The Opioid Crisis Is The Healthcare Crisis

Summary

• The opioid crisis as a national emergency is a red herring issue.
• Not comprehending the opioid crisis as a symptom of the healthcare crisis ensures failure.
• Understanding the opioid crisis as a symptom of a dysfunctional medical system is the key to a long-term fix.

Opioids start as a short-term fix, enabling the worker to stay on the job, but they also slow healing—and can even prevent it.
CEO's Guide to Restoring the American Dream: How to deliver world class healthcare to your employees for half the cost, by Dave Chase and Tom Emerick (2017)

There have been a few attempts here recently to highlight the investment aspect of the opioid crisis. Most of that risks focusing on short-term trading opportunities, not long-term investment strategies. The totally confused approach of government so far would seem to cast doubt on the chances for a clear long-term solution, yet there are a few indicators that real progress is possible and already underway, driven by both business, unions, municipalities and other entities.

In a very interesting piece by Marshall Gordon, Healthcare Companies Work to Ease the Opioid Crisis, he points to initiatives from CVS (CVS) among others in the area of managing the crisis. The most interesting part of his article is that he endeavors to look at the problem in an ESG-investing context, and specifically relates it to the UN Sustainable Development Goals (SDGS), item 3, good health and well-being. That is the right way of looking at it, but I would suggest that analytically we need to dig a level deeper.

In an earlier article from a different author, there was an exploration of the immediate fall-out from an investment perspective. Valid as far as it goes, but more of a trading than an investing exploration in as much as there is no clear long-term analysis of what the solution is. Other articles have touched on specific roles by specific companies. We need to look at the structural issues however.

Our failing healthcare business

In their brilliant book, the CEO's Guide to Restoring the American Dream: How to deliver world class healthcare to your employees for half the cost, Dave Chase and Tom Emerick devote an entire chapter to the opioid crisis as a symptom of our failing healthcare paradigm, and point out that employers are both victims and unwitting accomplices and enablers of the crisis by virtue of their role in our completely dysfunctional healthcare system.

They point to hundreds of companies and organizations that have begun to make the radical changes that are necessary to solve our healthcare conundrum, or as Warren Buffett so aptly refers to it: the tapeworm that's eating our economy. Here is another choice passage from the book:

Warren Buffett said it all: "GM is a health and benefits company with an auto company attached." In fact, it spends more on healthcare than steel, just as Starbucks spends more on healthcare than coffee beans.

For most companies, healthcare is the second largest expense after payroll. This puts you in the healthcare business.

So, how's your healthcare business doing?

That's the first question the COO of a large private equity fund’s healthcare benefits purchasing group asks when he sits down with the CEO of a newly acquired company, say a manufacturer. Naturally, the CEO will look puzzled. The COO will then show that the company has, for example, 4,200 members enrolled in their health plan and spends the typical $10,000 per year per member for healthcare. He then asks "How's your $42 million healthcare business?

That's when the light bulb goes on, said the COO. (op. cit. p. 116)

It is so brilliantly simple, since healthcare for the most part is provided through companies, every business is in the healthcare business. Jamie Dimon hinted at the same recently in connection with announcement by Amazon (AMZN), Berkshire (BRK.A) (BRK.B) and Chase (JPM) for their new healthcare initiative, which I have dubbed 'ABC Healtcare' for the sake of convenience: they already are in the healthcare business, whether they like it or not.

Now, for the investment analysis (as opposed to a trading analysis), this CEO's guide would be a good place to start, or you can follow Dave Chase's articles on LinkedIn. He recently weighed in on the things 'ABC Healthcare' should do, and should definitely not do as well as the means that might get them there. The upshot is, order of magnitude better care for half the price or less. In all likelihood Dave Chase's articles shed more light on the likely direction of 'ABC Healthcare' than all the superficial speculation on how technology could make healthcare more efficient.

In short, the development of breakthrough change in healthcare is already well along, as can be seen in initiatives like Welcoa, and HealthRosetta. Given how large healthcare is as a share of business overhead and the economy in general, it is time to pay attention to which companies are actively working on long-term solutions, particularly since reductions of 50% or more along with vastly better overall care are well within reach.

In previous articles, I had already pointed out that GEICO and Whole Foods Market each have their own internal pilot programs for a new healthcare model and both are now about ten years old. So let's take a look at the drivers of the solution.

Multiple, interlocking paradigm changes

We are now living the ultimate derailment of the Rockefeller model of industrialized healthcare, which was brilliantly analyzed in the book by E. Richard Brown, Rockefeller Medicine Men, (1979). Meanwhile, the foundational criticism of our healthcare model was perhaps the book Medical Nemesis (1976) by Ivan Ilych.

In a more constructive sense, it is the book The Quantum Doctor, (2011) by quantum physicist Amit Goswami, which goes beyond critique into providing a constructive path forward towards a new paradigm. The Quantum Doctor is a model for the physician in which quantum mechanics replaces the Newtonian physics in which the medical 'science' remains hopelessly stuck to date.

Conclusions drawn from even one faulty premise are of necessity faulty and like always with obsolete paradigms these manifest in problems without real answers. Examples from medicine are: "you have to take these pills for the rest of your life," (that is merely short for: I don't have a clue what I am doing, but this is how you make it manageable) and the inability to explain both the failures of its own cures as well as some of the successes founded in other healing modalities, or for that matter spontaneous recoveries from supposedly terminal conditions.

Our healthcare model has suffered from compounding the problem by ever more fixes of fixes of fixes, drugs to soften the side effects or interactions of other drugs, and so on. Numerous courses of therapy from the annals of 'pharmageddon' do little more than continuously combatting the unintended consequences of therapies that could not possible solve the problem, because, again, they proceed from a faulty premise. The only winners are the pharmaceutical companies. Examples include:

• Serious gastro-intestinal problems that begin with antacids and end up in surgeries later in life, which would have been totally preventable with adequate lifestyle changes earlier, as documented in the 1992 classic Your body's many cries for water, by Dr. Batmanghelidj. The whole point is that symptom suppression, in this case with antacids, instead of dealing with the cause, leads to a lifetime of progressively more serious drug use until the problem spins totally out of control and operations become necessary. The bottom line is that besides drinking water, which is now universally emphasized, other dietary changes would easily make antacids obsolete and make much diet-related digestive trouble a thing of the past.
• Ever since the book Prevent and reverse heart disease, (2008) by Dr. Caldwell B. Esselstyn, Jr. essentially the same goes for heart disease. Dr. Esselstyn will say, anytime you put him in front of a room, that cardiovascular disease in its entirety is a paper tiger that does not even need to exist, for it can be entirely prevented and reversed with lifestyle changes and specifically a whole foods, plant-based diet. At this moment, these insights are rapidly gaining ever widening acceptance, including endorsements by the AMA and ACC (American College of Cardiology), who now both recommend to hospitals to always provide a nutritionally sound plant-based meal option to patients. The movies Forks over Knives, and What the Health have become instant classics. Statin sales alone are a dream income stream and yet completely superfluous.
• Increasingly, diabetes is also on the list of diseases that are susceptible to the dietary approach, and recently Dr. Neal Barnard, of PCRM (Physician's Committee for Responsible Medicine), published both an updated version of his book on the nutritional treatment of diabetes as well as a new cookbook for diabetics. Perhaps even more impressive is a new project by a lay person, a recovering diabetic, Jon McMahon, who just launched iThrive, a 9-episode documentary series on the nutritional approach to diabetics, along with an on-line support group. He has managed to collect all of the top experts in this series, and combine it with everything you need to know on a practical level. In the second episode physicians explain in detail how the existing course of treatment is a path not of curing or preventing diabetes, but a path of drugs, leading to more drugs, to insulin and yet more drugs. Surely the dream of the pharmaceutical industry.
• The upcoming documentary Code Blue adds the story of Dr. Saray Stancic, who recovered from MS with the Whole Foods, Plant-Based diet, and now specializes in lifestyle medicine to help others with the nutritional approach. After twelve years with MS, Dr. Stancic got off a handful of medications, all of which she was going to "have to take for the rest of her life," before she got on the Whole Foods, Plant-based diet and was soon free of MS.
• Finally, in the area of cancer, the linkage of animal proteins and cancer has been known for at least a hundred years, but more recently these notions were scientifically researched and solidified in The China Study. Primarily through the China Study, but combined with the clinical experience in all of the specialties mentioned above and more, it becomes clear that the plant-based diet is the largest single thing that people can do to raise their life expectancy and quality of life.

What most of these scenarios have in common is that they combat symptoms, without getting at the cause. This focus on symptom suppression sets us up for a never-ending game of whack-a-mole and an endless spiral of compounding drug use without any hope of real relief or anything that could pass for health and healing. Seen in that light, the opioid crisis can be seen merely the culmination on that short term focus on symptom suppression.

It is the final derailment of the drug-laced gravy train for providers and pharmaceutical companies. It is certainly not an isolated phenomenon. The drug companies have reduced doctors to dispensing clerks and conditioned the patients to believe that the only function of the doctor is to prescribe the right drug.

In short, the first paradigm shift comes, courtesy of The Quantum Doctor, in completely re-framing the metaphysics of medicine, which puts the mind of the patient central in the healing process. A close corollary is the second paradigm shift towards diet as the biggest single thing people can do to prevent and potentially reverse numerous major diseases. In nutritional science it is about shifting from the primacy of protein to the primacy of complex carbs, which totally inverts the nutritional framework.

In other words, the primacy of diet and lifestyle in therapy empowers the patient as the primary actor in his own health and well being. It is the single biggest step we can do towards treating the cause not the symptom. Treating only the symptoms just amounts to a path of deferred maintenance, which inexorably leads to ever bigger and more expensive maintenance problems later on, such as $100,000 open heart surgeries that would have been perfectly preventable. Conversely the new nutritional science of the whole foods, plant-based lifestyle creates nutritional abundance and a whole new level of health and well-being.

In 2018, this whole phenomenon of shifting towards prevention over pills is gaining dramatic traction in the form of several movie releases, starting with The Game Changers, by James Cameron, debuting to standing ovations at the Sundance festival. The movie debunks the dangerous myth that animal protein is healthy. Along with it are productions like the Code Blue movie mentioned above (dealing with MS) and the iThrive documentaries (dealing with diabesity), and the film The Big Change, which focuses on weight loss.

The opioid crisis and what comes after

If the opioid crisis is treated as an isolated problem, we will learn nothing. If it is understood as what it is, a symptom of our completely dysfunctional sick care system, maybe there is hope. Just by inference the partners in 'ABC Healthcare,' Amazon, Berkshire, as well as Chase, have the in-house knowledge to truly make an order of magnitude breakthrough in healthcare, with better health outcomes at less than half the cost.

It is within reach. The son of a friend works as a cook in Hawaii for a program to teach people a Whole Foods Plant-Based diet, which is paid for by insurance. They already recognize that lifestyle change is cheaper than treating heart disease for 20, 30 or 40 years.

Pharmageddon has made doctors into legal drug pushers and the distinction of the legal and the illegal variety has become largely academic. Of course, nearly unique in the world, pharmaceutical companies pitch prescription drugs to patients directly in the US (New Zealand is the only other exception), de facto disintermediating doctors and resulting in establishing a patient expectation that the doctor's only job is to prescribe the right pill.

At the same time doctors won a full employment program courtesy of the drug companies, for it's a lot of work to keep treating symptoms and controlling the underlying symptoms just enough so the patient stays well enough to pay the bills. In short, economics worked once again: you reward people for more treatment, and you will get more and more treatment, until it's the treatment that kills you. Iatrogenic disease is the 3rd leading cause of death already and we should add in the larger part of the opioid crisis - again, if we do not first analyze the problem, we will end up fixing the wrong issues.

Hope for material change lies in the more structural work of healthcare reform that is starting to make inroads in the corporate world, pioneered by organizations that cover various aspects, be it Health Rosetta for the business model, the American College of Lifestyle Medicine and PCRM (Physician's Committee for Responsible Medicine) and Wellness Forum Health, as well as many other institutions for medical training. Compared to that, the political flap over national crisis of opioids is a minor dust-up and a distraction.

It is too idiotic that 170 opioid deaths a day are a national crisis, but 1,700 deaths from perfectly preventable heart disease are business as usual - not to mention cancer, MS, diabetes and a whole host of other diseases that are partially or wholly preventable with lifestyle changes.

Investors should be watching what companies are doing in this area. It is now totally "in play."

The long-term ESG angle

For every dollar in retail sales of meat, fish, eggs, or dairy, the animal food industry imposes $1.70 of external costs on society. If these external numbers were added to the grocery store prices of animal foods, they would nearly triple the cost of these items. A gallon of milk would jump from $3.50 to $9, and a store-bought, two-pound package of pork ribs would run $32 instead of $12. (Meatonomics, David Robinson Simon, 2013)

The real long-term ESG angle lies in the fact that one of the many indirect costs of the animal protein craze is a massive healthcare bill, which David Robinson Simon is probably underestimating in the book. But the environmental costs are monumental as well, from the book:

As much as we might like our Dairy Queen and Burger King, the reality is, compared to plant protein, raising animal protein takes up to one hundred times more water, eleven times more fossil fuel and five times more land.

In short, while fixing the healthcare problem will of necessity entail a shift away from animal protein, it is also the single biggest thing we could do for climate change. The reports are that on the whole the typical vegan is fourteen times less resource intensive than a meat-eater. In short, solving climate change and solving our healthcare problem are merely two sides of the same coin. It is all one and the same problem.

Food, nutrition, medicine and supplements

The developments listed here collectively restore the old Hippocratic dictum, "Let food be thy medicine," to its central role in health and well-being, while also underscoring that much of contemporary medicine violates that other Hippocratic principle of "Do no harm." It turns out that in practice our medical system doesn't do much better than pay lip service.

What is emerging is that, post the China Study, for the first time we have an actual nutritional science, rather than a collection of old wives tales and untested assumptions. Moreover, we are now starting to understand that it does not work to eat heavily processed food, from which most nutritional value has been stripped, and make up the difference with supplements. Vitamin C from an apple is 265x more bioavailable than it is from tablets, so don't even bother with them.

Beta carotene in a carrot is a powerful anti-oxidant, whereas in supplement form it is a co-carcinogen. There are many more examples where nutrients work in the context of food, but can have nasty side effects in isolated form as supplements. The same problem besets a lot of drug research. The overwhelming majority of drug as well as supplement studies is flawed because there is no control for a healthy, whole foods, plant-based diet, which is nutritionally abundant.

It becomes uninteresting to know if a smoker of two packs of cigarettes a day decreases their lung cancer risk if they stop smoking the two cigars they smoke on the weekend. Yet that is how narrow many, if not most studies are. T. Colin Campbell, refers to it as reductionism, and it boils down to taking a narrow slice out of context and studying the effect of a single vector, which produces an uninteresting result, because life is not that way. The alternative is a holistic approach to health and nutrition, which Campbell explores and defines in his book Whole, which he wrote after the China Study.

Investing impact

Health Insurance: Evidently, you can go down the list of health insurance companies, and the majority are part of the problem set, not the solution set. They are interested in creating the appearance of cost control, but in reality they have reshaped the life of a doctor to two thirds paperwork and on third medicine.

The nature of their business model means that they make their money from more treatment, not less. I addressed this in part with my recent comments on the Aetna (NYSE:AET)/CVS merger, but it is the universal problem of the health insurance industry. As organizations learn better strategies for healthcare, this sector is in for wrenching change.

Pharmaceuticals: As I have touched on in recent articles, a long list of medicines, both over the counter and prescription, become irrelevant to those who adopt the whole foods plant-based lifestyle, and it is growing faster than ever. What now still appears to be a fringe phenomenon is gaining traction rapidly.

Very evidently, the manufacturers and marketeers of opioids and their handmaidens are in a lot of trouble, and those who come up with better solutions are likely winners, as was already covered by others. The obvious targets of the lawsuits are partially private, like Purdue, but the list includes several major public companies.

Johnson & Johnson (NYSE: JNJ), Cardinal Health (NYSE: CAH), Endo International (NASDAQ: ENDP), Teva Pharma (NYSE: TEVA), Pfizer (NYSE: PFE), Mallinckrodt Pharma (NYSE: MNK), AmerisourceBergen (NYSE: ABC), and McKesson (NYSE: MCK), as discussed in the article on the investment aspects of the opioid crisis I referenced above. However, if indeed there is only a whiff of serious healthcare reform that gets under way, the entire healthcare segment is in for a serious overhaul.

In terms of culpability, the drug industry as a whole took responsibility for dis-intermediating the doctors by their whole direct-to-consumer marketing model, and as several of the protocols discussed above show, the overwhelming trend has been towards drugs and more drugs, not health. Statins and baby-aspirin, are part of the problem, and so is viagra, for ED is merely an early warning of cardio-vascular disease that should be reversed or prevented with lifestyle change instead of enabled with drugs, leading to far worse consequences and ever more medical interventions later on.

Supplements: Apart from the mounting evidence that supplements hardly work or are counterproductive, certainly in the context of a whole foods, plant-based diet they are provably entirely superfluous, since the diet itself ensures an abundant supply of all nutrients, with the one exception perhaps being a small amount of B12, which may need to be supplemented.

Restaurant sector: Most fast-food restaurants have business processes that render them unsuited for seriously incorporating plant-based options in their diet, as I wrote about recently. In the fast-casual sector there are several that are potential exceptions to that rule. I recently paid some attention to Chipotle (CMG) as a surprise candidate in this area.

Food industry: Factory farming will need to be phased out in the long-run. The damage to the environment and to human health is simply staggering. Dairy is out: milk is for baby cows. Much of the packaged food business is also too dependent on all the processing methods that deprives food of its nutritional value.

All of the above are categories where the change will be felt as a negative trend, with the exception of some chains in the fast casual segment if they capitalize on these changes. In the meantime whole new sectors are being created in the food business, PlantPure Nation foods are now at Publix and Engine2 products are at Whole Foods, also Dr. McDougall's foods are gaining traction in the retail channel. That list is growing.

The real change will be if we finally drain the real swamp in Washington where check-off programs push all the things we should not eat such as meat and dairy, and fail to market what we should eat, such as spinach and broccoli, in spite of the fact that the average American already eats far more meat and dairy products than even the very seriously flawed dietary recommendations that originate from the same government.

Conclusion

It will pay to watch the developments at 'ABC Healthcare.' For the time being, they need to find a CEO for the venture. Once it gets seriously underway, it can do more for the competitive position of the sponsoring companies than anything else. As the change in healthcare begins to show concrete results on the scale that these three are capable of, it will spread to the rest of the economy at an accelerated rate. All the talk of the single payer system and exceptionalism about the opioid crisis will be seen for the red herrings that they are.

I still tend to believe that the real long-term solution will be one where your primary care physician is a lifestyle medicine practitioner who works for you on a retainer basis, and organized with their own mutual company to put the consumer in charge of the medical system in a meaningful way.

As a personal note, in my business I am involved in energy retrofitting, and too much time is wasted in that sector yammering about sustainability, but what is needed is better financial analysis of energy retrofit opportunities. Like healthcare, the area is under-managed from a financial standpoint.

However, once I made the personal decision for a whole foods plant-based diet, I began to realize that the solution for our climate problems is centered there. The whole area of sustainable energy is of secondary importance. The whole hoopla about automobiles transitioning from ICE to BEV is laughably unimportant by comparison, even if it did work.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.