Congress
Infrastructure, Drugs and Reconciliation. Hedgeye Macro policy analyst, J.T. Taylor reports that he expects legislative text on an infrastructure bill the week of July 17. This bill should be followed quickly by budget reconciliation. Between now and then, health policy advocates will be lobbying for a variety of provisions for inclusion. Currently our running list includes:
- Filling the Medicaid Gap. House leadership with Senate support wants to make ACA subsidies available to people living at 0-138% of the FPT in non-expansion states. (+MOH, CNC, ANTM)
- Expansion of Medicare benefits. Senate leadership wishes to expand Medicare benefits to include hearing, vision and dental care. (-UNH, ALHC, CLOV as these benefit make MA attractive to consumers)
- Drug Prices. Eyed as a pay-for for the aforementioned benefit expansions, the House drug price legislation probably won’t fly in the Senate with the exception of a redesign of Medicare Part D and perhaps some value-based purchasing language for Part B.
The White House
Executive Order on American Competitiveness. The White House issued an Executive Order on American Competitiveness that naturally includes sections on health care, directly and indirectly:
- Encourages Federal Trade Commission to ban or limit noncompete agreements. Bad news for MD and the physician roll-up play, especially for niche practice types.
- Revives the Trump-era effort to permit importation of drugs from Canada. The point of importation initiatives is not actually importation, although that will probably happen, it is designed to close the gap between what Canada is able to negotiate with drug makers and the “free market” price in the U.S. Good politics but probably not that effective a policy, especially for Canadians.
- Direct HHS to increase support for generic and biosimilar drugs. The term “support” suggests some enhancement of reimbursement. When viewed through the concerns expressed by the White House report on pharmaceutical supply chain issues, probably means some sort of reimbursement add-on for drugs administered by facilities. They could also be talking about the continued accelerated approval of generics and biosimilars but that is old news.
- Directs HHS to issue a comprehensive plan to combat high prescription drugs and price gouging in next 45 days. That is a short window by government standards, so they already know what they want to do. Based on Senate discussions, HHS actions could include a value-based arrangements which are generally worthless unless CMS is willing to close the formulary. It might be a good time to mention that one of CMS’s new employees is a Massachusetts state Medicaid official who submitted a waiver to CMS for a closed formulary in the Medicaid program. It was rejected by the Trump administration.
- Asks the FTC to review “pay-for-delay” agreements via rule. Pay-for-delay is low hanging fruit and it is a wonder it has lasted as long as it has. Probably will not affect ABBV as it is unlikely to be retroactive.
- Requests implementation of OTC sales of hearing aids. (EAR)
- Encourages review of hospital mergers. The seems to contemplate horizontal mergers and does not seem to address vertical mergers that have also had an impact on competition. Also, probably old news but makes the folks at the Arnold Foundation happy.
- Requests HHS to finish implementation of hospital transparency rules. This policy will probably be one of the most significant legacies of Trump health care efforts. The Biden administration is doubling down on it and appears to be committing to enforcement action which can include public shaming to fines. We have maintained that the publicly-traded hospitals are much better positioned with price transparency due to their history of price control – generally not a thing in health care. (HCA, THC)
- Directs HHS to standardize plans on the ACA Exchanges. One of the most vexing issues for ACA plans is their complexity. Generally, policymakers, who tend to be highly educated lawyers, Ph.D.'s or MPHs, fail to understand the limits of time, interest and understanding that exist for the objects of their efforts. Complexity was one of several things that have contributed to the ACA plan’s lackluster performance. (MOH, CNC, UNH, ANTM, CI, OSCR, BHG)
- Also, as a likely follow-up to the recent supply chain reports, the White House is asking the USDA to establish new rules to stop “exploitation of chicken farmers and adopting anti-retaliation protects.” Another provision asks USDA to “increase opportunities…. for alternative food distributions systems like farmers markets and developing standards and labels so consumers can choose to buy products that treat farmers fairly.” The precariousness of the food supply chain was brought to the fore during COVID but rural Members of Congress and especially Senators have long advocated for a system that does not pit a farmer against 3-4 meat processors. Not sure farmer’s Markets will get the job done but let’s see what they come up with.
Medicare Rule-A-Rama. This week, CMS released:
Still waiting on:
Physicians Fee Schedule for 2022 and “other revisions to Medicare Part B”
CY 2022 Hospital Outpatient annual payment update
New at OMB:
FY2022 Skilled Nursing Facility annual payment update. Final Rule.
FY2022 Inpatient Rehabilitation Rule annual payment update. Final Rule.
FY2022 Inpatient Psychiatric Facility annual payment update. Final Rule.
FY2022 Hospice annual payment update. Final Rule
Most-Favored Nation Drug Model. The Biden administration is reviving Trump’s effort to create a demonstration model that permits international prices to influence certain Part B drugs. The drug industry H-A-T-E-S the idea and has instead pushed for reforms to the Medicare Part D benefit design. The resurrection of the model can mean several things:
- Keeps pressure on the drug industry to negotiate inclusion of certain drug-related provisions in reconciliation.
- Helps moderates who would like to see the problem addressed but could never get comfortable with the House bill that limits price increases to inflation (which in 2021 might be higher than usual).
- Provides a method for the White House to address Part B drug prices pursuant to the EO issued today.
- Is a procedural matter to related to ongoing litigation over the Trump-era rule.
The head of the Innovation Center, Elizabeth Fowler, has said in the past, the Biden administration would take a different approach with this model. Tying drug prices to what other government negotiate is popular so it seems likely they will use it for some purpose that affects drug price policy.
FDA’s Aduhelm drama. The self-inflected wounds for federal science agencies persist. The FDA prevailed upon BIIB to accelerate its post-approval clinical work. It then revised the label to make clear it was suitable only for people with mild Alzheimer’s (something that was not on the label but assumed to be the case). Today, FDA Acting Commissioner Woodcock has requested that the OIG look into approval of Aduhelm as questions swirl about the collaborative relationship that some believe is too cozy between the FDA and BIIB. The final outcome is not likely to be very different. BIIB has approval to market the drug. What is different is that the FDA’s reputation as a scientific agency is taking a few blows.
Other Stuff
The Dangers of Telemedicine. The HHS Office of the Inspector General announced an enforcement action against Crestar Labs in Tennessee. The complaint alleges an $86 million scheme to defraud Medicare. The lab engaged telemedicine doctors – some of which did not establish a relationship with the patient – to order genetic tests. This is the sort of thing that worries policymakers in the telehealth realm and why its lasting impact is likely to be a productivity enhancer for established physicians and a behavioral health solution.
Rural Health. For all the obsession with health care in Washington for the last 20 years, it has done nothing but deteriorate in rural areas. WMT has stepped in with their health clinics and new white label insulin offering. Now comes DG with a planned expansion of their health offerings. Rural health is going to be a hot place in the coming years. Finally.
SPAC and S-1 Corner
Interesting S-1s
Rotech Healthcare Holdings. Provider of home medical equipment and related products and services. Includes oxygen, ventilators, sleep therapy, wound care and DME. Thought Bubble: home care continues to grow due to patient preference, safety concerns and because is helps solve labor challenges using the available and free workforce of the family and friends.
Biofrontera, Inc. Products focus on the treatment of actinic keratoses, which are skin lesions that can sometimes lead to skin cancer. We also market a topical antibiotic for treatment of impetigo, a bacterial skin infection.
The Better Being Co. High-growth whole-body wellness platform that develops, manufactures, markets and distributes trusted and beneficial vitamins, supplements, minerals and personal care products through a portfolio of differentiated brands.
Icosavax, Inc. Biopharmaceutical company leveraging our innovative virus-like particle (VLP) platform technology to develop vaccines against infectious diseases, with an initial focus on life-threatening respiratory diseases. Thought Bubble: vaccines for infectious disease have never been considered a great way to make money. Now, post-COVID, the world understands that battling viruses may be a permanent part of the public health arsenal.
Nuvalent, Inc. Preclinical stage biopharmaceutical company focused on creating precisely targeted therapies for patients with cancer. We focus our discovery efforts on small molecule inhibitors of kinases, a class of cellular targets that can play a central role in cancer growth and proliferation.
SPAC Corner
No new health care focused SPACs that we know of. Mr. Palihapitiya closed on his biotech SPACs and now has ~$1B with which to go shopping. This should be interesting. All in about $27B in dry power about half of which is closed with the two year clock ticking.
You can access the updated SPAC spreadsheet here.
If you are investing in SPACs but not super familiar with health care, hit and we can help.
Recent Events
Venture View: Direct Contracting, VBP and other Business Models w/Marcus Whitney of Jumpstart Health Investors. Click here for replay and slide deck.
2H 2021 Health Policy Themes. Includes Hedgeye/Jumpstart’s Health Care Ecosystem and our house policy view for each subsector. Click here for replay and slide deck.
Upcoming Events
Note Date Change: July 21 @ 12:30 p.m. ET Brad Smith, former Director of the Innovation Center at CMS and I will be talking about the history and potential of direct contracting.
Emily Evans
Managing Director – Health Policy
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