Top of the Funnel | Macro Data + Policy Position Monitor
Producer Price Index. YoY % PPI for health care has lapped the nutty comps for late 2020 and early 2021 and settling into its more familiar range of ~1-2% YoY. PPI in health care measures reimbursement by payers, including the government. With COVID-19 hospitalizations ebbing, taking with it waivers for cost-sharing, revenue operations are returning to a more normal pattern with a few exceptions:
- PPI for neoplasms has rolled over but remains elevated in absolute terms, suggested prolonged levels of higher acuity
- PPI for medical supplies, equipment and instruments are off the hook; a result of contract resets, shortages like those noted below and demand.
- Medicaid payments to psychiatric and substance abuse provides remain unusually high as illustrated by PPI by payer for those services.
Inflation chartbook can be found here.
Policy Position Monitor
Policy Position Monitor is here.
Congress.
Pandemic Response. ((CVS (-), WBA (-), DGX (-), LH (-)) The stand-alone pandemic relief bill that House leadership had planned for this week did not happen. Speaker Nancy Pelosi is having a little trouble with her flock. Conservative Democrats and Republicans are leery of additional spending without offsets in light of inflation trends, and no one can agree to the offsets.
There is also a touch of pending scandal in the air. Almost everyone is quietly concerned that all that free money may not have been spent wisely. The unhealthy relationship between PFE and the White House/CDC/FDA is raising eyebrows. Long time denizens of government know that things done fast are often done poorly and it might just be a matter of time before this election year’s “bridge to nowhere,” or worse, emerges.
The White House sent NIH’s Dr. Anthony Fauci and SecHHS Xavier Becerra to the Hill Thursday to try and save the bill. Neither seems prepared to make a compelling case given the dismal record keeping and reporting thus far.
There remains some pressure to address health care issues like Part D reform so perhaps more COVID money makes its way through with that bill. The CHIPS bill, which is focused on innovation and research might also be the ticket to ride and it started moving again this week. Next week or so should provide more clarity.
Taking Another Crack at Laboratory Developed Test Regulation. ((MYGN (+/-), ILMN (+/-), PACB (+/-) Sen. Patty Murray, in tabling Sen Rand Paul’s amendment to a pandemic response bill, indicated that she and Sen. Richard Burr would be introducing an LDT reform bill. The debate, when it emerges, will be about who gets to regulate the LDTs.
Republicans believe the authority rests with CMS under CLIA. Democrats seem to think the FDA is better suited. For anyone who followed the debate over regulation of LDTs in 2014-16, you know it will not be easy to develop consensus. LDTs consist of tests developed within medical research centers to widely distributed genetic tests developed by MYGN and others.
There is also a very legitimate debate over FDAs authority. It does press the imagination into overtime to conclude an LDT is a device. That inconsistency will need to be rectified to settle a major part of the debate.
The White House.
New COVID-19 Czar. (The American People (+/-)) Jeff Zients, who has taken a lot of criticism for his handling of the COVID-19 response is leaving the White House and being replaced by the ubiquitous and pleasant cable news star, Dr. Ashish Jha, head of the school for public health at Brown University.
It is an appointment that does not bode well for improving the coordination and messaging on the COVID response. Aside from being an academic and not a logistician, Dr. Jha’s very public COVID commentary has been uniform in parroting of CDC/White House policy even when the scientific evidence has been weak and public sentiment resistant.
Worse, Dr. Jha’s background in public health sets him up as a rival to the CDC Director, Rochelle Walensky, rather than a complement. It does nothing to support a durable pandemic response infrastructure across the government.
But that gets you a White House appointment these days so a win for Dr. Jha.
Shifting COVID-19 Response to the Private Sector. ((UNH (-), ANTM (-), HUM (-)) Absent more federal funding, the White House is working on plans to have insurers assume responsibility for COVID vaccines and treatments. This effort would be part of a normalizing the response to the pandemic, but it is a complex undertaking.
Drugs approved under a EUA are normally not covered by conventional insurance medical policies. Federal testing policy has run on wide-open, and that scenario would not likely persist under traditional coverage requirements. Medical policies normally require that laboratory tests be used for the diagnosis and treatment of disease, which implies the presence of symptoms. And so forth.
Without much clarity on how this normalization will unfold, it should be considered a headwind as the White House and Congress will attempt to extract coverage mandates on the order of current unmanaged utilization policies.
More of the Tangled Web. ((BIIB +/-) That man of mystery, Xavier Becerra emerged this week to pledge a unique midyear reduction in Medicare Part B premiums due to the limited National Coverage Determination for BIIB’s Alzheimer’s drug, Aduhelm. Although the Office of the Actuary claims in their most recent Trustees report that they have not studied the matter because of all the uncertainty, they are now tasked with assigning a value to its limited coverage.
Working in Washington requires daily acknowledgement of its political milieu, but you hate to see one of the last refuges for nerdy data people get pulled into the political task of making the SecHHS look good.
Other Stuff
Another day, another EUA. PFE applied for another EUA for a fourth course of the COVID-19 vaccine for people 65 and over. Of course, of you watch the Sunday shows you already knew that. Albert Bourla appeared on Face the Nation last weekend and indicated a fourth booster might be necessary, getting ahead once again of the federal regulatory agencies. MRNA has also filed for a fourth course. In their case, they want to deliver to the all adults.
Adding to Health Care Woes. Supply shortages have begun to appear as the health care system somewhat normalizes. Bags of saline and dextrose solution were added to the FDA’s shortage list this week. These are supplied by BAX, Hospira and ICU Medical, among others. Estimated date for resolution is not until late March to late April. Vaprisol was also reported in short supply by Cumberland Pharmaceutical. They do not anticipate supply to recover until 3Q 2022.
Those shortages are no doubt contributing to supply inflation noted earlier.
DOJ v UNH. Mark your calendars. The Department of Justice’s case will begin August 1. UNH had asked for an earlier date but the judge said no.
Events.
Recent
End of the COVID-19 Gravy Train? Relief Funds, End of PFE + Timing.
Calendar. The Hedgeye Health Policy Calendar is back. You can find 2021 here with searchable ticker list. You can find 2022 here.
IPOs + SPACs
Komodo Health announced they were working with bankers for a planned IPO this year. The data analytics company is much like a few hundred other data analytics companies we have looked at since “value-based care” care became a thing, post-ACA.
The last pre-money valuation was $3.1B for a Series E round in which Tiger Global was the lead. Given the meltdown for growth names in this Quad 4 environment (slowing growth/inflation), hitting that number or anything close to it is probably unrealistic.
It won’t be the last. Names like Devoted Health and Olive have valuations that do not begin to factor in the post-pandemic reality of health care. Worse, so many of these companies were built on false predictions, made by people who know little about the industry and the future of health care post-ACA.
From the perspective of some less than savvy crossover funds, it may be they no longer want the cheese, they just want out of the trap.
SPAC spreadsheet is here. A few more withdrawals but still a lot of money.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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