Top of the Funnel | Macro Data + Policy Position Monitor
Share Shift. ((HCA (+), THC (+)) Not-for-profit hospitals dominate health care. The employ more people and are responsible for more discharges and inpatient days. However, their access to external revenue streams like the 340B program, Disproportionate Share Hospital Funds, make them uniquely profligate.
Generally, NFPs employ more people per discharge and are top heavy with administrators. In contrast, for-profit providers tend to be much leaner operations. A labor crunch – while bad for everyone – appears to have had less impact on the for-profit provider in 1Q than the NFPs.
NFPs may suffer from a lack of organization rigor while their affiliated physicians still need to get patients through the ORs. A doc that cannot perform surgery will inevitably start looking for alternative affiliations. It is going to take a few more quarters to see how durable the trend is but it isn’t crazy to think the NFPs, particularly the Academic Medical Centers are facing some serious headwinds.
CONGRESS
ACA Premium Support. ((ACHC (-), DVA (-), HCA (+), THC (+)) Not surprising, it appears that an extension of tax credits/subsidies for ACA will not make it into a reconciliation bill. It is not surprising because Sen. Joe Manchin has made it clear that he was not interested in supporting any proposal that is not means tested. Granting tax credit support to people making over 400% of the Federal Poverty Threshold does not meet the Senator’s criteria.
With the progressive agenda threatened by the realities of electoral politics, it is increasingly clear drug price reforms may be the only health care provision that makes it into a reconciliation package.
The same electoral politics suggest those drug price reforms that do make it into a reconciliation package are not going to be as bold as once envisioned. Linking prices and rebates to inflation is obviously a bad idea in the near term. Negotiating prices on a select subset of Part B and D drugs might get included but as a practical matter is probably unworkable, much like the No Surprises Act.
The most viable drug price proposal is the long overdue reform to Part D. The effect of the provision would be to cap out-of-pocket expenses for beneficiaries and smooth the cost sharing, so it is not as front end loaded as it is now. Other important provisions would discourage the high-cost drugs that tend to push people to the catastrophic phase faster and caps on insulin cost sharing.
Until this point, Part D reforms have been stymied by the insurance lobby that relied on the status quo to bias formularies in favor of the brand drugs that generate rebates to limit growth of Medicare Advantage premiums.
If I am right and Part D gets an overhaul, coupled with the FTC’s scrutiny of Pharmacy Benefit Managers, most especially CVS, and the competitive pressures for new enrollees persist, the headwinds for MCOs only get stronger.
Regulation of Laboratory Developed Tests. ((ILMN (-), PACB (-), MYGN (-), NTRA (-) et al)) Senate HELP reported out of committee on Tuesday their version of the FDA’s user fee bill. It included Ranking Member, Richard Burr’s VALID Act which proposes to give the FDA clear authorization to regulate Laboratory Developed Tests in certain cases.
The VALID act would not apply, for example to tests that were developed and performed within the boundaries of a state. The bill would also require a risk-based approach. Tests that do not affect a clinical response, for example, would be considered low risk. Obviously, any test designed to detect cancer and genetic disease would fall into the regulatory sphere.
The good news is that any test that passes muster with the FDA is almost assured a National Coverage Determination and consideration by the U.S. Preventive Services Task Force. The bad news is that the path through to FDA, which is at its most dysfunction state since its founding.
Given that the House version of the bill does not include LDT regulation, the differences will have to be worked out in committee at which time there will be a hearing of grievances and a final bill agreed to. My bet is it turns out closer to the Senate version.
THE WHITE HOUSE.
Pharmacy Benefit Managers: From Bad to Worse. ((CVS (-), UNH (-), ANTM (-)) Coming on the heels of the FTC’s decision to launch an investigation into anti-competitive practices of Pharmacy Benefit Managers is, first, a whistleblower lawsuit alleging CVS’s Silverscript PBM actively worked to discourage dispensing of generics in favor of rebate heavy brand-name drugs.
Second, the FTC issued an enforcement policy statement this week regarding PBM practices, with this zinger:
“The Commission has a long history of addressing commercial bribery and will continue to do so.”
Call it by its name, I suppose.
Concurrently with that policy statement the FTC released a presser that again uses the b-word, “The Federal Trade Commission announced that it will ramp up enforcement against any illegal bribes and rebate schemes that block patients’ access to competing lower-cost drugs.”
You should feel free to credit this recent blast of activism as a general trend at the White House in favor the pharmaceutical industry. You should also consider the introduction of the word bribery as an allusion to criminal wrongdoing.
Whatever PBMs are doing, especially the ones housed inside insurers, the message is: STOP.
Shots for Tots. ((PFE (+/-), MNRN (+/-)) The FDA has issued an Emergency Use Authorization for MRNA’s vaccine for children 6mo to 5 years. PFE received the same go-ahead for kids 6mo to 4 years. The data is not exactly compelling. PFE reported 76% efficacy for children 6mo – 2 years and 82% efficacy for 2-4 years. PFE’s efficacy data, however, is based on few COVID-19 cases in the trial participants and a short follow-up time.
If you are into human experimentation, especially on children – something that appears to be all the rage these days – you might be part of the 20% of parents that eagerly waiting to immunize their children, according to a KFF poll. More likely the vaccinations will be delivered under state or institutional mandates to those that cannot find a way to avoid them.
Florida Man. ((PFE, (-), MRNA (-)) Federal deliver of vaccines for children 6mo-4 years is expected to begin on Tuesday.
But not in Florida.
Governor Ron DeSantis’s Surgeon General has determined that vaccinations for this cohort are not necessary, due to the low risk of serious illness and the unknown risks of vaccination.
The Governor has declined to pre-order doses from the federal government. The State Department of Health is taking orders from physicians for those who see a need for the vaccine but so far none of submitted a request, according to the state.
The value of requiring physician orders for the vaccine is that it involves a clinician unlike what a public health department. DeSantis is likely depending on their wisdom to limit distribution to children for which there is a medical need.
Other Stuff
340B & SCOTUS. The Supreme Court ruled for the American Hospital Association et al this week over the Trump Administration's pretty dramatic rule that cut Medicare reimbursement for 340B drugs and reallocated savings to all hospitals. Even a non-layer like me had trouble see how CMS had the authority the claims. In a rare moment SCOTUS appeared to agree.
Recent Events
Venture View with Marcus Whitney. If you need a quick primer on the state of venture investing and the coming mark downs, this video is for you.
Upcoming Events
U.S. medical Economy Macro Update, Thursday June 23 @ 10am ET (watch for invite tomorrow)
PFE: Bad for America (joking, but only kind of). Tuesday June 28 @ 10am ET.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
Twitter
LinkedIn
