Weekly Briefing No. 44 | A Fintech Opportunity in the EpiPen Fiasco?

As the summer winds fade, we look back at Mylan Labs’ EpiPen fiasco and ponder a possible fintech opportunity. We also take note of Apple’s nasty battle with Aussie banks, the resilience of some fallen unicorns, an ETF issuer’s reinvention as a fintech company, a blockchain non-problem and the end of a tech-bank celebrity marriage. Finally, we highlight Snagajob, a gig economy standout.

IN DEPTH

A fintech opportunity in the EpiPen fiasco?

Warren Buffett once quipped that if a company requires a prayer session before raising the price of its product by 10%, then it’s a terrible business. For Mylan Labs, there are other lessons to be learned from its astounding EpiPen price hike: 1) If you are going to quadruple your price on a life-saving drug used by children, excuses and gimmicks won’t mitigate the hit to your reputation; 2) If your product was handed a virtual monopoly by the FDA, the Feds will feel betrayed if you start engaging in monopoly pricing; 3) If you do something that reeks of cronyism in an election year, prepare for congressional investigations conducted with sledgehammers, not scalpels; and 4) Unlike price hikes put through by the likes of Netflix and ClassPass, health care price spikes won’t quickly fade from memory because health care, not software, is truly eating the world. Although Mylan instituted a questionable incentive scheme to goose its revenues, it (so far) does not appear to have broken the law. As such, in the longer term, this controversy will fade. And its embattled CEO, Heather Bresch, is correct in asserting high deductible plans are part of the problem. That’s why we continue to be interested in fintech solutions that could help consumers finance medical expenses that fall under their deductible limit. To be clear, the EpiPen situation is not primarily a financing problem. It’s representative of the surreal economics associated with health care. But fixing health care pricing mechanisms won’t be happening any time soon, no matter what politicians say. In the meantime, we would encourage the growing universe of tech-powered alternative lenders to take a hard look at deductible financing. We realize it’s a much tougher medical-loan category than lending to borrowers who want to finance elective treatments such as rhinoplasty or bariatric surgery. But consider that in 2006, just 4% of Americans were enrolled in employer-sponsored high deductible plans. By 2015, that number soared to 24%. You don’t need to be as brilliant as Buffett to see an opportunity in that.

For a thoughtful analysis on Mylan’s EpiPen crisis, see here.

Apple tangles with Aussie banks in nasty kangaroo boxing match.

Although Apple’s tax woes with the European Union grabbed the bigger headlines this week, the company’s increasingly nasty exchanges with Australia’s banks is a compelling story to watch. In essence, all of Australia’s big banks (except ANZ) are attempting to band together and demand access to the inner workings of Apple Pay’s platform. Those inner works specifically relate to the company’s contactless technology. If the banks are successful, third parties would be in a position to create their own apps that could bypass Apple Pay. Apple is claiming that providing such access would harm consumers, but this battle is all about precedent. Apple, unlike Google and Samsung, wants to ensure iPhone users have no choice but to use its payment solution. That’s the Apple way and it’s unlikely Australia’s truculent banks will prevail. Still, we were sympathetic to the banks when Apple filed a complaint that blasted the banks as being control freaks over this issue. Give us a break, Apple. Who is more control freaky than you?

IN BRIEF

Better to be a living donkey than a dead unicorn. We liked this New York Times article highlighting Silicon Valley fallen stars that have managed to hang on. Companies such as Evernote and Zirx saw the tide turn against them, but rather than go down in a blaze of glory,  they engaged in some old-fashioned belt tightening and re-emerged as hard-working donkeys. We remain persuaded by the arguments put forth by VCs such as Bill Gurley and Mark Suster indicating the next few years may be marked by turbulence for investors and start-ups alike. But we also agree — at least directionally — with the sentiment expressed by Affirm founder, Max Levchin: “The start-up world did heed the warnings.”

ETF issuer attempts fintech pivot. Last week, ETF issuer Accushares reached the conclusion that its four ETF products had no future given increased regulatory requirements and the competitive landscape. But rather than liquidate the company, Accushares has decided to combine its ETF expertise with recently purchased fintech patents and refocus on creating “next generation” ETF technology solutions. While some market participants may smirk at this change in direction, we think the company deserves credit for taking action and not wallowing in self pity. If you’re up for a reinvention of your own, we’d suggest you check out MIT’s upcoming fintech course, beginning September 5th.

Blockchain tech doesn’t have an image problem. Despite the embrace of blockchain technology by nearly every major bank, consulting firm and (increasingly) insurance company, several ‘concerned’ blockchain executives — who call themselves the Muskoka Group — convened recently to work on improving the tech’s image. If there is a “problem” with blockchain tech, though, it isn’t grounded in misconceptions. All that needs to happen is for one of the many highly promoted blockchain applications to produce significant results. Once that occurs, blockchain skeptics may see the light.  

Does Tesla really need anything else on its plate? It looks like Auto Insurance is next up for Tesla, according to what looks to be an orchestrated leak to several tech news outlets like this one. The roll-out will target the Australian and Hong Kong markets and will involve partnerships with QBE Insurance and AXA. Is there anything cash-strapped-but-cool Tesla doesn’t want to do?

Amazon and Wells Fargo just ended their celebrity marriage. The ink wasn’t even dry on the partnership papers, but the two west coast icons are now finished. Six weeks after Wells Fargo started offering student loan discounts to Amazon Prime Student members (with much fanfare), the two companies have abruptly ended the arrangement. The FR was one of many publications that heralded the unusual pairing and its significance for future tie-ups between bank and tech firms. Both are staying close-lipped on what happened, but clearly, there’s a story there.

Company of note: Snagajob.

We came across this company in a recent Bloomberg article and we’re glad we did. Snagajob is one of the leading job platforms for “lightly skilled” freelance work. The Virginia company, which started in 2000 and now works closely with LinkedIn on sharing research, completed a $100 million capital raise earlier this year led by Rho Acceleration. As the gig economy continues to grow (a virtual certainty in our opinion), look for Snagajob and competitors to gain increasing recognition as important participants in America’s rapidly changing economy.

Comings and goings.

Bridget van Kralingen, IBM’s former senior vice president of Global Business Services, will be assuming a new role as head of IBM’s blockchain initiatives. In this capacity, the South African native will oversee the company’s blockchain R&D and its efforts to accelerate market adoption of blockchain tech. Also last week, AlphaSense, a search engine for financial data, hired Scott Mabry as a vice president of account management. Earlier in his career, Mabry had served as Thomson Reuters’ head of investment management for the Americas.

Quote of the week.

“Select only things to steal that speak directly to your soul. If you do this, your work (and theft) will be authentic. Authenticity is invaluable; originality is nonexistent.”

~ Jim Jarmusc