6 Top Healthcare Trends You Can’t Afford to Ignore

Some big shifts are happening now

Americans spent a mind boggling $3.5 trillion on healthcare last year, and that figure’s still climbing. Although costs keep rising, the way we spend our hard-earned dollars in order to stay healthy is shifting rapidly.

Some companies that operate in this space are going to fall behind, while others will thrive. Investors that stay on top of these six trends that are reshaping the healthcare landscape now stand a much better chance of coming out ahead in the long run.

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1. JPHathazon is coming

In 2015 the average American spent more than twice as much as the average Canadian did for healthcare. In fact, we spent $5,656 more than an average person in the OECD, a group of 34 developed nations. Three of the country’s largest employers, JPMorgan Chase (NYSE: JPM), Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), and Amazon.com (NASDAQ: AMZN) decided to band together to do something about it earlier this year.

Warren Buffett described ballooning healthcare costs as…

“a hungry tapeworm on the American economy” earlier this year when announcing the formation of a new not-for-profit venture tasked with lowering costs through any means available. Nothing changes fast in healthcare, but we’ve never seen an entity with nearly as many resources attempt to bring transparency and simplicity to such a heavily regulated sector of the economy. For starters, these three companies employ a combined 1.2 million guinea pigs to fine tune their healthcare spending experiments before unleashing any new services to the general public.

Right now, there isn’t a lot we know about the nameless entity that I’ve tentatively dubbed “JPHathazon,” but we probably won’t need to wait long for the next market-shaking news to emerge. The joint venture recently appointed a CEO who’s also a Harvard professor, and four-time best selling author. Hopefully, Dr. Atul Gawande will write us a clear explanation of what his well-resourced outfit intends to accomplish.

2. Bigger is safer

Months before JPHathazon announced its intentions, simple rumors that Amazon might start managing health benefits for its own employees spurred an ongoing wave of consolidation in the healthcare sector. For example, large health plan providers, such as Anthem (NYSE: ANTM), traditionally hire pharmacy benefits managers, such as Express Scripts (NASDAQ: ESRX) to negotiate discounts and rebates from drugmakers.

A couple years ago, Anthem sued Express Scripts for $15 billion over allegedly unshared rebates and discounts that accrued during a 10-year contract. Anthem could be exaggerating for effect, but it’s easy to see why major private insurance providers Aetna (NYSE: AET) and Cigna (NYSE: CI) are currently trying to merge with leading benefits managers CVS Health (NYSE: CVS) and Express Scripts, respectively. How this will shake out for consumers is hard to say, but it’s going to be awfully tough for smaller plan providers that don’t have their own benefits managers to compete with going forward.

3. Telemedicine is taking big steps forward

Tired of waiting rooms full of germs and old magazines? You’re not alone. A poll from The Associated Press-NORC Center for Public Affairs Research found nearly nine out of 10 adults over 40 years old would be comfortable employing telemedicine. Despite the interest, the practice has been achingly slow to take off.

One of the biggest issues has been reimbursement, but we’re about to see some major improvements on this front. The Chronic Care Act of 2017 allows Medicare to reimburse providers for a much wider variety of services related to treating people with chronic conditions such as diabetes and kidney failure.

The over 65 crowd might lead the charge, but Medicare isn’t the only force driving telemedicine forward. The ongoing opioid epidemic shined some light on the limited state of substance use disorder treatment availability, and a bill making its way through Congress aims to address the issue by boosting telemedicine access in an important way.

Medicaid has lots of restrictions on where telemedicine care can be delivered and where it can be received that severely limits its use. Lifting geographic restrictions for substance abuse services could have an effect that spills over to other types of services.

4. Crunch time for cannabis

The Canadian Senate recently voted in favor of a bill that will legalize recreational cannabis. It isn’t a done deal yet, but it sure looks like the country’s big marijuana growers can breathe a sigh of relief, at least for a while.

It might be tempting to buy shares of some of a big grower like Aurora Cannabis or Canopy Growth (NYSE: CGC), but it’s important to understand the oncoming glut of this unusual commodity. These two companies alone will soon have enough capacity to produce a million tons of dried cannabis annually. That’s enough to supply 2.7 million adults with an entire gram of dried flower per day. A gram daily is a typical amount some veterans need to combat post-traumatic stress disorder, but it’s a whole lot more than the average recreational user can be expected to consume.

Canada’s impending cannabis glut is great news for consumers, but not so good for producers. Canopy Growth and Aurora Cannabis are already losing money, if oversupply drives prices much lower their investors could lose a bundle as well.

ALSO READ: Which States Will Be Voting on Marijuana in 2018?

5. Finally keeping records

Doctors with accurate health records make better decisions, but getting them to record their interactions in a shareable format is a lot harder than it should be. The Centers for Medicare & Medicaid Services (CMS) began requiring providers to demonstrate meaningful use of electronic health records in 2015 or suffer reductions to their Medicare payments.

The program’s far from perfect, but it is working. A recent survey from Salesforce.com found 32% of baby boomers access their health records through a self-service portal versus just 23% of millennials, even though all participants had health insurance and a primary care doctor.

Those incentives have helped an EHR service provider called Athenahealth (NASDAQ: ATHN) grow its bottom line at a rate of 22% over the past five years, and we’re still long way from total interoperability. That means there’s still heaps of room for this company to grow. With former General Electric CEO Jeff Immelt as Executive Chairman it could ride this powerful trend even further.

Gene therapies permanently alter a person’s DNA to produce a therapeutic benefit, often with breathtaking results. As a result, biotech companies, financiers, and the Food and Drug Administration are working extra hard to bring as many of these drugs to market as quickly as possible.

Even a general public raised on science fiction can appreciate recently approved Luxturna from Spark Therapeutics (NASDAQ: ONCE). This is the first directly administered gene therapy in the U.S. that targets an inherited disease caused by a mutation in a specific gene. It uses an engineered virus to deliver a normal copy of a gene that allows retinal cells to produce a protein necessary for sight.

Right now nobody really knows how gene therapies like Luxturna are going to shake out from a financial perspective. The treatment only needs to be injected once, yet it costs $425,000 per eye. With perhaps just 2,000 potential U.S. patients, end payers might not put up a major fight when it comes time to provide reimbursement, but that attitude could change.

There are at least 10,000 known disorders caused by problems with a single gene. That means there are a lot of potential targets just waiting for a group of scientists with enough funding to attack them. Venture capital funding of privately held biotech companies broke through the $10 billion barrier last year led by gene therapy start ups. Publicly traded companies, such as Crispr Therapeutics, have amassed multi-billion valuations before giving a single dose of their experimental gene therapies to anyone. They can’t all be zingers, but all that money is going to push a lot of new therapies onto the market, for better or for worse.


John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Cory Renauer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Athenahealth, Berkshire Hathaway (B shares), and Salesforce.com. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.

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