A (hopefully) one-time note: 2020 was an unexpected year (duh). We hope 2021 is both better and more predictable. While it was essentially the only topic of 2020, we are steering clear of COVID-19 predictions here, hoping fervently that an effective vaccine will be (has been?) approved imminently, distributed efficiently and equitably, and that by the end of 2021, COVID-19 becomes as well managed as seasonal flu and that schools, businesses, and our economy are safely open and flourishing.
As 2021 approaches, here are 10 predictions for what we think will happen next for health care in America. But first we look back on our (dismal— think COVID response, not COVID vaccine…) 2020 performance. Suffice it to say, we whiffed, Bill Buckner “through the legs” type whiffed. We published our 2020 predictions on Dec. 6, 2019, three weeks before COVID-19 was discovered in Wuhan, China. Everything got reprioritized. Remarkably, we still got “two plus a little” predictions correct, but who shoots for 20%?
What did we get right? We were correct that Big Tech did not disrupt health care (again). Haven lost momentum with Atul Gawande being replaced as CEO, while Apple, Google, and Facebook did little other than support contract tracing and share mobility data with public health agencies.
We were correct that the election year would lead to health policy paralysis. The ACA remains; no legislation was passed; and new policy has been limited to executive orders of questionable impact (drug pricing) and legality (price transparency).
We predicted that pharma would shift focus from cancer immunology to other therapeutics areas, and three of the five largest M&As that occurred were outside of oncology: Portola (hematology), Dermira (dermatology), and Corvidia (cardiology). That said, immune oncology remains a centerpiece of everyone’s efforts, and maybe we should have learned by now that drug discovery evolves on a time frame longer than our one-year prediction cycle.
We still believe in many of our unrealized 2020 predictions. We think growth at all costs has limits, but with excess capital looking for returns and low interest rates, that day of reckoning continues to be postponed. We do think data privacy remains poorly managed, but, amid COVID-19, standards were relaxed to the point that even unencrypted Zoom was allowed for telemedicine visits and hospitals endured more ransomware attacks. We are also bullish on A.I. over the long term and think that DeepMind’s protein-folding breakthrough is an exciting early advance.
So, good riddance to 2020, long live 2021:
A non-health prediction: U.S. Senate does not flip to Democratic control, which sets health policy landscape
Perhaps Biden’s largest goal as President is to create a sense of normalcy. He will try to avoid, rather than dominate, the daily news cycle. He will not engage in the stream-of-consciousness Twitter antics of the recent past. He will also be constrained by a 50/50 Senate, which means his cabinet picks will need to be more moderate to get confirmed (as evidenced by the headwinds facing Neera Tanden at OMB). A slim Republican Senate majority will hold the most progressive wing of the Democratic Party in check and also make ideas like Medicare for All or a strong public option nonstarters.
1. Confidence (and independence) is restored in the CDC and FDA
We expect very experienced and noncontroversial leaders to lead the FDA and CDC. Furthermore, these leaders will be fact-based and transparent in their approaches to approving therapeutics, diagnostic tests, vaccines, and public health measures for COVID-19. We think the FDA and CDC will create surveillance programs to track COVID-19 vaccine side effects, efficacy, and local immunity and outbreaks.
Expect the CDC to be much more active in shaping the national public health dialogue and instilling confidence in getting a COVID-19 vaccination.
2. Virtual care for Medicare takes off
While there are not many silver linings to COVID-19, one benefit has been the dramatic increase in telemedicine adoption. Medicare is covering telemedicine for the first time on an emergency basis.
We think Medicare will make telemedicine coverage permanent. This will lead to seniors, similar to millennials, preferring telemedicine to in-person visits for much of their care.
Moreover, virtual care will actually work better than infrequent in-person care for seniors since it enables clinicians to do more check-in visits, track biomarkers more often, and engage faster when exacerbations can still be mitigated. Over time, this trend will be embraced by new entrants, risk-bearing clinicians, and ACOs alike.
3. $0 out-of-pocket care options emerge for most people
After 20 years of ever-increasing premiums, deductibles, and co-pays, a combination of many factors will lead to free care options for most people. Biden will take a more progressive approach to public health, enabling everyone to access no-cost-sharing COVID-19 testing, treatments, and vaccinations.
Fierce competition in Medicare Advantage will lead to most seniors having access to zero-dollar premium plans. As a by-product of the recession, Medicaid enrollment will grow, and Biden will repeal all Medicaid cost sharing and work requirements. We think Biden will also temporarily increase ACA subsidies as part of a COVID-19 relief package. Commercial insurance companies will continue to drive telemedicine usage by waiving co-pays too.
4. ACA survives and repeal efforts (finally) die
After a decade of turmoil, Republicans will stop trying to repeal the ACA, and Democrats will embrace it instead of Medicare for All. This will, for the first time, shift focus to trying to make the ACA work better.
We also believe the Supreme Court will uphold the ACA when they announce their decision in the final Republican challenge to the law, California v. Texas, over the constitutionality of the individual mandate.
5. “Nursing homes” go virtual and become home care
Nursing homes, forever, have been sources of outbreaks of resistant bacterial infections like MRSA and VRE.
COVID-19 reinforced that they are the last place you want a loved one to receive care. These cultural shifts combined with improvements in both hardware and software will lead to the rise of home care with visiting nurses and therapists in many cases.
We think home care will prove better since patients will have lower risk of infection and delirium. Home care providers will be able to remotely keep watch over all of the vital signs monitored today by nursing homes and identify exacerbations and intervene just as early to mitigate them.
6. Special-purpose acquisition companies (SPACs) fall out of favor
The year 2020 has seen a tornado of SPAC activity. We watched Hims, Clover, and Augmedix all go public via SPACs, as well as the former Livongo team launch a $500 million SPAC.
We think that SPACs will lose luster over 2021 as several of the completed SPACs perform poorly, leading the (arm’s length) PIPE investors to pull back on pricing and the (theoretical) economic benefits of SPACs versus IPOs to deteriorate for good companies.
This will be counterbalanced by a reduction in the SPAC sponsor economics as the set of interesting target possibilities narrows, allowing those few targets to drive auction-like dynamics as they choose a SPAC vehicle.
In the end, SPACs will return to a go-public vehicle of choice only for companies with business challenges such as lower growth or less predictable results, which make a traditional IPO not an option.
7. The mental-health revolution continues
2020 has been an emotionally challenging year for us all: COVID-19, recession, social justice protests, school closures, and a contentious election.
This has turbocharged demand for mental-health services of all types. COVID-19 has also driven large increases in both virtual and computer based care, which has made care far more scalable. More mental-health care will translate into lower medical care costs, lower turnover among employees, and high patient satisfaction. As a result, we think mental-health will grow faster and also attract more capital than other health care sectors.
8. Health care IT (HCIT) IPOs and M&A increases dramatically
On the heels of the mega-Teladoc/Livongo merger creating a $20 billion behemoth, pressures will intensify on every other HCIT company to grow faster and gain scale. Moreover, since private capital remains plentiful and interest rates near zero, M&A will be an enticing and cost effective approach for companies to augment organic growth.
More companies will merge, or make acquisitions, to gain scale to go public and also to create businesses that are large enough to exist independently. We think 2021 will be a year of coalescence of lots of point solutions into larger platforms so that there is a single place for patients to engage and a company or payor to partner.
9. No action on drug pricing
With the promise of multiple COVID-19 vaccines being invented and brought to market in record time, public opinion will turn very positive for pharmaceutical companies. This will squash all efforts to regulate drug prices for the next year (at least).
The recent Trump executive orders on “most favored nation” pricing will be challenged in the courts and never be enacted. We do not think this reprieve extends to pharmacy benefit managers, who will continue to be scrutinized over rebates, pharmacy payments, and their formulary placement criteria.
10. Amazon pharmacy gains traction
We have been perennially skeptical of Big Tech making progress in health care. One exception is Amazon’s new pharmacy.
We think that Amazon will gain traction since COVID-19 has led to dramatically more e-commerce for all things and made pharmacies akin to nursing homes: scary places to visit since they are filled with sick and possibly COVID-19-contagious people.
Amazon’s consumer trust, incredible delivery speed, and low prices will allow the company to take meaningful share from retail pharmacies.
We look forward to seeing how many of these come true. In the meantime, we wish you a safe and happy holiday season and 2021.
Bob Kocher and Bryan Roberts are partners at the venture capital firm Venrock, where they invest in health care businesses.
