Darwin's Our Take 6.1.26: Sutter and Allina Health advance plans to combine

Sutter and Allina Health advance plans to combine, Quorum goes nonprofit, and health systems sue CVS

Sutter Health and Allina Health approved a definitive agreement, taking the next step in their plan to combine and create an integrated nonprofit health system.

Warner Thomas, Sutter Health’s CEO, said in the announcement: “Healthcare is becoming more complex and demanding, both for patients trying to access care and for the people delivering it. Together, we will lead the way to accelerate solutions, recruit more physicians, and expand locations to improve access and redesign how care is delivered to our patients and communities.”

The two health systems signed a letter of intent in March. The combined organization will have 39 hospitals and more than 400 primary and specialty care sites serving more than 5 million patients in Northern and Central California, the area in and around Minnesota’s Twin Cities, and the western part of Wisconsin. Estimates place the combined entity’s annual revenue at approximately $26 billion.

As part of the agreement, the organizations said they will invest more than $2 billion in Minnesota and western Wisconsin to achieve goals such as establishing new ambulatory care sites, expanding access to specialty care, and enhancing digital capabilities.

The next step, they said, is to initiate the state and federal regulatory review process. The organizations anticipate completing the transaction by the end of the year, at which time Allina Health will become the Upper Midwest Division of Sutter Health — though Allina will retain its name, brand, and regional headquarters in Minneapolis.

In separate news, days after Raleigh, N.C.-based WakeMed Health & Hospitals announced on May 1 that it had agreed to merge with Charlotte-based Atrium Health, the health system received an unsolicited counterproposal from Chapel Hill, N.C.-based UNC Health.

Although WakeMed and UNC Health have a longstanding partnership (through which a substantial proportion of WakeMed’s medical staff receives training at the UNC School of Medicine), WakeMed’s board of directors determined that the deal with Atrium Health “is in the best interest of WakeMed and the communities we serve.”

Both options invite scrutiny on the grounds that such a merger could reduce competition within the service areas and lead to higher costs of care.

In fact, after the deal with Atrium was announced, at the urging of state officials, the Wake County Board of Commissioners postponed a vote to amend a transfer agreement between WakeMed and Wake County that would permit the health systems to combine. The vote was delayed so that stakeholders, including WakeMed employees and Wake County residents, have the opportunity to provide input on the proposed merger.

On the other hand, if WakeMed were to merge with UNC Health, the combined health system would control 80% of the healthcare market in Wake County, according to WakeMed.

Despite WakeMed’s decision to pursue the deal with Atrium — which includes a $2 billion investment in Wake County — UNC Health apparently remains open to exploring a “broader” relationship with WakeMed.

Meanwhile, Brentwood, Tenn.-based Quorum Health entered into a definitive agreement with a newly formed entity, QKA Health Corp., which does business under the name Healthside Partners. Through the agreement, Quorum will transition from a for-profit hospital operator backed by private equity to a nonprofit health system.

Chris Harrison, Quorum’s CEO, said, “It is becoming increasingly challenging to deliver care and support a strong workforce without pursuing strategic solutions. By becoming a nonprofit, we are strengthening our ability to serve rural communities that rely heavily on government-sponsored programs.”

When Quorum was formed in 2016 as a spinoff from Community Health Systems, it was a publicly traded company with 38 hospitals in 16 states. After filing for bankruptcy in 2020, it began downsizing. Currently, it has 11 hospitals in nine states.

By transitioning to a nonprofit model, Quorum will be eligible to participate in the 340B drug pricing program, qualify for certain tax exemptions, and have more access to philanthropic funding, according to a news release.

The agreement includes more than $300 million in planned capital investments over the next few years, which will be allocated toward expanding outpatient services, upgrading facilities, and implementing new technology.  

If the usual closing conditions are met and regulators approve, Quorum expects to complete the transition this fall and begin operating under the Healthside Partners name.  

As a final note, hospitals owned by Mount Sinai Health System, Michigan Medicine, and the University of Kansas Health System are suing CVS Health in separate lawsuits.

The hospitals claim the company — through its CVS Caremark pharmacy benefit manager and affiliated subsidiaries, including CaremarkPCS, WellPartner and CVS Specialty — used spread pricing to retain approximately $250 million in savings from the 340B drug pricing program that should have been passed along to the hospitals from 2020 to 2025.

Spread pricing refers to the practice of reimbursing providers less than the amount PBMs receive from insurers for eligible prescription drugs through the 340B program.    

Several news outlets said CVS Health declined to comment on the lawsuits.

HCR #208: New podcast series on The Future of Value Based Care, with Don Calcagno

Value-based care has been the defining promise of health care reform for two decades. Yet new evidence still takes an average of 17 years to reach standard clinical practice, payers and providers remain structurally misaligned, and most VBC models still prioritize payment mechanics over actual patient outcomes. Don Calcagno, former Chief Population Health Officer of Advocate Health, joins John to talk about why value-based care is still "in the early innings" despite years of promise, and how closing the structural gap between payers and providers is the real barrier that the industry keeps avoiding. Watch here or listen on your favorite podcast platform.

What else you need to know

Eli Lilly agreed to spend as much as $3.8 billion to acquire three privately held biotechs with a focus on infectious diseases: Bothell, Wash.-based Curevo Vaccine, Swiss firm LimmaTech Biologics, and Vaccine Co., based in Bethesda, Md. Dr. Daniel Skovronsky, Lilly’s chief scientific and product officer, said the acquisitions “reflect a deliberate strategy to prevent disease at its source rather than treat its consequences.”

Curevo’s focus is on developing varicella zoster virus vaccines with a next-generation synthetic adjuvant to improve tolerability. Its lead asset, amezosvatein, is being developed to mitigate the side effects some individuals experience with GSK’s Shingrix, which is currently the only FDA-approved shingles vaccine.

LimmaTech develops vaccines against bacterial pathogens with increasing antimicrobial resistance. The company’s lead candidate, LTB-SA7, is in early clinical-stage development as potentially the first vaccine for Staphylococcus aureus, which causes staph infections. Two of LimmaTech’s preclinical programs center on gonorrhea and chlamydia.

Vaccine Co. has been developing a proprietary in vivo nanoparticle technology designed to elicit immune responses as durable as those associated with traditional virus-like particle vaccines, but through a simplified manufacturing process. In the company’s lead program, a five-antigen, Phase I-ready candidate is being developed to prevent infectious mononucleosis caused by the Epstein-Barr virus. The Epstein-Barr virus has also been linked to the subsequent development of multiple sclerosis and multiple cancers.

Lilly could pay up to $1.5 billion for Curevo, $780 million for LimmaTech, and $1.55 billion for Vaccine Co. in a combination of unspecified upfront and milestone payments, according to a press release. All three transactions are subject to customary closing conditions.

Separately, Lilly released top-line results from a pivotal Phase III clinical trial of retatrutide, a first-in-class GIP, GLP-1, and glucagon triple hormone receptor agonist. The study assessed the investigational drug in individuals with obesity or overweight who have at least one weight-related comorbidity but not diabetes.

At all three doses evaluated, the drug led to “clinically meaningful weight reduction for nearly all participants,” said Dr. Ania Jastreboff, director of the Yale Obesity Research Center and the trial’s lead investigator. “People with severe obesity on the highest dose of retatrutide lost on average 30% of their body weight over two years,” she said. Additionally, the drug resulted in “clear improvements in assessed cardiometabolic health measures.”

Although some participants experienced two types of adverse events not typically seen with other weight-loss drugs — urinary tract infections and dysesthesia, a physical touch sensation of burning, itching, or pain — Lilly noted that these events were generally mild to moderate and most resolved during treatment. Of note, participants receiving the lowest dose of retatrutide had a lower rate of discontinuation than the placebo group.

Results from this and other clinical trials of Lilly’s weight-loss therapies will be presented at the American Diabetes Association’s 86th Scientific Sessions in New Orleans on June 6 and June 8.

Tennessee became the second state to pass and sign into law a bill prohibiting pharmacy benefit managers from owning or operating pharmacies in the state. The FAIR Rx Act requires PBMs that currently own pharmacies to divest them by July 1, 2028, though a six-month extension can be granted if a sale is being negotiated. According to a press release from the Tennessee Pharmacists Association, PBM “abuses” have contributed to the loss of 620 pharmacies in the state since 2017. Many of those closures, the organization said, resulted, at least in part, from PBMs’ “unsustainable reimbursements,” as they reimbursed their affiliated pharmacies at rates higher than those for nonaffiliated pharmacies.

A year ago, Arkansas passed and signed into law similar legislation. Major PBMs filed a lawsuit to block that law, and a judge issued a preliminary injunction to prevent it from going into effect while the legal challenge plays out.

Now, CVS Health is suing to keep the new Tennessee law from being implemented, alleging it unfairly targets national companies such as CVS while favoring the state’s independent pharmacies. According to CVS, the law would cause the company to close more than 130 pharmacy locations in Tennessee (along with 25 retail medical clinics, Healthcare Dive reported, citing a company spokesperson), which in turn would limit patients’ choices and increase drug costs for employers. At least nine other states are considering legislation like the bills passed in Arkansas and Tennessee, Healthcare Dive reported, citing the National Community Pharmacists Association. A similar federal bill was reintroduced in Congress on May 13.

Gilead Sciences’ Hepcludex (bulevirtide-gmod) is the first drug to gain FDA approval as a treatment for chronic hepatitis D virus (HDV) infection in adults. Specifically, the accelerated approval is for use of the injectable drug in adults without cirrhosis or with compensated cirrhosis. The approval was based on a decrease in HDV RNA and alanine aminotransferase normalization in a late-stage clinical trial, Gilead Sciences noted in a news release, pointing out that an improvement in disease-related outcomes has not been established and continued approval may be contingent on verification and description of clinical benefit in a confirmatory trial.

According to Gilead Sciences, chronic HDV is considered the most severe form of viral hepatitis and is associated with a markedly higher risk of rapid disease progression, liver failure, and mortality as compared with hepatitis B virus infection alone. (Only individuals with HBV can contract HDV.) Studies estimate HDV affects between 2% and 4% of those with HBV, or approximately 40,000 to 80,000 people, the company said in the release.

AstraZeneca’s Baxfendy (baxdrostat) received FDA approval to lower blood pressure in adults whose hypertension is not adequately controlled. The daily tablet, a first-in-class aldosterone synthase inhibitor, is to be taken in combination with other antihypertensive treatments. Ruud Dobber, executive vice president of AstraZeneca’s biopharmaceuticals business unit, said in the company’s announcement of the approval that about 23 million people in the U.S. have uncontrolled hypertension despite being on two or more drugs for the condition.

Dr. Bryan Williams, chair of medicine at University College London and a primary investigator in a Phase III trial of Baxfendy, said the drug’s novel way of lowering blood pressure “has the potential to transform clinical practice by targeting a root cause of persistently uncontrolled hypertension.” Executives at AstraZeneca believe annual sales of Baxfendy for this indication could reach at least $5 billion. Radnor, Pa.-based Mineralys Therapeutics has submitted a New Drug Application for another drug in this class, lorundrostat, and expects an approval decision in December.

What we’re reading

Precision Medicine’s Next Hurdle Isn’t Science — It’s Execution. MedCity New, 5/25/26    

Primary Care as a Public Utility: The Case for a Common Fund. JAMA, 5.20.26

Private Equity Acquisitions In Primary Care: Changes In Utilization, Spending, And Workforce. Health Affairs, 5.20.26

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