The biggest healthcare stories of 2013

December 23, 2013- By Steven E. Greer, MD

Like a broken record, 2013 was yet another tough year for healthcare companies. Several forces are currently changing the supply and demand curve for therapeutics, resulting in fewer hospitalizations and visits to the doctor. Effective new drugs that could once be priced arbitrarily in the six-figures and still sell well are now meeting pushback. Also, patients are putting off surgical procedures, hurting sales of medical devices.

Even before the ACA law (Obamacare) was enacted, the cost of healthcare coverage for employers was driving a trend to provide insurance policies with higher and higher out-of-pocket costs. A new form of healthcare delivery arose to meet the demand of people with ailments who either did not have insurance or desired to pay in cash. Walk-in cash clinics unaffiliated with tertiary care medical centers sprouted up in shopping malls across America.

With tens of millions still unemployed and without insurance, and the rest with the new forms of pseudo-insurance, overall healthcare spending growth in the United States slowed to levels not seen since the HMO days on the 90’s. The White House, desperate to spin the unpopular ACA law, took credit for the reduction in spending, and no letup seems likely in store for 2014.

With that as a depressing overview, we reviewed the events of the year to attempt to come up with a list of the most important healthcare stories for 2013. This is what we came up with. The most important stories of 2013 were:

  1. The botched rollout of the Obamacare health exchange website: Driving the President’s job approval ratings to all-time lows, and giving Republicans a second life after shutting down the government, the completely botched start of the enrollment period for the individual health insurance exchanges was the most important story of the year in all of news, not just healthcare. The sequela included multiple changes to the ACA law allowing companies and individuals to delay the mandated purchases of insurance.
  1. Employers dropping insurance coverage: While a botched website made for good news, the most significant impact of Obamacare was the rapid strategy for many companies to drop insurance coverage as a jobs benefit, and instead, offer a fixed payment for employees to purchase insurance through the exchanges. The foundation of American healthcare has been employer-based insurance (for good or bad), and 2014 will see a new paradigm in the economics of healthcare consumption.
  1. Patients losing their health insurance and doctors: Another major consequence of the ACA law, to become a big story in 2014, is the refusal of many doctors group to participate in ObamaCare, causing patients to lose their trusted doctors. Millions of Americans have already lost their insurance because of the ACA law. Unlike the website fiasco, there will be no quick fix in 2014 for patients losing their doctors.
  1. Change in guidelines for statin therapy: After 30 years, two cardiology specialties decided to eliminate the LDL number as the arbitrary goal to chase deciding statin therapy (The Healthcare Channel had reported for years why the LDL was a pointless surrogate market). After the guidelines changes, the mainstream press was unquestioning. However, The Healthcare Channel first reported that the “heart risk calculator” was arbitrary and silly. Shortly thereafter, the mainstream press joined in the criticism.
  1. Angelina Jolie’s prophylactic double mastectomy: When one of the most admired women in the country, such as actress Angelina Jolie, decides to make an unusual and dramatic personal health choice, millions of women take note and emulate. That is what happened when Ms. Jolie underwent a prophylactic double mastectomy because of her family history and inheritance of the BRCA gene as risk factors. Disturbingly, now the rate of double mastectomy in women with very early stage breast cancer, and no genetic risks, has skyrocketed. Makers of the BRCA genetic test, such as Myriad Genetics and 23andMe, saw sales boom.
  1. President Bush’s coronary stent: When the 43rd POTUS, George W Bush, underwent a routine “executive physical” in Texas at a clinic infamous for performing coronary CT-scans on everyone, sure enough, they found a coronary lesion and stented him. The Healthcare Channel led the way in pointing out the futility of the therapies, and how it was emblematic of America medicine.
  1. China arrests Big Pharma sale reps for bribery: Very effectively, China used anti-bribery laws to arrest Big Pharma sales reps, accusing them of kickbacks to doctors. The chilling effect made instant impact on the Chinese prescription drug markets, with ripple effects in the U.S. as GlaxoSmithKline stopped paying American doctors for drug promotions (The Physician Payment Sunshine Act, soon to kick in, also played a role).
  1. FDA creates “Breakthrough” approval pathway: The Healthcare Channel was the first to report on the importance of the new “Breakthrough Pathway” for drug approvals created by the FDA. As the year progressed, stocks moved based upon whether new drugs won the coveted status.
  1. FDA shuts down 23andMe home genetic test marketing: One of the consequences of the Angelina Jolie decision, above, was the demand for home genetic test kit offered by Google’s 23andMe. However, the company, in pure hubris and incompetence, essentially dismissed the FDA and marketed the test without FDA approval, leading to the agency pulling the kits off the market. The bigger issue raised was the ethics of a for-profit company gathering sensitive genetic information that can be sold the marketing firms for directed adverting.
  1. All-oral cures for hepatitis C: As anticipated by every analyst, Gilead’s all-oral HCV drug, sofosbuvir, was approved, with promise to cure most patients without the toxic interferon and ribavirin. Other companies with similar drugs will have them approved soon.

Aside from those “Top Ten” news events of the year, other stories important to specialty analysts included:


A flood of biotech IPOs: Dozens of new companies became publicly traded this year as the biotech IPO market was the hottest since the disco days of 2000. The offerings came amidst an overall environment of a biotech pricing bubble. It was a unique phenomenon to biotech. Medical devices and other industries did not enjoy the same drunken demand from the markets.

All-oral HCV drugs: As previously mentioned, the new all-oral therapies to treat HCV, obviating the highly toxic injections of interferon and ribavirin, finally hit the market. Whether Gilead’s Sovaldi (sofosbuvir) will launch as well as expected, given the huge ASP of $1,000 per pill and more than $87,000 for the full treatment, remains to be seen. AbbVie and others are coming soon with their own all-oral regimens.

Biogen Idec’s (BIIB) launch of Tecfidera: Biogen launched its newest MS drug, a small molecule generic drug reinvented as fancy branded Tecfidera. Questions of whether a cheap generic would be allowed onto the market are still an ongoing concern given the huge price of Tecfidera.

Ariad (ARIA) implosion: Safety concerns caused the FDA to place a hold on clinical trials of Iclusig, then halted sales as well. The company laid off 40% of the workforce and the market cap went from $4 Billion to $200 Million, rebounding a bit when the FDA allowed sales to resume.

Amgen (AMGN) acquisition of Onyx (ONXX) for $10 Billion: This M&A move demonstrated the desperation of the flagship biotech for new growth of any kind.

Big Pharma:

Morphed into biotech: Big Pharma capitulated, gave up on the business model of creating one-size-fits-all drugs, realizing that there will never be another Lipitor, and began to shrink, spin-off, consolidate, and morph into more of a biotech model.

GlaxoSmithKline stopped paying doctors: Due to arrests in China over bribery, and the impending Physician Payment Sunshine Act (helped made into law by The Healthcare Channel), Glaxo got out of the doctor bribing business and stopped paying doctors to promote drugs. Other companies could follow their lead.

Physician Sunshine Act finalized: A mentioned, this law was part of the ACA Obamacare law, but lobbyists delayed it for three years because of the ominous power it has. It will go into effect in 2014.

Still setting huge prices on new drugs: Despite all signs indicating that $100,000 annual cost for new drugs is untenable in the current healthcare system, companies are still doing business as usual. Several new drugs were priced to cost the patient well more than $100K per year.

Orphan drug model: Mentioned above, part of the morphing into biotech has caused M&A deals to acquire orphan status drugs to treat small populations. The reason is that drugs granted an orphan status by the FDA still enjoy unfettered pricing power.

Anti-PD1 cancer drugs: This new class of drugs were the major innovation for Big Pharma, showing efficacy in melanoma and other cancers.

Statin guideline changes: as mentioned above, this development matters less to the income statement than it does for the overall environment in medicine. For major medical  societies to be willing to take a stand (albeit decades too late), is an ominous sign for Big Pharma.

Medical Devices:

Failure of Edwards Lifesciences (EW) Sapien TAVI: Probably the most followed  device in the sector was the Sapien percutaneous aortic valve. Continuing from the woes of 2011 (first predicted by The Healthcare Channel), the launch disappointed analysts. The company eventually lowered expectations at the analyst day.

Intuitive Surgical runs into reality: After a decade of invincibility, which created hubris and ignorance within the company, Intuitive Surgical finally ran into reality. Gynecologists got in on the act and began to use robots to perform hysterectomies. Partly due to operator error, partly due to a glitch in the devices, patients began to be harmed. The mainstream press piled on, and sales of the capital expenditure systems plummeted.

The rise of HeartWare (HTWR), problems with Thoratec (THOR): The launch of HeartWare’s LVAD took 25% of the U.S. market away from Thoratec right away. Compounding Thoratec’s problem were published reports of a spike in pump clotting since March of 2011. The New England Journal of Medicine article led to mainstream press reports. The response from the FDA remains to be seen.

Genetic tests questioned: As previously mentioned, because of Angelina Jolie’s decision to undergo a double mastectomy based on the BRCA gene test result, Myriad Genetics (MYGN) revenue saw a windfall. Other companies, such as Google’s 23andMe, tried to ride the wave, only to be shut down by the FDA.

The industry hits bottom: After many years of declining revenue, the ICD and orthopedic implant markets stabilized. However, the spine surgery devices continued their decline.

Other notable events in medical devices were Boston Scientific’s (BSX) return to growth, continuous glucose sensing reaching an inflection point (DXCM, TNDM), and the success of the Bard (BCR) drug-coated balloons.

The FDA:

Breakthrough Status: As mentioned at the top, this was one of the most important developments of the year.

Crackdown on antibiotics overuse: Decades too late, the FDA finally began cracking down on the overuse of antibiotics in livestock that cause resistant bugs harming humans. The agency is also limiting antibacterial hand soaps.

Crackdown on invalidated genetic tests: As mentioned at the top, the shutdown of 23adndMe was a powerful statement.

Avandia back on the market: As a complete repudiation of Dr. Steve Nissen, critic of Avandia, the FDA removed restrictions in the label and the drug is back on the market. Recall, Dr. Nissen made news in 2007 by publishing in the NEJM a poorly designed study that claimed Avandia was unsafe. The FDA placed restrictions on Avandia in 2010.

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