Weekly Health Tech Reads | 6/30/24

Walgreens intends to divest VillageMD, Hims & GLP-1 compounding takes a hit, and more

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Walgreens shares plunge 20+% as it misses earnings; plans to divest VillageMD

Walgreens’ share price took a major hit on Thursday after it missed earnings and announced that it is reviewing the financial performance of 25% of its ~8,700 stores. It intends to shut down a “meaningful portion” of those stores. Walgreens noted during the call that the other 75% of stores generate 100% of Walgreens’ operating income for this segment.

Walgreens also shared during the earnings call that it will be reducing its stake in VillageMD to be a minority shareholder in the business. Walgreens didn’t share any additional details regarding what that transaction might look like, beyond noting that they intend to retain a stake in VillageMD.

✍️ Going Deeper

The writing has seemingly been on the wall for this VillageMD news for a bit now as Walgreens has clarified its new strategic path forward as the preferred retail pharmacy partner to the industry. It’s going to be worth watching how quickly — and to whom — Walgreens divests its position in VillageMD assets.

It seems like this will be a management buyout, where VillageMD leadership is lining up a financial party to buy out the Walgreens stake. It’ll be interesting to watch what happens with the various pieces of VillageMD at this point — do Summit Health or CityMD get split into their own businesses as part of all this? I’d imagine not immediately, but it seems like a relatively complicated strategic narrative having all three of those assets under one umbrella. VillageMD appears to have contemplated an IPO back in 2022, so it wouldn’t be entirely surprising to see them operate once again as a standalone private entity with a longer-term plan for an IPO.

Regardless of what happens to the VillageMD assets, it’s clear that Walgreens has moved on here and is focusing its energy, understandably, on righting the core business. Still, it’s striking to look back at the 180-degree strategic turn since former CEO Rosalind Brewer was on stage speaking at HLTH in 2022, saying that “dispensing of pharmaceuticals is not going to be our long-term growth avenue.”

During the earnings call, current CEO Tim Wentworth kicked off the session noting significant turnover in the leadership team that is ready to execute a “turnaround” of the business. This chart of Walgreens’ stock price over the last 30 years from the WSJ provides good context for the challenge at hand:


Hims takes a hit as the GLP-1 compounding market is called into question

Hunterbrook Media shared a blistering report about Hims & Hers GLP-1 business, driving down Hims & Hers stock price by 8+%. The report centers on the company’s practice of prescribing compounded GLP-1s through a regulatory loophole that allows manufacturers to prescribe compounded versions of drugs while there is a shortage. It’s a worrisome read, filled with shady characters and troubling business practices.

The article includes the helpful decision tree below, which highlights why Hunterbrook thinks there is no long-term positive outcome for Hims & Hers in the GLP-1 market.

Given the impact on the stock price, I imagine Hims will have to respond to this report at some point. It will be curious to see what that response is.


Deloitte’s big, error-riddled business in Medicaid eligibility systems

This KFF piece investigates Deloitte’s role in managing Medicaid state eligibility system contracts and the issues that plague those eligibility systems. The article does a nice job of diving into the issues people are facing in various states as a result. It also highlights how much revenue Deloitte is bringing in off these contracts. Per the chart below, it has contracts with 25 states that are worth over $5 billion.


A state-by-state view of Medicaid doula programs

This is a helpful rundown of Medicaid doula coverage across the country, providing a good state-by-state view of policies.

Other Top Headlines

  • SCOTUS overturned the Chevron doctrine this week in case about fishing regulations. This ruling will have far-reaching impacts by limiting the ability of federal agencies like HHS and CMS to interpret ambiguous laws.

  • Optum has withdrawn its bid to acquire Stewardship Health, Steward’s primary care group. It’s unclear why Optum backed out, although this HealthcareDive piece speculates it may have been due to concerns about regulatory approvals. It will be interesting to see what happens with the primary care assets here.

  • A network of independent rural hospitals in Minnesota formed a new clinically integrated network, the Headwaters High-Value Network. Cibolo Health is the company behind the creation of the CIN, its second such network. The first is the Rough Riders Network in North Dakota, formed in October 2023. Seems like an interesting model to watch in the rural healthcare landscape.

  • Vizient is acquiring the remaining outstanding portion of Kaufmann Hall from PE firm Madison Dearborn. In 2021 Vizient and Kaufmann Hall began a commercial partnership when Vizient took a minority stake in Kaufmann Hall, and the two entities appear to have found success

  • Amazon Clinic’s telehealth offering was rebranded under One Medical this week. While I can understand the business rationale for Amazon's decision, combining the offerings has to be challenging, both operationally and culturally. Remember that Amazon Clinic was historically staffed by SteadyMD, Wheel, and others.

  • eVisit, a virtual care platform for health systems, purchased UPMC’s inpatient tele-consult technology and added UPMC and Medstar Health as investors.

  • Medically Home has partnered with Hackensack Meridian Health. In the next six months, they’ll be rolling out Medically Home’s hospital-at-home model to 18 hospitals.

  • Arcadia acquired VBC analytics platform CareJourney. The press release notes that both companies are currently profitable, and after the acquisition, Arcadia will have over 200 customers.

Funding Announcements

  • Foodsmart, a telenutrition platform, raised $200 million. Foodsmart covers 2.2 million members via contracts with insurers across all lines of business - Medicaid MCOs, MA plans, commercial insurance and 1,000+ employers. Foodsmart also works with health systems enabling PCPs to refer patients to Foodsmart dietitians.

  • Sidecar Health raised $165 million in funding to expand its approach in the commercial insurance market. Sidecar currently offers employer plans in Ohio and Georgia. The funding round was led by Koch Industries, a conglomerate that owns brands like Georgia-Pacific. Koch will help Sidecar enter the jumbo employer market and also offer Sidecar to a segment of Koch’s employees in 2025.

    • The HTN Slack conversation about this funding round included a couple of helpful explanations of how Sidecar’s model works for employees for folks who are curious as to how the insurance product works.

  • Function Health, a lab testing platform, raised $53 million from Andreessen Horowitz and others. According to the press release, the company has almost 50,000 paying members, a waitlist of 200,000+ people, and a new strategic partnership with Equinox.

    • Andreessen penned an interesting blog post about the vision for Function — lab tests are merely the first step in building a platform that integrates all of your health data and then eventually probably overlays an AI doctor on top of it.

  • Form Health, an obesity care provider, raised $38 million.

  • Adonis, a revenue cycle management platform for providers, raised $31 million.

  • HeyDay Health, an in-home and virtual care model for Medicare and dual-eligible populations, raised $12.5 million.

  • Hummingbird Healthcare, a company that helps health systems streamline call center operations, raised $10 million.

  • Pear Suite, a model empowering CHWs to manage SDoH needs, raised $1 million.

Reads from the Community

The Great Obamacare Enrollment Fraud. by Brian Blase and Drew Gonshorowski.
This was an interesting paper that suggested a number of exchange enrollees are misrepresenting their income to qualify for fully subsidized health plans. It provides another glimpse into the coming debate over enhanced subsidies. Read more.

The Burden of Health Insurance Premiums on Small Business. by Chris Wheat and Chi Mac
This JPMorgan research piece looks at small business health insurance premiums between 2018 and 2023. Read more.

The Pillaging of Steward Health Care. by Mary Bugbee
If you’re looking for a very deep dive into the Steward Healthcare fiasco, this provides a good recap of the situation. Read more.

Lessons from Eliot Fishman, Director of the Policy and Programs Group at CMMI, on Medicaid from a Federal perspective by Lipsa Panda
This Pear Healthcare podcast / article provides a nice perspective on what CMMI is up to in Medicaid. Read more.

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