Venrock partner Bryan Roberts speaks with Mathai Mammen, Global Head of R&D at the Janssen Pharmaceutical Companies of Johnson & Johnson, about Mammen’s career path and what differences he’s found working on drug development in both small and large companies. Managing 14,000 people has its challenges, but the scale is incredible: J&J’s products touch more than 1 billion people worldwide. They also discuss trends in gene editing and CRISPR thanks to machine learning and AI.
Venrock partner Bryan Roberts chats with Mathai Mammen about COVID-19 vaccine development and therapeutics in this special episode of Running Through Walls. Mammen serves as the Global Head of R&D at the Janssen Pharmaceutical Companies of Johnson & Johnson, where he is heading up the firm’s COVID-19 vaccine development. They discuss J&J’s unique approach to the vaccine and which therapeutics are promising in the fight against the virus. Mammen shares how the U.S. can be better prepared for the next pandemic, and highlights how his company approaches vaccine production and distribution on a global scale.
Want more? Here’s the latest from Running Through Walls.
10x Genomics CEO and co-founder Serge Saxonov joins Venrock’s Bryan Roberts to discuss the founding of the company and its recent IPO. Saxonov shares his story of emigrating from Tajikistan to New York City as a teenager, learning English and becoming an entrepreneur. He talks candidly about how he’s grown as a leader over his six years as CEO of the company and how the company’s technology has evolved to meet customers’ needs.
Want more? Here’s the latest from Running Through Walls.
As we near the end of 2019, it is time for us to look ahead and share what we believe 2020 has in store for the health care ecosystem. But first, let’s look back and assess how we did with our 2019 predictions.
Overall, we got about half correct (five or six out of 10 depending on whether you count Blue Cross Blue Shield of North Carolina’s attempt to consolidate with Cambia). What we got right was growth of Accountable Care Organizations, more digital health consolidation, dialysis disrupted, dramatic growth in telemedicine, and breakthroughs in DNA sequencing platforms.
We were wrong about electronic health records (EHRs)—both about any meaningful improvement in the UI and that the government would break the ice on interoperability.
While there has been lots of talk about both of these topics, we do not think much progress was made in 2019. We were equally wrong about pharmacy benefit manager (PBM) disruption, with lots of talk but no action after the Centers for Medicare and Medicaid Services (CMS) withdrew their proposal to eliminate drug rebates.
We do think interoperability and PBM changes will happen but, like most changes in our ecosystem, they will take longer to come to fruition. We were also wrong about insuretech getting tarnished as start-ups, or at least start-up valuations, continue to do very well.
As we look ahead to 2020, here are 10 predictions that are shaping our thinking:
1. Turns Out “Growth at All Costs” Has a Limit
After the debacle of WeWork’s unsuccessful IPO, SoftBank’s subsequent $8.9 billion bailout (Too Big to Fail?) and many formerly high-flying private companies trading below their 2019 IPO prices, growth investors are going to become more discerning regarding eventual, or even near term, financial independence.
To be clear, there will still be way too much money available given the low rates of return in other asset classes, but that sea of cash seeking a home will focus on high growth, high gross margin businesses that could be cash flow positive if necessary. This could push more mature companies to exit (whether M&A or IPO) since the private markets will no longer be so permissive.
2. Cancer Immunotherapy Is Recognized—As Crowded
After multiple years of focus and investment from biotech investors, the market for the next blockbuster immunotherapy runs dry of differentiated ideas and the current batch of immune oncology programs starts to look incremental, therefore not revolutionary enough to command the high prices required for their production. As a result, investors’ cash rotates toward other areas like CNS and autoimmune disorders.
3. Medicare Advantage is Everyone’s Favorite. Uh Oh…
CMS will continue to make Medicare Advantage (MA) a better deal for new Medicare beneficiaries. We think CMS will continue raising rates for MA, thereby allowing plans to lower cost sharing as well as offer more generous drug, dental, and vision benefits.
MA plans will continue to differentiate from traditional Medicare—offering patients better experiences like telemedicine, text-based care interactions, and help with social determinants of health.
The ensuing growth in MA membership will drive even more investment in MA oriented start-ups, most of which will succumb to poor execution compared to the large incumbents that receive most of their net Income from MA (so they really care).
4. Data Privacy Taken Seriously
Hospitals have long viewed their medical records as gold waiting to be mined. For the last few years, a slew of start-ups and Google have come to health systems offering to anonymize, organize, and sell their data to pharma.
The hitch is, it’s very hard to anonymize data and most of the time this was done without patient consent, so a backlash around violating patient privacy is coming. These debates will be intensified by the hunger of AI for large datasets and, we think, the discovery of many examples of patients being re-identified.
5. More Biomedical Philanthropy
Perhaps a by-product of the Warren and Sanders campaigns, the decade long bull market or more likely turning 35 years old with bad knees… more billionaires, especially from the recent generation of tech companies, will follow the lead of Chan-Zuckerberg and Sean Parker and set up biomedical research institutes. Successful entrepreneurs will be entranced by the potential of using new tools and computing power to tackle biology and cure disease.
6. AI Begins to Prove Useful
After several years of pure hype, beyond being able to recognize images, AI will begin to become useful clinically.
While we remain equally excited about non-clinical use cases like more efficient billing, coding, credentialing, and provider directories, we think that AI use cases to support biomedical research and clinical decision support will begin to become useful and practical.
We also think that AI’s insatiable appetite for data will be rate limiting for most clinical use cases since the training data is contaminated with medical errors and bias.
7. More Skeletons Come Out, a la uBiome
As investors pivot towards more rigorous diligence processes, we think it is inevitable that cut corners, made by startups to grow faster, will come back to haunt them—tales of artificial user growth, phantom unit economics, and regulatory disregard will lead to hand wringing and schadenfreude.
8. No Disruption Bogeyman from Big Tech
Despite a steady stream of breathless articles about Amazon and Haven, Google, Facebook, and Apple disrupting health care, we think that they will shift much of that attention to other things in 2020.
Next year big tech is going to deprioritize health care disruption to deal with crises in public trust, privacy, and other consumer technology opportunities. For all the talk about building consumer health products and disrupting PBMs and payers, we think the best we can hope for are continued small experiments and acquihire acquisitions.
9. Election Year Policy Paralysis
While disappointing, we do not believe Congress is going to be able to cooperate long enough to solve problems like surprise billing, make any meaningful progress on drug prices, or to improve the Affordable Care Act.
With a presidential election and impeachment overshadowing everything, neither side will want the other to declare any sort of victory. To the extent policy is developed, the action will happen at the State level (which we think is interesting).
10. Primary Care Physicians (PCPs) Break Free from Hospitals
2020 will be the year the PCPs wake up and realize that they can earn more and be happier working independently of health systems.
As a result, payers will try to tempt PCPs to break free by offering them higher reimbursement, start-up capital, and even subsidized office space and technology.
We also think that we will begin to see a reprise of the 1990s with lower margin health systems tiring of losing money on their employed doctors and offer to sell them back their practices for peanuts.
We hope that this gave you a glimpse into our minds and piqued your curiosity. We look forward to seeing what happens. Until then, wishing you all a happy holiday season and 2020.
Bob Kocher and Bryan Roberts are both health care investors and partners at the venture capital firm Venrock.
Health Care Investors Predict 10 Ways the Industry Will Change in 2020 was originally published on Fortune.
Ed and Todd Park join Venrock’s Bryan Roberts to continue their conversation about fixing the big problems in healthcare. In the second part of our two-part episode, the Park brothers examine rewiring the healthcare stack for the inevitable shift to a value-based care paradigm. They talk about their success with their latest venture Devoted Health, including how they build and motivate a workforce to stand up to the challenge of healthcare.
Todd and Ed Park, serial entrepreneurs in health IT, sit down with Venrock partner Bryan Roberts to discuss their early experiences founding athenahealth. Todd and Ed look back at how the company evolved from a women’s health clinic to a provider of practice management services. Tune in to find out their advice for new entrepreneurs, the mistakes that shaped their path, and the core team that helped them get to where they are today.
By Bob Kocher and Bryan Roberts
Probably the most rewarding part of venture investing is tackling difficult problems with great people (and then succeeding…). Devoted Health is a textbook case. An enormously important, yet hugely complex challenge – redesigning health care to be higher quality, more affordable, and delightful for those in great need — with a team of people so well prepared and talented that they have the possibility of succeeding.
It is undeniable that brothers Ed and Todd Park are uniquely capable entrepreneurs, combining distinctive healthcare knowledge, technology skills, inspirational leadership and impeccable values, with a determination to succeed. At this point in our relationship, any project in which they are interested, we are too. How did we get there? It begins with the founding of Athenahealth, where Ed and Todd, as early 20-somethings, were, respectively, the initial engineering and business leadership, along with Jonathan Bush, of this groundbreaking health care IT business. Bryan led their early institutional funding round and, after 10 years on the Board of Directors, then co-founded another pioneering effort in the space with Todd and Giovanni Colella, Castlight Health. Ed broadened from Chief Software Architect to COO at Athenahealth, while Todd became CTO of the United States in the Obama Administration. Bob entered the fray when he was working at the White House and collaborated closely with Todd to liberate information across health care, subsequently joining Venrock in 2011. Working together to surmount many disparate challenges across these various situations over the last 20 years created a foundation of unshakable trust. In fact, “Would you trust them with your life?” was a criterion used to evaluate potential hires early in Devoted’s life.
Devoted is also deeply rooted in purpose. It is the offspring of once-in-a-generation changes in incentives driving how America pays for healthcare (the transition from fee for service to value-based care), coupled with quantum improvements in information availability and technology. The need on which Devoted is focused is encapsulated by Dr. Atul Gawande’s observation that “the best care in the world costs less than the typical care patients receive in America.” Devoted was conceived to reliably and scalably deliver this better care at lower cost, getting people the right care in the right place at the right time.
Prior to founding the company, the four of us went on an early 2017 “walk-about” – meeting with many of the best thinkers, physicians, health system leaders, technologists, academics, community leaders, and health plan leaders in America. A few early observations made lasting impressions:
- Exceptional primary care doctors deliver dramatically better outcomes at lower cost
- Both outcomes and costs improve when exceptional primary care doctors have aligned incentives and better information
- Opportunities exist to improve both financial incentive alignment and the quality, speed, and breadth of the data and information delivered to primary care doctors
- Even the best primary care doctors would value more help supporting patients with social work, behavioral health, and home-delivered services
- The best examples of aligned incentives and better information exist among primary care doctors serving seniors in the Medicare Advantage program
- The technology stack currently being used to administer health insurance plan operations is horribly outdated
Our belief is that it is necessary to build a “full stack” solution to deliver on the promise of better care at lower cost, at scale – not a point solution. Scaling the advent of exceptional primary care-driven health care across the country requires the ability to deliver optimally on incentive alignment and information flows – we therefore decided to build a next-generation Medicare Advantage health insurance plan and our own new core software from scratch to do exactly that. We also decided early on that it is better to partner with primary care doctors as opposed to acquiring them or attempting to deliver all of the care ourselves. Finally, listening carefully to top primary care physicians, we decided to build care services designed to complement what they do, starting with Devoted health guides who help our members navigate the health care system and a Devoted house-call medical group that can deliver care at home to members at risk and in need. Devoted is therefore a “payvidor” – a payor/health insurance plan, combined with a suite of provider support services to improve care and outcomes.
Devoted’s aspiration is to become the “go to” payor and care partner for exceptional primary care physicians, delivering better data faster and seamlessly into provider workflows and IT systems, simplifying administrative processes and making them happen invisibly in the background, listening to primary care physicians about what they wished they had to better care for their patients, and providing a growing array of care services that meet the needs that our primary care physician partners articulate. We’ve also set out to build a member experience that emulates the best consumer experiences and honors every member as if they were our own mother or father. By building confidence with members, Devoted hopes to be entrusted to help them navigate care when they get sick.
Over the last 18 months, the Devoted team has made amazing progress, converting our concepts into an initial business, now over 150 employees strong. Bob has served as Devoted’s founding Chief Medical Officer, building the clinical strategy and team. And yesterday, Devoted began enrolling our first members in eight counties in Florida, partnered with a network of primary care doctors, specialists, and hospitals to which we would be proud to send a loved one for care. 2019 will be a year of tremendous growth and learning for Devoted, and we are thrilled to be partners with Ed and Todd on this audacious journey.
Maria Eitel, founder and co-chair of the Nike Foundation, joins Venrock’s Bryan Roberts to discuss the Time’s Up movement and recent cultural shifts in the workplace. Maria shares her journey from working in the White House to founding The Girl Effect, and the simple formula girls need to be successful. She also discusses the importance of creating shared spaces where men are involved in the conversation.
Chris Chen, CEO of ChenMed, joins Venrock’s Bryan Roberts to discuss the challenges and successes of providing healthcare to the population that needs it most – the poor, the old, and the sick. Chris’s father, James Chen, founded ChenMed as a way of providing concierge-style healthcare to low- and moderate-income seniors. When his father faced a health scare, Chris spent 24 hours learning how to run the business. After his father recovered and Chris completed his fellowship, they expanded ChenMed to 42 medical centers and significantly decreased hospitalization rates of their patients. With cardiovascular, oncological, and orthopedic diseases plaguing his patient population, Chris emphasizes the importance of holistic healthcare practices and collaborating with doctors who understand the economics of healthcare. Although wanting to cure the world may be his kryptonite, Chris shares how staying focused allows him to help those who need it the most.
As the CEO of medical technology company ZELTIQ, Mark Foley was on the front lines of a major business transformation. Venrock’s Bryan Roberts talks to Foley about turning the company around by changing the business model and swapping out the majority of leadership, culminating in the successful acquisition by Allergan for $2.4 billion in April 2017. But the exit wasn’t all smooth sailing. Foley shares details on the initial failed bids that rocked the company’s culture, how he managed morale during this tricky time, and what led to the successful deal in the end. He also shares how investors can recover after an initial stumble, and how he made the transition from VC to CEO successfully.