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Does An Insurance Company Really Want to Develop New Therapies?

Via David Shaywitz on Twitter, I’ve been seeing comments from the insurance company startup Clover Health that raised my eyebrows a bit.

The misalignment between existing health insurers and their customers is that insurers view customers in terms of annual income instead of customer lifetime value. This is where (Vivek) Garipalli believes Clover’s edge will be — capturing the data around customer lifetime value

“At Clover, we’ve built everything around this centralized view of our customer and try to capture as much data as we can about each customer … The traditional insurer is not set up to drive workflow management with their customers.”

OK, I have no objections to that view, except the usually slightly creeped-out ones, common to this era, about how so many companies are devoting so much time, effort, and money to capturing every single possible bit of data about me that they can. I mean, I use Google, and I use Amazon, and I leave as much of digital footprint as anyone else, so I know that a lot of people know a lot more about me that I might think. But still. Anyway, it’s not that part that I’m wondering about, it’s this one:

Those data sets could eventually help Clover expand beyond insurance into therapy and care itself, Garipalli told Drew Armstrong of Bloomberg in a fireside chat.

“We’re building one of the most longitudinal datasets in healthcare, and that might mean we start building our own therapeutics.”

It’s hard to say what he’s driving at there. It might be the (somewhat annoying phrase alert) “digital therapeutics” market, which to me is Silicon Valley’s way of saying “See, we’re making a a big difference in human health, even though we’re still writing code and making small electronics just like we always have”. I’m open to the idea that some of these things could be valuable, but I’d like to see data. Verily’s “Project Baseline” features such devices, and the first patients have started in their study (to some fanfare), and we’ll see how good a data set they can build.

There’s also the AI/machine learning/deep learning/pick your buzzphrase area, which people very much want to apply to huge health data sets. (Those terms are not necessarily equivalent, I need to add). I see no reason that that sort of thing can’t work, but it’s suffered from a lot of overly raised expectations so far. The opinion that IBM has been “choking on its own hype” about its Watson system’s applications to medicine seems accurate to me. Perhaps this is what Clover has in mind, though?

If, on the other hand, they are thinking about making new medicines based on therapeutic hypotheses that come out of their customer data, that’s an even bigger jump, and it’s one that I would imagine that an insurance company is ill-prepared to make, to put it as gently as I can. I sometimes roll my eyes about (for example) academic research departments trying to discover new drugs and take them all the way to the clinic, but I have a lot more faith in them than I do in an insurance company. Hopping directly into the drug research business from a completely non-physical-sciences industry and background sounds like a recipe to lose all your money, unless you’re just turning yourself into a source of funding and not much else.

But in that way, that’s where I can see the insurance folks really making an impact: in funding clinical trials, particularly comparative ones between existing therapies. People have talked about this for some time, and recent efforts are explicitly trying to get these sorts of things going. In these cases, though, the insurance companies will mostly be providing the money for clinical research organizations to do the work. If Clover or others can come up with worthwhile ideas based on their own data analysis, so much the better. We’ll see eventually what they really have in mind.

34 comments on “Does An Insurance Company Really Want to Develop New Therapies?”

  1. Scientistsailor says:

    If you can get past the buzz word bingo (, I can see their point. It makes sense that an insurance company should be interested in what therapies really work and are cost-effective. Think Kaiser, both insurer and provider…

    1. tangent says:

      They be interested in knowing, sure, but they have no financial interest in anybody else knowing. It makes more sense for them as a trade secret. Dispersing knowledge of what therapies work is a public good in an economist’s terms.

  2. Emjeff says:

    I’m constantly amazed at how easy people in other industries think drug development is…

    1. Mad Chemist says:

      I know, especially the Silicon Valley people.

    2. Mark Thorson says:

      Drug development is just software, right?

      1. resonator says:

        And cancer is just a coding problem. Just ask Microsoft:

        1. Pfft, Cancer is trivial. Just ask the guys on Y Combinator’s (bush league VC firm) “Hacker News” forums:

          1. kjk says:

            Yes it’s a huge mistake to trivialize the extremly complex world of biology into “a coding problem”. Instead, trivialize what’s simple about biology: The mechanics of the experimental work itself. The fun part, designing experiments, is often 10-fold dwarfed by the time spent doing experiments. This tedium is being addressed by companies like Transcriptic and Emerald, in which dumb robots are blindly carrying out a lab procedure (written in Python) by transferring stuff from PCR machine to incubator to centrifuge, etc. Biologists now can finally be biologists instead of lab rats.

  3. Steve says:

    If you need data, look at the deal Roche just did with mySugr. Digital health is going to be big business.

  4. Passerby says:

    Considering that pharmaceutical companies no longer develop new therapies, insurance companies might as well give it a shot.

  5. biotechie says:

    Personally I say why not? Of course it’s glib for the company to claim its also going to create new drugs as a result of collecting its longitudinal data. But frankly Framingham-type studies do look like a good way to tackle complex disease…after all it did lead to the statins…one of the most successful drug classes in cardiovascular disease. I don’t see why these longitudinal studies have less chance of providing new biology to chase after with therapies than most of the other disaster that is for therapies of complex disease (like Alzheimer, Parkinson, MI etc) and diseases of aging. The problem is that 1) this is going to take a LONG time. And 2) getting hold of data that helps you see new potential points for therapeutic intervention in human biology is a long way from acquiring the vast expertise/experience acquired by pharma and in past 30 years biotech for drug discovery and development and human biology’s annoying knack for torpedoing projects!

  6. Mark Thorson says:

    If there was a health insurance company that required exercise, I’d go with them. Being sedentary is not a pre-existing condition in any reasonable, Republican sense any more than being a glutton is. Don’t rely on self-reporting. The difference in health outcomes would be so large that the insurance company would be able to support a chain of gyms that are free — required, actually — for policy holders. For someone in good health, 30 minutes of vigorous aerobic exercise three times a week gets you all of the benefits of exercise. With more studies, we might find a lesser amount is sufficient.

    1. Anonymous says:

      “For someone in good health, 30 minutes of vigorous aerobic exercise three times a week gets you all of the benefits of exercise.”

      Not sure what this means? Shouldn’t 30 minutes of vigorous aerobic exercise give you the benefits of exercise, because, you know, it’s exercise?

      1. David says:

        I think the point is that 30 minutes of intense basketball or soccer 3x weekly is not the same as 30 mins of wandering about a mall once a week, which, while positive as far as that goes, would not yield “all of the benefits of exercise” in the same sense. I’m assuming the sense intended is the benefits of exercise as touted by various studies and advertising, and that 30mins high impact 3x weekly is ‘sufficient,’ and you don’t see a doubling of benefits if you do this 6x weekly.

      2. Mark Thorson says:

        Additional exercise doesn’t provide health benefits beyond 30 x 3.

        1. biotechtoreador says:

          “Additional exercise doesn’t provide health benefits beyond 30 x 3.”

          Hmmmmmm, I know this is science blog, but there are a good # of running blogs that would suggest this is quite incorrect….

          1. Ken says:

            I was reading it as “What I do is exactly the right amount of exercise,” but I’m a poisonous cynic.

          2. Pete says:

            There’s quite a difference between physiological benefit that lets you runs faster and health benefit. If you want to be even a decent amateur athlete, 3×30′ is not going to get you there (unless you got very lucky with your genetics), you probably need to be doing four or five times that at least. But it’s not clear all this extra exercise will help your general health; and if you push up the numbers a bit further to what elite-type athletes do, it most likely is damaging in the long term.

      3. Crocodile Chuck says:

        I think Mark is referring to HIIT:

        I agree with him 100%.

    2. Pennpenn says:

      I get where you’re coming from, but it honestly sounds like a pretty tough sell at least initially. I mean, presumably the insurance would cost more to maintain the gyms but the people who are going to be adverse to exercise would have to have some pretty big draw-cards to go along with mandatory exercise regime and the only really reliable means I can think of is lower costs/premiums. If they were concerned enough about the reduction in the health issues caused by a sendenary lifestyle for that to be a selling point they’d probably go to the gym of their own accord anyway…

      1. Mark Thorson says:

        Tough sell? Good! I don’t want to be pooled with those people. I only want to be pooled with people who get at least the minimum amount of exercise necessary for good health. I don’t want to pay for the health outcomes of sedentary fatties.

        1. Pennpenn says:

          Well when I say “tough sell” I don’t mean “this will engender a self selecting pool of customers” I mean more in the sense of “this venture would work about as well as a biscuit submarine”. Still, might be interesting to see some kind of trial.

        2. fajensen says:

          “Paying for losers” is kinda baked into the way insurance works.

          One may think that it would be a good idea if only one could pool together all the “winners” and “sensible folks” in an exclusive insurance policy, which should then be “cheaper”.

          This is not exactly the way the insurance provides sees the situation. Insurers are in the business of taking “negative skew positions”. The characteristic of those is a long string of smaller positive gains, rudely interrupted by the occasional large loss. The insurers ongoing problem is to make sure that the occasional large loss is always less than the many smaller gains, they are quite good at this too. I think only Lloyds and Obamacare have blown up.

          If someone now comes along and propose a pool of “better, less risky people” in exchange for a lower premium, the risk of the insurers, the single large loss exceeding the many gains, will likely go up!

          The reasons are that the pool of “winners” is smaller so each individual being unlucky now “counts” for a lot more risk, those risks will be less diversified (not everyone will crash a private plane, sink on a Yatch, wrap a Bugatti Veyron around a tree or have lots of plastic surgery – the “winners” will). On top the payments are smaller, providing less reserve for the losses. The insurance people will want to cover for that increased risk, meaning that they want pretty much the same premium as before, maybe More.

          1. Eric Nuxoll says:

            They don’t have to actually own/operate the gym; they just have to have an agreement with gyms that can track and report attendance (e.g. scanning a membership card for entry). The policyholder signs up for a gym membership and if they attend with the minimum frequency (e.g., X times per month) then they get a discount on their next insurance premium, or (much more attractive to both the gym and people whose insurance premium is paid by others) a discount on their next gym membership payment.
            This is the approach my employer takes, although they’re a university that funds its own health insurance and operates its own gym, which I suppose really streamlines the negotiations and data transfer.
            I suppose this actually punishes people who exercise on their own, though, in that it breaks the exercising cadre in two and spends the savings from their presumably lower claim rate on gym memberships that only benefit half of the cadre.

    3. redfiona says:

      A few UK health insurance companies give you money off if you go to a gym regularly, but only if it’s a gym owned by the same umbrella company. Which are always horribly awkward to get to.

    4. Orv says:

      I’ve seen insurance companies try this — one that I know of gives patients with high BMIs a monitored pedometer, and demands a certain number of steps a day or they lose their coverage. There are a few problems with this, starting with the fact that they make no allowances for people with conditions that limit mobility. In one case I know of, a person had foot surgery and they refused to suspend the step requirement during recovery, for example.

      On the whole it came off more as a way to punish “fat” customers than a way to help them, especially since research suggests people who lose weight with diet and exercise manage to keep off, at best, about 20 pounds. Severe diets to lose more are unsustainable and may create more health problems than they fix.

      While there’s a lot of evidence people who are already thin are healthier than fat people, there’s surprisingly little evidence that losing large amounts of weight improves health or extends lifespan. We tend to gloss over that because of a cultural “fat == immoral” idea.

  7. greasypocket says:

    Large, heterogeneous, longitudinal datasets are notorious for containing a lot of contradictory data, especially when derived from the most heterogeneous of sources (humans). Furthermore, these glorified datasets often contain a significant fraction of flat-out nonsense and noise. Which raises the following questions:
    1. Are they going to describe how they generate their data?
    2. Will their data (and data analyses) be subject to some form of peer-review equivalent? If they propose to become a therapeutics company and/or control access to certain drugs, we need to know if they are capable of doing this in an accurate and responsible manner.

    Finally, Vivek Garipalli states that Clover will “…start building our own therapeutics.” That’s a good one! No – data (no matter how big) != therapeutics.

    I’m optimistic about the future ability of AI/machine learning to help expedite drug discovery and development (hit identification, lead optimization, PK/PD modeling). However, this field is still in its infancy and will need a lot more work before it can do this.

  8. David says:

    Seems to me this could be one way to go forward, in America, without dramatically altering the healthcare/insurance/financial/economic landscape. If a big health insurance firm (or/and, arguably, life insurance firm), and a big pharmaceuticals/therapies company can get together, they might have a conversation. That hypothetical conversation might go something like “we’d save lots of money and be able to offer cheaper premiums, if we could cure diabetes or make maintenance treatment much cheaper…let’s fund our therapy-development arm towards making that happen.”
    Such insurance/therapy development partnerships would go some way towards supplying the arguably lacking profit motive for cures (as opposed to management treatment), and at least some of the less profitable therapeutic areas. Insurance companies are sure to want MRSA or the next H1N1 to be like a generic ear infection – a simple course of antibiotics, rather than a lengthy hospital treatment probably leading to death and a life insurance payout/no more premiums.

  9. Anon says:

    “and that might mean we start building our own therapeutics”

    I think by that they mean they will assign better combinations of existing drugs to the right people, based on outcomes data, not literally developing their own novel NCEs.

  10. PCS says:

    Sounds reminiscent of the rage in the early 90’s for buying pharmaceutical benefit management companies, so that pharma could be “in the business of selling health care solutions.” Multi-billion dollar write-offs ensued within a few years.

  11. Walther White says:

    Take it with a grain of salt. Or a ton of it. After all, the same insurance companies that think drug development is easy are the same ones with executives shelling out money for homeopathic remedies and chiropractors.

  12. Lame duck says:

    Don’t laugh:

    I work in a midsized pharamceutical company. I got a new boss. He has no pharma experience, but brags about how he has worked extensively with engineers, so he understands the R&D mindset. He has sweet talked the CEO into a major internal investment in digital health. They have no idea what they are talking about.

    I get emails every week on topics about “platforms” and “innovation” none of which talk about pharma. They are about Apple, Uber, Airbnb, and any other company not in pharma or even healthcare. The justification is that we are tunnel vision focussed and we will be disrupted out of business, just like these companies have disrupted their industries.

    Any new idea with “algorithm” or “analytics” or “artificial intelligence” attached to it is good. The words “efficacy” and “patient outcomes” is never mentioned.

    I saw apps the team has just created. They look like something highschool coders put together. They are struggling with understanding HIPPA compiance. There is no business consideration on how to launch the app, because there are no business people in the group, much less anyone with pharma experience.

    Why is this possible? Because CEOs are scared shitless that they will get disrupted by something they don’t understand. And they are vulnerable to be sweet talked by outsiders, and they are vulnerable to the Silicon Valley hype.

    As this blog often mentions, this won’t end well. Options are to run like heck, or if I can’t find anywhere to go, then lay low and find a way to duck the fallout when it comes, but this doesn’t help my career at all.

    1. fajensen says:

      Well, If it is a publicly traded company, you could perhaps buy some put options on the stock. Making the fallout more Golden.

      Before you run, be aware that the situation is pretty much the same everywhere, in many industries. I doubt that there is negativity on the career side over the business you are in tanking, this happens to people all the time.

      It is even possible that the morons are actually right somehow, even by chance. I’d be really careful about shorting the stock because “The Market” or some venture fund may think that the idea of “digital health” is Just Wonderful on the Unicorn Scale. Even if it doesn’t work and there is never going to be any money in it – since someone mentioned Uber.

      We, business and techie, just see things differently. The investment side is sometimes so different that David Icke could be right (making a proper living off the lizard people is an achievement too, I think).

  13. Morten G says:

    But aren’t these data available in higher quality in countries with single payer healthcare systems?

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