Things I’m Thinking About In Healthcare Part 1

Nikhil Krishnan
Oct 9, 2016 · 9 min read

There are too many middlemen “two-way” advocates in the health system

The intermediaries, including wholesalers and pharmaceutical benefits managers, or PBMs, are key players in deciding which drugs get used and how much they cost patients. While the rebate amounts are usually kept under wraps for competitive reasons, the case of EpiPen is offering a rare insight into how the system works — and the blame game resulting from it. Drugmakers say the price increases fund ever-rising rebates, while PBMs say costs would be even higher if they didn’t negotiate the discounts on behalf of insurers and employers.

“The PBMs say things like ‘It helps us keep our prices low to our customers,”’ [Wells Fargo analyst David Maris] said of rebates. “But that’s not what’s going on, it’s part of their business model now.”

The proposed Medicare pilot will fundamentally change how doctors are reimbursed for giving chemotherapy and other injectable drugs. Currently, doctors are paid by a simple formula: the average sales price of the drug, plus 6 percent (under the federal budget sequester, that amount has been cut to 4.3 percent). That means doctors see a bigger upside when they prescribe and administer the most expensive drugs. Under the pilot, doctors will receive an amount far less influenced by the drug’s price: a flat fee, plus 2.5 percent of the price (0.9 percent under the sequester).

Many healthcare products have CPG (consumer packaged goods) characteristics

Affordable Care Act “native” businesses

I had fun making this

Rather than trying to improve them, the most exciting health tech companies will ignore the parts of healthcare that have become obviously anachronistic, actively discarding convention. The seeds of this difference have been sown in a handful of companies started in the last few years. They are painstakingly taking relationships from incumbents, winning with deflation, and making healthcare markets more efficient. A different healthcare system will inevitably be created.

Patient information is unnecessarily overguarded and overblown

Areas I’m Interested In/See Opportunity

Thanks to Malay Gandhi and Michael Dempsey

Nikhil Krishnan

Written by

I try to be funny about tech but usually fail. Tech Industry Analyst @cbinsights, @columbia alum

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