The Year in Review
Editor’s Note: This week’s issue is a whopper, as we recap the year’s biggest stories and trends in health care. We’ll return to our regular schedule in January. From all of us at Darwin Research Group, we hope you enjoy some quality time with family and friends this holiday season! -JM
The most significant Big Pharma and biotech deals
While there weren’t any massive deals this past year like Pfizer’s $43 billion acquisition of Seagen in 2023, there were still several noteworthy transactions.
The largest was Novo Holdings’ acquisition of contract manufacturer Catalent for $16.5 billion. Despite attempts by consumer groups and labor unions to have the Federal Trade Commission block the purchase, it closed on Dec. 18. Novo will use the three fill-finish facilities it gained in the transaction to increase supplies of weight-loss drug Wegovy (semaglutide).
- Johnson & Johnson acquired La Jolla, Calif.-based Ambrx Biopharma for approximately $2 billion in cash, completing the deal in March and gaining a synthetic biology technology platform for developing next-generation antibody drug conjugates (ADCs).
- Gilead Sciences expanded its liver portfolio with the acquisition of Fremont, Calif.-based CymaBay Therapeutics for approximately $4.3 billion in March.
- To boost its cardiovascular pipeline, Novo Nordisk acquired Hanover, Germany-based Cardior Pharmaceuticals in May for approximately $1.1 billion. Novo’s Wegovy received FDA approval in April for use in patients with concurrent heart disease.
- Boston-based Vertex Pharmaceuticals bolstered its autoimmune and inflammatory disease pipeline with the acquisition of Seattle-based Alpine Immune Sciences for $4.9 billion in May.
- Sanofi acquired La Jolla, Calif.-based Inhibrx — or, more accurately, an Inhibrx drug candidates being developed for a rare inherited disorder that can lead to lung and liver damage — for approximately $1.7 billion in May. Inhibrx’s other pipeline assets were spun off into a separate, publicly traded company operating under the name Inhibrx Biosciences.
- Novartis paid $2.9 billion in May to acquire German oncology biotech MorphoSys. But issues associated with pelabresib, a BET inhibitor that was the main candidate Novartis sought in the acquisition, caused Novartis to take an $800 million writedown on the deal in October and announce last week the closing of two MorphoSys sites in Munich and Boston.
- AstraZeneca completed its acquisition of Fusion Pharmaceuticals, a biopharma company based in Ontario, Canada, that develops next-generation radioconjugates, for approximately $2.4 billion in June.
- Illumina completed its spinoff of Grail on June 25, reversing its contested $8 billion acquisition of the biotech company in 2021.
- Baxter International signed a definitive agreement in August to divest its kidney care segment, to be named Vantive, to private equity firm The Carlyle Group for $3.8 billion. Carlyle will make its investment in Vantive in partnership with Atmas Health. The deal is expected to close by year-end or in early 2025.
- Boston Scientific acquired Irvine, Calif.-based Axonics, which makes neurostimulation devices to treat urinary and bowel dysfunction, for $3.7 billion in November.
- Danish drugmaker Lundbeck acquired La Jolla, Calif.-based Longboard Pharmaceuticals for approximately $2.6 billion on Dec. 2.
- Cardinal Health completed its $1.15 billion acquisition of Nashville, Tenn.-based Integrated Oncology Network (ION) on Dec. 3. ION’s 50+ practice sites will be integrated into Navista, Cardinal’s oncology practice alliance.
- AbbVie complete its acquisition of Boston-based Aliada Therapeutics for $1.4 billion on Dec. 11. Aliada’s lead investigational candidate, in development as a potential treatment for Alzheimer’s disease, uses a novel blood-brain barrier crossing technology licensed from J&J subsidiary Janssen to enhance delivery of targeted drugs into the central nervous system.
The top health system mergers and partnerships
Risant Health, a nonprofit organization Kaiser Foundation Hospitals (KFH) created in 2022 to accelerate the adoption of value-based care, completed its acquisition of Danville, Pa.-based Geisinger in March. KFH referred to the transaction as a member substitution, through which Risant became the sole corporate member of Geisinger and assumed Geisinger’s balance sheet. In June, Risant signed a definitive agreement to add its second health system, Greensboro, N.C.-based Cone Health, a nonprofit that serves more than half a million people in the state’s Piedmont Triad. That transaction, structured similarly to the one with Geisinger, closed on Dec. 1.
Other high-profile mergers, partnerships, and affiliations:
- Froedtert Health and ThedaCare, both based in Wisconsin, launched their combined health system on Jan. 1.
- Also on Jan. 1, St. Louis-based BJC HealthCare and Kansas City, Mo.-based Saint Luke’s Health System finalized their merger.
- Two other Missouri mergers were completed at the start of the year: Columbia, Mo.-based University of Missouri Health Care and Jefferson City-based Capital Region Medical Center unified under the MU Health Care brand, and Cape Girardeau-based SoutheastHealth officially became part of St. Louis-based Mercy, to be rebranded as Mercy Southeast.
- Winston Salem, N.C.-based Novant Health expanded its footprint in neighboring South Carolina with the acquisition of three hospitals from Dallas-based Tenet Healthcare for approximately $2.4 billion on Feb. 1 and the acquisition of UCI Medical Affiliates, an urgent care and physical therapy network, from Blue Cross Blue Shield of South Carolina in November.
- St. Luke’s, based in Minnesota, and Aspirus Health, based in Wisconsin, completed their affiliation in March.
- Northwell Health, based in New Hyde Park, N.Y., announced plans to combine with Danbury, Conn.-based Nuvance Health in March, proposing a $1 billion bailout of the struggling health system. Although the attorneys general in both states have approved the merger and a public hearing was held in Connecticut in November, the deal has not yet been finalized.
- Oregon Health & Science University and Legacy Health signed a binding, definitive agreement in June to combine under the OHSU Health name, and the Oregon Health Authority said in October it would begin its preliminary review of the proposed integration. That transaction is expected to close in the spring.
- St. Louis-based Ascension received approval from regulators in Illinois last week to sell nine of its hospitals and several post-acute facilities in the state to Ontario, Calif,-based Prime Healthcare for $375 million. If the Archdiocese of Chicago approves the transaction, it is expected to close early next year.
- Washington Health System officially became part of UPMC on June 1.
- Philadelphia-based Jefferson Health and Lehigh Valley Health Network, based in Allentown, Pa., officially combined on Aug. 1.
- Henry Ford Health and Ascension Michigan launched their newly combined organization, which took the Henry Ford Health name, on Oct. 1. The transaction also included assets and facilities belonging to Genesys Health System, a member of Ascension.
- Tenet Healthcare completed the sale of its 70% ownership interest in Birmingham, Ala.-based Brookwood Baptist Health to Orlando Health in October.
- Founding members Baylor Scott & White Health, Memorial Hermann Health System, Novant Health, and Providence launched Longitude Health in October to address health care’s “most complex challenges and opportunities.” The for-profit holding company plans to establish three operating companies that will act as startups on pharmaceutical development, care coordination, and billing.
- With the expanded partnership between Lifespan Health System, Rhode Island’s largest hospital system, and Brown University, Lifespan was officially renamed Brown University Health in October.
- General Catalyst’s venture capital firm, Health Assurance Transformation Corp. (HATCo), signed a definitive agreement in November to acquire Akron, Ohio-based Summa Health, following up on a nonbinding agreement signed in January.
And, it looks like Sanford Health may finally complete a merger. In July, the Sioux Falls, S.D.-based health system signed a nonbinding agreement to combine assets with Marshfield Clinic Health System, which serves rural Wisconsin and Michigan’s Upper Peninsula. When the two nonprofits signed an affiliation agreement in October, they expected to close the deal by year-end. At the time of publication, that had not yet happened.
Novel alliances promoted AI use and digital health
With the advent of generative AI, startups and longtime industry leaders have come together to develop and test models that can address some of the inefficiencies in the health care system. Others have focused on creating new digital health tools with the same end goal in mind. These are some of the year’s most newsworthy efforts in both areas:
- Mayo Clinic partnered with Sunnyvale, Calif.-based AI startup Cerebras Systems to develop AI models specific to health care that will assist physicians with patient diagnosis, treatment planning, and outcome estimation.
- With backing from Mayo Clinic and Microsoft, the Coalition for Health AI (CHAI) formed a new nonprofit venture to oversee a nationwide network of laboratories at U.S. universities and other institutions, including Mayo Clinic, Duke, and Stanford. The labs will test AI tools designed for health care, with the twofold goal of creating a system for certifying and registering AI models and publishing information about how the models perform before they are widely adopted.
- City of Hope created one of the first oncology-specific large language models with potential uses beyond document summarization, data structuring, and responding to basic requests for information. The models could also prove useful in clinical trial matching programs and in the drug discovery process.
- Epic Systems launched a spatial computing concept app for the Apple Vision Pro headset in February, and Sharp HealthCare announced a collaboration with Epic, Elsevier, and others to create a Spatial Computing Center of Excellence to explore how the technology could enhance patient care.
- Cone Health, the University of New Mexico, and more than 30,000 physicians provided input in the development of a generative AI version of Elsevier Health’s clinical decision support tool. Called ClinicalKey AI, the tool was launched in March.
- Sutter Health partnered with Pittsburgh-based startup Abridge to make Abridge’s generative AI medical document tool available to groups of the health system’s physicians and advanced clinicians. Christus Health and Kaiser Permanente deployed Abridge’s tool across their health systems. Mayo Clinic and Epic are collaborating with Abridge on a generative AI ambient documentation workflow tool for nurses that will work in conjunction with Abridge’s physician-facing documentation product.
- Based on a successful pilot program initiated early in the year, Ochsner Health agreed to implement DeepScribe’s ambient AI clinical documentation technology throughout the health system.
- New York City-based Aegis Ventures partnered with nine of the country’s leading health systems in a strategic alliance called Digital Consortium to co-develop an ecosystem of synergistic companies that will address core clinical and operational issues. Two more health systems later joined the alliance.
- Epic released an open-source validation tool hospitals and health systems can use to test and monitor AI models that integrate with EHR systems, including those not developed by Epic.
- Mayo Clinic and SandboxAQ are exploring the use of advanced, AI-powered magnetocardiography (MCG) technology to improve cardiac diagnostics.
- Hackensack Meridian Health partnered with K Health on an AI-driven primary care app called HMH 24/7 designed to give patients access to the health system’s clinicians via smartphone, with a dedicated clinician on the platform to oversee their care journey.
- Dana-Farber Cancer Institute, Fred Hutch Cancer Center, Memorial Sloan Kettering Cancer Center, and the Sidney Kimmel Comprehensive Cancer Center and Whiting School of Engineering at Johns Hopkins launched the Cancer AI Alliance, with the intent of identifying more ways to transform cancer research and care by applying “responsible AI to the collective power” of their data in order to unlock insights while protect data security.
- Mass General Brigham launched the Healthcare AI Challenge Collaborative in partnership with Emory Healthcare and other health care entities to build a scalable framework for evaluating health care AI.
- Mount Sinai Health System opened a $100 million research center dedicated to developing AI tools and technologies to enhance patient care.
- Several large health systems, in collaboration with the American Telemedicine Association, formed the Center of Digital Excellence, or CODE, an alliance to accelerate the integration of digital technologies into care delivery. Intermountain Health, Mayo Clinic, MedStar Health, Ochsner Health, OSF HealthCare, Sanford Health, Stanford Health Care, and UPMC are among the founding partners.
Retailers hit the brakes on their ventures into primary care
Before going into 2024, Walgreens had already announced plans to close 60 underperforming VillageMD clinics as part of the company’s $1 billion cost-cutting initiative. But on a second-quarter earnings call in late March, CEO Tim Wentworth said 140 location had already been closed and another 20 or so would be added to that total.
The drugstore chain took a massive $5.8 billion non-cash goodwill impairment charge in the fiscal second quarter related to VillageMD due, in part, to “lower than previously expected longer-term financial performance expectations,” according to Manmohan Mahajan, Walgreens’ chief financial officer.
In May, Cigna wrote off $1.8 billion of the $2.5 billion it invested in VillageMD in late 2022, citing the primary care chain’s lackluster growth and Walgreens decision to close additional underperforming clinics. In October, Cigna reported another $1 billion non-cash investment loss related to VillageMD.
On Walgreens’ third-quarter earnings call in late June, Wentworth said the company would look at closing “a significant portion” of underperforming Walgreens stores in the next three years and reduce its 53% stake in VillageMD.
In August, Walgreens announced that it had sold all of its remaining unencumbered shares of drug distributor Cencora (formerly AmerisourceBergen) common stock for proceeds of approximately $1.1 billion. An SEC filing around that same time indicated that Walgreens might sell all or part of the VillageMD business.
The following month, Walgreens sold it stake in BrightSpring Health Services, a Louisville, Ky.-based provider of home- and community-based pharmacy and health services for medically complex populations, to global investment firm KKR & Co.
In October, Walgreens said it planned to close 1,200 stores in the next three years, and earlier this month The Wall Street Journal reported that Walgreens Boots Alliance was considering selling the retail chain to private equity firm Sycamore Partners.
CVS Health has not been impervious to the conditions that have dragged Walgreens down, even though the company has its pharmacy benefit manager, CVS Caremark, to offset disappointing performances in other segments. Aetna, part of CVS’ health care benefits segment, has experienced the same challenges with its Medicare Advantage plans as other insurers have, including higher-than-anticipated costs associated with increases in inpatient care.
The company announced during a second-quarter earnings call in August that it would attempt to trim $2 billion in costs over the next few years, in addition to a cost-cutting initiative of up to $800 million announced in 2023.
The Wall Street Journal reported on Sept. 30 that CVS planned to trim its workforce by 2,900 and was considering splitting up the company’s pharmacy chain and its health insurance segment.
Within a couple of weeks, talk of breaking up the business had ended, and CVS had replaced CEO Karen Lynch with David Joyner. In November, Steve Nelson was appointed as Aetna’s president.
Perhaps the biggest surprise of the year among retailers was Walmart’s sudden decision on April 30 to close all 51 of its Walmart Health centers and eliminate its virtual care business, saying there wasn’t a sustainable business model for the company to continue offering health care services “at this time.”
Citing a challenging reimbursement environment and escalating operating costs, Walmart said it hadn’t been able to realize the profit necessary to stay the course. The company lost $230 million on Walmart Health in 2023.
The last of the Walmart Health clinics closed at the end of June, but Walmart will be leasing 23 of the former Walmart Health locations in four states to Humana’s CenterWell for senior-focused primary care clinics, which will operate under the CenterWell and Conviva brands. The new centers are expected to open by mid-2025.
Amazon also scaled back, eliminating hundreds of jobs in its One Medical and Amazon Pharmacy segments early in the year to realign internal resources with goals established for the businesses.
Google revealed over the summer that it would not renew its enterprise agreement with Amazon’s One Medical when the contract expires later this month, and Google has been transitioning the One Medical care centers it had in some of its offices to Premise Health.
Other than news of a collaboration with Cleveland Clinic announced at the HLTH conference in October, Amazon One Medical had a relatively unremarkable year. The collaboration with Cleveland Clinic involves opening a joint primary care office next year in the Cleveland area and plans for additional facilities over the next several years. Healthcare Dive reported at the time that One Medical has similar arrangements with about 20 other health systems.
Amazon tinkered with some of its existing services, like integrating its Amazon Clinic pay-per-visit telehealth service into its One Medical offerings and expanding it RxPass drug subscription program to Prime members with Medicare coverage. Last month Amazon One Medical introduced a new Pay-per-visit (which is the rebranded Amazon Clinic) telehealth service for Prime members that offers low upfront pricing.
In March, Amazon Pharmacy became a third-party dispensing provider for Eli Lilly’s new direct-to-consumer program, LillyDirect Pharmacy Solutions, allowing it to deliver certain prescribed medications made by Lilly directly to patients’ homes. And Amazon Pharmacy plans to open pharmacies in 20 new cities in the year ahead, allowing more customers to get same-day prescription deliveries.
PBMs stayed in the hot seat
Numerous bipartisan bills on PBM reform were introduced in both the House and the Senate but failed to gain any real traction.
Congressional hearings centering on PBM practices took place over the course of several months, including a highly contentious hearing in July in which senior leaders of the top three PBMs — CVS Caremark, Express Scripts, and Optum Rx — participated. As usual, the PBM executives pointed their fingers a drugmakers as the culprits for high drug prices, but members of the House panel pushed back.
That particular hearing followed the release of a report on the House Committee on Oversight and Accountability’s findings from a 32-month investigation into the role PBMs play in prescription drug markets. The report supported damning findings from a similar investigation the Federal Trade Commission conducted on PBM practices.
In September, the FTC filed an administrative complaint, which is similar to a lawsuit, against the top three PBMs and their group purchasing organizations, alleging the companies rigged pharmaceutical supply chain competition in their favor, forcing patients to pay more for life-saving medication, including insulin.
A few days before the FTC took legal action, Express Scripts filed a lawsuit against the FTC, claiming the commission’s report was defamatory and was interfering with the company’s business relationships.
In November, all three top PBMs sued the FTC, claiming the agency’s administrative process violates their due process rights under the Fifth Amendment.
Several states either took legal action again PBMs or passed legislation to increase oversight of them.
Earlier this month, a bipartisan Congressional group introduced the Patients Before Monopolies (PBM) Act on Wednesday, which would prohibit parent companies of health insurers and PBMs from also owning a pharmacy business.
