Politics. “Ease along” was a favorite phrase of former Tennessee Governor, Ned Ray McWherter, one of the most revered politicians in the state’s history. “Ease along,” or, if you prefer the highbrow version, “festine lente,” means to bide your time, look for an opportunity and be prepared to act. The skills required to do so; perseverance, patience, persistent electability and a working moral compass; have become anachronistic in the point and click age – or so we thought.
Ease along Sen. Chuck Schumer and Sen. Todd Young did. Their Endless Frontier Act, originally a feel-good bill in the 116th Congress that created a new Directorate at the National Science Foundation, was refiled this month. With American attitudes toward globalization and the implications for national security taking a hard turn this past year, an opportunity for Schumer and Young emerged.
The refiled Endless Frontier Act, S. 1260, expresses bipartisan concerns about the theft of federally funded intellectual property at places like the National Institutes of Health and their grantee universities. It also seeks to address practices that have proven to compromise supply chains, like the use of forced labor.
The bill expressly limits federal contracts with entities connected to or controlled by the governments of Russia, Iran, Korea and China. Continuing a theme that began with last year’s COVID bills, the Endless Frontier Act would increase funding research at the highly secure facilities at or controlled by the Departments of Energy and Defense. The bill also seeks to force research out of its traditional centers of Los Angeles, San Francisco, Boston, Chicago and Houston and established technology hubs at Historically Black Colleges and Universities, which are largely in the south.
As we have pointed out for a year now, science is now a national security priority much like it was during World War II and throughout the Cold War. That new landscape, however, means NIH and its favored grantee universities, whose long standing posture of international cooperation – some in Congress would argue to the point of credulity – will have a diminished role relative the enormous resources being allocated to the overall research effort.
If history is any guide, this latest geo-political swing of the pendulum is just beginning. In a world where labor can be compelled to work for free or close to it and where crucial technologies like genomic sequencing can be appropriated through forced joint ventures, it seems protectionism of some sort is a natural result.
Policy. Like so many things in politics and government, the time horizon for any trend can be attenuated far longer then you thought imaginable. The most recent example is the persistence of Pharmacy Benefit Managers in the drug supply chain despite a decline of net prices.
In 2017, Donald Trump began his crusade against “middlemen” but faltered when his advisors warned of increased premiums in Medicare Advantage plans. Members of Congress from both parties have railed against the role these contract negotiators play in drug cost inflation but have been unable to agree on a solution.
The Attorney General of Ohio has his own solution. In July 2020, A.G. Dave Yost filed a lawsuit against CI’s Express Scripts claiming the company did not meet price guarantees in the state’s Highway Patrol Retirement System. In March A.G. Yost filed another complaint against CNC. The lawsuit is under seal so I cannot read it but press reports indicate that CNC’s Envolve unit and its Health Net Pharmacy Solutions overcharged the Ohio Medicaid plan.
This lawsuit and others filed in 5-6 states are likely indicative of something larger. Net drug prices have been dropping for several years. Branded drugs have met with biosimilar competition. Employers and other plan sponsors are getting savvier about how their pharmacy benefit is managed. All those things suggest there is less growth, and perhaps contraction of the amount of money sloshing through the drug supply chain.
If the Congress’ concerns about supply chain resiliency ultimate come down on the side of onshoring critical pharmaceutical components, things can only get worse, barring significant subsidization by the federal government.
With the pie getting smaller or at least not growing, the antics of PBMs and their insurance masters gets more intolerable for the drug industry which responds with their own aggressive tactics on rebates or volume guarantees. Protecting margins, as we have learned many times in health care, can often send those on the receiving end of a squeeze into less than ideal behavior, as AG. Yost has discovered.
Power. Paired with COVID-19 relief bills that unleashed crazy amounts of funding into scientific and medical research, the Endless Frontier Act begins what is certain to be a multi-year unfolding of a new type of arms race, complete with geopolitical tensions.
It isn’t all bad.
The bill, with sponsorship from the Senate Majority Leader, is certain to pass in some form and its implications have necessitated that it do so with bi-partisan support. The Majority Leader has permitted eight amendments including ones that a year ago might have been considered inflammatory; prohibitions on funding the Wuhan Institute of Virology and banning gain of function research funded by NIH.
Another amendment requiring the U.S. Trade Representative to investigate and report on use of forced labor, including when used in critical supply chain activities, would have met with almost insurmountable resistance a year ago from the health care, retail and the apparel industries. In a post-pandemic world opposing enforcement of the Tariff Act of 1930 to preserve low cost disposable medical supplies seems suddenly egregious.
Not that they are not trying, lobbyists for colleges and universities dependent on NIH funding streams have set upon the Capitol to argue against some of the restrictions aimed at foreign interests. The list of research universities listing Endless Frontier in their disclosure includes the U.S.’s most notable institutions of higher learning. A small number of pharmaceutical companies have filed disclosures on the bill, but an industry known for its lobbying prowess seems to have capitulated to a new world order for medical supplies.
Enjoy your Memorial Day. It should be nicer than the last one.
Emily Evans
Managing Director – Health Policy
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