Patients Are Taking the Driver's Seat in Healthcare

Healthcare companies are rethinking their business models as patients gain more control over how they access care and purchase medicine. Our analysts Erin Wright and Terence Flynn unpack this shift and the emerging opportunities.Read more insights from Morgan Stanley.----- Transcript -----Erin Wright: Welcome to Thoughts on the Market. I'm Erin Wright, US Healthcare Services Analyst at Morgan Stanley.Terence Flynn: And I'm Terence Flynn, Morgan Stanley's US BioPharma Analyst.Erin Wright: Today, how the consumer is moving into the driver's seat across healthcare.It's Monday, September 14th at 7:00 AMWe're recording in New York City, where Morgan Stanley's twenty-fourth Annual Healthcare Conference is happening this week. One of the biggest shifts we're seeing across the industry is patients gaining more choice, transparency, and control over how they access care and medicine. You can already see it in everyday behavior. In our AlphaWise survey earlier this year, thirty-four percent of US consumers said that they'd chosen to take a voluntary wellness lab test in the past three years, and roughly two-thirds already own a wearable or plan to buy one.And now we're seeing the same trend reshaping how people buy medicine and choose care. So Terence, let's start with biopharma. For years, direct-to-consumer pharma meant advertising and nudging people to ask your doctor about what particular treatment is best for them. What's different this time around? And what's different in this next wave of direct access?Terence Flynn: Yeah, absolutely. Thanks, Erin. So for most of the industry's history, the patient sat at the end of the value chain and had really limited control over the product, the price, or the route through which the drug was obtained.Manufacturers marketed to doctors and consumers, but the transaction was itself intermediated. So we think that's starting to change here. It's no longer simply about more consumer advertising or another cash pay discount. There's a parallel access infrastructure that's building here where the patient can increasingly start the initiation of the treatment journey themselves, obtain a prescription, often digitally through a telehealth provider, and then fill this prescription through other non-traditional channels.And so there really is a shift in the model that we're starting to see here. But again, we're not talking about replacing insurance here; we're talking about areas where friction is high and where a cash pay price is viable.Erin Wright: So Obesity has been the clearest proof point, as we are seeing patients asking providers about GLP-1s. Where else are we seeing this?Terence Flynn: Yeah. So manufacturers are actually already selling over twenty-five branded drugs directly to patients at cash prices. Now, the common features of these drug classes are that they're self-administered, so essentially the patient can start and stay on treatment, and where there's limited in-person infrastructure that's needed, and where, as I mentioned, you have a lower price point or a coverage gap, meaning traditional insurance coverage doesn't exist.Now, we're seeing this in large chronic categories. You mentioned obesity. Another one is, migraine headaches. There are also other areas that are amenable to telehealth, so think oral PCSK9 therapies, topical dermatology, non-opioid pain. So again, we think as more self-administered products launch, you're gonna see the addressable DTC pool expand.Erin Wright: And ultimately what does this reveal about patient demand and gaps in reimbursement?Terence Flynn: Yeah, I think GLP-1s, as you mentioned, Erin, provided the first proof point here that this new DTC model could actually be viable. And really the reason for that is that, the US employer coverage base right now, only about fifty percent cover these obesity medications.And so for the other fifty percent, you have a gap in coverage. And that's really why people are seeking other channels for coverage. And so again, that really created this opening here for this new model. And so again, that's another consideration when you think about other medicines that could go through these channels is you have to think about the insurance coverage situation. And so for some areas like oncology, for example, insurance coverage is gonna be very high, and so those wouldn't be amenable to a DTC approach.Erin Wright: So Terence, your analysis points to roughly twenty-six billion peak US opportunity. What makes a certain therapeutic well-suited for direct-to-consumer, and where is the