Envisioning the Future of Health Care

Health care and investment industry leaders delved into emerging opportunities in pharma and life sciences during two recent virtual sessions held in partnership with the Association for Corporate Growth.

One session, “The Future of Healthcare: Technology Bolsters the Pharma Industry; Creates M&A Opportunities,” was sponsored by CIL Management Consultants. The other, “The Next Generation of Virtual Care,” was sponsored by United Healthcare. Answerthink provided support as the event’s third sponsor.

Next Generation of Virtual Care

In the “Next Generation of Virtual Care” panel, Patrick Keran, vice president of product at United Health Group, credited the COVID-19 pandemic with bringing virtual health care and its benefits to the forefront.

“It’s not a secret any longer,” he said. “With COVID and everything else that’s been going on, it has heightened awareness and use over the past year and a half.”

Use of telehealth increased 2,500% between 2019 and 2020, Keran noted.

“Basically, that means that a lot of people leveraged it and a lot of people enjoyed the experience,” he said.

Keran defined virtual health care as any kind of care that is provided in a virtual forum, including primary medical care, specialty care, behavioral or mental health care or therapies, such as physical therapy or speech therapy.

Keran outlined the company’s four-part transformative approach to providing virtual care, which he said is intended to drive simplicity, engagement, convenience, accessibility and affordability.

One area the company is focusing on is called Local Care, which enables a patient who has an established relationship with a primary doctor to see that doctor virtually or in person.

“We don’t want to break that relationship,” he said. “Rather, we want to enhance that relationship, and virtual care is a way to do that.”

“[United Healthcare’s Virtual Urgent Care] is a low-cost solution for people who can’t get to their primary care doctors quickly when they need to.”

Patrick Keran
Vice President of Product, United Health Group

He said 22 states have reimbursement policies that allow a physician to bill a virtual visit at the same rate as an in-person visit. In the other 28 states, physicians are reimbursed at about 15% less on average for a telehealth visit compared to an in-person visit.

Another area where the company offers virtual care is in urgent care. United Healthcare’s Virtual Urgent Care is geared to people who need to get to a doctor quickly, at off hours, or when they have a condition such as a rash or back pain. It also caters to those who don’t already have a primary care physician.

“It’s a low-cost solution for people who can’t get to their primary care doctors quickly when they need to,” said Keran, adding that his company currently works with three providers across the nation.

Another area of focus for United Healthcare is Virtual Primary Care, which enables members to access care virtually if they don’t currently have a primary care physician. It also can help them establish an ongoing relationship with a primary doctor.

The program, which is being piloted in 11 markets, provides both medical and behavioral care. The emphasis is on convenience and allows users to take advantage of many benefits, such as scheduling appointments in advance, receiving ongoing care for chronic conditions, and filling and refilling medications.

Keran estimated the cost would be 20% lower than in-person rates for reimbursement, and would allow for care in a wide range of areas, including wellness.

He expects the service to be available in all 50 states later this year.

Finally, the company is also developing a Virtual First program that would, as its name indicates, offer virtual care first for medical, wellness and behavioral health, and in-person care as needed.

The care would be provided by a yet-to-be-selected national provider that would assemble a multidisciplinary care team of providers including a primary care physician, registered nurse, nutritionist, social worker, care manager, and health and wellness coach.

“Think of it as a high-touch, concierge, integrated system that our members can utilize to their advantage,” he said.

The Virtual First program would allow for individuals to be referred to medical specialists when needed. The primary care physician would continue to consult with the specialist and follow up on a patient’s care.

Keran concluded the session by saying he is interested in hearing from attendees and others about what they’d think of adopting the Virtual First program.

Future of Health Care

In the “Future of Healthcare” panel, three investment professionals discussed the changing landscape of technology in life sciences and pharma, and how it is fostering M&A opportunities.

The panelists were Michael Raymer, CEO of Pro-ficiency, which provides clinical trial simulation-based training; Rick Riegel, CEO of Phlexglobal, a technology and services organization that addresses clinical and regulatory matters; and Rebecca Pigula, principal at CIL Management Consultants, which offers commercial due diligence and strategy advice for private equity firms, banks and other corporate clients.

The panelists agreed that the pharma and life sciences sectors have traditionally been slow to adopt new technologies.

“They tend to be laggards compared to more forward-looking industries,” Riegel said. “They often will wait for technologies to be tried out in other industries and then adopt them. Then, there is a lot of fast following once a couple key industries do that.”

“The companies that get traction in the clinical trial space are companies that are delivering efficiency, taking cost out, and reducing cycle time. Those are the kinds of investments that should be focused on for any investor interested in this space.”

Michael Raymer
CEO, Pro-ficiency

Riegel said COVID-19 has prompted companies to be more open to adopting new technologies and ways of doing business, which he expects to continue in the post-pandemic era.

“COVID has been an accelerant to the industry overall,” agreed Raymer who, along with Riegel and Pigula, said these spaces are ripe for investment.

“As everyone knows, there is an unprecedented amount of investment capital available in the market now, globally,” Riegel said. “The investors, whether they are venture capital or later stage private equity, are looking for the right harbors to put that money—the right investments.”

While embracing novel solutions, Raymer cautioned against investing in a new technology in the clinical trial space and other areas merely for the sake of technology.

“For too long, we’ve chased technology for the sake of technology,” he said. “The companies that get traction in the clinical trial space are companies that are delivering efficiency, taking cost out, and reducing cycle time. Those are the kinds of investments that should be focused on for any investor interested in this space.”

Riegel noted that virtual or decentralized clinical trials are attracting a lot of interest, and companies in this area are experiencing unprecedented valuations.

The drive for a COVID-19 vaccine brought attention to the pharma and life sciences spaces, and Pigula said other forces also are creating interest in these arenas.

These forces include demand for new treatments for other diseases or health conditions besides COVID-19, companies that offer different payment models for health care, and technologies that drive efficiency in drug delivery.

“There are tremendous opportunities for businesses to help improve efficiency, improve adoption of drugs, and maximize revenue opportunities for pharma companies,” Pigula said. “It really is a broad market with a huge range of opportunities for investors.”

The players in this space include both private equity investors and strategic acquirers that are private equity-owned.

“There are a lot of smaller businesses doing smart and interesting things that are now being rolled up by PE-backed companies, acquired as platforms, or that are being rolled into the big players in the space,” she said. “The [contract research organizations] and others have been very acquisitive here.”

Raymer noted that consolidation is an ongoing trend.

“We’ve seen consolidation on both the pharma and CRO sides, as scale matters in both instances,” he said. “To be able to provide a portfolio of services as a CRO to a broad base of therapeutic ranges and types [is key], and having that scale is important to them.”

Private equity plays an important role in taking companies to the next level, but timing is crucial.

“If you’re too small and are moved into a strategic player, you can get swallowed up and the strategic [acquirer] never gets the benefit of the acquisition,” he said.

Areas where the panelists see great potential for innovation are in big data, AI and in digital imaging.

“We’re just beginning to tap that,” Riegel said. “It’s not related just to digital data, but to digital images and the power that imaging will play as we go forward, both as a bio marker and as evidence of disease.”

Pigula recommends that companies and investors alike seek not just to solve a particular problem, but also to search for adjacent areas where they might bring a solution.

“It can be difficult for companies to find the next opportunity once they’ve driven adoption for one function,” Pigula said. “Where do they go next? What’s adjacent? Where else can they innovate or disrupt?”

“Companies get rewarded for making the types of acquisitions where they are adding [not just] capability but complementary clients bases that the two businesses can then cross-sell. They are rewarded over a company that just buys out a competitor and gets greater market share within the niche or vertical.”

Rick Riegel
CEO, Phlexglobal

Riegel said that investors that consider the broader picture of a particular investment and find ways to leverage the strengths of both the investing business and the one that is being acquired are better situated to find success.

“Companies get rewarded for making the types of acquisitions where they are adding [not just] capability but complementary clients bases that the two businesses can then cross-sell,” he said. “They are rewarded over a company that just buys out a competitor and gets greater market share within the niche or vertical.”

He added that successful PE firms do as much due diligence and up-front work as they can. Pigula agreed and said her company is asked frequently by clients to help them do their homework and take advantage of complementary opportunities that a particular investment may provide.

“We get asked a lot [by clients] who say ‘Can you educate us on how this market fits together?’” she said. “‘What do these businesses actually do and what is the combination logic of putting these different businesses together? If we acquire this particular target, what are the different things we could bolt on to that and what are the values, whether revenue synergies or operational synergies, that it would provide?’”

While investing in the pharma and life sciences spaces comes with obstacles, the panelists agreed this arena also offers many opportunities.

Not even the industry’s traditionally cautious approach to adopting new technologies is necessarily an obstacle.

“Inertia can be a barrier, but it can be overcome and it has been overcome,” Pigula said.