Business

WITH HIS long white coat, stethoscope, genially soothing manner and wonky eagerness to discuss “population health management” and “patient-centred” medicine, Ronald Searcy seems the Platonic ideal of a primary-care doctor. The most unusual thing about him is where he works: a compact facility complete with examination rooms, dentist’s office, phlebotomy lab and X-ray room tucked into a Walmart in north-west Arkansas. Since 2019, Walmart has opened 32 of these “health centres” in five states; by the end of next year it plans to more than double that number, and expand into two more states.Walmart is not the only big company expanding its medical offerings. Earlier this year Amazon acquired One Medical, a concierge practice (meaning clients pay an annual membership fee) with offices in cities across America. Dollar General, a discount retailer, has set up a partnership with DocGo, which runs mobile health clinics, and has launched a pilot programme at three shops in Tennessee. Walgreens and CVS, both retail pharmacies, have robust primary-care offerings; last year more than 5.5m patients visited a CVS MinuteClinic, making it one of the biggest providers in the country, and earlier this year CVS completed its acquisition of Oak Street Health, an elderly-focused primary-care provider with offices in 21 states. What do these companies see in the medical business? The answer, befitting America’s byzantine and rent-filled health-care system, is both simple and complex.The simple answer is money. Americans spend a stunning amount of it on health: roughly 18% of GDP in 2021, far exceeding the rich-country average of about 10% and more than double the ratio of some, such as South Korea, with healthier and longer-lived populations. Americans’ spending is forecast to rise by 5.4% per year over the next eight years (see chart), outpacing broader economic growth and accounting for almost one-fifth of GDP by 2031. The bulk of that spending will come from Medicaid and Medicare, federal programmes that cover health-care costs for, respectively, poor people and over-65s.The complex part reflects changes in how insurers, including Medicaid and Medicare, pay for coverage; as well as changes in how consumers are willing to get it. Start with the insurers. The predominant payment model is fee-for-service, in which insurers reimburse doctors for each visit or procedure. Its advantage is simplicity. Its downside is that it encourages medical consumption but, for the most part, is indifferent to outcomes: doctors get paid the same amount whether a patient gets healthier or not.From 2016 to 2021, however, the share of health-care spending on “alternative payment models” rose from 29% to 40%. In a survey in 2022 most payers believed that these payment models, in particular those that let doctors share in the upside of keeping patients healthy, would rise. This approach, known as “value-based care,” (VBC) is an artefact of the Affordable Care Act. It incentivises doctors to keep patients healthy—for instance, by letting them share in savings if a patient with a chronic condition takes her medication and stays out of hospital—rather than simply paying them for every procedure performed. Companies are betting that they can make more money on this model than the old one.Retailers entering or expanding their primary-care offerings are also betting on consumer habit. The most recent Consumer Pulse Survey by Accenture, a consultancy, showed that nearly one-third of consumers—and more than one-third of those between 18 and 35—were open to getting medical care at a grocery store or big-box retailer, and more than 90% of customers would trust a retailer with their medical data. Retailers believe that this sort of trust, along with their convenience (75% of Americans live within five miles of a Dollar General, and 90% within ten miles of a Walmart) is a winning combination.Better technology improves VBC, both by giving insurers more health measures to judge a doctor’s success, and by providing doctors with a better way to stay in touch with their patients. Walmart Health and OneMedical, for instance, use apps that show patients their medical history, including upcoming appointments and when they need to repeat their prescriptions. Both these companies also have in-house pharmacies to which they can direct patients. And the primary-care doctor is the de facto co-ordinator and gatekeeper for a patient’s whole medical care. Some worry that VBC could provide an incentive for insurers to deny referrals and necessary care, and keep the savings. But if the patient gets sicker, they share those costs too.Managing that downside risk will be tricky. The sort of proactive care and patient contact that VBC requires may be cheaper with a smartphone than without one, but it is not cheap. Providers need to invest in technology, but may also need to keep on top of patients with repeated phone calls and home visits—the sorts of things that apps cannot do. Firms that get it wrong will struggle. Those that get it right will rake in their share of the immense tide of money sloshing around America’s bloated and inefficient health-care system, and may also, incidentally, keep people healthier.■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Pfizer’s vaccine that protects adults ages 60 and older from respiratory syncytial virus, or RSV, was slightly less effective after 18 months, according to clinical trial results.
The data suggests that the protection the vaccine provides wanes over time, similar to what is observed with shots for Covid and the flu.
The New-York based pharmaceutical company will present the results to an advisory committee of the Centers for Disease Control and Prevention.
Pfizer expects to release 24-month data later this year, which will provide a better picture of the shot’s durability.

Respiratory syncytial virus – viral vaccine under research
Hailshadow | Istock | Getty Images

Pfizer’s vaccine that protects adults ages 60 and older from respiratory syncytial virus was slightly less effective after 18 months, according to clinical trial results the company announced Wednesday. 
The data is from New York-based Pfizer’s clinical trial on more than 34,000 older adults over two RSV seasons, or 24 months. The latest data is specifically on participants in the Northern Hemisphere at “mid-season two” in the trial, which is around 18 months after vaccination. 

The shot was 78.6% effective against more severe lower respiratory tract illness with three or more symptoms after 18 months, down marginally from 85.7% at one year. Those symptoms include wheezing, shortness of breath, rapid and shallow breathing, and mucus production.
The vaccine was roughly 49% effective against the same condition with two or more symptoms after 18 months, according to Pfizer. That’s a steeper decline from the shot’s 66.7% efficacy at one year. 
The vaccine was generally well tolerated, with no adverse events reported by participants at the 18-month mark. 
Pfizer presented the results to an advisory committee of the Centers for Disease Control and Prevention on Wednesday. The committee will form a recommendation on when and how often the company’s RSV shot should be administered in the U.S. now that the Food and Drug Administration has approved the jab. 
Pfizer’s RSV vaccine is the second to win approval after a shot from GlaxoSmithKline, which will present similar longer-term data on Wednesday. 

Pfizer’s results are a first glimpse at its vaccine’s durability in protecting against RSV, which causes mild symptoms similar to a cold in most people but more severe infections in older adults and children.
The data suggests that the protection the vaccine provides slowly wanes over time, similar to what is observed with shots for Covid and the flu.
But the 18-month data also suggests Pfizer’s shot is still generally protective against RSV after one year.
It’s still unclear what the vaccine’s efficacy will look like at 24 months. Pfizer expects to release that data later this year, which will provide a better picture of the shot’s durability.
Annaliesa Anderson, head of Pfizer’s vaccine research and development, told CNBC that the company is “very encouraged” by data from the phase three clinical trial. 
She noted the vaccine maintained high efficacy against lower respiratory tract illness with three or more symptoms, which is more severe than the same condition with two or more symptoms. 
“As with most vaccines, you’re really looking for an impact against more severe disease that causes higher levels of mortality, morbidity and health-care associated contact,” Anderson told CNBC. “To be able to see high efficacy carrying on is very important to us, and we think it’s going to provide people comfort as they take the vaccine.”
Pfizer hasn’t released data on the effectiveness of its vaccine against severe RSV disease defined as a patient requiring hospitalization, oxygen support or a mechanical ventilator. 
Anderson said studies are ongoing, and so is research evaluating the shot’s efficacy in older adults with weak immune systems. 
RSV kills 6,000 to 10,000 older adults and hospitalizes 60,000 to 160,000 of them every year, according to the CDC. 
The risk of hospitalization increases with age, and adults ages 70 and older are more vulnerable.
Pfizer estimates that if 50% of people ages 60 and older receive its shot for older adults, the vaccine could prevent more than 5,000 deaths, 68,000 hospitalizations, 51,000 emergency department visits and more than 422,000 outpatient visits. More

Last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.73% from 6.77%.
Applications to refinance a home loan fell 2% for the week and were 40% lower than the same week one year ago.
Mortgage applications to purchase a home increased 2% for the week but were 32% lower than the same week a year ago.

The average rate on the most popular mortgage, the 30-year fixed, fell for the third straight week, but demand for mortgages didn’t move much.
Total mortgage application volume increased 0.5% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This after demand surged the week before.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.73% from 6.77%, with points falling to 0.64 from 0.65 (including the origination fee) for loans with a 20% down payment.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 6.80% from 6.79% for loans with a 20% down payment. This marks the second straight week that jumbo loans have a higher rate than conforming loans.
“The last time jumbo rates were higher was in December 2021. Tighter liquidity conditions have prompted jumbo lenders to pull back, increasing rates in the process,” wrote Joel Kan, an MBA economist, in a release.
Applications to refinance a home loan decreased 2% for the week and were 40% lower than the same week one year ago.
Mortgage applications to purchase a home increased 2% for the week but were 32% lower than the same week a year ago. Homebuyers are starting to get used to higher interest rates, but the continued drop in new listings of homes for sale is keeping sales low. Federal Housing Administration demand rose more than conventional loan demand.

“First-time homebuyers account for a large share of FHA purchase loans, and this increase is a sign that while buyer interest is there, activity continues to be constrained by low levels of affordable inventory,” added Kan.
Homebuilders are benefiting from the dynamic. Mortgage applications to purchase a newly built home jumped 17% in May compared with May 2022, according to the MBA. In tandem with demand, single-family housing starts jumped 18.5% in May compared with April, according to the U.S. Census.
Mortgage rates began this week slightly lower, but that could change Wednesday as investors react to testimony from Federal Reserve Chairman Jerome Powell before the House Financial Services Committee. More

The big-box retailer said Wednesday that it is testing an extension facility that helps it get online orders to more shoppers the day after they click “buy.”
The discounter may open similar hubs in other major U.S. cities.
The company’s e-commerce sales have declined, especially as shoppers buy fewer discretionary items.

A Target logo is displayed on the screen of a smartphone.
Sheldon Cooper | SOPA Images | Lightrocket | Getty Images

Target has a new way to speed packages to customers who live in the farther-out suburbs and neighborhoods of major cities, as it tries to give its e-commerce business a jolt.
The big-box retailer said Wednesday that it is testing an extension facility that helps it get online orders to more shoppers the day after they click “buy.” It opened the first one last month in Smyrna, Georgia, about 16 miles northwest of Atlanta, and may open them in other cities.

Drivers from Target-owned delivery service Shipt pick up packages from the extension facility and deliver them to customers’ doorsteps. The drivers are independent contractors, similar to those who deliver for Uber.
The extension facility is part of Target’s effort to offer next-day delivery to more customers. Early this year, it said it would spend $100 million over the next three years to build a larger network of supply chain hubs to support the effort.
More than 96% of the company’s online orders are fulfilled at stores. The retailer has opened supply chain facilities, dubbed “sortation centers,” that then help group those boxes into denser and more efficient delivery routes. It has opened nine facilities and plans to have at least 15 by the end of January 2026.
The extension facility adds to that model and expands the radius for faster deliveries.
Target did not disclose the price of the extension center, but a spokesperson said it is not part of the planned $100 million in supply chain investments. Target said the extension facility will bring next-day delivery within reach of 500,000 more customers near Atlanta. It now can provide next-day delivery to a total of three million people in the Atlanta area.

Target’s push to deliver online orders faster and more profitably comes as its e-commerce sales shrink and shoppers pull back on discretionary purchases. In the most recent quarter, which ended April 29, Target’s digital sales declined 3.4% year over year, mirroring the downward trend seen by Costco, Best Buy, Kohl’s and others. One of its rivals, Walmart, bucked the trend as online sales jumped 27% year over year in the U.S. in the fiscal first quarter.
Plus, in recent weeks, several analysts have downgraded Target’s stock, saying its sales may have peaked during the Covid-19 pandemic. They cited a tougher backdrop for selling apparel and other items that aren’t food or necessities. Those challenges added to blowback Target has faced for including and then later removing some LGBTQ+ merchandise from its Pride Collection.
Shares of the company have fallen about 11% this year, underperforming the 14% gains of the S&P 500. Its stock closed at $132.72 Tuesday, down nearly 30% from its 52-week high.
On a call with reporters in May, Target CEO Brian Cornell said customers are still shopping online. Yet, he added, many items shipped directly to customers’ homes are discretionary merchandise — and those sales have slowed. More

Novo Nordisk sued five medical spas and wellness clinics for allegedly selling cheaper, unauthorized versions of the company’s weight loss drugs Ozempic and Wegovy. 
The Danish drugmaker initiated the lawsuits in federal courts in New York, Texas, Florida and Tennessee,  according to complaints obtained by CNBC. 
Novo Nordisk asked the courts for orders blocking the sales of the counterfeit medicines and an unspecified amount of money damages.

In this photo illustration, boxes of the diabetes drug Ozempic rest on a pharmacy counter on April 17, 2023 in Los Angeles, California.
Mario Tama | Getty Images

Novo Nordisk on Tuesday sued five medical spas and wellness clinics for allegedly selling cheaper, unauthorized versions of the company’s weight loss drugs Ozempic and Wegovy. 
The Danish drugmaker initiated the lawsuits in federal courts in New York, Texas, Florida and Tennessee,  according to complaints obtained by CNBC. 

The suits accused the spas and clinics of marketing and selling “compounded” drug products that claim to contain semaglutide, the active ingredient in both Ozempic and Wegovy. Compounded drugs are custom-made versions of a treatment that are not approved by the Food and Drug Administration. 
Novo Nordisk is the sole patent holder of semaglutide and does not sell that ingredient to outside entities. It’s unclear what the spas and clinics are actually selling to consumers.
Novo Nordisk asked the courts for orders blocking the sales of the unauthorized drugs and an unspecified amount of money damages.
“These unlawful marketing and sales practices, including the use of Novo Nordisk trademarks in connection with these practices, have created a high risk of consumer confusion and deception as well as potential safety concerns,” the company wrote in a press release Tuesday. 
The spas and clinics named in the lawsuits include Pro Health Investments, Champion Health & Wellness Clinics and Flawless Image Medical Aesthetics. 

It also includes Effinger Health, which operates as Nuvida Rx Weight Loss, and Ekzotika Corp., which is doing business as Cosmetic Laser Professionals Med Spa. The latter clinic offers a $30 Groupon for a one-week “semaglutide weight management program.”
The spas and clinics didn’t immediately respond to CNBC’s requests for comment.
The suits come amid a shortage of Wegovy and Ozempic, which has led to a boom in compounded alternatives that claim to be the popular injections. 
The FDA last month warned about the safety risks of unauthorized versions of Ozempic and Wegovy after reports emerged of adverse health reactions to compounded versions of the drugs. 
Several states have also threatened to take legal action against compounding pharmacies that make or distribute unapproved variations of Novo Nordisk’s weight loss treatments. More

Domino’s Pizza is rolling out a new technology nationwide that allows customers to receive a delivery almost anywhere, ranging from parks and baseball fields to beaches.
The Pinpoint Delivery rollout will make the feature available for the first time in U.S. markets.
Domino’s said a soft launch for Pinpoint Delivery received positive feedback from customers and delivery drivers.

Franchisee Tom Peterson demonstrates a new Domino’s Pizza Inc. app, part of their digital ordering system, at a Domino’s “pizza theater” location in Jersey City, New Jersey.
Craig Warga | Bloomberg | Getty Images

For the customer craving pizza while sunbathing on a beach or relaxing in a park, Domino’s Pizza wants to make delivery as easy as it is at home.
Domino’s on Tuesday announced its new Pinpoint Delivery service, which allows customers nationwide to order to locations without a standard address. Customers can follow their orders in real time using the company’s tracking service, access a driver’s GPS location and receive text alerts about the delivery’s progress, the pizza giant said in a press release.

“No address? No problem,” said Christopher Thomas-Moore, Domino’s senior vice president and chief digital officer. “Domino’s is proud to be the first quick-service restaurant brand in the U.S. to deliver food to customers with the drop of a pin.”
The company said a soft launch for Pinpoint Delivery last week across all Domino’s stores nationwide received positive feedback from customers and delivery drivers.
“A pop-up window on the app lets customers know they have four minutes to meet their driver and retrieve their order at the designated pickup spot” near where they placed the order, Domino’s spokesperson Danielle Bulger told CNBC.
Domino’s launched a similar pin-drop delivery technology called Domino’s Anywhere through its master franchisee in Australia in 2017. The Pinpoint Delivery rollout will make the feature available for the first time in U.S. markets.
Domino’s shares dropped more than 1% on Tuesday. They have surged more than 8% over the past five days.

Stifel analyst Chris O’Cull upgraded the pizza chain to buy from hold last week, saying the company will “stabilize delivery sales and continue growing carryout sales to new record levels,” CNBC reported last week.
The digital segment makes up about 80% of the company’s orders. Domino’s faced challenges in recruiting and retaining a sufficient number of delivery drivers last year, which hit sales.
As competition in the food-delivery industry grew during the pandemic, Domino’s has expanded its technology to gain an edge. It started to test pizza-delivery robot cars in 2021, and integrated voice ordering through Apple’s CarPlay technology earlier this year.
Clarification: This story was updated to reflect that Domino’s notifies customers through its app about the amount of time they have to pick up the order. More

Bed Bath & Beyond plans to hold a separate sale process for Buy Buy Baby, as it looks to nab a bid solely for what is considered its crown jewel assets.
The company will move forward with the auction for Bed Bath & Beyond, which received a $21.5 million offer for its intellectual property assets from Overstock.com.
Bed Bath & Beyond, which filed for bankruptcy this year, has garnered interest for Buy Buy Baby, which includes the possibility of keeping the stores open.

A Buy Buy Baby store in the Brooklyn borough of New York, US, on Monday, Feb. 6, 2023.
Stephanie Keith | Bloomberg | Getty Images

Bed Bath & Beyond is working on another last-ditch effort to keep one of its chains alive.
The retailer said in court papers it will run a separate sale process for Buy Buy Baby — considered the crown jewel of its assets — as it moves forward with the auction of its Bed Bath & Beyond chain.

The separate sale process gives the retailer more breathing room to nab a bid from a buyer that could be willing to keep Buy Buy Baby stores open, or at least maximize an offer price.
Buy Buy Baby assets garnered interest from buyers even before its parent company filed for bankruptcy in April. The baby-merchandise retailer has since attracted interested buyers during the sale process, including from some prospective bidders that have even shown interest in keeping its physical footprint alive, CNBC previously reported.
The auction for Buy Buy Baby’s assets is slated to take place on June 28.
Meanwhile, Bed Bath & Beyond’s fate to shutter its stores appears to be sealed. An auction for the company’s assets will move forward on Wednesday.
Last week, Overstock.com submitted a $21.5 million offer for Bed Bath & Beyond’s assets, including its intellectual property, business, internet and mobile properties, and all business data. The bid will be used to set the floor at the auction.

The sale process was extended recently as the company held discussions with prospective stalking horse bidders who would set the floor at the auction.
Bed Bath & Beyond’s stores were considered less likely to attract interest, and buyers were expected to focus on its digital assets. The retailer had attempted numerous times in recent months to turn its business around before its bankruptcy filing in April. More

The king is dead. ¡Viva el rey! That is the cheer ringing through drinking dens this summer as Bud Light, America’s self-styled “king of beers” for 22 years, is dethroned by Modelo Especial, a Mexican brew. Spare a thought for the vanquished. Rarely has an effort to rejuvenate a brand gone as spectacularly wrong as when Bud Light’s marketers entered into a liaison with a transgender social-media star, only to fall victim to America’s culture wars. On the bright side, it offers a chance to examine a little-known success story. Constellation Brands, an American firm that went into brewing only a decade ago, offers a lesson in how to wage an old-fashioned corporate insurrection, Mexican-American style.Schumpeter should declare an interest. Having lived for many years in Mexico, parts of his life have been spent accompanied by one Mexican brew or another. Modelo Especial was rarely one of them. South of the border, it doesn’t have huge cachet. Yet in America the same beer, with the same taste, has overtaken even Corona Extra, its better-known sister brand. That is because, in straightforward business terms, Constellation got everything right, from manufacturing to distribution to retailing. Most of all, it grasped the growing power of the Latino consumer. The Modelo Especial story starts with antitrust. Not the newfangled sort in which size itself is considered taboo, but the old-school idea that buying a competitor can lead to higher prices. It dates back to 2013, when AB InBev, the Belgium-based owner of Budweiser, paid $20bn to take control of Grupo Modelo, Mexico’s largest brewer, whose brands such as Corona and Modelo Especial were rivals to Bud Light north of the border. America’s Justice Department intervened. It determined that, in order to maintain competition, AB InBev should divest Modelo’s entire US business to Constellation, which was then a relatively little-known wine and spirits seller worth $8.1bn. (AB InBev kept the Grupo Modelo business in Mexico and the rest of the world.) Today Constellation is worth $45bn and is one of the most respected consumer-goods companies in America.Bump Williams, a consultant who first noticed that in the four weeks to June 3rd, at-home sales of Modelo Especial had shot past Bud Light in dollar terms, uses a vivid expression to describe the way Constellation nurtured the brand. He calls it “feeding the hot hand”. When the company noticed that the beer was taking off, it did not let a perception that Corona was the front-runner distract it. It threw its weight behind the mood of the marketplace.Its priority was to ensure that supply met demand. That involved making a huge bet on Mexico. When Constellation acquired the brands, it resolved to brew them south of the border. Since then it has increased its production capacity in Mexico fourfold, at a cost of $6.4bn—more than the $4.8bn it paid for the brands in 2013. It is not stopping there. It plans to invest up to a further $4.5bn over the next three fiscal years, boosting capacity by more than 70%. Investing in Mexico has not been without setbacks. In 2020 protesters, backed by Andrés Manuel López Obrador, Mexico’s populist president, voted in a plebiscite to stop Constellation from building a factory close to the border because of concerns about water shortages. So it moved the factory to Veracruz, on Mexico’s wetter east coast, with the president’s blessing.Distribution in America was the next challenge. To start with, Constellation focused on bringing Modelo Especial to a few cities with big Hispanic communities, such as Los Angeles and Chicago. After the brand took off there, it expanded farther afield. It built brand awareness one step at a time and worked closely with its distributors to ensure that supply kept flowing. Once in shops, Constellation focused on showcasing the Modelo brand. “They’re wine guys, they know the value of display,” says Mr Williams. They also got pricing right. Instead of foisting large increases on consumers, Constellation made incremental price rises. For many years, Modelo Especial has been the fastest-growing beer in America, says Scott Scanlon of Circana, a market-research firm. Yet more impressive is that it is a premium brand, rather than a budget one, at a time when wallets are stretched—and a full-bodied beer, rather than a low-calorie one, when waistlines are. The reasons for its consumer appeal are twofold. First is advertising. Unlike Bud Light’s, it is not gimmicky. It tells stories of ordinary people who have overcome hardship. That has helped it pull off the trick of remaining authentically Mexican even as it joined the big-beer league. Second is the market itself. Its core consumers are Latinos, who have growing economic power in America. According to McKinsey, a consultancy, it is not just their population that is increasing faster than the American average. So is their spending power. If America’s Latinos were their own country, they would have had the third-fastest growing economy after China and India during the past decade.The flamin’ hot handThis power may cast a halo effect on other products of Mexican descent. Tequila looks likely to overtake vodka as America’s best-selling spirit. Grupo Bimbo, a Mexican multinational that is America’s biggest baker is, like Constellation, a respected consumer-goods company. In a sign of the times, a new film, “Flamin’ Hot”, tells the story of how a Mexican-American janitor convinced Frito-Lay, owned by PepsiCo, to produce spicy Cheetos to win over the Hispanic market, reviving its business. (The snack’s true genesis is disputed, but its popularity is in no doubt.)Modelo Especial may yet lose its crown as Bud Light gets over its current crisis. Yet the fizzing growth of the Mexican-American brand suggests it could eventually gain a more lasting lead. It is lamentable for business in general that America’s cultural divide has done so much damage to Bud Light’s reputation. But the consolation is that Modelo Especial’s success suggests the cultural divide between America and Mexico is narrowing. ■Read more from Schumpeter, our columnist on global business:What Tesla and other carmakers can learn from Ford (Jun 13th)What TIM’s mega-spin-off reveals about Europe’s telecoms industry (Jun 8th)Australia and Canada are one economy—with one set of flaws (Jun 1st)Also: If you want to write directly to Schumpeter, email him at [email protected]. And here is an explanation of how the Schumpeter column got its name. More