Healthcare delivers market-moving news for investors every year, but 2018 was especially busy: The FDA approved drugs that work in entirely new ways (looking at you, Alnylam (ALNY -0.40%)!), trial disappointments derailed investors (sorry, Incyte (INCY -0.14%) and Geron (GERN -4.04%)), and mergers and acquisitions took us further toward vertically integrated healthcare. If you missed any of healthcare's biggest stories this year, then this week's episode of Industry Focus: Healthcare is for you! Listen in as host Shannon Jones and Fool.com contributor Todd Campbell discuss:
- Whether CAR-T gene therapies are living up to the hype (hint: not yet);
- how new trial data could change cardiovascular disease treatment;
- why combination immuno-oncology excitement should be tempered;
- the year's stutter-steps forward for gene-editing;
- the FDA's revolutionary approval of Alynlam's RNAi therapy;
- top swing-and-miss disappointments, including one very embarrassing one for Celgene (CELG);
- deals, deals, and more deals, including CVS Health's (CVS 0.82%) acquisition of Aetna;
- how an FDA decision validated medical marijuana;
- Moderna's (MRNA -0.91%) massive IPO; and
- Amazon's (AMZN 1.75%) foray into healthcare.
A full transcript follows the video.
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This video was recorded on Dec. 12, 2018.
Shannon Jones: Welcome to Industry Focus, the show that dives into a different sector of the stock market every day. Today is Wednesday, December 12th, and we're talking Healthcare. I'm your slightly under-the-weather-radar host, Shannon Jones, and I'm joined via Skype by healthcare guru, Todd Campbell. Todd, how are you?
Todd Campbell: I'm great, Shannon! I'm sorry to hear that you're feeling not 100% today.
Jones: Thank you, Todd! I'm on the mend. I had a call with my mother earlier this week and she recommended, I guess you could call it a brew, of things from the cabinet, apple cider vinegar and cayenne pepper. So, I tried to brew. I don't know if you've ever had prep for a colonoscopy or just eating a bad taco, but I will say, it works, just not in the way that I intended it to. Other than that, I'm all good, Todd.
Campbell: [laughs] Oh, I don't think I'll be calling you for that recipe, Shannon!
Jones: [laughs] I don't know, Todd, we might just have a product on the market. Now that Synergy has gone kaput, some of these other, human fecal companies that are out there, hey! We might have a product! And the show has taken a dark turn. I apologize. Todd, welcome! So glad to have you on the show!
Campbell: Hey, it's great to be here. It's hilarious, when I was trying to do the prep work for today's show, I think we probably could have filled five shows with all of the things that have happened in 2018 in healthcare.
Jones: Yeah, absolutely. It's been such a wild roller coaster ride, for sure. In today's show, we're actually just going to break it down to what we think are maybe the top 10 healthcare stories of 2018. I'm super excited to dive into this, Todd. Let's just set the stage. The markets this year have been, I guess you can call them dramatic.
Campbell: Dramatic is a good way to state it. It's almost like a tale of two different years, all packed into this past 12 months. We've had the S&P, basically now as it stands today -- as of filming, things can change -- up a little bit less than 2%. Big change, obviously, from the big market move we saw last year. And then, we've had a weird dynamic in healthcare where pharmaceutical stocks have done pretty well, and some other parts of healthcare have done pretty well, but bio has really not done that well. I've looked at the iShares biotech index ETF, the IBB, that's down on the year. So is the Health Care Select SPDR biotech ETF. But if you look at the pharmaceutical ETFs, those are about 3.5%. And if you look at healthcare overall, it's up almost 14%, a significant amount of outperformance. Listeners who are tuning in, if you're down this year, you may have a very different amount of holdings in healthcare than some other listeners who may actually be up this year.
Jones: Absolutely. And that's why I love doing and reading through year-in-review shows like this. You really get a sense of not just how the markets are performing, but really investor sentiment, as well. And it really sets the tone and the stage for the upcoming year, which for us is 2019. There are going to be a lot of catalysts to keep an eye on.
Speaking of this year, let's just dive right in, Todd. I think we can say to start, the CAR-T hype train has officially left the station here in 2018. 2017 was really all about CAR-T stocks. The reason why there was so much hype was because it was this new, innovative approach to supercharge the body's own immune system to fight and target cancer. Well, as we have seen with many biopharma stocks along the way, just getting to approval is the first hurdle of many. CAR-T stocks is no different. Todd, CAR-T is just not yet that billion-dollar blockbuster that we were hoping to see.
Campbell: It's a great reminder, Shannon, of how oftentimes, the pre-launch expectations are just too optimistic. Everybody thought that these therapies, which are incredibly complex, and they're incredibly expensive -- what, over $500,000 all in to have these gene therapies given to patients. Yeah, it takes a long time to get these things launched, build up momentum for them. Maybe that's what we saw here in 2018. You have these great expectations coming into the year. You had Gilead Sciences go out and buy Kite Pharma, spending nearly $12 billion to get its hands on that CAR-T. Its sales this year, year to date, are only $183 million. Then, you've got Novartis' Kymriah. They developed that one in-house and launched it last year. Its sales this year are only about $48 million. You've got less than $250 million in sales through the third quarter for CAR-T drugs that are on the market. And that is, like you said, very shy of the blockbuster hype that was associated with these drugs.
Jones: Yeah. I think some of the challenges with CAR-T, they certainly haven't been exclusive to CAR-T, but when you consider that you're taking a patient's T cells, taking them out of the body, then you're actually genetically modifying them in a lab and then putting them back into a patient, you can imagine the logistical steps that are required. Also, the manufacturing variability from patient to patient. And, of course, that also depends on the patient's health. That can change, too. Just the challenge of logistics. Oftentimes, these patients also are in an inpatient setting, so they're hospitalized while they are receiving this CAR-T treatment. The cost, you mentioned $500,000. That goes up exponentially when you start talking about all the other acute care costs that are associated with that, too.
Campbell: Yeah, and I think that for investors listing and saying, OK, yeah, these CAR-Ts haven't lived up to expectations this year, what could happen next year in 2019? Obviously, now we're getting more data in that shows that these therapies are still durable. At ASH earlier this month, Yescarta had data that showed that 39% of patients still were in response after two years. That's good. You see durability like that, that helps to increase confidence in doctors using it and payers using it. So maybe you get a nice little slower-than-hoped build in sales in 2019 that you want to keep an eye on.
Jones: Absolutely. And certainly, keep an eye on the reimbursement end of things. These drugs have had challenges just getting reimbursed by public and private payers. That'll be another issue. But, yes, I do think things will slowly turn around for CAR-T stocks.
On the flip side, top story No. 2, there were some biopharma companies focused in heart health, specifically cholesterol-lowering drugs, that did get a nice dose of some positive news in 2018. That was phenomenal. Most came from compelling study data that we had been waiting for. It's encouraging because now, we're starting to see movement in what is cardiovascular health. Honestly, heart health is so important. Cardiovascular events are the leading cause of death in the United States, so, positive news on that end, Todd.
Campbell: Yeah, 800,000 deaths per year just in the United States from cardiovascular disease. That's despite tens of millions of patients taking their statins as prescribed every day. There's undeniably a need for new treatment options for people with cardiovascular disease, and that has led to the development of different classes of drugs. For example, you had the PCSK9 inhibitors that got launched from Amgen and Regeneron a couple of years ago. Similar to the CAR-T situation, blockbuster expectations prior to launch and anemic or lackluster sales since then. That, however, could be changing because earlier this year, Regeneron and Sanofi are teamed up on their drug, Praluent. They reported cardiovascular outcomes data that shows that, yes, their PCSK9 inhibitor does reduce the risk of major cardiovascular events like heart attack and stroke. That came on the heels of data from Amgen's drug Repatha last year that also said that. So, now we have conviction that this class of drugs can reduce the risk of these events. That could lead to, obviously, sales going much higher from here for those drugs.
You also had another class of drugs, Vascepa, which is made by Amarin, and that drug's been on the market for a long time to lower triglyceride levels in people with really, really high triglyceride readings. They came out in September and reported that, yeah, their purified fish oil, which is Vascepa, if you use that, that also can reduce the risk of heart attack and stroke. So, now you have proof for both of these approaches. I wouldn't be shocked if you saw sales for PCSK9 inhibitors and the Amarin's Vascepa soar in 2019. It'll be really interesting to watch how that plays out.
Jones: Yeah, totally agree. When you consider that PCSK9s and even Vascepa are add-on treatments to statins -- and that's really where they saw a lot of the benefit in the studies that came out this year -- I think you definitely see a huge opportunity moving into 2019. Keep an eye on those stocks.
Next up, we're going to talk about the leaders of the immuno oncology front, specifically leaders who are producing a kind of drug called checkpoint inhibitors. These PD-1s continue to dominate, but as you describe it, Todd, there have been cracks in the armor. The next key is combination therapies. How do you get them working together?
Campbell: Right. Immuno oncology has been the big story of this decade. The launch of PD-1 drugs, Bristol Myers' Opdivo, Merck's Keytruda, they've revolutionized how we attack certain cancers like melanoma and lung cancer. But, now that they're being so widely used, we are starting to see that people do relapse after receiving these therapies, some people don't respond to them, maybe there are more side effects than we initially thought to their use. So, you've got a bunch of different companies who've gone out and said, "How can we improve upon these PD-1 drugs?" So, they're running combination trial therapies, where they're taking their drugs in development and using them alongside Opdivo and Keytruda and some of these others in that same class of drugs.
The hope had been that that would be a slam dunk. You take these drugs, they have mechanism of action X, you match them up with the anti-PD-1s that have mechanism of action Y, and sure enough, it all works perfectly. More people ended up responding for longer periods.
Unfortunately, some of that enthusiasm got tempered earlier this year. That was because Incyte had been doing a combination study matching up its IDO inhibitor with a PD-1 inhibitor, and unfortunately, when the trial results came in, that combo failed to outperform PD-1 use alone. That really threw a big monkey wrench in the concept of, will combination therapies actually improve upon the therapy or not?
Jones: Todd, I would dare say that that Phase III trial failure with Incyte's drug was probably the biggest pipeline failure, just because there was so much hype leading into that Phase III readout. Everyone said, "OK, these checkpoint inhibitors, we know that they work in some patients, and for those that do, you see some impressive results. But if we can start to combine with an IDO inhibitor... " There are other combinations that have been tested and haven't really proven them out. But, there was so much hype leading into this Phase III study. I think this was probably the biggest heartbreak for many of us that love this space. Yeah, a lot of chip in the armor when it comes to PD-1s. Definitely something to keep an eye on. Some of the hype related to these combination therapies has been tempered moving into 2018, and it'll probably continue to be so for 2019, as well.
Campbell: I mean, there are 1,500 clinical trials still ongoing for combination therapies with PD-1s. 1,500. Which is crazy. It's up from 216 in 2016. PD-1s are going to remain the mainstay. If you look at Opdivo and Keytruda, the two top-selling ones, if you combine their sales together, they did almost $4 billion in sales last quarter. If you look at estimates, PD-1s could be $30 billion drugs by 2025. I think PD-1s will remain a mainstay, but for investors heading into 2019, reign in a little bit of your optimism for any trial readouts that are combination-oriented.
Jones: Excellent. Let's dive into top story No. 4, and that's related to gene editing. For our listeners, for investors out there, gene editing headlines likely have filled your news feeds over the past year or two, some for good reasons, some for not-so-good reasons. The promise and hype of gene editing, being able to actually go to the underlying cause of disease and correct it before the disease even starts, has been a huge opportunity, obviously a ton of investor enthusiasm. But what we saw in 2018 is that, like any other biopharmaceutical asset, there are going to be setbacks. Todd, we saw that here with gene editing.
Campbell: Yeah, and that caused stutter steps. There are 6,000 genetic diseases. They affect about 350 million people worldwide. And a lot of those genetic diseases don't have any treatment options available. The whole idea of being able to go in and delete a piece of DNA or insert a piece of DNA that can change the way that we're producing proteins to fix or address these genetic diseases, is really exciting. But, again, stutter steps in 2018.
The first big stumble for CRISPR, which is one of the main approaches for gene editing that's gotten a lot of attention, happened in May, when the FDA put a hold that delayed the start of a human clinical trial of Vertex and CRISPR Therapeutics' (CRSP -2.26%) CRISPR gene editing approach in patients with sickle cell disease. That happened in May.
Then, in August, some optimism got renewed because Vertex and CRISPR were allowed to start human trials for beta thalassemia, which was the first time a U.S. company won an OK to start in human trials for that gene editing approach. Then, the clinical trial got lifted up in October, again, adding a little bit more enthusiasm for it. And in November, Editas, which is CRISPR Therapeutics' competitor, they actually won FDA approval to start their human trials for a rare genetic disease that involves the retina. For CRISPR, it's been like that, "OK, we're taking some steps forward, we're taking some steps backward. We want to make sure we get everything correct, because we want to make sure that we don't run the risk of having off-target gene editing happen." Basically, that's where you've got all these repeats of genetic sequences in the body, we want to make sure we're only getting the one we want to be edited. So, I think some caution is warranted. But, yeah, that created some stutter steps for that approach.
Jones: You mentioned the off-target effects. Thinking about that, there are some studies that have been running that could indicate the increased risk of cancer associated with the CRISPR-Cas9 system. Something to watch. May not necessarily be a deal breaker, especially if it gets approved for many fatal diseases where there's a huge unmet need, but certainly puts a damper on commercial viability, if that is the case.
Also, from a CRISPR perspective, there are studies that show that our immune system may actually not work well with CRISPR. There are some studies that said CRISPR may not work in some patients, and then, even those that it does actually work in, it may actually elicit a response stronger than is necessary. So, there could be some safety effects.
I think, all in all, though, as we see these first human trials get up and running, and we start to see and hear about their pathway to approval, you can expect that regulators will be all over these companies. You can expect getting through to approval will be scrutinized.
Campbell: Yeah. It's really early innings for the CRISPR-Cas9 style approach to gene editing. Not so much early innings for Sangamo's zinc finger nuclease approach. Studies have been going on since early 2000s for that approach. Actually, in September, they were dealt a blow when they reported disappointing results for a gene editing approach targeting Hunter syndrome. That also dampened some of the enthusiasm for gene editing.
For CRISPR-Cas9, yeah, kind of early innings. Who knows when we'll finally actually get some late-stage trial to digest? It won't happen in 2019, though, that's for sure.
Jones: Yeah, I think the earliest we might start to see some data is maybe 2020 there. Certainly, something to keep an eye on.
Moving ahead, our fifth top story is centered around a first here in biopharma land. 2018 was a first year for many different therapeutic assets and disease classes. One in particular is a technology called RNAi, RNA interference. It's basically a technique to silence troublesome genes. Todd, this is also a Nobel Prize-winning therapy. A lot of expectations on the floor for the company behind this drug.
Campbell: Yeah. The whole concept of interfering with these messenger RNA that basically allows for a gene to produce a protein, that is not a new concept. It's been around a long time. One of our fellow Fools, Brian Orelli, had a great article way back in 2007 -- 11 years ago -- about the promise of RNAi. And in 2018, we finally got the first approval of a drug that works this way, and that was the FDA OK of Alnylam's Onpattro.
Jones: With Onpattro, it took Alnylam 16 years to actually successfully launch this drug. And it's got an eye-popping price tag, Todd. We're looking at $450,000 for a disease class that is not that huge. Globally, we're looking at maybe 50,000 patients. Here in the U.S., it's even smaller than that. What do you have to say about the runway for this particular drug here?
Campbell: It's great that we've been validated now on this approach, of this option that's available for these patients. The disease we're talking about, hereditary transthyretin and mediated amyloidosis -- ATTR is what we'll call it -- it's a debilitating and often fatal genetic disease. So, it's great that this has been approved. It's a relatively small addressable market, as you mentioned. Actually, the second RNAi was approved by the FDA in October when they approved Ionis and Akcea's Tegsedi. So, there's actually two similarly working RNAi drugs that are now on the market targeting this one approach. That, of course, means that they're going to have to divide the market opportunity between the two of them. It'll be very interesting to see whether or not one is a winner or one is a loser in 2019. Keep an eye on both of them.
Jones: Absolutely. Todd, it would not be biotech if it weren't for the pipeline blow-ups and setbacks that always seem to happen. 2018 was no exception to that. There were some notable pipeline blow-ups this year.
Campbell: We could have done an entire show on swings and misses. Unfortunately, it's just the nature of the beast in biotech. It's notorious for its failed trials. 90% of clinical trials end up failing to pan out. It's not shocking that there were a number of setbacks.
One that might have been a little shocking, we've talked about it on the show before, is Celgene's refuse to file letter that it got in February from the FDA for its arguably most important pipeline drug, Ozanimod, which is a drug that is hoping to be used in multiple sclerosis. It's an oral drug that would compete against Gilenia, which is a $3 billion plus drug. Celgene went out and paid $7 billion to land that drug. And everybody was looking forward to that one getting filed early this year, and then getting approved before the end of this year. Didn't happen. Unfortunately, the FDA looked at the application and said, "No. We can't review this. You're going to have to get together more information and resubmit it to us."
Jones: I think that's truly one of the more embarrassing stories of 2018. This is Celgene, this is one of the big biotechs that every little biotech hopes to become one day. So, to have that management misstep, to where there's not even enough evidence for the FDA to review to say that this drug is approvable, is unquestionably disappointing. I am encouraged, though, with Celgene. I know they've had some management shuffles throughout the year. I think they're getting back on track. But, certainly, that was one that had a lot of people scratching their heads.
The next one, we talked a little bit about. Of course, that was Incyte and their Phase III flop.
Campbell: Yeah, the IDO inhibitor being used with PD-1. That came up short in April. Obviously, that caused a big sell-off in Incyte shares, and it caused IDO programs at various different companies to get shuttered. That was a devastating blow.
But even more devastating than Incyte's failure was probably the news that J&J (JNJ 0.08%) was abandoning development of Geron's Imetelstat, a therapy for myelofibrosis, myelodysplastic syndromes.
Jones: I know we've talked about this at length with Geron. This has been one of the more polarizing biotech stocks to watch. You definitely saw the red flags have been there leading up to this breakup with J&J. Ultimately, what you have now is Geron just holding on, hoping maybe a partner might come in. But really, their cash is dwindling. This will be a stock that, if I had to rank the ones that I don't think will make it, this would probably be near the top of that list.
Campbell: 2019 will be key. They could theoretically suffer a cash crunch by the end of next year. It'll be very interesting to see what they do with this drug. If J&J had gone forward, had taken this drug into Phase III, it would have been a huge payday. It'd be a very different story for investors in Geron. Geron shares lost 62% of their value when J&J walked away. I looked earlier this morning, only trading at $1.40 a share. That's down from $6 prior to the decision back in September. Obviously a big bummer for those shareholders.
The list goes on and on, though, Shannon. You hinted at the top of the show, Synergy Pharmaceuticals probably making that list even longer this year, this morning announcing that they're actually going to go and declare bankruptcy in order to sell their assets off to Bausch & Lomb for about $200 million. Synergy had launched a constipation drug to battle against Linzess, the top-seller in the indication. However, they had too much debt on the books, they weren't able to refinance that debt. With sales not ramping up nearly as quickly as was necessary, now, they've had to basically shut down their operations and fire sale the rest of their assets.
Jones: I'm sure there'll be many more to come in 2019. Moving on, of course, the flip side of biotech pipeline blow-ups, the things you can expect in a given year. You can also expect deals, deals, and more deals, and 2018 did not disappoint, Todd Campbell.
Campbell: So many deals, Shannon! I mean, oh, my God, again, another whole show right here. We're going to crank through a few of them that were notable to us anyways. You had, in the first nine months of 2018, across all sectors, $3.3 trillion worth of deals. About 40% of those deals were here in the U.S. alone. Two of those deals, the biggest to me in healthcare, was the acquisition of Aetna by CVS, which was a $69 billion deal. That closed on November 28th, just before this month. Then, you also had the $67 billion dollar tie up between Cigna and the pharmacy benefit manager Express Scripts, which was supposed to close this year, but now looks like it won't close until June.
Jones: Yeah. The CVS-Aetna deal is one that I don't think investors fully appreciate just yet. When you think about it, CVS has been your neighborhood retail pharmacy that you go to. Now, they've acquired this huge health insurer. And now, you're really starting to see the strategy that they're going after. They're going to transform from this neighborhood retail pharmacy store to a much bigger healthcare conglomerate. They've been doing smaller acquisitions along the way to build that up. They've got right now 1,100 walk-in clinics. Then, they're also managing prescription benefits of more than 94 million people. You can see that CVS is going to be a stock to watch just because there's so much going on with it.
Campbell: Right. They're now an insurer. They're a pharmacy benefit manager. They're a pharmacy fulfillment company. And they're a healthcare provider. What this year showed us with the CVS-Aetna deal and the Cigna-Express Scripts deal is that these companies feel like the way to win in the future is to get as vertically integrated as possible, to cut out the middleman as much as possible, so that they can maintain margin and not have to pay those middlemen their costs.
But those are only some of the deals. Other deals that happened this year in healthcare that were notable to me was private equity taking Athenahealth private for $5.7 billion. That was big in the healthcare IT area. You had Roche's acquisition for $5.3 billion of Foundation Medicine, a company that uses your DNA to help doctors figure out how to treat your cancer. You had Medtronic buying Mazor Robotics, a robotic surgery company, for $1.6 billion. You had Illumina buying PacBio in gene sequencing for $1.2 billion. There were just so many deals on and on. That doesn't even include, you had Celgene's big deal at the beginning of the year, where they went out and bought CAR-T company Juno Therapeutics for about $9 billion. So many deals we could be talking about.
Jones: Yeah, so many deals. One other notable one, Bristol Myers Squibb, this was actually the largest biotech licensing fee in history, they paid $1 billion to develop Nektar's NKTR-214T, basically combination approach, another huge deal. Yes, there are so many deals this year, we could go on and on. It really, truly could be its own episode.
But I want to make sure we keep it going. Let's dive into the next top story, and that's all related to everyone's favorite topic, marijuana. Canada finally legalized adult use recreational marijuana in October of this year. Really, the big first was with GW Pharmaceuticals and their CBD product, Epidiolex.
Campbell: Of course, the recreational market opportunity is huge, and everyone's focused on that. But from a healthcare perspective, I think the biggest news in marijuana this year was the validation of cannabidiol, CBD, which is the second most common chemical cannabinoid that's found in the cannabis sativa plant. For years, people have been using CBD oil to help reduce seizures in epilepsy patients. But that was based on anecdotal evidence. What GW Pharmaceuticals did is, they went out and created a purified formulation of CBD, then took it through all of the different phases of trials to prove it out scientifically that, yes indeed, if you take CBD, you can reduce the risk of having seizures. Specifically, this drug Epidiolex, was tested in Dravet syndrome patients and Lennox Gastaut syndrome patients, which are two types of epilepsy that are very hard to treat with existing anti-epileptics. The FDA approved Epidiolex this past summer, and the DEA gave it very favorable scheduling. That drug is now on the market. Again, like I said, big, because it validated the concept of, this chemical cannabinoid from the marijuana plant does scientifically improve outcomes for patients.
Jones: Very exciting. I think you'll see even more companies diving into this space in 2019, as well. Certainly an area to keep an eye on. Also, 2018 saw the historic public debut of biotech unicorn Moderna Therapeutics, ticker MRNA. Todd, do you think this company is really worth the hype that has gone into it? [laughs]
Campbell: There were so many biotech IPOs this year. I think one of the reasons that biotech was actually down this year was because there was so much more supply coming onto the market. After a couple of years of rallying for these stocks, investor appetite just started to wane for them.
Does Moderna mark the peak of this cycle for biotech? I guess that remains to be seen. But, yeah, $604 million IPO. That ends up valuing, if you include the shares that weren't issued out to the public, the company at $7.5 billion. Which is a really, really big valuation for a company that has its most advanced drug in Phase II, and may not even have data from Phase II trials that we can get excited about until at least 2020.
Jones: Yeah, but they do have a pretty stacked pipeline. You're looking at 10 therapies in human trials, 11 pre-clinical. One of the things I do like about this company is that it's not just about one particular type of therapy or technology. They're really building an R&D platform. The applications of using messenger RNA to identify targets, to tweak targets, I think, is really promising. Certainly something to keep an eye on.
One of the things that I always caution when I see the IPO market blow up in a particular year, you can expect to see, as a result of that, many more pipeline blow-ups. If you think about it, the more money you're throwing at many of these very small biotechs, the higher the likelihood that many of these won't make it. That's always a pause for me heading into the new year, when I see that we've come off a really strong IPO market. But this one is definitely one to watch.
Campbell: That's an awesome point, Shannon! Before we jump into No. 10, that's an awesome point to remember. You're right, when you have so much money that's just sloshing around, it's no longer only the best ideas attracting that venture capital. Now, you've got a lot of different ideas that are attracting that venture capital, and that increases the risk that a lot of the exciting stocks that have come on and IPO-ed in the last couple of years end up fizzling out.
Jones: Absolutely. To close out our 2018 year in review in Healthcare show, Todd, we couldn't close this year out without mentioning Amazon at least once. I think for all of the Industry Focus shows, Amazon comes up as a threat. This year is no different for healthcare. Matter of fact, Warren Buffett famously called our rising healthcare costs "a hungry tapeworm eating out the U.S. economy." And he actually did something about it in 2018, Todd.
Campbell: Yeah. This is a fascinating story. Amazon has been looking around the edges of healthcare for over a year. Then, earlier this year, Amazon surprised everybody by teaming up with Berkshire Hathaway -- Warren Buffett's shop -- and JP Morgan to create a brand-new nonprofit venture with the goal of disrupting healthcare as we know it today. They're very light on details on how they're going to do it. A lot of companies have been trying to change the game in healthcare. But these are three huge employers, over a million employees combined, and they're tackling it head-on. And what makes it really unique is that they've not set this up to be a for-profit venture. They've said, "Everything's on the table. Let's bring in some fresh, best-in-the-business minds and see how we can go about rethinking how we treat people so that it's cheaper and people have better outcomes."
Jones: Yeah. A huge area to watch. I would say, going back to Amazon, this wasn't the only thing they did in 2018. They also bought a small growth company called PillPack, which I think was probably an even larger step for them, and really demonstrating, "We are going after the healthcare space, and we are a threat to be reckoned with."
Campbell: Over $300 billion a year spent on medication. A lot of people have been saying, "What's Amazon going to do? Can they disrupt it? Is CVS in trouble? Is Rite Aid in trouble? What's going to happen with these companies?" What ended up happening is, Amazon went out and bought this really small start-up that has carved out this niche in providing these daily packets of all pills to people who take multiple medications per day. It's highly automated, a very technology-oriented company. It fits very nicely into what Amazon wants to do. How that dovetails in with this future nonprofit, who knows? What that means for CVS and Rite Aid and Walgreens in 2019, we simply don't know yet. But it's certainly a very fascinating move by this company, and one that investors shouldn't ignore.
Jones: Absolutely. Be sure to check us out in January as we come back and talk to you about some of the top stories you'll want to watch in 2019. But, that's it for this week's show. As always, thank you so much for tuning in. If you want to dive deep into many of these stories that we've covered in the past, be sure to check us out, we've actually got a YouTube channel now. If you go to youtube.com, The Motley Fool, you'll be able to pull up all of our past episodes. And, of course, if you're listening via iTunes or Stitcher, continue doing that as well.
As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. This show is produced by Austin Morgan. For Todd Campbell, I'm Shannon Jones. Thanks for listening and Fool on!