Chart of the Week
Congress.
Drug Prices. As we wait to see if bipartisan bills, if any, emerge from current negotiations over the budget and infrastructure, drug prices are clearly at the front of the line of pay-fors for what happens next. After decades of trying, Democrats see reconciliation as the best chance to get something done.
Moving to the fore as a possible offset is a delay/repeal of the Trump administration’s rebate rule. In the counterintuitive world that is Washington, the rebate rule would have added $177B to the deficit over 10 years. The main driver of the impact would be higher Medicare Advantage premiums, which the federal government subsidizes.
The math, as strange as it is – the CBOs score does not, for example, consider costs associated abandonment/unfilled prescriptions due to high cost sharing – presents Congress with a quandary: do they perpetuate what is largely considered a bad policy that drives up gross drug prices or do they try go for a permanent fix?
We think “political expediency for $500, Alex.”
However, there is certain to be some more requirements for transparency. As with hospital prices, the health care system’s lack of unit prices has allowed complete industries to be developed around the end buyer’s inability to known what the price is.
That opaqueness also keeps us from knowing if the scope and scale of rebates has changed as this issue’s profile has been raised. Anecdotally, we hear tales of PBMs getting more aggressive. The GDRX earnings report August 12 and the release of statutory files on August 12 will provide additional insight. (CI, UNH, CVS, GDRX)
Also, in the mix is a ban on “spread pricing” by PBMs serving Medicaid plans. States have moved to eliminate the practice which may explain some of the more aggressive behavior we have heard about.
Medicare Dental Coverage. Another of the reindeer games being played with the CBO score, is driving down the cost for an expanded dental benefit. Traditional Medicare does cover certain procedures deemed “medically necessary” but routine exams and prosthesis are prohibited by statute.
If the Biden administration can find a way to expand the definition of “medically necessary” by regulation that would shrink the number of items and services an expansion of tradition Medicare would need to cover under the soon-to-be proposed plan.
Both of those things make Medicare Advantage plans marginally less appealing as it puts traditional Medicare on a more level playing field without the brokers, the networks and prior authorization. ((-)UNH, ANTM, ALHC, CLOV, CI, HUM)
The White House.
Medicare Rule-A-Rama. This week, CMS released:
CY 2022 Hospital Outpatient PPS Policy Changes and Payment Rates. Proposed Rule. Notable provisions:
- The payment update is 2.3%
- The big news here is that not only is the White House continuing the Trump policy of requiring hospitals to disclose prices, it is also looking to increase penalties to meaningful levels – for large hospital systems a max penalty of $2M per year. The penalty will get the attention of the C-suite at all hospitals but particularly the nonprofits. Unlike-for profit operators like HCA and THC, the large not-for-profit systems have been the beneficiary of significant revenue streams that may have led them to more profligate behavior than would not be permitted if shareholders were involved.
- The Biden administration, however, is not thrilled with the Trump policy of eliminating the Inpatient Only List and is planning to relist 298 procedures that were removed for CY 2021. Nor are they down with the expansion of the Ambulatory Surgery Center Covered Procedure List. They propose to remove 258 of the 267 procedures added in CY 2021.
The policy decision attempts to reverse the philosophical approach of the Trump administration that deferred to physicians’ judgement when it comes to site of service. The dramatic reversal is going to raise the hackles of insurers which rely on federal policy to clear the way for their coverage decisions.
The change could also compound labor problems as outpatient departments and ASCs coupled with home care would no longer be able to mitigate lower throughput at hospitals. ((-)SGRY, THC, UNH, ANTM, HUM, CI, HCA)
- The Biden administration is continuing the policy of reducing payment for 340(B) drugs by 22.5% of ASP. This issue is being litigated so the final word will probably be with the courts. If approved by the court, the policy is greatly beneficial to the for-profit hospitals who are not eligible for the 340(B) program but receive a redistribution of savings from the payment reduction. ((+) HCA, THC)
- Following adoption in the Consolidated Appropriations Act of 2021, CMS is asking for information on a new provider type, Rural Emergency Hospital. REHs are to provide emergency, observational care and other health and medical services as determined by the SecHHS.
Still waiting on:
FY 2022 Skilled Nursing Facility PPS. Final Rule
FY 2022 Inpatient Rehabilitation Facility PPS. Final Rule
FY 2022 Inpatient Psychiatric Facilities PPS. Final Rule
Most Favored Nation Model (Part B drugs)
FY 2022 Hospice Payment rate Update. Final Rule.
Other Stuff.
Medicaid Enrollment. There is a thesis floating around that Medicaid enrollment will roll-over hard once the Public Health Emergency is over. CMS Administrator Chiquita Brooks-LaSure indicated yesterday in a speech at Georgetown University that the administration would be working to see that does not happen. The original guidance from the Trump administration allowed state six months after the Public Health Emergency ends to begin disenrolling people for eligibility reasons. It appears that will be relaxed. ((+) MOH, ANTM, CNC)
Delta Dawn. As has been the case for well over a year, public health responses to the new, more transmissible Delta variant have been varied. There are a lot of politics in there but there are also the disparate levels of infection. As people head indoors due to the Florida’s summer heat, cases and hospitalization have been ticking up. New York is having a different experience. Overall, the uptick is not material as hospitals are not reporting material staffing shortage.
SPAC and S-1 Corner.
Interesting S-1s
Cognition Therapeutics (B. Riley) Clinical-stage biopharmaceutical company engaged in the discovery and development of innovative, small molecule therapeutics targeting age-related degenerative diseases and disorders of the central nervous system, or CNS and retina.
Thorne Healthtech, Inc. Missed this one from the 16th. Thorne and Onegevity, provide actionable insights and personalized data, products and services that help individuals take a proactive approach to improve and maintain their health over their lifetime. By combining our proprietary multiomics database, artificial intelligence (AI) and digital health content with our science-backed nutritional supplements, we deliver a total system for wellness.
Marpai, Inc. combination of Marpai Health, Inc. and Continental Benefits LLC. Marpai Health is our A.I.-focused subsidiary, with a research and development team in Tel Aviv, Israel. Continental Benefits is our health care payer subsidiary that provides administration services to self-insured employer groups across the United States. This combination allows us to differentiate in the TPA market by delivering something new – a technology-driven service that we believe can lower the overall cost of health care while maintaining or improving health care outcomes. Our Thought Bubble: Disrupting employer sponsored insurance is hard. Benefit consultants are too dug in. But COVID-19 elevated benefit costs to the c-suite where a permanent reduction of the SG&A line is appealing.
IsoPlaxis. Enabling deeper access to in vivo biology and driving durable and potentially transformational research on disease in a new era of advanced medicine. We believe our platform is the first to employ both proteomics, or the study of proteins and their functions, and single cell biology in an effort to fully characterize and link cellular function to patient outcomes by revealing treatment response and disease progression.
RenovoRx, Inc.. (Roth) Clinical-stage biopharmaceutical company focused on developing therapies for the local treatment of solid tumors and conducting a Phase 3 registrational trial for our lead product candidate RenovoGem™.
SPACs.
Aesther Healthcare Acquisition Corp. ($100M, EFH) Focused on Pharma, Medtech and devices.
Bioplus Acquisition Corp. ($220, Cantor) Focused on Global Life sciences.
Jade Mountain Acquisition Corp. ($100, EFH) Focusing healthcare and technology industries, specifically within the biotechnology and pharmaceutical sectors
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.
Upcoming Events.
Note Date & Time Change: Aug. 5 @ 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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