New! As we mentioned last week, we have added an index of publication and events with links and tickers in searchable calendar format. In honor of earnings season, we are also adding policy notes from releases which this week consists of JNJ, THC, HCA & ISRG
Chart Cartoon of the Week
Congress
Irreconciliation. I know you have stopped paying attention, figuring you will wait until Congress spits out the final product. I don’t blame you. Unfortunately, we long ago learned both the process and the details around it are important. So, here the most recent pertinent developments:
- The House version of drug price legislation (inflation-linked price caps, etc.,) appears to be a non-starter in the Senate. Sen. Menendez of New Jersey has said he does not support it. They may very well back into some sort of value-based purchasing program for new, high priced launches. They are also likely to agree on benefit redesign to Medicare Part D, which has bipartisan support. If drug price policy is not available as a budgetary offset, the chatter on “improving” risk adjustment in Medicare Advantage plans gets more relevant.
- Somewhat related, the National Association of Medicaid Directors sent a letter to CMS asking for relief from covering Aduhelm. Recall that they sought the same relief for Sovaldi, and it was denied by CMS. If CMS relents, it could be a whole new ballgame when it comes to high launch price drugs with limited evidence to support them.
- The expansion of Medicare benefits to include hearing, dental and vision is getting watered down and may be eliminated altogether. The insurance industry has lobbied hard against a new scope of benefits in traditional Medicare as it would eliminate, at least for a while, the competitive advantage MA plans have in offering “free” supplemental benefits. ((+) UNH, ANTM, HUM)
- Sen. Bernie Sanders and Sen. Joe Manchin. Sanders is upset the West Virginia Democrat isn’t playing ball and Manchin is wondering why the Independent Socialist is trying to get him ousted from the Senate by his voters. Not a good set-up for success.
PBM Fees. Sen. Ron Wyden is asking CMS to looking into the correlation/causation between PBM fees (most likely DIR) and closure of independent pharmacies. Apparently in June, CMS testified that fees doubled between 2018 and 2020. Wyden’s request was spurred by the closure of a small chain of independent pharmacies in the Pacific Northwest. ((-) CVS)
Hearings Next Week
House Committee on Education and Labor, Subcommittee on Workforce Protections and Subcommittee on Civil Rights and Human Services Protecting Lives and Livelihoods: Vaccine Requirements and Employee Accommodations
House Committee on Energy & Commerce, Subcommittee on Health Caring for America: Legislation to Support Patients, Caregivers, and Providers
The White House
Prior Authorization. The American Hospital Association has been pushing CMS to revive and expand a rule designed to streamline prior authorizations. In a fit of pique, the Biden administration withdrew a rule approved at the end of the Trump administration that would have put limits on time allowed for prior authorization and require on-line tracking of requests, among other things. The AHA is asking that a new rule be proposed that includes the earlier provisions and adds Medicare Advantage plans. Our Thought Bubble: Rumors abound that MA plans have been slow walking reimbursement using all the tricks in the toolbox. ((-) UNH, ANTM, HUM)
Medicare Rule-A-Rama.
Other Rules.
Possession, Use, and Transfer of Select Agents and Toxins; Addition of SARS-CoV/SARS-CoV-2 Chimeric Viruses (Interim Final Rule) No more taking your viruses on vacation.
COVID-19 Vaccination and Testing Emergency Temporary Standard Rulemaking
Omnibus COVID-19 Health Care Staff Vaccination (CMS-3415)
Other Stuff
The Occupational Safety and Health Administration started preliminary efforts to revoke state plans for Arizona, South Carolina and Utah, saying the states had failed to protect health care workers from COVID-19. More than half of US states operate their own enforcement effort under a state plan submitted to the Department of Labor. Not sure where the DOL is going to get the bandwidth to do their own enforcement and inspection but that is a problem for another day.
Home and Community-based Services. CMS is out encouraging uptake in broadened home and community-based services in Medicaid with a central website to share state plan amendment ideas.
Hearing Aids. FDA has finally completed its proposal to regulate over-the-counter hearing aids by creating a new device class. The OTC rules are designed to improve competition by permitting sale of approved devices directly to consumers without an doctor’s order.
Policy-related Earnings Commentary.
A several themes ran through this week's earnings' announcement from JNJ, ISRG, THC and HCA. If you have been following us since at least the start of the pandemic they aren't much of a surprise.
- Labor shortages. Well known and clearly affecting device demand especially among what are considered elective procedures. We had heard from a large VC fund a couple weeks ago with a number of device companies in its portfolio that sales have been week because staffing ORs has been an issue. This commentary was confirmed by JNJ & ISRG. THC and HCA were relatively upbeat about managing labor using analytics and real time management of demand. Their approach is confirmed by BEA and Census data that shows a gap in throughput between not-for-profit and taxable hospitals.
- Supply Chain. If you had any doubt that U.S. supply chain problems were not the result of a hundred container ships bobbing like corks off the California coast, ISRG should have disabused you of that notion. They cited both labor and supply chain problems, specifically the chip shortage. They expect it will take a long time to remedy but are not experiencing any adverse effects to margins yet. They also cited supply shortages at hospitals where their systems are installed. THC mentioned supply shortages of certain clinical supplies and technology equipment as well.
- Site of Service. JNJ reported robust sales to ASCs and THC reported solid growth in their USPI unit. Coming into focus is spillover demand from backed up hospitals to alternative sites. THC's report that it is gaining physician associations at its ASCs confirms this. A doctor that needs to make a boat payment is going to find an OR and it appears they are being successful. The Trump administration had proposed relaxing rules around which procedures can be performed in an ASC or an outpatient department. In another fit of pique, the Biden administration has proposed revoking it. We will see if they enact a policy that, like several others, makes things worse.
- Acuity. We have been documenting acuity trends for months and they are clearly in evidence at the hospitals. To stem the tide it will be critical that as many procedures as possible move out of hospitals to make way for the sickest of the sick. Also, you cannot have higher acuity at providers with no impact on MLRs at the MCOs. They are two sides of the same coin.
SPAC and S-1 Corner
IPOs
Journey Medical Group. A commercial-stage pharmaceutical company founded in October 2014 that focuses on the development and commercialization of pharmaceutical products for the treatment of dermatological conditions.
Trajector, Inc. “We provide personalized, technology-enabled solutions that improve people’s lives by helping them better understand, access, and navigate the benefit programs for which they are eligible. We provide an essential service and differentiated experience to our clients, who primarily include U.S. military Veterans and permanently disabled individuals, sharing our clinical expertise in order to bring clarity to otherwise cumbersome and discouraging eligibility processes.” Our Thought Bubble: The battle of the machines – between tech-enabled approaches to ensuring benefits and the providers of those benefits – is heating up. See e.g. Olive
Brightspring Health Services. “We are a leading home and community-based healthcare services platform, focused on delivering complementary provider and pharmacy services to complex patients. We have a differentiated approach to care delivery, with a purpose-built and scaled model that addresses the three critical services that the highest-need and highest-cost patients require” Our Thought Bubble: See previous mention of Home and Community-based services.
SPACs. Health care continues to add SPACs despite their reputation. Two more this week in Life Sciences. Access updated spreadsheet here.
Hedgeye Health Policy Publication/Event Calendar. Click here for searchable calendar.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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