| THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
1. Weight loss drug Wegovy cuts risk of heart problems by 20 percent. On Tuesday, Novo Nordisk released the headline results of a large clinical trial demonstrating that its popular GLP-1 inhibitor Wegovy reduced the risk of heart attacks, strokes, and cardiovascular deaths by 20 percent. The SELECT trial enrolled roughly 17,600 non-diabetic adults aged 45 and older who were overweight or obese with established cardiovascular disease. It compared people in this population treated with the drug to those given a placebo, and tracked them for up to five years. The drugmaker said it plans to release the full trial results at a conference later this year. These results are similar to a previous study that found Wegovy sister drug Ozempic, also made by Novo Nordisk, reduced the risk of adverse cardiac events by 26 percent in adults with type 2 diabetes.
The Gist: The cardioprotective effects demonstrated in this study far exceeded researchers’ expectations. Though concerns still abound about the high costs of Wegovy (nearly $1,350 per month) and similar drugs, these results will certainly put pressure on Medicare and other insurers to provide coverage. Questions remain around how the drug actually improves cardiovascular outcomes, and whether patients with cardiac disease who are not overweight or obese might also benefit from taking it. Despite the fact that the data are still preliminary, the argument that obesity medications are solely “lifestyle” or “vanity drugs”—which some insurers and employers have been using to deny coverage—will now be much harder to defend.
2. Babylon Health to end US business as proposed go-private deal falls through. The beleaguered digital health company announced on Monday that its previously proposed arrangement to go private via a deal with Swiss-based neurotechnology company MindMaze will not happen, offering no further details. That deal was arranged by AlbaCore Capital Group, which had secured a loan for Babylon in May to implement the transaction. Babylon said that it will now exit its core US businesses, which consist mostly of value-based agreements with health plans, and will continue to seek a buyer for its Meritage Medical Network, a California-based independent practice association (IPA) comprised of approximately 1,800 physicians. Babylon said it may have to file for bankruptcy if it can’t secure additional funding or reach another deal to divest.
The Gist: Babylon is one of the starkest digital health “boom-and-bust” stories thus far. Despite the fact that the company overpromised and under-delivered in both the US and abroad, it was able to raise—and then lose—billions of dollars in just a few short years after going public in October 2021 via a special purpose acquisition corporation (SPAC) merger. It remains to be seen who will buy Babylon’s attractive IPA asset. Presumably insurers, retailers, health systems and other players are evaluating a purchase, either to enter or expand their provider footprint into Northern and Central California.
3. Latest court order pauses No Surprises Act’s Independent Dispute Resolution (IDR) process once again. This week, the Centers for Medicare and Medicaid Services (CMS) for the second time suspended the arbitration process, outlined in the No Surprises Act, for new out-of-network payment disputes between providers and payers. Federal judge Jeremy Kernodle in the Eastern District of Texas once again sided with the Texas Medical Association (TMA) in the lawsuit, which challenged CMS’s 2023 increase in administrative fees for arbitration (from $50 to $350), as well as restrictions on batching claims, which require providers to go through a separate IDR process for each claim related to an individual’s care episode. While CMS said that it made these changes to increase arbitration efficiency, TMA argued that the changes made the IDR process cost-prohibitive for providers, particularly smaller practices.
The Gist: Implementing the No Surprises Act has been a huge headache for CMS. Since it went into effect last spring, the IDR has seen a case load nearly 14 times greater than initially estimated, and has been hampered with delays. Insurers have blamed providers for overloading the system with frivolous claims, while providers have accused insurers of ignoring payment decisions determined by third-party arbiters or declining to pay in full. The silver lining amid all this infighting is that the No Surprises Act is successfully preventing surprise bills for many consumers, despite the intra-industry turf war over its implementation.
Plus—what we’ve been reading.
4. Are American doctors overpaid? A recent National Bureau of Economic Research (NBER) working paper analyzed the individual income tax records of 965,000 US physicians between 2005 through 2017 to provide a comprehensive look at physician earnings. As doctors’ incomes are often a combination of wage and business income, earnings are commonly underestimated in survey data. Researchers found that the average physician earned $350K per year, which rose to $405K annually during the prime earning years of ages 40-55. However, researchers found a large gap between the lowest and highest earners: the top ten percent of physicians in that age band averaged $1.3M per year, with those in the top one percent averaging over $4M (and 85 percent of that income coming from business income or capital gains versus wages).
The Gist: Many policymakers long believed that increasing the number physicians nationally would drive higher medical spending, and worked to constrain supply by freezing funding for residencies in the late 1990s, a move that has yet to be fully unwound. Recent research, however, has found that the impact of physician supply on excess treatment is small or nonexistent. Meanwhile, the imbalance in supply and demand has led to relatively high prices for physician labor. Compared to other western countries, the US has far fewer physicians per capita, and we pay our doctors significantly more. Case in point: Germany has 69 percent more physicians per capita, and American doctors are paid roughly 50 percent more than their German counterparts.
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