On Wednesday, one of the largest medical service companies in the United States removed Livongo from its preferred position in digital formulary, as the digital health startup and telemedicine provider Teladoc Health reportedly encountered obstacles in their ongoing merger.
Cigna’s $98.6 billion Evernorth is home to its Express Scripts pharmacy benefits manager, giving priority to competitors Big Motor Health More than Livongo for chronic disease management in its annual prescription review of digital health applications and therapies.
The company developed the Evernorth digital health formulary in 2019 to help customers distinguish thousands of digital health products on the market. This service allows PBM employers and health plan customers to easily integrate their preferred products into their pharmacy services. Livongo and LifeScan will now be listed as alternatives to Omada Health, which has 1,600 employers and health plan customers. In the third quarter, Evernorth counted 103.6 million lives on its platform.
Dr. Sean Duffy, CEO of Omada Health, said: “For some companies with preferred locations, this has changed.” Cigna and Livongo did not respond to interview requests.
Teledoc Health downplayed the importance of Cigna’s decision. “Every year, thousands of digital solutions apply to join Evernorth’s digital health formulary,” a spokesperson wrote in an email. “We decided not to pay extra for the preferred status next year.”
Since the establishment of the formulary, Livongo has been the top spot for diabetes management. At the time, it pointed out that its addition proved that it can help drive better clinical and financial results. A 2019 study by Express Scripts found that patients who actively used Livongo for 3 to 12 months improved their medication compliance by 6.4% and reduced medical expenses by 24%. Since October 2015, the company has partnered with Express Scripts for diabetes management.
Like Livongo, Big Motor Health Help users manage chronic diseases. According to data from Modern Healthcare’s Digital Health Business & Technology, the company has raised $256.5 million in venture capital with participation from Cigna’s venture capital arm and other large healthcare companies.
Unlike Livongo, Omada is not owned by the telemedicine parent company that directly competes with MDLive, which directly competes with MDLive. Cigna paid an undisclosed amount to acquire Earlier this year, Ari Gottlieb, head of A2 Strategy Group, said.
He said that Cigna did not want to support digital health competitors like Teladoc Health, which drove this decision. He said that other insurance companies such as UnitedHealth Group, which have internal telemedicine tools, might do the same.
Gottlieb said: “This may be a realization that many of these services are not highly differentiated in the market, so you may replace them without much impact.” “Why help your competitors?”
In August 2020, Livongo and Teladoc Health announced a $18.5 billion merger, Setting a record in digital health. Its purpose is to create the industry’s largest virtual care company and allow Livongo patients to receive guidance on diabetes and other diseases at home, and refer them to Teladoc Health’s digital experts when necessary, where they can obtain more advanced treatment care and access prescription.
Teladoc Health paid 10% start-up premium, Some analysts at the time said that the valuations of these companies were excessively exaggerated. Since the transaction was completed in October 2020, the company’s share price has fallen by approximately 53%. Gottlieb said this trend surpasses Teladoc Health. He said that Wall Street “had irrationally raised interest rates during the peak period, and now there is a revaluation.”
Gottlieb said the drop in stock prices may also indicate that investors are rethinking the value of these types of services. He said that ideally, most patients with diabetes or other chronic diseases have been diagnosed and received care by primary care clinicians. He said that the idea that Livongo users can then easily transfer to experts through the integrated platform does not bring much benefit to users because the services provided by Teladoc Health are not clinically intensive. He said that the main value of the platform to these users is that its clinicians can prescribe.
“The complexity they provide is still relatively immature,” Gottlieb said. “They are working hard to build for the future and where they think the market is going, not necessarily what it is today,” he said.
In the third quarter, Teladoc Health counted 76.8 million insured persons on its platform, and only 725,000 registered persons were eligible for chronic disease services. But of the millions of people eligible for Teladoc Health’s virtual service, only 5% actually used the service to arrange a total of 3.9 million visits. Gottlieb said that most of these users may schedule mental health checks.
Gottlieb said: “You can say that there are many benefits. You started from a small base.” “It is also important to admit that we started with a very small base.”