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Dispensed: The inside story of uBiome, a visit to the largest health system in New York, and what it’s like to take a ‘biotech for dummies’ course

Dispensed: The inside story of uBiome, a visit to the largest health system in New York, and what it’s like to take a ‘biotech for dummies’ course

uBiome is a microbiome testing startup in San Francisco.

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uBiome is a microbiome testing startup in San Francisco.
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uBiome

Hello,

Welcome to this week’s edition of Dispensed, our weekly healthcare newsletter here at Business Insider, where we’re recovering from sugar rushes induced by a company-wide summer party last night.

If you’re following along with what’s happening on the hill, you might have noticed a refrain that echoes what Emma Court had the scoop on last week.

Are you new to our newsletter? You can sign up for Dispensed here.

This is your last reminder to submit nominations for our under 40 in healthcare list. The form for nominations is here. Submissions will close next Wednesday, June 19. As a reminder, we’re looking for rising stars within the healthcare industry bringing interesting ideas to their roles – regardless of whether it’s in the C-Suite or earlier in their careers.

To start off this week’s newsletter, I wanted to be sure you caught Erin Brodwin’s deep-dive into uBiome. It’s a must-read for anyone following the fallout after the FBI raid in April. It’s full of new details about what working at the company was like over the years, and where corners may have been cut.

uBiome convinced Silicon Valley that testing poop was worth $600 million. Then the FBI came knocking. Here’s the inside story.

  • The Silicon Valley health startup uBiome is in hot water on the heels of an FBI raid in April.
  • Founded in 2012, uBiome raised $105 million from investors on the promise of exploring the microbiome, a “forgotten organ.”
  • As uBiome advanced from a citizen science project to a clinical-testing company, it overstated the medical value of its tests and prioritized growth over patient care, according to insiders, lawyers, and government officials.
  • “Some of my uBiome results remind me of astrology,” one former employee said.
  • uBiome may also have run afoul of federal and state regulations while running some of its tests, according to the experts, insiders, and documents.

Need a refresher on all of our uBiome coverage? You can find it here.

Relatedly, Erin teamed up with our colleagues on the strategy team again to bring you an important guide.

how not to get duped by hot startups4x3

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Gilbert Carrasquillo/Getty Images; Olivia Reaney/Business Insider

The VC’s ultimate guide to sniffing out risky healthcare startups – and not getting tricked into backing them

And while we’re on the topic of VCs, Emma took a look at Mary Meeker’s massive Internet Trends report released this week. Parts of the healthcare slides reminded us a lot of the 2014 slides Meeker presented, which are a good reminder of how slow healthcare moves. Emma explains why that should be a warning for startups looking to disrupt the industry.

Two other tidbits from the world of startups to put on your radar:

Erin and finance reporter Jeremy Berke had the scoop on a new VC that’s looking exclusively at psychedelics. They see it as an emerging field following all the growth in the cannabis industry.

Investors just launched the first VC dedicated exclusively to psychedelics, which they call the ‘next wave’ after the cannabis boom

  • Psychedelic drugs like psilocybin and ecstasy are starting to attract attention from investors.
  • In an exclusive interview with Business Insider, the world’s first psychedelic-focused VC firm shared its plan for seeding promising startups in the space.
  • Based in Canada, the firm, called Field Trip Ventures, aims to open clinics in the US and partner with existing research groups.
  • Field Trip’s founders hail from the marijuana investment world. They see psychedelics as “the next wave of the path that’s been created by cannabis,” they said.

Speaking of field trips, Emma in May sat in on a “biotech for dummies” course in which she – alongside biotech executives – got a refresher on biology. That included running an experiment to extract DNA from a strawberry.

BioBasics

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Hollis Johnson/Business Insider

We took the two-day, $1,300 ‘biotech for dummies’ class where healthcare executives, HR managers, and investors catch up on science for the first time since high school

Our new healthcare fellow Clarrie Feinstein put out her first story this week – a look at why UnitedHealth Group or Carlyle Group are the likely acquirers of Magellan Health.

The biggest US health insurer and a top private-equity firm are likely buyers for $1.6 billion Magellan Health, according to Leerink

  • Magellan Health is likely to be acquired by UnitedHealth Group or Carlyle Group for about $85 to $90 a share, according to Ana Gupte, an analyst at SVB Leerink.
  • Magellan has a pharmacy-benefits business and a healthcare unit that offers insurance and other services, such as behavioral health.

Clarrie also has the details on a move made by California lawmakers to extend Medicaid coverage to undocumented residents between 19 and 25. That makes California the first state to do so.

The exterior of Northwell's North Shore University Hospital.

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The exterior of Northwell’s North Shore University Hospital.
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Courtesy Northwell Health

A trip out to Long Island

Back in April (it’s been a busy couple of months), I hopped on the Long Island Rail Road so I could see firsthand the ways in which hospitals are prepping for the future.

What I saw took me a bit by surprise. As Northwell Health CEO Michael Dowling explained to me, about 50% of the health system’s revenue now comes from services that are provided outside of the hospital. That’s a big shift from a decade ago, when 80% of the health system’s revenue came from hospitals.

Here’s a look at what Northwell’s doing with its existing hospitals.

Dowling also made the case to me of why he thinks hospitals will be the one to disrupt the healthcare industry – rather than newcomers like Amazon or even CVS Health. You can read more about his reasoning here.

We also discussed how Dowling – even after a devastating first attempt – still wants to be in the insurance business one day. He explained why that is.

A flash from the past: A year ago, the Department of Justice came out with its criminal charges for Theranos founder Elizabeth Holmes and former president Sunny Balwani, making for a busy Friday evening. We’re still waiting for that trial to get underway.

Be sure to send your thoughts/words of encouragement as we sift through under 40 nominees next week to healthcare@businessinsider.com. You can also find me directly at lramsey@businessinsider.com.

With that, I’ll leave you all to your weekends. I’ll be out next Friday, so there will be a guest writer of Dispensed. Stay tuned!

– Lydia

Oklahoma is implementing a new program that only pays big pharma full price if their drugs work

Oklahoma is implementing a new program that only pays big pharma full price if their drugs work

  • Under the conditions of a new Medicaid program in Oklahoma, the state will only pay drugmakers the full agreed-upon price of the drug if it works as advertised.
  • Oklahoma’s plan is part of the Trump administration‘s commitment to lower drug prices.

Oklahoma’s Medicaid program this month will start implementing a first-in-the-nation drug pricing policy where it will only compensate drug companies the full price for their medication if they work exactly as advertised.

This type of rebate program aims to hold pharmaceutical companies accountable for the efficacy and safety of their drugs. The program is state-wide and will not affect the pricing of drugs in any other states.

The program works as follows: Oklahoma and the drug companies agree on a certain price for a certain medication. If the drug works as promised, the states pay the drug company the full price. But if it falls short in terms of effectiveness, then the state only pays the drug company a fraction of the initial agreed-upon price.

If it works, it could save the state an estimated $2 million.

It’s all part of of the Trump administration’s plan to lower drug prices.

“Oklahoma’s plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs,” Secretary Alex Azar said in a Center for Medicaid and Medicare services press release in June when the plan was first announced. “The Trump Administration is committed to giving states the flexibility they need to make healthcare more affordable, and strongly supports innovations like value-based purchasing for prescription drugs.”

The state, however, is not forcing drug companies to participate in the program. Sign-up is voluntary, but can positively affect company reputation. Additionally, drug companies that do sign up will have their effective products that have passed through this system put on a preferred drug list, which could result in more profit in the long run.

See also:

The CEO of one of the largest health insurers in the US explains why he thinks healthcare costs so much

The CEO of one of the largest health insurers in the US explains why he thinks healthcare costs so much

Cigna CEO David Cordani

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Cigna CEO David Cordani
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Reuters
  • Last week, Business Insider sat down with David Cordani, the CEO of health insurer Cigna, to discuss skyrocketing healthcare costs in the US.
  • In 2017, the US spent $3.5 trillion on healthcare. Spending is expected to climb to $5.7 trillion by 2026, according to the Center for Medicare and Medicaid services.
  • Cordani says he thinks high costs come from too much reliance on intervention after the onset of disease or illness, rather than sickness prevention.

It’s no secret that healthcare costs are high in the US.

David Cordani, CEO of Cigna, told Business Insider in an interview last week that the central reason why these costs have skyrocketed is because the country focuses more on intervention after a person gets sick rather than illness prevention.

“We spend the majority of our money and resources addressing people once they’re sick. We need to spend some more of our resources keeping people healthy in the first case, and identifying people who are at risk of health events and lowering those health risks,” he said.

In 2017, the US spent $3.5 trillion on healthcare, and that figure is projected to reach $5.7 trillion by 2026, according to the Center for Medicare and Medicaid Services. Hospital care (32% of spending), drug prices (10% of spending) and physician and clinical services (20% of spending) are all getting more expensive.

Cordani suggested that providing more social service support such as local education programs, financial assistance, and resource guides for finding healthcare providers would help bring down healthcare costs, as well.

Another issue, he said, is that the US has more specialists and more hospitals per capita than most other developed countries, and less primary care doctors like OBGYNs, pediatricians, and family practitioners.

“We spend a lot more money on high cost intervention, as opposed to enabling the primary care physician, the geriatrician, the pediatrician, to have more resources to help to coordinate care for individuals,” said Cordani.

There’s potential to improve drug affordability by increasing the quality of post-clinical care, Cordani believes. Hospitals, instead of just prescribing pills, should assess if the patient truly needs drugs to help them get better. Health insurers should also offer more behavioral and well-being services such as mental health therapy, nutrition guides, and lifestyle advisory.

Cordani summed up his approach: “First, you always need to have a strong foundation. And we do so by engaging the individuals, trying to lower health risks, keep people healthy, and then improve the quality of healthcare that’s delivered. Two, use actionable information to predict or identify health risks before they happen … that’s how you improve overall cost and quality.”

Watch the full interview here.

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