states have reported more success.
Massachusetts was an early leader in ramping up contact tracing and has partnered with the humanitarian organization Partners in Health for over 1,500 contact tracers. There are an additional 1,000 contact tracers at local health departments, the state said.
Maryland said it had quadrupled its contact tracing workforce to about 1,400 since late April.
While new cases of coronavirus nationally have fallen some from their peak, there are still about 20,000 new cases reported a day, with surges in some states like Arizona, Texas and Arkansas.
Redfield, the CDC director, pointed to AmeriCorps as another source of contact tracers at the hearing on Thursday.
AmeriCorps has partnered with Colorado for over 800 contact tracers, the state announced this week. The organization said it is working to announce agreements with a handful of other states as well.
Redfield expressed urgency for getting enough contact tracers in place ahead of a potential second wave in the fall.
“We really have to get this built and we have to get it built between now and September,” he told the House Appropriations Committee.
One obstacle is that if there are too many new cases of coronavirus each day, the contact tracing system becomes overwhelmed.
Experts say the system works best in trying to keep a relatively small number of cases from spiraling out of control. Therefore, if the number of cases remains too high throughout the summer, it hinders efforts to tamp down a resurgence in the fall.
Still, Redfield expressed hope that the country could contain the virus in the fall.
“It is fundamental that we have a fully operational contact tracing workforce that can every single case, every single cluster, do comprehensive contact tracing within 24 to 36 hours, 48 hours at the latest, get it completed, get it isolated, so that we can stay in containment mode as we get into the fall and winter of 2020,” he said.
https://thehill.com/homenews/coronavirus-report/501416-urgency-mounts-for-a-contact-tracing-army

Nursing homes fail to get COVID-19 under control

More than three months since the coronavirus first appeared in a Seattle-area nursing home, facilities are still struggling to contain its spread.
According to federal data collected and released publicly for the first time this week, thousands of nursing homes across the country lack basic personal protective equipment (PPE). Facilities are also facing staffing shortages, and many are even running out of hand sanitizer.
Meanwhile, testing among residents and staff remains scattershot, despite federal recommendations. Some states have begun mandating tests, but disagreements over who will pay means that potentially sick residents and staff will not be identified and isolated.
Advocates say states and the Trump administration have failed to ensure operators of nursing homes are protecting the most vulnerable as COVID-19 devastates many facilities.
At least 32,000 residents and about 600 staff members have died in nursing homes due to COVID-19, according to the Centers for Medicare and Medicaid Services (CMS), and that number is likely to rise as more facilities report numbers.
Meanwhile, more than 95,000 COVID-19 cases have been confirmed in nursing homes, while more than 53,000 presumed cases are suspected, according to CMS.
“We had an opportunity at the outset of the pandemic to target resources, target funding to help with the excess costs” of protecting nursing home residents and staff, said Katie Smith Sloan president and CEO of LeadingAge, the association of nonprofit aging services providers.
“We pleaded, asked, begged, and we were ignored month after month. We knew residents and workers were hit particularly hard, and the data shows the devastating price of the failure to target resources,” Sloan said.
Other numbers from CMS, while incomplete, also paint a grim picture of the impact of the virus on nursing homes.
Nearly 2,000 nursing facilities reported a shortage of staff, according to the CMS data, with clinical staff shortages in over 300 facilities. More than 2,200 nursing homes said they don’t have enough aides.
In terms of supplies, almost 2,000 facilities said they have only a week’s supply of N95 respirators. More than 250 reported that they don’t have any surgical masks, and slightly more than 800 facilities said they will run out of hand sanitizer within a week. More than 230 said they have no hand sanitizer at all.
Agency officials said 88 percent of the country’s 15,000 nursing homes reported data, and until every facility reports, the numbers are likely to fluctuate, especially based on the availability of testing.
The Trump administration urged states to test every resident and staff member, but did not mandate it. States ultimately passed the responsibility onto counties and nursing homes, resulting in individual, uncoordinated plans.
“The federal government is not really taking the leadership in what needs to happen, where tests should go, what the actual rules are,” said Toby Edelman, senior policy attorney for the Center for Medicare Advocacy, a group that advocates for nursing home residents.
Some states have mandated universal testing of residents and staff, but have not committed to paying for it.
Michael Mina, an assistant professor of epidemiology at the Harvard T. H. Chan School of Public Health, said testing nursing home staff bi-weekly, or even weekly, just doesn’t seem feasible given the current testing capabilities.
The tests are expensive, there aren’t enough reliable, rapid diagnostic tests available, and nursing homes lack the manpower to accomplish it.
“The resources just haven’t been there,” Mina said.
“It was an extraordinary effort to get Massachusetts nursing homes tested just once. And they had about five weeks to do that. It was a massive, massive effort with a tremendous number of people involved to make it happen. And so the thought of doing that every week, it just wouldn’t be feasible,” Mina said.
CMS Administrator Seema Verma said Medicare will cover the costs of testing residents if there’s a suspicion of an outbreak, but nursing homes are responsible for testing the staff.
She said states should be able to cover the costs because of $11 billion in CARES Act funding that is meant to be used exclusively for testing.
“We feel like there’s adequate testing with the $11 billion that has been provided to states, and they can support their nursing homes,” Verma said on a recent call with reporters.
The American Health Care Association, which represents for-profit nursing homes, has lobbied for an additional $10 billion to help fund expedited testing and additional staffing. The group said it would cost more than $1 billion to test every staff member weekly.
But testing is just one part of how states and nursing homes should be prepared to protect their residents. One of the other methods is effective infection control measures.
Verma lauded the efforts of some nursing homes that made “stringent efforts” to screen staff and enforce hand-washing. She said those facilities saw fewer, if any, outbreaks of COVID-19.
Many of the nursing homes with high rates of infection and deaths had previously received low quality scores.
Yet the nursing home industry has long argued individual facilities should not be held responsible.
Nathan Boucher, an assistant research professor in the Sanford School of Public Policy at Duke University, said he agreed with that assessment on responsibility.
The nursing home population was going to be at risk no matter what, he said.
“This is a particularly virulent form [of coronavirus], and the demographic that is in these facilities, and these older folks medically complex seriously ill, who are in a system of care that has been long neglected and underfunded,” Boucher said.
https://thehill.com/homenews/coronavirus-report/501429-nursing-homes-fail-to-get-covid-19-under-control

Boss wants you to test, track for Covid-19 symptoms. There’s software for that

As more employers reopen their offices, stores, and warehouses, a growing number of health tech companies are pitching smartphone apps and other tools to help them bring employees back to work safely in the Covid-19 era.
The tools go far beyond the infrared thermometers and temperature checks that have dominated the conversation around safely reopening. The new wave of software products allows employers to direct their workers to get a Covid-19 test, clear them to return to work, track their symptoms, and trace the contacts of anyone who tests positive for the coronavirus.
The rollouts are forcing digital health vendors and their employer customers to navigate a range of unprecedented legal, cultural, and financial questions. Among them: What kinds of surveillance can employers require their workers to submit to — and will employees actually use these tools?

There’s also a looming question of whether employers will be willing to shell out for yet another wellness product at a time when they’re trying to avoid more layoffs and furloughs.
“They’re going to have to, to some degree, if they want to bring their employees back,” said Greg Chittim, who co-leads the digital health and health IT practice at the consulting firm Health Advances.

In industries where routine screenings such as drug testing is not the norm, Chittim said, “a large portion of the workforce will need to wrestle with how they transition to that — and the executive teams and the benefits managers need to figure out how to buy that, and who to buy it from, and what they need, and how they can do it.”
So far, the push on these offerings has been led by health tech companies that — in normal times — charge employers to help their workers navigate their health benefits. For example, Castlight Health last month rolled out its Working Well tool, which, among other things, uses machine learning to let employers forecast trends in health and productivity for the workforce.
Then there’s Collective Health, which last month unveiled its Collective Go tool, which offers employers a free set of guidelines for returning to work and a paid app for workers to check their symptoms and exposures and navigate the status of their Covid-19 tests.

The idea is to provide evidence-based guidance to employers that otherwise don’t know how to go about developing a return-to-work plan, said Rajaie Batniji, the company’s chief health officer. “In the absence of clear leadership here or clear guidance from the government, a lot of employers feel like they’re having to play armchair epidemiologist — and very few employers are really positioned to do that,” Batniji said.
Collective is immediately charging for the offering — an approach that stands in contrast to some other back-to-work tools being rolled out for free, at least for now. Microsoft and the insurer UnitedHealth Group last month announced that they would offer U.S. employers free access to their ProtectWell smartphone app, designed to screen employees for Covid-19 symptoms and clear them for work.
Collective said it is signing up employers for the service through deals that are being inked separately from its existing benefits navigation contracts. The company declined to disclose any names of its new Collective Go customers, but said that one of its first customers is in the childcare services category; it is also seeing demand from medical systems, gig-economy services, manufacturers, and retail.
Many health tech companies are pitching their products to industries such as manufacturing that rely on warehouses and other physical workspaces, as well as essential businesses that don’t need to go “back to work,” but whose employees have been at their workplace throughout the pandemic. The businesses they’re less focused on: Mostly white-collar industries that have the luxury of allowing their employees to continue to work from the couch at home.
That’s by design. While tech companies in Silicon Valley and other urban hubs have been early adopters of some digital health technologies, they have not historically accounted for a huge chunk of the revenue for employee wellness companies, which count on large blue chip employers with staff who tend to be older and sicker. And in the Covid-19 era, tech companies have signaled that they may be among the last to bring their workers back into the office, making them unlikely clients in the back-to-work business.
As has been the case in the employee wellness sector for years, some of the back-to-work tools may raise questions about whether employers are invading their workers’ privacy — and so digital health vendors pitching pandemic-related services are taking steps to try to steer clear of such concerns.

Consider the health care artificial intelligence startup Jvion, which announced last month that it has developed an AI-powered survey for employers that their workers can take to get a recommendation on returning to work. Based on the employees’ answers, the tool spits out three possible statuses: cleared to return, medical clearance required, or cannot return to work.
The tool lets employees print out a letter with that status that they can hand to their bosses. Jvion is also working on an update to the tool that would notify an employer of that status directly. But that’s all that will ever be shared with an employer, said John Showalter, a physician who serves as Jvion’s chief product officer.
“The employers that we’ve talked to are very much concerned with their employee privacy,” Showalter said. “They don’t want the answers that we have from our surveys, and we don’t want to give them the answers from the surveys.”

Your boss wants you to take a Covid-19 test and track your symptoms. There’s software for that

Covid-19 is changing the game for health care companies and investors

Even as the health care industry has stepped up with an unprecedented response to the Covid-19 pandemic, health care companies are being undermined by a loss of revenue, splintering of their clinical workforces, and the disintegration of normal as we know it. For health-related entrepreneurs and startups, this means the rules of engagement with their stakeholders, including venture investors, are also changing. The emergence of a new abnormal will depend on several factors.

Is money available?

The message from the venture capital community is that it’s open for business. Firms say they are being more cautious but are still willing to invest. A few venture outfits have even closed new funds within the last weeks.

The truth for entrepreneurs and venture-backed health care companies, however, is more nuanced. Investors are always open to hearing about new deals and looking for ways to shore up current portfolio companies. The pipeline development analysts cannot afford to sit twiddling their thumbs. But new deals are exceedingly rare right now, and industry pundits say that the deals that do get done are on far less frothy, or certainly more realistic, terms — approximately 30% lower valuations and falling — than before Covid-19.

The word on the street is that venture capital firms are looking for a two-year runway, a difficult measure to assess in times of extreme uncertainty. And with most health care companies facing potentially dramatic negative impacts to sales, staff, and supply chains, that projection becomes even cloudier.

Investor as therapist

Sharing resources and best practices among portfolio companies has been a long-stated objective for many venture firms. Funders have even tried to provide centralized platforms and programs across their investments, ranging from annual summits or small CEO peer-mentoring groups to recommended consultants that can help save on fees. But a sense of competition between founders, limited bandwidth to meaningfully engage, and a desire for entrepreneurs to not show weakness in front of investors have probably all contributed to the historically spotty uptake of these services.

In the midst of the Covid-19 pandemic, venture capital firms have renewed their commitment to provide these types of shared resources for portfolio health care companies. These programs have popped up seemingly overnight and are diverse in nature. They can include office hours with fund partners or group conference calls between CEOs who share an industry, sometimes facilitated by a fund partner and other times left unchaperoned for “real talk.”

Websites and tools aggregating best practices in response to Covid-19 are continuously being updated by venture fund staff or portfolio company leaders. Topics and perspectives can include how to humanely conduct a layoff, manage cash runway in times of uncertainty, or deal with the sudden, acute stress and mental health implications of leading companies and families through this crisis.

I’ve been seeing more founders take up such offers than in the past. Some no doubt are in desperate need of support, while others might just be feeling physically isolated and cut off while maneuvering their companies from a home office, a guest room, or even the kitchen table. The big question is whether this trend of resource sharing will extend into the future and if these deeper interconnections, including more frequent, honest, and vulnerable dialogues between investors and portfolio companies, will have meaningful implications for future financial returns for venture capital companies or for the quality and richness of entrepreneurial ecosystems.

A Covid sure thing?

The reality of venture investing is that some startups will fail while others succeed. The difference now is that some are failing more rapidly than in “precedented” times. Most firms have an investment thesis and abide by it, but personal networks and gut instinct no doubt play a role — especially now when no single investor or entrepreneur has a clearer crystal ball than others.

When looking at the next round of investment in health care companies, it’s fair to say that Covid-19 is creating a market for telehealth and other virtual health-related platforms. But beyond that, a lack of clarity on the future will no doubt contribute to at least a short-term wait-and-see attitude.

Still, many companies have wasted little time pivoting from their original business models to embracing clear emerging needs like production of personal protective equipment, infection prevention methods, or remote or virtual engagement for distanced selling and staff training, all while investing cycles into the next big ideas birthed by the pandemic — moves that will eventually entice investors to once again eagerly place their bets.

Those bets will surely come with more risk. For example, when evaluating companies that serve hospitals, how can one reasonably predict what the hospital of the future will look like, or when hospitals will have the time or financial resources to embrace the new or innovative?

The duration of the Covid-19 outbreak will dictate how and when we treat routine and elective procedures like knee replacements and cataract extraction — first with trepidation and eventually at the levels seen in January. But patients’ fear of hospitals could affect the volume of procedures long after the pandemic subsides. And uncertainty as to whether elective procedures will return in full force ahead of the release of a vaccine (which even the most aggressive predictions pin at 12 to 18 months out) raises even further question about already shaky ground.

Practitioner skepticism over whether employers hold their best interests at heart or have been adequately protecting their efforts on the frontlines will figure into inevitable changes to hospital infrastructure and care standards. It is reasonable to expect that what we previously called “patient and practitioner experience” will transition to become “patient and practitioner demands” in the post-Covid-19 era. The definitions of “nice to have” and “need to have” as defined by patients and their caregivers will become increasingly polarized, with both patients and practitioners defining what they will require before returning to the hospital. These demands could ultimately become the lens through which health systems and leaders make future decisions about innovations and investments.

Market demand

Ultimately, investors will continue to play a critical role in how the health care industry rebuilds itself. The demand for venture funding will almost certainly increase as new business models and concepts emerge from the melee and the faltering foundation of health care delivery caused by Covid-19. Entrepreneurs will rush to fill gaps such as higher thresholds for infection prevention, social distancing within hospitals, relaxation of HIPAA standards, or even remote clinical consultations that have already been highlighted as fresh opportunities for change.

With debt markets completely locked up, health care companies in the commercialization phase will also be forced to approach venture funds for both their dollars and their therapeutic counsel. Yet it is uncertain at this point in the crisis if venture investors will be responsive.

Fortunately, venture capital firms in the health care space do not necessarily mean vulture capital. Many funds are committed to advancing meaningful solutions in the industry and supporting the needs of underserved populations and the greater good.

What’s next?

Venture capital has been and will remain an integral part of the health care innovation ecosystem. But some of these companies might be better equipped to help the sector reach its new normal than others. Just as this global crisis is separating the survivors from the victims in the hospital market and across our populations, so too will it accelerate the success or the demise of venture funds.

Investors who rose through the ranks as former entrepreneurs and business operators and those who prioritize their existing portfolio companies over new investments might be better positioned to see long-term returns — both financial and in terms of loyalty. Conversely, investors who exclusively chase the shiny new object may have near-term returns but will lose the trust and confidence of the entrepreneurial community.

Just as investors should focus on long-term outcomes, health care innovators must also take the long view. This (hopefully) once-in-a-lifetime upheaval is an opportunity for transformation and reimagining standards, perceptions, and practices. The sacred cows of health care are no longer looking so sacred, and the right health care companies and venture investors will recognize this opportunity and maximize their ability to do well by doing good.

Eric M. Stone is a health care entrepreneur, patient advocate, chronic disease sufferer, adviser to several health care startups, and co-founder and chief executive officer of Velano Vascular.

Covid-19 is changing the game for health care companies and investors