Patrick Center: Wednesday afternoon, time for our bi-monthly conversation with Crain’s Grand Rapids Business senior writer Mark Sanchez. I’ve been hearing a lot about this recently and that's the cancer drug shortage. Your reporting is reaching a tipping point.
Mark Sanchez: Yeah, this was first a couple weeks back to Michigan Health and Hospital Association and the Michigan State Medical Society. Kind of put out this warning that there's a shortage of these 2 cancer drugs, oncology drugs, Cisplatin and Carboplatin. This is kind of occurring a lot in the industry, in health care and a story I’m posting this week, kind of a follow-up piece to what we wrote back there on the 18th…we talked to some of the health systems around and providers and said this is getting kind of common, these drug shortages. There's a lot of production of the compounds and the ingredients that go into pharmaceuticals that are overseas: India, Asia, China. They run into problems. There's also, you know, if you have a quality issue in a plant the FDA, can shut it down pretty fast to fix it. And the FDA doesn't just inspect the plants in the U.S. they inspect those plants overseas that are importing compounds and the pharmaceuticals to the U.S.. So this is an issue. The health systems are working it through. They are actually kind of used to this type of situation and they're keeping close track on their inventory. They're keeping close contact with a cardiologists that are referring patients to them. The word is that this could last through June. Folks in Congress are beginning to take a look at it and just talking to health systems they say this news become common and maybe this could be a situation where finally on a federal, national level, there's some discussion about who we want to just simply go to the lowest cost producer? Do we want all of this occurring overseas, so much of this production overseas? And what else can the FDA do to help alleviate this situation in the short term and then work on the long-term issues?
PC: We’ve talked about this before in the past about manufacturing overseas and the logistics and everything else. What is that space, for lack of a better term, that drives these types of situations where companies will still offshore manufacturing went in fact, producing domestically may be the better choice?
MS: Cost cost cost. And, you know, we saw this occurring for years. So much of supply chains for so many industries going overseas to foreign markets for a lower cost labor market and then three-plus years ago when the pandemic hit, those supply chains got seriously disrupted and you had shortages. Well, remember PPE, back early in the pandemic. We've seen shortages of other things we've seen the last couple years and some manufacturers beginning to re-shore or near-shore their supply chains. We're seeing this crop up again in the pharmaceutical industry. It comes down to cost. It is a business. I should also add, Patrick, when I talk to folks that such as U of M West and the other individuals, they say at least here in Grand Rapids, this is not affected patient care. They've been able to manage their inventory and manage their supplies and access and aquire what they need. It has not disrupting patient care. They have not had to postpone treatment. They are watching it carefully and managing it very carefully and closely. But at this point, they have not had to alter care or seek alternate drugs.
PC: Have they given you any estimated time lines where it may become an issue or will this be averted?
MS: The hope is to avert it, but they can’t forecast what the future holds and how soon this plant in India is able to ramp back up the production. There was an update from the Health and Hospitals Association this week where they said there is some progress being made in these things should start flowing again. Part of the problem was the one plant went down. So then there's a switch from that drug to this drug and the manufacturers can't keep up with that increased demand for that drug. It's a snowballing effect. This is just proving how delicate the supply chain is for this industry.
PC: You touched on cost earlier. The cost of health care seemingly always rises. And yet again, we're going to see some rate increases that are coming for small businesses.
MS: Yeah I’ve written health care a long time. And I'm still waiting to be able to write the story that “Hey! Your health care costs are going lower!” I'm not real confident about it. But this is another rate filings this month from both Blue Cross Blue Shield of Michigan and Priority Health. If you're a small business and you provide employee health coverage, here's the bottom line for you for policies that renew January one for Priority health. There's the proposal to the state for the HMO and point of service plans that would increase rates by statewide average of 6.7% and 6.3% for PPO plans. If you’re a client to Blue Cross Blue Shield of Michigan, there rate proposal to the states has been a 4.9% statewide average for PPO plan and a 5.5% increase for their HMO plans. That's consistent with what we've seen the last couple years for a period of years up in to be four about 2021. The rate increases were a little lower, were moderate. And now in the last 2 years, we've seen a little larger increase. Part of it is obviously what's gone on the last 3 years. Insurance rates are really set by medical plants. What's that medical plants trend? What's the pharmaceutical trend and what the 2 big health plans that really dominate most of the market here in Western Michigan say it is those medical trends or at least the cost trends for their pharmacy. And the pharmaceutical and drugs are really rising rapidly, especially for specialty drugs were in this new era of molecular medicine. We've got some great, great drugs out there that do amazing things. But boy, they’re expensive and that contributes to all these costs that go into the formula. That's your insurance rates.
PC: How has COVID impacted this? I know, we're out of the pandemic, but there's probably a lagging price increase in there somewhere from what we went through,
MS: Yeah kind of been hopefully out of the pandemic for the second year for 2024. And the insurance company started this a year ago for the first 2 years of the pandemic, they were eating those costs. There's obviously a lot of federal money to help offset those costs. But they generally ate those costs when they were treating a member who had COVID and was ill last year, started fixing those costs into the right formulas into that whole equation that goes into setting these rate proposals and for the second year, same thing. So basically the cost to COVID just like flu other illnesses. That's all cooked into these rate proposals now from here until whenever.
PC: We're talking with Crains, Grand Rapids business, senior writer Mark Sanchez, Michigan. Angel investors are expecting a rebound after a drop in 2022.
MS: Yeah, a fairly significant decline in 2022 in Angel investing and these are folks high net worth individuals. They meet the federal definition. They're investing on their own and start up and businesses and or they’re part of Angel network such as Grand Angels or Muskegon Angels or Kazoo Angels down in Kalamazoo. Where they're looking for these innovations, the start-up companies and they're providing them the capital. They need to really get going in off the ground and hopefully grow and create jobs and all those things we want to see. And this is a report that comes out each year from the folks in Ann Arbor Spark in what's called the Michigan Angel Community. It's kind of organization promoting Angel investing in Michigan and bottom line, the Angel investors. 46.3 million dollars. They put into 79 Michigan start-up companies last year. That's a 29% decline in their deal flow in the number of deals with the invested in and a 33% decline in the amount. Now what's happening? You've seen evaluations of start-up companies and businesses decline. So some businesses are holding off going to market to raise capital or they're requiring less capitol. But a lot of what you saw last year and this is played out in other investment fields was the rising interest rates that made it a little more expensive. You saw economic uncertainty with outlooks continuing to say “we may have a recession later this year”. You had a lot of uncertainty put into the equation with the Silicon Bank failing here back in March, although those post 2022 and now that it looks like we've gotten past that issue of Silicon Valley bank and other banks that have failed, the hope is that investors come back to the table and start making these investments at the pace that they were previously. But like anything you look at well, why there are some very good reasons why it's not that investors are just simply walking away. There's economic uncertainty, higher rates and some other issues that work that made some of your angel investors out their kind of pause their activity for a little bit.
PC: Crains Grand Rapids business, senior writer Mark Sanchez, thank you so much.
MS: Thank you, Patrick.
