SAN FRANCISCO – The healthcare business class returned to its San Francisco haven last week for JPMorgan’s annual healthcare conference at the gilded Westin St. Francis in Union Square. After a two-year pandemic, the mood among the CEOs, bankers and startup founders in attendance had the aura of a reunion — as they gossiped about promotions, work-from-home routines, who would get what investments. Dressed in their best capitalist attire – ranging from brilliant blue or pastel purple blazers to chic puffer coats – they gathered for big parties held in art galleries and restaurants.
But the fun was tinged with a new anxiety: will the big money invested in healthcare because of COVID-19 continue to flow? Would investors be looking for results – meaning profits – instead of just cool ideas?
The busy conference had as much talk about profits as it did about patients. The mostly maskless crowd spoke English, French, Japanese — and, of course, money.
In addition to corporate and investment types, attendees routinely saw surprising characters — like celebrity doctor Mehmet Oz, who held court in the lobby on Jan. 10 fresh off his Senate loss.
Although the atmosphere in the packed hotel corridors was upbeat – or, at least, cheerful – there was a thud of anxiety underneath as everyone was aware that the fortunes of the healthcare business seemed to be slowing.
The conference began with a sidewalk protest by the pharmaceutical company Gilead Sciences, whose drugs to fight HIV and hepatitis C are incredibly effective — and incredibly expensive. During the pandemic, Congress for the first time created a plan that would allow Medicare to negotiate drug prices in the US, which are by far the highest in the world. In a statement, company spokeswoman Catherine Cantone said Gilead is the largest private funder of HIV programs in the US, adding: “Gilead’s role in ending the HIV and hepatitis epidemics is to discover, develop and provide access to our life-saving medicines.”
Then there is the economic environment, which is becoming insidious. Journalists from the financial publication Bloomberg diagnosed a lack of exciting deals. Startup executives—who used to find it easy to get millions of dollars in investment—seemed obliged to show results in their impromptu pitches in bars and coffee shops. Business executives of all stripes have promised that they are either turning a profit right now or they will…soon.
“I think it’s a tough year,” Hemant Taneja, CEO of venture capital firm General Catalyst, said during a panel. He suggested that large swathes of health tech startups are overvalued and that their customers will be more interested in whether they actually provide useful services.
The new message to potential investors was clear. “The idea that you can grow without being profitable is dead, gone,” Dr. Jon Cohen, CEO of mental health startup Talkspace, said in an interview.
Some tried to celebrate both financial and humanitarian success. BioNTech co-founder Uğur Şahin was interrupted by applause during the presentation as the mRNA vaccine developer, along with Pfizer, recounted the role of injections in the fight against the pandemic. And that was before highlighting his company’s role in reducing infectious diseases, saving lives and meeting the global health needs for tuberculosis and malaria.
The conversation later turned to the pricing of his company’s flagship vaccine — which it is trying to set at more than $100 per dose, compared to the average national purchase price of $20.69. One hundred dollars is a fair price in terms of “health economics,” argues BioNTech’s chief strategy officer, Ryan Richardson: hospitalizations and serious outcomes avoided.
A thought provoking comment
There was cognitive dissonance at the conference. Consider drugstore giant CVS — which is steadily expanding beyond its retail roots into health insurance and primary care. CVS Health CEO Karen Lynch said the company looks at all factors underlying health as part of its health business. “Health isn’t just about working with a provider; it’s about all the other factors — including housing and nutrition,” she said. The sight that often greets CVS customers upon entering the store has been overlooked: candy, chips and other processed foods.
For critics, it was a mind-boggling comment. “The last I heard, CVS was a for-profit company, not a welfare agency,” said Marion Nestle, a researcher who has been a longtime critic of the food industry. “It sells junk food that makes people sick and drugs to cure those diseases. What a great business model!”
CVS spokesman Ethan Slavin offered a very different vision, one in which CVS strives to be the ultimate health and wellness destination. “We are constantly evolving our food and drink range to offer healthier, trendier products.” It also supports programs to increase food availability in underserved areas, he added.
Some techies have encountered new skepticism about “artificial intelligence.” Ginkgo Bioworks co-founder Jason Kelly noted during his presentation that people at the conference heard so much about AI during the meetings, “they want to stop listening to it.” (Ginkgo’s AI, used to support pharmaceutical and biotech research, he said, was different from the others.)
One surgeon, Dr. Rajesh Aggarwal, revealed that discussions with financiers about the stealth startup he founded, which focuses on metabolic health, focused on silver bullets. “Tell me if I invest in this, I’ll increase my spending 10x,” he said, paraphrasing the bankers. Many, he said, wanted to “do something good” for the patients.
Aggarwal felt that investors are looking for simple solutions to health problems. And one item fits that: a new class of drugs — GLP-1 agonists, a type of drug that helps with weight loss but will likely have to be taken for a long time. Some analysts predict that these drugs will be worth $50 billion. Bankers, Aggarwal opined, aren’t “thinking health care,” they’re “thinking dollars tied to the pill.”
KHN (Kaiser Health News) is a national, editorially independent program of the Kaiser Family Foundation.