Brainstorm Health: Centene WellCare Deal, AbbVie Approval, Obamacare Decision

It would appear that the health care consolidation trend is here to stay.

On Wednesday, health insurer Centene (#61 on the most recent Fortune 500 list and an enthusiastic believer in the Affordable Care Act marketplaces) announced plans to snatch up rival WellCare in a deal valued at more than $15 billion before debt.

“With the addition of WellCare, we expect to bolster and diversify our product offerings, increase our scale and have access to new markets, which will in turn, enable us to continue investing in technology and better serve members with innovative programs designed to meet their needs,” said Centene CEO Michael Neidorff in a statement.

That means that Centene (if the deal clears) will be getting significantly bigger. But the health insurance and benefits manager market itself will continue to get smaller after the corporate marriage, with even more power concentrated among a few major players.

Consider the giants recently produced by the CVS-Aetna deal, the Cigna-Express Scripts deal, UnitedHealth’s massive reach across its Optum and traditional insurance units, among other recent health care M&A. Health care companies are leveraging vertical and horizontal integration strategies alike, snapping up firms that are in their own business and at different links in the supply chain alike.

The companies would argue that this can both boost their bottom lines while helping consumers, since the search for scale can, ultimately, cut costs. Whether or not that plays out in reality is a very different question.

Read on for the day’s news.

DIGITAL HEALTH

Drones for medical samples. Logistics giant UPS said on Tuesday that it's begun a program with North Carolina's WakeMed hospital system to use unmanned drones for medical sample delivery. It's a joint project with drone firm Matternet and would be meant to divert the transportation services from courier vehicles to drones, which could deliver sensitive biological materials far faster than conventional methods. (Fortune)

INDICATIONS

AbbVie stakes its hopes on a blockbuster drug wannabe. AbbVie, maker of the world's best-selling drug, notched an important win for its future, post-Humira aspirations with a Japanese approval for Skyrizi. Like Humira, Skyrizi treats inflammatory conditions such as psoriasis and psoriatic arthritis. It would be an important followup to Humira after the latter drug's U.S. patent expiration in 2023, but would likely not obtain anywhere close to Humira's consistent $20 billion per year haul. (FiercePharma)

THE BIG PICTURE

Trump admin reportedly overrode HHS Secretary, Attorney General on Obamacare decision. Politico reports that yesterday's surprising Trump administration move to claim that the entirety of Obamacare is unconstitutional was more or less driven by allies of White House acting chief of staff Mick Mulvaney (and perhaps President Trump himself)—and in opposition to key administration figures like Health and Human Services (HHS) Secretary Alex Azar and Attorney General William Barr. HHS has denied that narrative; it would be striking given that Barr's DOJ was the one to issue a brief supporting a controversial and strongly-criticized ruling by a Texas judge finding all of the Affordable Care Act unconstitutional. (Politico)

REQUIRED READING

The Business of Your Face, by Jeff John Roberts

The CDC Will Start Tracking Ticks This Year, by Emily Price

Commentary: A Wall from Mexico to New Zealand, by Sandro Galea

Federal Trade Commission Fines Robocallers Millions of Dollars, by Erin Corbett