Silicon Valley takes on health care as tech billionaires disrupt insurance, pharmaceutical markets

December 1, 2022

Health care costs are top of mind for the millions of Americans that made their annual Open Enrollment elections with a goal of saving in 2023. This is especially true for the many Americans that are still looking for ways to save even after selecting the most affordable options for coverage available during their employers’ signup period.

With the rising cost of health care and prescription drugs, consumers are now turning to unlikely sources for relief: Silicon Valley tech billionaires.

USC experts discuss the significance of billionaire tech gurus like Mark Cuban (Cost Plus Drugs) and Jeff Bezos (Amazon Pharmacy and the new RPT Amazon virtual clinics) disrupting the business of health care and prescription drugs.

Contact: Nina Raffio at raffio@usc.edu or (213) 442-8464

Future success relies on lessons learned from the past

An expert in startups and growth hacking, Paul Orlando directs the Lloyd Greif Center for Entrepreneurial Studies at USC Marshall. He has also co-founded and led startup accelerators and incubators based in Hong Kong, Rome and online.

“Health insurance and prescription drugs — what startups might call ‘boring industries’ are ripe for disruption. And much needed. I don’t believe many people rave over their health insurance provider or how inexpensive their prescription medicines are.

“At the same time, we’ve seen ethical dilemmas and unintended consequences from attempted business building with prescription drugs, such as the Oxycontin/Purdue Pharma scandal. With health insurance and medications in the U.S. at high costs to the consumer globally and without outcomes that match those costs, I look forward to disruption in these industries.”

Contact: porlando@usc.edu

Not exactly the act of public service you imagined, but still a step in the right direction

“Health care has been in the crosshairs of technology leaders for a long time because the size of the space – the sheer volume spent on health care in the U.S. – is too big to ignore. The pharmaceutical sector is simply a more focused attempt at teasing out a piece of the healthcare system that maybe has a higher probability of success than attacking all of healthcare at once.

“Are these technology billionaires doing this as part of giving back to society? No, not necessarily. Health care is the biggest sector of the U.S. economy in terms of cost and the largest opportunity for creating a profitable business. And because it is so inefficient and fragmented, there is an opportunity to both cut down on costs and still create a profitable company. So it’s a win-win; it has a social impact, plus it’s a good business to be in.”

Arvind Bhambri is an associate professor of management and organization at USC Marshall who specializes in strategic change, competitive strategy, business development, and leadership.

Contact: bhambri@marshall.usc.edu

Can Mark or Jeff solve our prescription drug cost crisis?

It depends on the drug, explained Karen Van Nuys, a health and finance expert at the USC Schaeffer Center for Health Policy and Economics.

“One way that you can answer that is from the perspective of a patient who can get Imatinib from Mark Cuban’s Cost Plus Drugs for $14.40 a month. If they had gone through their insurance system and not used Mark Cuban, they would have potentially had a coinsurance payment of hundreds of dollars a month for this drug, or even more. By the way, this is a cancer drug that is enormously effective for chronic myelogenous leukemia. Patients are frequently put on this drug for life to keep cancer in remission. So patients having access to it for $14.40 a month, and not $800 a month of a copayment for the rest of their lives, makes a huge difference.”

But mail order prescription services like Cost Plus Drugs comes with limitations, she warned.

“One of the things to keep in mind is that so far, all of these solutions are mail order, which aren’t great for drugs like insulin that need to be refrigerated. That is still a problem that needs solving. We need to come up with creative models that bypass the insurance system for drugs like insulin and get low-cost options to patients. You just can’t do that through mail order.”

(Photo/Karolina Grabowska from Pexels)