Bootstraps bingo

Many people may be familiar with the American idiom, “pull yourself up by your bootstraps” as a rally for improving a situation or solving a problem by one’s own hard work. Efforts can be arduous, even a gamble.

(As an aside: Apparently, that phrase emerged in the 19th century originally to describe someone as being delusional about accomplishing some ludicrous task.)

In January, two proposed bootstraps business deals surfaced that seemed to qualify.

First up: Three prominent integrated delivery networks detonated an idea to jump into the pharmaceutical business with the aim of driving drug prices down. Executives from the three provider organizations offered few details on what and how exactly they planned to do this. If anything, they succeeded in controlling the media cycle’s game of speculative musical chairs for a couple of days and even convinced short-sighted profiteering opportunists on Wall Street to dump on key Big Pharma stocks. Not surprisingly, those share-price dips were short-lived.

Certainly, the possibilities of provider-based organizations overseeing their own supplier source pique curiosity in a way not felt since HCA tried to merge with American Hospital Supply in 1985 until VHA served as an economic “voice of reason.” AHC accepted Baxter Travenol Laboratory’s subsequent merger offer instead.

Scores of unanswered questions remain that the IDN Trio’s executives publicly acknowledged. Would they physically launch a manufacturing company that would produce private-labeled generic products? Or would they buy an existing generic drug manufacturer? Or simply partner with a generic drug manufacturer or several? Are they tacitly conceding that not even committed cooperative buying has succeeded in controlling and thwarting price inflation?

Next: Amazon.com, Berkshire Hathaway and JPMorgan Chase announced they were forming some kind of tech-savvy company to deliver “simplified, high-quality and transparent” care to benefit their U.S. employees, their families and potentially, all Americans, according to Chase Chief Jamie Dimon, and also to combat what Berkshire’s sardonic sound byte master, Warren Buffett called “a hungry tapeworm on the American economy.”

Sure, the Houses of Jeff Bezos, Buffett and Dimon may be flush with resources but their collective declaration should grant healthcare organizations a hefty (and temporary) sigh of relief. Apparently, Amazon’s not going to disintermediate distributors and GPOs after all (See “Resilience parries with relevance” story on page 10), at least for now. Further, all the reconnaissance at the supply chain conferences and trade shows and research into healthcare policies and regulations merely represented a baseline for this new venture that may have frightened off billions of dollars in the stock market with the announcement, but drew curious responses from financial analysts who either worship or grouse about the Triple Crown of Corporate America’s royal family.

Of the two proposed deals, the latter offers a better shot at seeing reality even if it culminates as a short-lived excursion. For one, Bezos bought a national newspaper and a grocery store chain after pundits pooh-poohed his predilection for both. Don’t count Amazon out just yet. Buffett remains the X factor and could just as well invest in a successful hospital company like HCA or smaller competitor(s). Dimon represents the bank vault.

What’s the key challenge for the former? If the IDN Trio merely partners with a manufacturer then they’re just coalescing into another GPO. But if they buy or launch a pharmaceutical manufacturer then they open themselves up to catastrophic and stratospheric liability and risk. How? When any negative healthcare treatment outcomes emerge, lawyers and the media typically target companies with the deepest pockets to blame, onto which affected patients and the public quickly latch. Provider-based organizations likely could not afford, let alone cost-justify, such a fiscal load.

Now if the IDN Trio wanted lower drug prices than even the GPOs could deliver, why not simply work hard, have fun and make history by inking a contract through Amazon Prime?