Advanced economies typically spend about 10% of GDP on keeping their citizens in good health, a share that is rising as populations age. America’s profit-riddled healthcare-industrial complex consumes 17% of GDP, equivalent to $3.6trn a year. That is unsustainable. However, changes are slowly being implemented that could lower healthcare costs.
Healthcare is ripe for disruption, but any attempt to disrupt our state of healthcare has been met with pushback and challenges. PBMs, insurers, pharma companies, and hospitals don’t want to give up their profits even if it’s better for the general population.
Alphabet, Google’s corporate parent, healthcare ambitions seem to be the most approach to disrupting healthcare. Between 2019 and 2021, Alphabet’s venture-capital arms, Google Ventures, and Gradient Ventures, and its private-equity unit, CapitalG, made about 100 deals, a quarter of Alphabet’s combined total, in life sciences and health care. So far this year, it has injected $1.7bn into futuristic health ideas, according to CB Insights, a data provider, leaving its fellow tech giants, which spent around $100m all told, in the dust.
Alphabet is the fifth-highest-ranking business in the Nature Index, which measures the impact of scientific papers in life sciences, behind four giant drugmakers and 20 spots ahead of Microsoft, the only other tech giant in the running. The company has hired former senior health regulators to help it navigate America’s healthcare bureaucracy.
Google launched itself into the wearables business in 2019 with a $2.1bn acquisition of Fitbit. The firm’s popular fitness tracker has counted steps and other exertions on around 100m wrists. It has come a long way since the Nintendo Wii motion-detecting game console inspired Fitbit’s founders. A new feature—a sensor that monitors changes in the heart rate for irregularities that can lead to strokes and heart failure—has just been approved by America’s Food and Drug Administration (FDA). Google is also trying to boost the healthcare potential of its other devices. To help it along, it has enlisted Bakul Patel; a former official tasked with creating the regulatory classification of “software as a medical device” at the FDA.
The FDA’s stamp of approval for the Fitbit sensor is a big deal. It should make it easier to get a similar thumbs-up for Google’s higher-end Pixel Watch, which uses a lot of the same technology and is due out this autumn, as well as other gadgets.
Google is also giving health records another whirl. The new initiative, Care Studio, aims at doctors rather than patients. Google’s earlier efforts in this area were derailed partly by hospitals’ sluggishness in digitizing their patient records. That problem has mostly gone away, but another has emerged, says Karen DeSalvo, Google’s health chief—the inability of different providers’ records to talk to each other. Dr de Salvo has been vocal about the need for greater interoperability since her days in the Obama administration, where she was in charge of coordinating American health information technology. Until that happens, Care Studio is meant to act as both translator and repository (naturally, searchable).
Then there is the cost of generic drugs. Mark Cuban made a big splash in the world of generic medications when he launched a new company earlier this year, pledging to only charge a 15% mark-up for its generic medicines,
Widespread cost savings from using Cuban’s new company could be steep. A recent study in the Annals of Internal Medicine took a look at almost 90 generic drugs that the Medicare Part D program pays for, finding that Medicare could’ve saved $3.6 billion in 2020 if it had purchased 77 of 89 drugs from Cuban’s firm.
Generic drugs versus branded is also a considerable expense. Mylan recently launched a generic version of the Advair inhaler at a 70% discount. But Express Scripts, which manages pharmacy benefits for 100 million people, is telling pharmacies to dispense the more expensive Advair brand because it won’t cover Mylan’s generic.
Express Scripts currently requires pharmacies to dispense the brand-name versions of 9 medications instead of their generic equivalents, including Advair, according to a March memo obtained by Axios. If pharmacies try to fill those generic prescriptions, the claims are rejected.
Will pharma and other healthcare companies partner with disruptive organizations? Not if it affects their bottom line. America’s healthcare system is just too damn profitable.