Mergers & Acquisitions

The proposed acquisition of Blue Cross and Blue Shield of Louisiana (BCBSLA) by Elevance Health, Inc., the parent company of Anthem, faces deepening legal and political opposition from Louisiana elected officials and other stakeholders. The deal is not the first proposed rollup of Blues affiliates to face determined opposition from state officials and regional health care stakeholders — nor is it likely be the last, experts say.

Public officials including Louisiana Attorney General Jeff Landry, a Republican, have spoken out against the deal. Landry, also the leading Republican candidate in this year’s governor’s race, is in the midst of an antitrust investigation of the sale, according to the New Orleans Times-Picayune. If the deal goes through, the paper reports, it will make Elevance the largest health insurer in the state, with 1.4 million members, beating out UnitedHealthcare.

CMS is growing increasingly concerned that people, particularly children, are being disenrolled from Medicaid and Children’s Health Insurance Program (CHIP) coverage even though they still meet eligibility requirements. The agency said it sent a letter to officials in all 50 states, Washington, D.C., Puerto Rico and the U.S. Virgin Islands requiring them to determine if they have an eligibility systems issue and, if so, to correct the problem and reinstate coverage to the affected people. Since states were allowed to resume Medicaid redeterminations in April after a multiyear pause due to the COVID-19 pandemic, CMS said it “has learned of additional systems and operational issues affecting multiple states, which may be resulting in eligible individuals being improperly disenrolled. These actions violate federal renewal requirements and must be addressed immediately.”

The $2.5 billion deal between Elevance Health, Inc. and Blue Cross and Blue Shield of Louisiana is facing some hiccups, per the New Orleans Times-Picayune. The Louisiana Blues affiliate must reissue ballots to 92,000 policyholders that will allow them to approve or reject the sale and invalidate proxy ballots that it’s already received. The insurer will also reschedule a meeting and official vote until after the state’s Dept. of Insurance has held a two-day hearing on the proposed sale. Louisiana Insurance Commissioner Jim Donelon and Attorney General and gubernatorial frontrunner Jeff Landry — both Republicans — have been critical of the deal, the Times-Picayune reported. The newspaper also said that attorneys in the state Dept. of Insurance “fully expect litigation” over the proposed transaction, which Elevance announced in January.

Digital health funding hit a six-year low in the second quarter of 2023, dropping for the sixth quarter in a row. That’s one of the findings of CB Insights’ State of Digital Health Q2’23 report. And while funding is unlikely to return to the peaks it saw in 2021, the industry may be undergoing more of a reset to funding seen in 2018-2019.

“The headline here really is that digital health funding has hit a six-year low,” remarked Chris Sekerak, intelligence analyst II at CB Insights, speaking during an Aug. 10 webinar titled Digital Health’s Midyear Review & What to Expect Next. For the second quarter of 2023, funding on a global basis dropped to $3.4 billion, a 3% decline from $3.5 billion in the first quarter. The last time that funding was this low was third-quarter 2017.

Health care operators such as hospitals or providers that are owned by private equity companies often have higher costs for payers and patients, according to a systematic review of research studies that was published on July 19 in BMJ. Alexander Borsa, one of the review’s authors, tells AIS Health, a division of MMIT, that the increased costs are primarily due to the groups’ rate negotiating skills as well as the trend of private equity companies looking to consolidate clinical practices, leading to less competition in certain markets.

The researchers also found that private equity ownership was associated with mixed to harmful impacts on health care quality, while they noted there were not enough studies to make conclusions about private equity ownership’s effect on health outcomes and costs to operators.

They wrote, though, that “no consistently beneficial impacts of [private equity] were identified” in the studies they examined.

The growth of outpatient facility fees “derives from the intersection of the United States’ increasingly consolidated health care provider market, highly complex health care billing systems, and frequently inadequate health insurance coverage,” according to a new study from the Georgetown University Center on Health Insurance Reforms (CHIR). The study’s authors and managed care experts tell AIS Health, a division of MMIT, that unless regulators and policymakers act, the trend that serves as a tool for maximizing hospital revenue is likely to intensify.

Facility fees are charges assessed by hospital systems for care delivered in an outpatient setting “that ostensibly cover the institution’s operational expenses for providing care,” the report says. They are separate from the professional claims that physicians, nurse practitioners, and other health care professionals submit [to insurers] for reimbursement for their services and expenses.” The practice of charging those fees is likely to happen whenever an independent practice is acquired by a health system — a frequent occurrence in recent years.

UnitedHealth Group has promoted Patrick Conway, M.D., to CEO of Optum Rx, the company’s PBM. Conway revealed the new role in a LinkedIn post. He was previously the CEO of Care Solutions at Optum, UnitedHealth’s health care services division. Heather Cianfrocco, Optum Rx’s CEO, is now the president of Optum. Before coming to UnitedHealth, Conway served as CEO of Blue Cross Blue Shield of North Carolina and as director of the Center for Medicare and Medicaid Innovation.

Mark Cuban Cost Plus Drug Co. has formed a partnership with Scripta Insights, a health care software company that works with health plans and self-insured employers to lower pharmacy benefit costs. Scripta plans on integrating the Mark Cuban company’s discounted pricing into its Med Mapper product. Alex Oshmyansky, CEO of Mark Cuban Cost Plus, said the companies “share a common goal of providing consumers the lowest possible price for their prescription medications.” The Mark Cuban company primarily sells generic medications at a discount, but earlier this year it began offering brand-name drugs from Janssen, a division of Johnson & Johnson Co., and IBSA Institut Biochimique SA, a pharmaceutical company based in Switzerland.

While merger and acquisition (M&A) activity in the life sciences industry has been a bit of a mixed bag the past few years, the first half of 2023 may indicate that deal making is picking up, say industry experts. Some headwinds may make it challenging at times, but the overall sentiment is a positive one.

“In life sciences, it’s a period of smart optimism as we head into the back half of the year” in terms of M&A activity, declares Kristin Pothier, healthcare & life sciences deal advisory & strategy leader at KPMG. “The overall biopharmaceutical deal market began to see a significant slowdown in the fourth quarter of 2022, and from a deal volume standpoint this carried through into the first quarter of 2023. As we look at all the potential for megadeals of the past, we don’t expect to see that as we move to the end of” the 2023 fiscal year and into FY 2024.

The Dept. of Justice (DOJ) and Federal Trade Commission (FTC) on July 19 released new draft guidance outlining its approach to antitrust enforcement after rescinding decades-old regulations the week before. The moves could further entrench and formalize the Biden administration’s aggressive anti-consolidation agenda. Health care insiders tell AIS Health, a division of MMIT, that the proposed guidance’s impact on health care insurers and providers is far from certain, but they say that the proposal could complicate any or all of data sharing, quality ratings, and value-based contracting — and stymie an active dealmaking environment.

The draft guidance, which is subject to a public comment period and may change, could have profound impacts on the broader economy, not just health care. The Biden administration’s antitrust regulators have evinced much more aggressive legal and economic theories of antitrust enforcement than any administration in decades. The new guidance is further evidence of the administration’s willingness to try and block deals such as acquisitions by health insurers of providers; provider mergers; and insurer deals for other non-insurance assets, such as business services and technology firms.

On June 30, Blueprint Medicines Corp. revealed that partner Genentech USA, Inc., a member of the Roche Group, will voluntarily withdraw Gavreto’s (pralsetinib) indication for the treatment of people at least 12 years old with advanced or metastatic rearranged during transfection (RET)-mutant medullary thyroid cancer who require systemic therapy. The FDA gave the indication accelerated approval on Dec. 1, 2020. Genentech said the decision, which was made in consultation with the FDA, was not due to new safety or efficacy data but rather due to the “feasibility” of conducting the Phase III confirmatory trial required for full approval. Confirmatory studies to convert the other indications of the kinase inhibitor, all of which have accelerated approval, to full approval are ongoing.