Better COVID news and many more IPOs: 10 health care predictions for 2022 from two top investors

This article first appeared in fortune.com. It is co-authored with Bryan Roberts.

We are back to prediction making once again, and here is the first: 2022 will be a year to look forward to. We hope that 2022 will be the year we go from thinking about COVID-19 every single day, to one when we can once again turn our compulsive worries to more mundane things, at least by the end of the year. 

Before elaborating on our health care predictions for 2022, let’s look back and see how we did in 2021. Not to brag, but…we crushed it with our 2021 predictions. (Longtime readers will recall years when our forecasts were solid F material.) By our scoring, we got eight out of 10 correct. Okay, that is technically only a B, but quite an improvement from 2020’s two out of 10. 

The only thing we got totally wrong was our prediction that Amazon’s retail pharmacy would gain traction. (We still have hope…it should work.) We gave ourselves partial credit for two other predictions: that confidence (and independence) would be restored at the Food and Drug Administration and the Centers for Disease Control and Prevention; and that virtual care for Medicare patients would take off. We think Rochelle Walensky is off to a good start at the CDC. We love Rob Califf at the FDA too, but why did it take so long to appoint him? And while there are new startups offering virtual primary care like Heyday Health and Patina, we are surprised by how rapidly care has reverted to in-person, both among Medicare Advantage groups like ChenMed and Oak Street and in the legacy brick-and-mortar health systems.

We did get a bunch of predictions right. There has been a huge amount of growth and new competition in Medicare Advantage, which has resulted in 96% of seniors having access to at least one zero-dollar premium plan, and lots of $0 premium Affordable Care Act (ACA) plans too. Demand for mental health care and home care of all kinds surged. 2021 was a record year for successful health care IT (HCIT) IPOs, headlined by Agilon and Doximity, as well as M&A headlined by Microsoft’s $20 billion acquisition of Nuance. While traditional financial markets soared, we predicted the SPAC crash. Politically, we were correct about both the ACA surviving and congressional inaction on drug prices. 

Now let’s look forward. Here we offer 10 predictions for what will happen in the world of health care over the next 12 months:

1. COVID will become endemic, and COVID-19 deaths will fall by 80% in the U.S.

We are hopeful that the COVID-19 situation will get much better in the U.S. in 2022. With very effective vaccines, sufficient supply, effective booster programs, employer mandates, and the expansion of eligibility to kids age 5 and above, we should have a population with lots of antibody-mediated protection. Unfortunately, we will have persistent pockets of susceptible people and a virus that mutates often enough that eradication seems super unlikely (hello, Omicron). But COVID-19 will have a much harder time spreading, and effective new treatments will lead to dramatic reductions in deaths in 2022. We expect daily COVID deaths to drop from about 1,200 per day at the end of 2021 to fewer than 200 per day by the end of 2022. 

2. Long COVID will be recognized as a chronic disease 

While we think new COVID-19 infections are going to get much better, we also think that we will gain a much better understanding about symptoms, treatments, and prognosis for the syndrome called long COVID. Sadly, we think that long COVID is likely to be a chronic disease with relapsing and remitting characteristics with no great treatments. 

3. Abortion rights will become state-based rather than federal policy

We think 2022 will be a momentous year for abortion. We think it is likely that the Supreme Court will uphold the Mississippi challenge to Roe v. Wade and rule that states can enact their own abortion policies. We think the court will not allow Texas’s citizen enforcement mechanism but will allow Texas to define viability at six weeks. This will lead to a patchwork of very different state policies and trigger strong reactions from all sides. 

4. More payers will try to become providers

We think that there will be an acceleration of legacy payers and pharmacy chains moving into the provider space. In 2021, Walgreens made a $5.2 billion investment in VillageMD and announced plans to add 500 to 700 clinics. We expect more investments and M&A of health care providers by the likes of Walgreens, CVS, RiteAid, and the Blues, maybe even Walmart. While some may say this is just playing catch-up to Optum’s playbook of the last decade, we think a 2022 twist will be that much of the activity will also include specialists instead of just primary-care doctors.

5. Changes will come to Medicare Advantage risk adjustment 

The Centers for Medicare and Medicaid Services are putting more effort into audits and enforcement of its risk adjustment rules, which are designed to incentivize Medicare Advantage to care for sicker patients. As only one of many examples, the centers recently sued Kaiser, alleging $1 billion in overpayments. While risk adjustment is a critical tool, there is growing concern that the current approach is gameable and leads to overpayments. We expect Medicare to kick off R&D efforts to build better risk adjustment models.

6. Digital health IPOs will do even better than in 2021 

While 2021 was a record year for the number of HCIT IPOs and dollars raised, we think that the 2022 class will both be larger in number and perform better post-offering. On the flip side (as a bonus prediction), we think that the therapeutics IPO market will cool substantially in 2022.

7. Digital health M&A volume and value will double in 2022

Health care remains, and is now being recognized as, an enormous market, ripe for disruption. Combine that with record profits and stock prices at most payers and technology companies over the last year and we believe there will be even more M&A, despite a dramatically hostile Federal Trade Commission. With COVID-19 and its attendant behavior changes providing a tailwind to many digital health companies, there are now a large number of companies that have enough revenue and growth to be attractive M&A candidates. On the less successful side, there are also a ton of HCIT point solution startups, and these companies, finding themselves stuck as $20 million to $50 million revenue businesses, will ultimately choose to be folded into larger platforms.

8. Failing is not a crime, but fraud is: Elizabeth Holmes will be convicted

While Elizabeth Holmes’s lawyers are arguing that a startup failing is not a crime, we think the prosecution will succeed at convincing the jury that Holmes committed fraud at Theranos. Moreover, we think that she will serve time in jail despite efforts to persuade the judge that as a new mother, she should serve only probation at home. In all honesty, both sides—management and investors—in the Theranos saga deserve an F. 

9. Alzheimer’s drug Aduhelm will fail to surpass $50 million in 2022 sales

The prelaunch analyst consensus for Aduhelm peak sales was $9 billion annually. Postlaunch, Aduhelm is off to a stunningly bad start, reporting only $300,000 in sales in the third quarter of 2021. We do not think things will get better for Aduhelm next year, making it an even bigger flop than PCSK9 inhibitors for cholesterol; all told, Aduhelm might see $50 million in 2022 sales.

10. Illumina will face real competition in DNA sequencing for the first time ever

Ilumina holds about an 80% market share in DNA sequencing globally. We expect the first viable competition, on both a price and performance basis, to begin to erode Illumina’s advantage. This will be true not only in niche markets—for example, long read and microbial—where companies like Pacific Biosciences and Oxford Nanopore are becoming competitive, but also in larger, more general markets, where rivals include BGI and a number of soon-to-launch new entrants. 

We also want to re-up two of our past predictions in a new category: perennial predictions. It remains to be determined if we will use these for grade inflation purposes—check back here in a year when we see how we did. 

Evergreen prediction No. 1: Big Tech will continue to be terrible at health care

We still believe that if anyone makes this work, it will be Amazon; Apple will simply be consumer-grade health entertainment and not actually medically useful. But we now revert to our bearish core belief that Big Tech just doesn’t understand how health care demand and incentives work. Outside of selling data to pharma, we think Big Tech will continue to waste prodigious amounts of money, and its greatest success will be that the Apple Watch can semi-accurately measure some biometrics for metric-needy people to bother their doctors with.

Evergreen prediction No. 2: Nothing will happen on drug pricing

Trump tried and failed. Biden tried and failed. The Center for Medicare and Medicaid Innovation may try and will fail. We do not think anything or anyone is going to meaningfully challenge high drug prices in the U.S. in 2022. We think Americans are going to be too appreciative of their COVID-19 vaccines and new therapeutics to make cutting drug prices popular enough. We think it is much more likely that Congress addresses drug pricing by capping out-of-pocket spending for seniors, and that will be the extent of any reforms.

We look forward to reporting back to you in a year. In the meantime, we wish you a safe and happy holiday season and 2022.

Bob Kocher and Bryan Roberts are partners at the venture capital firm Venrock, where they invest in health care businesses.

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