Lazard’s Orszag says it’s a ‘wild time’ to invest in health care as technology pressures companies

It’s a “wild time” in the health-care industry as new technology pressures companies to innovate while advancements in medicine hold the promise of cures for previously fatal diseases, investors said at CNBC’s Healthy Returns conference in New York Tuesday.

“It’s a wild time to be in health care at large because business models are evolving rapidly,” Lazard’s financial advisory CEO Peter Orszag said in an interview at the conference with CNBC’s David Faber.

Recent mergers like CVS Health’s combination with insurer Aetna highlight the pressure on companies to adapt to new competition from non-traditional providers like Alphabet’s Verily life sciences division and Amazon’s acquisition of online pharmacy PillPack last year. 

Combinations in the industry, “are really jostling existing business models to varying effects,” Orszag said.

But they will give insurance companies more data to show pharmaceutical and medical technology companies whether their drugs and devices are really working, he said. Those are “fundamental forces” the industries will need to respond to, he said.

Another change companies and investors need to contend with is how the health-care system will pay for new costly cures, said Jorge Conde, general partner at Andreessen Horowitz. He said new payment models will need to emerge to reward companies for not just treating conditions over the long term but actually curing them.

“I think we’ll see innovation in the way things are paid for over period of time,” he said.

Ali Satvat, a member of KKR’s private equity health-care team, said his team considers political changes when they do their diligence. Despite all these considerations, he said rewards for innovation are “still there.”