Publication | ThinkSet

A Call to Arms on Opioids

Bryan Cote

Winter 2019

The healthcare sector is mobilizing to combat addiction. Executives and investors must join the fight.

About a decade ago we saw the dawning of a new era in cancer treatment—one that sparked innovation, expanded patient access and helped save countless lives. Forty years in the making, the breakthrough wasn’t entirely driven by science or technology. It had been fueled in large part by systemwide commitment to the cause, and by a fundamental shift in relationships among key players in the health system.

Now, as the US health system girds for battle with another public health crisis, the cancer breakthrough provides important lessons for the payers, providers and researchers, as well as executives, investors and policymakers who have each played critical roles in the fight against cancer. Their coordination, collaboration, ingenuity and commitment will be called upon again— this time to combat the scourge of opioid addiction.

For all of those players—but especially for the executives and investors whose leadership will be essential in the coming years—the time is now to understand what must be done, what existing efforts are worth watching and what risks lie ahead, starting with the millions of American lives that hang in the balance.

Substance abuse treatment offers hope

An estimated $90 billion has been spent on cancer research alone in the nearly five decades since President Richard Nixon declared a war on cancer in 1971. If anything, combatting opioid abuse—more a behavioral than a scientific effort—will cost more, according to those on the front lines, such as Caleb Alexander, co-director of Johns Hopkins Center for Drug Safety.

“This is a treatable condition, just like diabetes or high cholesterol, and yet the vast majority of people with opioid use disorder are not enrolled and seeking care,” Alexander told CNBC in June. The scope of the problem in the US is well known—more than 2.1 million people currently addicted; hundreds dying of overdoses each week; President Donald Trump declared it a public health emergency.

Investing in opioid treatment begins to pick up

Given the enormity of the capital need, it’s been heartening to see investors in the past two years begin to take intense interest in addiction treatment and research. Private equity firms invested $2.9 billion in addiction treatment facilities last year, up from $11.4 million in 2011, according to PitchBook. Mark Parrino, head of a clinic trade association, told the Wall Street Journal at the time that private equity is now the “driving force” behind medication-assisted recovery.

And while much of that clearly stems from the fact that investors have recognized the financial opportunity presented by a crisis that involves more than 2.1 million patients, many investors are rallying to the cause because they understand the humanitarian urgency. In many cases, that understanding likely comes from personal experience; as opioid abuse and addiction spreads, fewer and fewer of us will be untouched.

I saw that playing out at a series of panel discussions on the opioid crisis I moderated in December, at BRG’s Healthcare Leadership Conference in Washington, DC. In one session, two of the four panelists had family members struggling with addiction. Across the country, one in three people know someone addicted to opioids, according to the American Psychiatric Association.

Investing in opioid treatment options

Those panel discussions provided a wealth of useful information for clinicians, executives on the payer or provider side, investors, or anyone else seeking a better perspective on the kinds of leadership and capital it will take to contain the opioid crisis.

One of the first things that has to happen is to train the medical community—from primary care doctors to pharmacists and emergency room nurses—on how to identify and treat addiction, either at their own facilities or by making sure patients land in a place that can give them proper care.

Part of this challenge is clinical, but we also need to overcome the stigma associated with addiction. Physicians who don’t see their clinic as part of the fight against opioid addiction don’t understand the scope of the problem. And their responses must go beyond writing referrals to specialists. We need clinicians at every level to literally hold patients’ hands and make sure they get to the places where they can start to turn around their lives.

Appropriate treatment includes a range of services

Once clinicians are capable of providing proper care, or at least identifying addiction and helping patients transition into addiction recovery programs, we need to ensure access to the medication, clinical care, counseling and rehabilitation programs needed to return patients to health and keep them there. This means working with payers—both public and private—to define policies that support physicians and their patients.

In this area we can find several hopeful analogies in recent efforts to treat cancer. In the Northwest, oncologists worked with Regence to create a streamlined and regimented process for using powerful new drugs, saving time and money on both sides. In Pittsburgh, clinical researchers teamed up with Highmark to test treatment pathways to find scalable cost savings. And in New York, physicians banded together with Innovent to create financial incentives for following pathways that kept patients out of the emergency room.

In each instance a health plan, recognizing the scope of the cancer crisis, sought clinics and institutions with innovative ways to address it, and trusted that the physicians on the front lines understood the complexity of the problem better than they did. Clinicians, in turn, respected the need to contain costs by developing replicable treatment plans that avoided costly hospitalization and ultimately realigned reimbursement around quality care.

Rehabilitation programs show opportunities for innovation

The opioid crisis calls for similar collaboration. But both payers and investors also need to understand that addiction is hard to treat, and no scientific discoveries will change that. Each opioid addict is different and will require different variations of medical and behavioral treatment. While some solutions may be scalable, all will require flexibility that allows doctors to personalize treatment and get patients back on track when they slip off the prescribed pathways.

Healthcare centers that are high achievers in these areas—training medical teams capable of treating opioid addicts, developing pathways that retain and rehabilitate patients, and aligning these programs with public and private payers—will make attractive investment targets in the years to come, meaning they can expand to treat more patients.

Vermont’s innovative opioid treatment pilot program

One of the panels I hosted at our Healthcare Leadership Conference featured two leaders of Vermont’s effort to expand opioid addiction treatment geographically and financially. Vermont devised a “hub-and-spoke” network of providers—and it is showing remarkable progress.

In 2012, Vermont designated a few medical centers as “hubs,” where physicians assess patients, consult on treatment plans and prescribe anti-addiction medication. As patients improve, they move to “spokes,” which range from family clinics to prisons and mental health facilities, located closer to the communities where addicts work and live. The idea is to immediately give addicts who enter the system the attention and resources they need to remain there, with as few obstacles as possible.

The state’s largest payer, Blue Cross and Blue Shield of Vermont, and its largest mental and health provider, Brattleboro Retreat, have joined together to lead the effort. When providers complained about the administrative burden created by the benefits manager it was using, BCBS agreed to cut out the middleman. It brought the benefits management function in-house, trained staff on the elements of care relevant to their roles and focused on supporting providers.

“BCBS invited us to the table,” Peter Albert, senior vice president of government relations at Brattleboro Retreat, said on the panel. “They went to the state’s clinical community to ask what’s not working, and what could work better.”

The patient outcomes from the hub-and-spoke model have been phenomenal. With 10.56 people in treatment per 1,000, Vermont now has the highest capacity for treating opioid dependence in the country, according to the Journal of Addiction Medicine. Among those in treatment, Vermont’s health department found a 96 percent drop in opioid abuse and an 89 percent drop in emergency room visits. Part of those gains have come from a 64 percent increase in physicians permitted to prescribe buprenorphine, and a 50 percent increase in patients served per physician.

The cost-benefit analysis has also been promising, though the results remain fairly limited because only a fraction of opioid addicts are being treated, and because the program is relatively new. But just two years into the coordinated effort, overall healthcare costs for opioid-addicted patients had dropped by 7 percent to 10 percent, including the cost of addiction treatment.

Investing in opioid treatment options should focus on expanding patient access

The Vermont model also helps illustrate where the health system is still falling short, and how the approach to opioid addiction continues to be too narrow. The state health department reported that patients and their families regularly complain of a shortage of wraparound services, such as help finding jobs or housing. And without public transportation in much of the state, access remains a major issue. There have also been issues around waiting lines at hubs and patients being dropped from spokes after they relapse.

As payers and policymakers set to work on finding solutions to the opioid crisis, the focus should be on getting patients into the system and keeping them there. This requires a new approach from institutions across the treatment spectrum, whether it’s primary care clinics that often serve as the health system’s point-of-contact with families, the emergency rooms dealing with overdoses, the insurers deciding what qualifies for coverage, or the physicians prescribing opioids in the first place.

Payers need to listen to physicians about what’s working on the clinical level and adjust their policies to encourage the expansion of those programs. Clinicians need to collect data and follow patient pathways to demonstrate to payers that their treatment plans are keeping patients out of the emergency room and cutting the cost of care.

And investors need to watch for examples where payers and providers are seeing success, both in treating patients and creating steady revenue streams from that treatment. By identifying those success stories, private equity and other investors can provide valuable assistance in confronting one of our country’s biggest problems.

Investors are starting to see opportunity in the opioid epidemic, and that’s not a bad thing. We desperately need capital to continue building a system that can absorb more than 2 million Americans struggling with a deadly illness. Developing solutions that offer a return on investment may not make a great marketing campaign, but it’s an essential part of responding to an emergency that’s costing us 130 lives a day in America.

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Bryan R. Cote

Managing Director

New York