Latest / CareTalk: Healthcare. Unfiltered. / Is The JPM Healthcare Conference Still Relevant?

Transcript

Is The JPM Healthcare Conference Still Relevant? · CareTalk: Healthcare. Unfiltered.

• 0:00
  It's mid January, so it must be time for the J. P.
• 0:03
  Morgan Healthcare Conference, where tens of thousands of biotech and healthcare companies and investors and hangers on come together in San Francisco to network and make plans for the year ahead.
• 0:13
  But with the pandemic, rival conferences and bad news about San Francisco, is the J. P.
• 0:20
  Morgan conference still relevant in 2024?
• 0:24
  You welcome to care Talk, America's home for incisive debate about healthcare, business and policy.
• 0:35
  I'm David Williams, president of health Business Group.
• 0:38
  And I'm John Driscoll, president of Walgreens Health.
• 0:41
  David Hangers on, are you talking about you and I?
• 0:45
  No, John, I'm actually not going to go this year.
• 0:48
  So I'm not going to be hanging on.
• 0:50
  Sometimes I would say, I'm not going. I'm not going.
• 0:52
  And then last minute a client would say, you got to come, and I would go. But not this year. No.
• 0:56
  And you?
• 0:57
  Oh, yeah, no.
• 0:59
  I've got some family stuff I've got to deal with early this week.
• 1:02
  But you don't want to miss the.
• 1:05
  It used to be the Indy 500 of deals and connection making. Maybe it's the.
• 1:10
  Maybe it's the Indy 200 now with the competing events, but it is still the signature event of kind of the healthcare business year.
• 1:21
  Do you want to describe it, David, just so people have a sense of kind of what's going on at the Weston in San Francisco and just contextualize this for the unknowing.
• 1:33
  For sure. John.
• 1:34
  So the idea is it's the start of the year, and after people get over their hangover from New Year's Day, they say, okay, what year is it, and what am I doing?
• 1:42
  So usually come together, investors and companies together, and companies present to the investors and tell them, hey, what's going on in the world.
• 1:50
  Now, it started out as purely biotech, and it used to be called the H and Q conference because it was Hambrook and Quist back in 1983, when they had a couple of hundred attendees, 20 companies, and then the company was H and Q was acquired by Chase, which was then acquired by J. P.
• 2:04
  Morgan in 2000.
• 2:06
  So since then, it's gotten to be very big and gone well beyond biotech to basically be everything within biopharmaceuticals and then healthcare, life sciences, and all sorts of other stuff that's out there.
• 2:19
  But it's basically, there's the conference itself, which a lot of people go to, but even more people are just there because of who else is there.
• 2:26
  Networking, sitting in cafes, and spending a lot of money at the western.
• 2:30
  But it's such a big economic boom for three or four days that I think up to 20,000 healthcare professionals come from the United States and around the world, from every part of the sector.
• 2:48
  There are tracks for the nonprofit hospitals, there are tracks for investing in healthcare in China, as well as the large biotech and pharma company and every service company, and actually every rinky dink little digital health idea, all of them converging on.
• 3:09
  I mean, it's such a massive boom for the city of San Francisco that when, to your point, Hembricktonquist, which was sort of a boutique biotech investment company, was sold to Chase, and Chase then was sold to Morgan, one of Jamie Dimon's largest deals.
• 3:29
  That is a condition of approval of the deal.
• 3:32
  The state of California apparently required that Morgan keep this conference in San Francisco.
• 3:42
  David, that's how big a deal it is.
• 3:44
  And I guess that makes sense, because as the most important conference, at least at the moment, in healthcare, you're talking about 20% of the US economy and a high variety.
• 3:55
  And once you hit a concentration of money and companies and media, it really does make sense, even if you just want to meet other companies, which is often what you and I end up doing out there to go there.
• 4:08
  It's built around a series of formal presentations that large public companies and private companies with a lot of debt are making to investors, but also private companies kind of teasing the market about whether they go public or whether they get sold privately.
• 4:26
  And then there are thousands, and I mean tens of thousands of meetings.
• 4:30
  It so absorbs all of the meeting space that, in fact, David, you and I have run into this.
• 4:36
  You're trying to sit down for a cup of coffee and someone says, well, $20 to sit there.
• 4:41
  Even the space rates go up in a city that's kept kind of a damaged reputation, but it's sort of the lollapalooza, where Lalapalooza meets the Indy 500.
• 4:53
  In terms of bad for the healthcare, that's good. John.
• 4:57
  As long as they don't have too much burning man mixed in with it, I think it's okay.
• 5:02
  Maybe the digital investors are feeling a little bit like the burning part of Burning man.
• 5:08
  But, David, maybe we talk a little bit about what do you expect this week?
• 5:11
  Because it's going to be covered on, I think today my boss Tim Wentworth's on Kramer and CNBC, and all of the business presses out there.
• 5:21
  But do you expect any news this week in the healthcare industry?
• 5:25
  Yeah, let's start on the biotech side, which is where the conference began and still the heart of it, in a sense, and, in fact, where real innovation does occur in the healthcare space, to the extent that there is any.
• 5:36
  John, everything's relative.
• 5:37
  And Biotech had a tough year last year, a lot of it having to do with interest rates being high.
• 5:44
  But over the time from November, December, there's like a 30% rally in biotech shares, and you'll start to see acquisitions being made.
• 5:52
  There were some toward the end of the year, and I think Johnson and Johnson kicked off the week with acquisition of Ambryx Biopharma, which is in the cancer space.
• 6:00
  So it's a biotech company acquired for a couple billion dollars.
• 6:03
  I expect you see more of that.
• 6:04
  Yes, John, I just think this is where people use the event to try to make news and create momentum.
• 6:14
  I think there's been, what is it, a 20 or 30% revival in the biotech stocks.
• 6:21
  But the challenge with biotech is it either looks too easy or is too hard.
• 6:26
  These are very highly complicated binary bets on whether a complex biologic will change the course of your cancer therapy or, frankly, your diet and outlook.
• 6:37
  Obesity and cancer seem to be the big categories that are ripping right now.
• 6:42
  And this is an opportunity to make news.
• 6:45
  But I think for every deal that's announced, there's probably 20 that are being negotiated at the outskirts of the conference right now.
• 6:53
  David, what about the digital health darlings that zoomed from a market perspective and value perspective during COVID as Covid has gone? Are they dead?
• 7:06
  Because I think there's, like 70% deflation in their stock values.
• 7:10
  What happens to the digital darlings?
• 7:13
  Well, they zoom, John, and they are digital darlings.
• 7:15
  And then the kind of the black swan, or whatever you want to call it, that happened, what you see there, bulldozer boom.
• 7:22
  Killed it right over them.
• 7:24
  There wasn't a lot of funding in the space last year, not a lot of ipos, but there's a few.
• 7:28
  So Teladoc, which had led things up and down, they seem to be doing better right now, is what I see.
• 7:36
  And then you've got clover health, which is expecting to make a profit in 2024, and then Oscar, which also had an IPO, and they're expecting to make money.
• 7:46
  So you're seeing like a more.
• 7:48
  It's less of a darling and more of sort of getting back to trying to show that they're more normal companies that can make money.
• 7:54
  So I don't know that we'll see anything super exciting, except there are some that are saying hey, we're making solid progress and less looking at going for the moon and more just for the upper atmosphere.
• 8:05
  So, digital darlings have a pulse.
• 8:08
  Not dead, still standing.
• 8:11
  Is your view on the Oscar Telek?
• 8:14
  I think I'm a little bit more skeptical of the clovers and the brights.
• 8:17
  I mean, there are the digital darlings that are truly digital, like a teladoc or digitally enabled like an Oscar.
• 8:25
  And then there are the posers like bright and Clover who said they were using technology, but it turns out they were standard variety, relative sort of slow stop go growth Medicare Advantage businesses that are taking risk.
• 8:43
  And honestly, the new Medicare Advantage, that's the managed care businesses in Medicare that were public.
• 8:51
  They've had a rough run as well.
• 8:53
  I mean, you saw that Agilen blew their earnings.
• 8:55
  Agilen's a physician practice management business that seemed to not be able to manage the physician practice.
• 9:03
  And the Medicare Advantage businesses, which were again growing like or valued like crazy and growing substantially during COVID in the last few years, have had a comeuppance.
• 9:15
  I mean, whether it's the large managed care companies like the Humana's and the United's or the smaller ones like Brighton Clover, the large ones have caught a cold and the other ones appear to have caught you.
• 9:28
  What's your perspective on this is again, everybody gets to tell their story at Morgan.
• 9:34
  What do you expect from managed care?
• 9:36
  Regarding Medicare Advantage?
• 9:38
  There's a lot of happy talk that people want to make now.
• 9:41
  In some ways it's good that these companies weren't radically different.
• 9:45
  Okay, well, at least it's like a health insurer.
• 9:47
  At least I can kind of understand what that is.
• 9:50
  There's definitely a sense that there's been too much focus on risk adjustment and kind of playing the game there as opposed to kind of fundamentally doing things like really engaging better with the patients and managing their health.
• 10:06
  I think it's just kind of hard to do.
• 10:07
  If anything, a reset is kind of in order there.
• 10:11
  And I think they'll just say, hey, we're taking a very sober view of this.
• 10:15
  But John, if you compare it with, I think you're missing one little thing there.
• 10:20
  David, what is it though?
• 10:22
  There's so much that you're missing, but managed care depends on the generosity of taxpayers.
• 10:32
  In the Medicare Advantage business, there is an annual price increase, there's a risk adjustment which allows you to basically charge a higher price for sicker patients.
• 10:43
  There are a number of levers that managed care has to increase its margins.
• 10:49
  And I think the reality is with not ballooning, but exploding budget deficit.
• 10:57
  And I think that you have pretty solid growth.
• 11:00
  I think the managed care companies are expecting to have a 5% enrollment growth in their Medicare books that the federal government is basically saying, look, we know we've been overpaying you.
• 11:10
  We're not quite sure how much.
• 11:12
  So we're just going to put the squeeze on you.
• 11:13
  And I think that's going to change the momentum of margin expansion.
• 11:18
  These are large, complicated businesses to run, and if you don't have just the buyer willing to pay you more, they really have to focus on managing in the details.
• 11:30
  And I think the advantage is going to go to the larger companies, but I think the air is going to be out of the balloon there for a while while they're, I think, very still substantial businesses.
• 11:40
  It's hard for me to believe that Medicare and Medicaid aren't going to continue to put the squeeze on the managed care players just simply because of the function of the fact that the budgets are.
• 11:50
  That we borrowed too much money and there's not enough taxpayer revenue coming.
• 11:55
  John, you know, if the regulators in California hadn't insisted on the conference staying, there probably should be in Washington, DC.
• 12:02
  Let's talk across the sectors.
• 12:03
  So in biotech, we talked about how high interest rates had been a factor.
• 12:06
  Well, that's certainly from the federal government.
• 12:08
  And there's a couple of other things that are being looked at from a policy standpoint, including the FTC enforcing some restrictions that are preventing investments, in one case by Sanofi for new Pompeii treatment with a startup company, concern about whether the Biden administration is going to use marching rights to invalidate patents for products that were developed using federal funding, which is most.
• 12:27
  But stop talking about the marching rights.
• 12:32
  Are you talking about those bands that play for the big ten?
• 12:37
  What are marching rights exactly, John?
• 12:38
  Talking about the Sousafone, et cetera.
• 12:40
  So the idea is that a lot of drugs are produced with research that was funded by the federal government, mostly NIH.
• 12:50
  And the idea is, hey, then a private company gets the patent, but if the products are overpriced or the government's not getting its value out of it, there's a threat to kind of come in and say, well, those patents aren't valid.
• 13:04
  Now, it's beyond my legal knowledge here to deal with it, but it's basically a political thing, stepping back and contextualizing it.
• 13:13
  I think that there's bipartisan outrage at drug costs.
• 13:19
  And look, it's a complicated issue because you want to protect your novel life changing life saving drugs.
• 13:30
  But if a lot of the primary, and this is a point that President Biden's made, if a lot of them or all of the primary research has been paid for by the taxpayer, the feds are okay with you charging a reasonable amount, but at the point at which you're charging extortionate prices to cure diabetes or to cure a particular type of cancer, I think that the feds are taking a narrower look at this.
• 13:56
  And again, I think it's not a black and white thing, but I do think you have, whether it's Donald Trump or Bernie Sanders, the two partners who rarely join, who are equally outraged at high drug prices, this is a way sort of getting to the source of limiting big pharma, or any pharma taking advantage of the generosity of the federal kind of pure research.
• 14:24
  I think it's really interesting.
• 14:25
  I think there's three or four vectors that are going to change the way biotech and pharma and drugs get developed.
• 14:33
  One is how the federal government treats the access and rights to patent for research that they've done.
• 14:41
  Another know, obviously, coverage decisions, what they cover and what they mean.
• 14:47
  The great example there would be a Duhelm and kind of the restrictions and a more nuanced view of, particularly for really difficult disease conditions, how much Medicare covers.
• 14:59
  Because once Medicare makes a determination about whether it's going to cover Medicare being the federal government for elderly people, then that's a signal generally for managed care companies and other insurers to cover.
• 15:10
  And the third is how the federal government handles the Medicare drug price negotiations.
• 15:17
  The first ten drugs represent about $50 billion worth of spend for the federal government.
• 15:23
  They picked the drugs, but the federal government has not actually communicated the framework to negotiate those prices in what it thinks is a reasonable price.
• 15:33
  It's going to be really interesting in September what happens there.
• 15:36
  So to your point about the fact that this conference is really about biotech and pharma, I think both of those industries are kind of holding their breath to try to determine, and the fourth vector being tier point trade, FTC, DOJ decisions on mergers and acquisitions, because historically, mergers and acquisitions have been the vehicle by which larger farmer companies that control and drive distribution have been able to, rather than innovate, they just finance and purchase.
• 16:07
  And if you think about it, increasingly the future of that industry is going to be decided in those pale, dimly lit, class b buildings that the federal government has in DC, as opposed to kind of high end suites at the four Seasons in San Francisco.
• 16:29
  It's actually interesting at how many different ways in which government decisions are going to affect the arc and the growth and the delivery of what happens in this industry?
• 16:41
  Well, let me make the case for biotech here for a second.
• 16:44
  So on the one hand, you've know the feds are paying for the early research and then they're paying for the drugs for reimbursement once it's there.
• 16:52
  But that will sometimes say, and then you'll have people like Sanders and Trump say, well, the prices are too a drug company.
• 16:59
  If I'm going to go and develop one of these drugs, it is extremely difficult to actually do the development.
• 17:02
  It's something that seems very promising when it was done in early development, could take decades and hundreds of millions of dollars to try to bring it through to clinical trials.
• 17:10
  And there's got to be a payoff at the end of the rainbow there.
• 17:13
  If you actually do something that's good, if you have high interest rates, which make it harder to finance for the long term, that's needed.
• 17:20
  If you're unsure of what you're going to get in terms of reimbursement and whether you can be acquired, it makes it a lot harder.
• 17:24
  And for at least these type of companies, when you're dealing with early stage companies, it makes it a lot harder to get innovation out there.
• 17:31
  It's very different from saying you've got a product that's a metoo product that's mostly focused on marketing and is just overcharging from kind of a monopoly position and going after that.
• 17:41
  You have to be very careful about hurting the early stage innovation versus dealing with things that are abusive.
• 17:47
  At the end of the whole wine, wine, wine, 70% of all of the drug inflation in the last decade or so is in standard chemical commas, not the novel biotech.
• 18:01
  I think you could carve out the novel biotechs and treat them differently.
• 18:04
  I think you're justifying the overcharging by pharma.
• 18:09
  Not at all.
• 18:10
  John, you're making my point.
• 18:13
  Go after those products and don't do things that make it hard at the end of the biotech range.
• 18:18
  Now you start to narrow the field.
• 18:20
  I mean, come on, David.
• 18:21
  I do think you make a really important point about uncertainty, though, as a business person, there are some phenomenal male and female executives leading some of these great biotech large and pharma companies.
• 18:36
  So I don't want to misspeak there, but you kind of just want to know what the rules don't.
• 18:43
  I think that the uncertainty around these four vectors, and because government doesn't like to make a decision if it doesn't have to, is actually creating more noise in the system than if they just laid out the rules. Yeah.
• 18:56
  John, let's finish up by talking about hospitals, because you were talking about who's going and presenting at the conference, and it's the public companies and also private organizations, really, frankly, whether for profit or not for profit, with a lot of debt.
• 19:10
  And hospitals have been losing billions of dollars, John, and that means they need to borrow a bunch of money.
• 19:16
  And if I'm going to make a know essentially, which is what a bond.
• 19:21
  Why, what argument is a hospital going to make that I should give them more billions of dollars that they can put toward their losses?
• 19:28
  Oh, I don't think you have to worry about that, David.
• 19:31
  I mean, most of them have portfolios of mean, let's put them into different buckets.
• 19:36
  I think the large integrated hospital systems with large investment portfolios, they're going to do just fine.
• 19:47
  They have major donors.
• 19:49
  They have a lot of political cover locally and federally.
• 19:52
  I do worry about the hospitals in rural areas and in urban areas where they don't have the right payer mix.
• 20:00
  They're covering more Medicaid and the no pays and the folks who are uninsured.
• 20:08
  I think in those cases where the mix of services they're doing, more primary care versus more interventional cardiology and cardiac stuff, or their payer mix, who pays for the bills is lower.
• 20:24
  I think it's really going to be a tale of two cities.
• 20:26
  I think that the large systems, even though they may be under a lot of stress, to your point, are going to be just fine because of their leadership, their political sponsorship, their reach.
• 20:36
  In many cases, they're the largest employers in these communities.
• 20:39
  So they've got a lot of political cover, not just because of the service they provide.
• 20:43
  But I do worry about hospitals in rural areas where you don't have that large concentration of power.
• 20:50
  I do worry about inner city hospitals that are serving primarily or exclusively the poor.
• 20:56
  I think we've got a social need to protect those.
• 21:03
  And I would look to the federal and state governments to actually make sure that they're backstopping them.
• 21:09
  But I think it's a tale of two cities, one of which is going to be fine, and the other one is really in trouble.
• 21:15
  Well, John, I'm glad you're carrying the caretalk flag out to the west coast this week.
• 21:19
  I'll look for it waving on tv.
• 21:21
  And for now I'll say that's it for yet another episode of Caretalk we've been talking about the J. P.
• 21:26
  Morgan Healthcare Conference 2024.
• 21:28
  I'm David Williams, president of health Business Group.
• 21:32
  And I'm John Driscoll of president of Walgreens south.
• 21:34
  If you liked what you heard or you didn't, please subscribe on your favorite service and we would love a review.
• 21:40
  Reviews help support our show and we love those who help support our show.