No more surgery in 2010

Having survived its multiple surgical traumas as the economy went over the cliff in the final quarter of 2008- after being T-boned by the exorbitant speculative run up in oil prices earlier that year- the economy has spent 2009 in the Surgical ICU experiencing repeated intubations, central lines, tapering with ventilator settings, MRSA and VRE infections, dialysis and multiple codes. Somehow it's survived. Unfortunately as we enter 2010 the doctors are still pressing for more surgery and drug interventions although common sense may finally have taken hold and the 'no extraordinary measures' order signed. This may be a time for tax incentives for new hiring and accelerated depreciation on purchases, but not a time to continue deeper interventions that will result in permanent iatrogenic problems. And please- we don't need more 'shovel ready' projects. Frankly I never want to hear that phrase again. I don't want to be caught up in traffic while one individual fills a pothole and 10 construction workers look on- all to artificially lower the unemployment rate. We need real increases in productivity to do battle in a world economy, not wasteful big government spending.
Indeed the current political stalemate is exactly what is needed- a standoff between the surgeons and the physicians over what should be done for the patient. Let them glare at each other and make threats as to why their actions are the only ones capable of saving the patient. As the year begins, there is increased hiring in the life sciences. Let's allow the patient to get up and take a few steps down the hallway. Perhaps they'll be discharged by the end of the year.

Biopsy of Economy

The economy continues to dominate our thinking. Really dominate- how truly sad when the focus should be on advancing medicine and technology, not on whether your biotech start-up will make it through the end of 2009. I see a pick up in VC financing and even a rare IPO- perhaps things are beginning to turn. We've been bouncing along the boulder field of the cliff the economy fell off Sept 2008 for long enough. But here's the rub- how are we going to have a sustained recovery when the focus is on reforming health care instead of helping business? Obviously reforming health care is center stage for political reasons. It is highly likely the Democrats will loose dozens of seats in the House and several in the Senate in the mid-term election. A turnover in the House is not out of the question; the number of seats that are in contention in the Senate makes a turn-over there unlikely in 2010. The unemployment and Under-employment rate will only slowly improve by the fall of 2010 and the Dow will likely be over 10,000- but the number of middle-class voters still affected by this economy will be significant. Hence the urgency to institute a comprehensive health care reform while Obama still has super-majorities in the House and Senate and can push through a public option. Or a public mandate- who are we really kidding here? As a physician, I understand the attraction of a single payer system. Frankly the multitude of private insurances was a real nuisance from a billing perspective. But competition is always the best way.
Regarding the economy- why not institute an investment tax credit as has been done in the past? Accelerated depreciation, expensing of otherwise long term capital assets and the ability to fully write-off purchases for your business this year. Why does the present administration seem to believe that it can government-spend its way out of this deep recession when the only way out is to grow the private economy? And that means improving the business climate, not raising taxes and expecting business to somehow pick up the slack. It means letting go- not taking over more industries as has already been over done.
By early 2011 the Obama agenda will have run it's coarse. Let's hope it will somehow help sustain the life sciences, not stand on top of them.

Healtcare Reform- Now or Never?

Indeed it does seem that change is imminent.
In order to have something in place before the next election cycle we may see a 3rd government run program slipped inbetween Medicaid and Medicare. This is the administration's opportunity to introduce a program that will eventually displace most private insurance for healthcare. Initially people will have a choice- but eventually few employers will want to pay for a more expensive, although responsive, private insurance plan. Fundamentally a 3rd program is the only way to actually dictate healthcare costs from the government's perspective. One can incentivize, cajole, extract promises, seek greater efficiency, but in the end if it is in the hands of private companies to set fees and approve procedures, the government does not control those costs. Obama also wants a legacy to his presidency he can point to and say 'I did this'. Just expanding private coverage does not provide that capstone. Look at the Massachusetts model: no one really got 'credit' for the program, it's still having problems, it's working but expensive. A 3rd government program can be implemented immediately,likely through CMS, and will result in additional hires to address unemployment- another one of Obama's associated promises. Private insurance cannot be relied upon to hire immediately. All the effort getting input from the stakeholders may ultimately just be a screen for implementing such a 3rd program. Obama has the votes in congress, he has Ted Kennedy to rally the country- I'm sure his team sees this as 'now or never'. We will see..

Health Insurance Turned Upside Down

I believe we need to move away from a health model that rewards procedures and disease and towards a model that promotes wellness. In order to accomplish an abstract, long term goal involving multiple stakeholders it is best to allow them to solve the problem themselves. But when each stakeholder is fighting to maintain status quo and surrender as little as possible it creates stagnation. Rather than regulate heavily- which is where the current administration is heading- my suggestion is to adjust the playing field to incentivize the stakeholders. Rather than a level playing field with a tug-of-war pulling on 'healthcare' , tilt the field so that all the players end up on the same side and are pulling in the same direction- not against one another. An initial step would be to adjust the insurance company's relationships with one another so that their interests align with making people healthier.

In order to promote wellness and get the health insurance industry focused on keeping people 'well' as opposed to treating illness after it occurs, then something fundamental needs to be done. Why should an insurance company receive premiums for months or years and rarely pay a claim because of 'luck' ? And is it not the 'fear' of being stuck with an enormous bill for a patient that drives the process of 'underwriting'? Underwriting is expensive, labor intensive, slow and wasteful.

I suggest that the insurance company which has been covering the person for the longer time should pay a portion of the claims that occurs after the person changes insurances. That would make the insurance company that received the most monthly premiums contribute more fairly when an illness occurs. If the first insurance company was responsible for a portion of any claim for a period of time after their coverage ended - let's say one or two years- then they would have a stronger interest in keeping that patient healthy in the long run. During their own coverage period they would make more of an effort to do so. And the second insurance company would know that even if there were underwriting concerns ( more than average # of claims or the person having a certain disease) that any new claims would be proportionately paid by the first insurance company. This would mitigate the new insurance company's risk. Perhaps the first insurance company would pay 90% first three months and decreasing 10% each month there after so at the end of a year it would be totally on the new health insurance company.

Without many fundamental changes to healthcare in the US the entire system will become unaffordable. The population is aging, technology is increasing, drugs are more expensive. This type of 'insurance sharing model' is only one change that could lead to new thinking and progress toward wellness.

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Biotech Bailout ?

The Federal Reserve's usual approach to stimulating the economy by lowering the fed fund rates has clearly been ineffective. No surprise. They decided months ago it would be necessary to move to what is termed quantitative easing – expanding the money supply literally by printing money- and have reportedly printed upwards of 1 trillion dollars. So with every industry lining up for it's share what can biotech expect? BIO has been lobbying heavily and reports 1/3 of biotechs will run out of money by mid 2009. But does this fragmented and highly competitive industry have the political clout to command a piece of the pie? Will there be support for a bailout to avoid the loss of multiple drug programs, billions of dollars of potential drug profits and the potential benefit to millions of patients with unmet or under met medical needs? On the 'No' side- no union pull or traditional democratic constituency to support, a secretive industry providing uncertain results that are years away from commercial viability, and one that is concentrated in just a couple of states. On the 'Yes' side - companies are heavily concentrated in CA and Nancy Pelosi is Speaker of the House, there is the allure of 'high tech' jobs providing clean, sophisticated growth opportunities, and with states experiencing loss in traditional manufacturing biotech is attractive as a platform on which to build other knowledge based industries.

How to construct a deal? Besides CA , NJ, MA and PA, I'd suggest getting the representatives and senators of some other large states with fledgling biotech industries committed - specifically FL, TX, NC , NY and MI. Get existing biotech support organizations, technology incubators, venture capitalists and university tech transfer involved and lobbying. And don't forget pulling in Canada with its own significant biotech industry in Ontario and Quebec. Canada contributed their own multi-billion dollar bailout for the auto industry and should be a partner in a biotech bailout as well. Biotech needs to become much more vocal about what it can do for the economy and about building the future for America. The funds have to be quickly and directly available- no long partnership and courtships, no grant applications that would normally take months to process. Perhaps supplying large amounts of cash through existing biotech focused banks to lend at zero of very low rates and due back only following successful outcomes, perhaps direct grants and support for existing R&D, perhaps taking stakes in biotechs that are currently beginning to struggle, perhaps direct support to tech transfer and incubator programs. The point is to make funding freely and readily available to existing companies as well as to new ones. This is an opportunity for biotech to move to the front burner of the bailout along with green technology and energy- let's turn up the heat !

Steven Levy MD
President / Head Healthcare & Life Sciences

The Acoma Group LLC

Business Development, Executive Coaching and Executive Search

www.acomagroup.com

Aussie Economic Outlook

As for Aus, yes we're feeling the pain, not as depressed about the future as the rest of the world though, probably because we have a belief that our future is strongly tied to China which despite the world slow down is still expected to have a GDP growth of 8%. If the GDP growth was 5% or less, I think we would be a lot more worried.

Nick Kalikajaros
CEO and Managing Director Private Banking Australia
"Corporate Advisor and Wealth Advisor to Entrepreneurs"