Humana's shopping spree continues, Mylan's offices were raided, and Comcast is making a health platform
|Apr 25||Public post|
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Humana, the health plan that might be getting acquired by Walmart, announced this week that they’ve done some acquiring themselves. Along with some private equity firms, Humana announced a plan to acquire Curo Health Services, a company that operates hospices in 22 states. Humana intends to combine Curo’s operations with those of Kindred Healthcare’s hospice arm to create what would be the nation’s single largest hospice operator.
With these acquisitions, Humana seems to be making a strong play for dominance in the Medicare Advantage market. Their recent focus has been on value based care, a model that calls for a controlled continuous care team across differing specialties. If the Curo and Kindred deals go through, Humana will be operating primary care practices, a robust in-home care operation, and the nation’s largest hospice chain. Humana would be the payer and provider for the vast majority of their Medicare Advantage population, allowing them to more deeply apply the theoretically cost-saving and value-boosting principles of value based care.
Their shopping companions, private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe, are also betting that Humana will be able to boost the value of these assets. The joint-venture partnership arrangement around the purchase of Kindred gives Humana a 40% stake in Kindred at Home (which includes home care and hospice), with a prior agreement that either party can force a sale of the remaining shares of the company to Humana within a few years. It’s safe to assume there were similar terms around the purchase of Curo. Private equity firms don’t get into a deal without a planned exit, so you can bet these firms will be working hard to increase Kindred at Home and Curo earnings so they can force a sale and get out with their healthy returns.
These deals make sense for Kindred as they improve their core offering, but what do they mean for Humana’s fate as an acquisition target? They certainly increase the overall price as it’s a larger enterprise. Aside from that, I’d argue they make Humana more attractive. Anyone acquiring Humana is most likely doing so because of their Medicare Advantage population, and these acquisitions only serve to make them more competitive in that space. Plus, any company large enough, like Walmart, to acquire Humana two months ago isn’t going to flinch at these additional costs.
When Mylan CEO Heather Bresch was testifying before Congress in 2016 over her company’s $600 price tag for EpiPens, her office in Pennsylvania was being raided by federal investigators.
Bloomberg reported yesterday afternoon that the first charges in a four-year probe into price fixing in the generic pharmaceutical industry are likely coming soon. The investigation, which “began in 2014 and has spread to nearly every major generic-drug manufacturer,” has been looming over the industry for some time.
The generics industry, as I’ve discussed in previous newsletters, is not doing so well. They’re having trouble earning the profit margins they’re accustomed to, meaning generic giant Teva, for example, is closing 40 manufacturing plants. Compound these financial issues with the above investigation which will likely show evidence of widespread collusion to avoid competition, and the fact that President Trump is planning a speech in which he’ll attack the high drug prices rampant across our healthcare system.
Finally, add in the new disruptive ventures like Intermountain’s non-profit generic drug making consortium and you’ve got a recipe for complete upheaval in the generic drug industry. When it all shakes out, the ideal result is that we’re not paying $600 for a drug that was first synthesized over a century ago.
Comcast, our nation’s most hated cable television and internet service provider, announced this week a collaborative joint-venture with Independence Health Group, a Blue Cross Blue Shield health plan based in Philadelphia. The venture will create a new company that will build a consumer-focused health information platform.
Yes. Comcast, the cable company.
Details are scant at this point, but CNBC reports that this platform will focus on allowing patients to access their data, and providing them with information relevant to their health needs. It will also be device agnostic, meaning Comcast isn’t just going to create “5 ways to fix your lower back pain” as a video listicle pushed to everyone with an xfinity cable box.
It’s an interesting move, as Apple is heading into adjacent space with their data initiative that puts patient’s healthcare data into the health app on their iPhones.
My biggest criticism of the Apple data initiative is that Apple typically caters to a higher socioeconomic bracket, and in-general a younger and more tech-savvy user base. Essentially, they’re providing better healthcare tools to people who are more likely to be healthy in the first place.
Comcast, on the other hand, has a user base that skews older. In fact, research firm eMarketer expects the overall number of Americans paying for television (via cable or satellite) to drop by 10% by 2021. They also anticipate that the 55+ demographic will actually increase their numbers in this regard. That 55+ demographic also happens to consume the vast majority of healthcare in this country.
Comcast’s announcement was met with snickering, but they could actually do a good job of reaching the people who need the most help, assuming this new JV leverages Comcast’s customer base, and isn’t just generic health content.