The Strategist in Brief: December 12, 2024

This episode covers breaking news about Walgreens reportedly in talks to sell itself to private equity firm Sycamore Partners, which could provide needed cash but also create financial pressures leading to potential bankruptcy. The episode also discusses the Biden administration's proposed rule expanding Medicare and Medicaid coverage for GLP-1 weight loss drugs to 7.4 million additional beneficiaries at a $40 billion cost over 10 years, Trump's emerging healthcare team including RFK Jr. and Dr. Mehmet Oz, and Bain & Company's prediction that non-traditional players could still capture 30% of the primary care market by 2030 despite retail health setbacks.

Transcript

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This is the audio version of The Strategist in Brief for December 12th, 2024. First, a piece of breaking news. According to a report in the Wall Street Journal, Walgreens is in talks to sell itself to the P. E. firm Sycamore Partners in a deal that would take the company private. The acquisition could provide Walgreens with a much needed infusion of cash and give the retailer a longer runway to figure out its faltering healthcare ambitions. But a leveraged buyout could also create financial pressures that lead to bankruptcy. Moving on to our market scans. The Biden administration issued a new proposed rule which would expand access to weight loss drugs and add guardrails for prior authorization in Medicare Advantage. The new rule proposes expanding Medicare and Medicaid coverage of weight loss medications, such as GLP 1s like semaglutide, to treat beneficiaries with obesity. Half of Medicare beneficiaries with obesity already have access to the drugs due to comorbidities. However, the Biden administration estimates that 3. 4 million Medicare beneficiaries and 4 million Medicaid recipients would gain access to the drugs at a cost of a combined 40 billion over 10 years. This expansion to 7 percent more of the Medicare population undoubtedly means more seniors will get on the medications, but long term adherence is still rare. In the short term, this could make more patients eligible for surgeries in ambulatory settings. The future of the policy is uncertain. The Trump transition team has declined to say whether the incoming administration would back it. The new rule also adds standardization and transparency around internal coverage criteria that Medicare Advantage plans use for utilization management, including prior authorization. CMS is also increasing its oversight of vertically integrated payers and MA plan marketing, although its endgame is still unknown. To help beneficiaries comparison shop between MA plans, CMS is also asking insurers for more information on their provider networks. In other news, Trump's health care policy team is beginning to take shape, with Robert F. Kennedy Jr. apparently set to be nominated as HHS secretary, and Dr. Mehmet Oz as CMS administrator. Multiple news outlets have reported that RFK Jr. is contemplating a change to the process of creating CPT codes, potentially displacing the American Medical Association. While it's not clear if this reform push would actually be an administration priority, The initiative would create substantial policy uncertainty around health system revenue streams and would kick off a lobbying frenzy as different specialties push for greater payments. While Dr. Oz does not have a substantial track record of policy positions, there has been speculation that the celebrity doctor would be relatively favorable towards Medicare Advantage. In 2020, Oz co wrote an article in Forbes calling for a Medicare Advantage for All program. While health systems with their own MA plans might fare better under an MA friendly administration, most health systems see the growth of the program as a financial drag. And now our final market scan. Two years ago, management consulting firm Bain and Company predicted that non traditional players could capture up to 30 percent of the primary care market by 2030. Despite the failure of Walmart Health and headwinds for Walgreens slash VillageMD, CVS, and Optum, a new report from Bain says their prediction is still on track. According to the new report, growing strength among payers with primary care assets can make up for the shrinking role of retail disruptors. Despite pullback by Optum, Humana and Elevance are moving full steam ahead into the market. Advanced primary care players like Agilon, Allidade, and Previa are also growing substantially, but they might need scale and the ability to shift patients into other models, such as the Medicare Shared Savings Program, to withstand MA headwinds. While Bain's report focuses on the threat to volumes, we think the bigger threat for health systems could be a shift in how consumers and patients perceive care and access to care. That concludes this week's Strategist in Brief. Be sure to read the full version on the web at hmacademy. com. Thanks for listening.