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Editorís focus: Whose business is it, anyway?
February 2018
by Jeffrey Bouley  |  Email the author
SHARING OPTIONS:

It sounds so simple in single-sentence form, and it goes like this: Three giant corporations—Amazon, Berkshire Hathaway and JPMorgan Chase, to be exact—announced near the end of January that they would form an independent healthcare company for their employees in the United States, in part to rein in the increasingly skyrocketing cost of healthcare.
 
So easy to say; so hard to wrap one’s mind around, though.
 
To say this announcement sent some shockwaves through the stock prices of health insurance companies and others in the healthcare world probably goes without saying. It’s not as if other companies—automakers in the late 20th century and individual big companies in recent years, like Walmart and Caterpillar—haven’t tried to take better control of health costs. But this trio includes a Warren Buffet-led holding company, one of the largest banks in the country and an online retail powerhouse that seems to make a habit of disrupting industries (not to mention that Amazon also has made noises about entering into the pharmacy marketplace—oh, and did I mention that CVS Health, a drug store chain, is working to buy the health insurer Aetna?).
 
As Jim Miller, president of PharmSource (which is a company of the business advice and analyst firm GlobalData) noted of the Amazon-Berkshire-JPMorgan triumvirate, “This is not the first instance of large corporations trying to take control of their healthcare costs; the U.S. auto companies, for instance, began analyzing their employees’ healthcare utilization 30 years ago. Despite efforts like that, healthcare costs have continued to grow at twice the rate of inflation.
 
“Clearly, having the talent and resources of America’s best companies can only be a good thing in the effort to bring healthcare costs under control. But healthcare costs have been resistant to innovation and intellect for decades, so we shouldn’t get too carried away about the transformative impact that even Bezos, Buffett and Dimon can have on the problem.”
 
And why should you, a DDNews reader, care?
 
Well, because while all of this is going on, Salt Lake City-based Intermountain Healthcare, a group of Catholic health systems (Ascension, SSM Health, and Trinity Health) and the U.S. Department of Veterans Affairs health administration (which represents 450 hospitals) have proposed to create a non-profit generic drug company to deal with the problem of drug shortages and rising drug costs. As they predict of their efforts in a news release: “The new initiative will result in lower costs and more predictable supplies of essential generic medicines, helping ensure that patients and their needs come first in the generic drug marketplace.”
 
See a trend here? Corporations with no experience in healthcare aside from providing insurance coverage for employees and maybe having healthcare clients/customers want to get into the health coverage business. Organizations that need to purchase and administer drugs getting into the business of either making generic drugs or contracting with CROs and CDMOs to design and make them on their behalf.
 
How long before we have people from very much outside the industry thinking that perhaps if they move into the field of discovering and developing drugs, they will be able to solve all the problems of high drug costs, long development timelines and more?
 
Which isn’t to say that would be all bad (though remember that former hedge fund manager Martin Shkreli bought out the very necessary and very affordable antiparasitic drug Daraprim and jacked up the price by more than 5,000 percent, so outsiders driving down prices isn’t a foregone conclusion). Disruption can be good at times.
 
Certainly, pharma giants have moved from major in-house R&D of decades ago to relying more and more on snatching up smaller companies with promising products or entering into “de-risking” deals with universities and research institutions. Novel ideas have long been in play by the pharma industry to deal with the complex challenges it faces. It is an industry in flux and is still trying to find the right balance between cost and profit, risk and caution.
 
So, maybe a corporate behemoth shakeup of healthcare will work. Maybe a non-profit generic drug-making collaboration will work.
 
And maybe Google deciding to become a drug discovery and development powerhouse or advocacy groups trying to supplant the FDA could work too, but do pardon me if—should such things happen—I remain skeptical that a very few entities, no matter how much wealth or resources they have, are going to readily fix problems of cost and supply simply because they want to.

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