Top of the Funnel | Macro Data + Policy Position Monitor
Personal Consumption Expenditures. ((HCA(+), THC (+)) Notwithstanding UHS preannouncement, PCE for health care and particularly hospitals reaccelerated in May, (.58% and .95% MoM%, respectively). These data are more consistent with the historical trend of higher use of health care services in advance of an economic slow down and possible loss of insurance coverage. It is also more consistent with the April and May PMI reports.
Admittedly the return to normal operations at hospitals has been slow but the last two months of data show promise. As always, we remind you that health care is local and the different incentives for not-for-profit and for-profit hospitals systems can produce idiosyncratic results.
Inflation chartbook can be found here.
Position Monitor. I have made a few changes to the Policy Position Monitor.
- Added PFE and MRNA to the short side due to expected vaccine backlash that may result in lower uptake in light of increasing concerns about safety. AdComms have begun to recognize Myocarditis as a possible issue and advocates for a more nuanced approach, with a focus on the immunocompromised and the elderly, are getting some traction with the states. PFE's defense department-like price hikes are another possible concern. Catalyst is mid-term elections.
- Moving all the specialty labs (FLGT, MYGN, NVTA, et al) to the short side in light of pending legislation to require FDA regulation of high-risk tests. Catalyst is Conference Committee report expected in September.
- Moving CI, CVS, UNH, ANTM to short side. Although CI has some interesting things going on with respect to modernizing employer sponsored insurance, the risks to their PBM from regulatory and legislative initiatives are substantial. CVS, UNH and to a lesser degree, ANTM have used drug rebates to fuel low/no cost Medicare Advantage plans. Changes to rebate calculations will make their offerings more expensive. Catalysts are PBM investigation at the FTC, Part D reform in Congress and other PBM related legislation in Congress.
Position Monitor can be found here.
CONGRESS
FDA User Fee Legislation. ((MYGN (-), FLGT (-) NEO (-), NVTA (-) el al)) The differences between the House and Senate bills are set to be resolved via Conference Committee but a final agreed upon version may not make it out until after the August recess.
For our purposes, one significant difference is the inclusion in the Senate version of Sen. Richard Burr’s VALID Act. The VALID act proposes to allow the FDA to regulate Laboratory Developed Tests such as those performed by MYGN.
Burr is retiring so there is reason to think his colleagues will stand firm with some minor adjustments.
Drug Price Legislation. Senate Democrats are allegedly seeking to move up the effective date and change the number drugs that can be negotiated by Medicare under the proposed framework agreed to last year.
The idea is, apparently, to inoculate the law against a GOP win of the presidency. The negotiation was originally set to start in 2025.
Perhaps in reference to Senate Dems efforts, Mitch McConnell has threatened to deep-six the USICA, other wise known as the “Chips Bill” if Senate Democrats continue their march forward on a partisan reconciliation bill.
There is nothing more dangerous than a politician without a race to run. November could create more than a few of those.
Mitch McConnel knows this.
THE WHITE HOUSE
COVID-19 Vaccines. ((PFE (+) MRNA (-)) The White House has reached an agreement with PFE to purchase 105M doses of the COVID vaccine in time for fall. What exactly they might be purchasing remains a question.
At various AdComm meetings throughout the spring, advisors seem to be pointing MRNA and PFE toward developing vaccines in response to strains of the virus likely to emerge in the fall and winter. In other words, the FDA and the CDC were looking to develop a process similar to the one they use for traditional flu shots.
Both MRNA and PFE indicated at the VRBPAC meeting on Tuesday they would not have clinical data for formulations that address the ba.4 and ba.5 subvariants. They said they believed the formulation they had developed for ba.1 might work on these subvariants.
In other words, the message telegraphed by the FDA and the CDC, has been ignored. PFE will sell a vaccine to fight yesterday’s war.
However, the FDA decision memo released late yesterday indicates that manufacturers should include a BA.4/5 formulation for fall boosters.
PFE’s new contract for $3.2B implies a cost to the U.S. taxpayer of about $30.50/dose, an increase of about 55% over the deal the FDA struck in June 2020. Reminds us of the late 1980s at the Pentagon.
PFE is confident it will hit its 2022 guide despite noise from the European Commission about renegotiating. With a mark as easy as the United States government, so are we.
RX to OTC. ((PRGO (+)) The FDA finally released a proposed rule that would create additional requirements for approving “additional condition for nonprescription use.”
Currently, certain non-prescription drug products are limited to drugs that can be labeled with enough information for consumers to self-select (e.g. hypertension and certain cold medicines). The FDA says that for certain drug products, limitations of labeling present challenges for adequate communication to consumers. The proposed rule is intended to increase options including those that might be technology-based.
SCOTUS
West Virginia v. EPA. ((EVHC (+)) While this decision is increasing the already high level of angst for the climate change lobby, it also has important implications for health care. Since passage of the Affordable Care Act, agreement on health care legislation has been scant.
Presidents from Obama to Biden have pushed the bureaucracy to come up with administrative solutions to policy priorities. President Trump’s use of public health law to impose an eviction moratorium was probably the high-water mark for the administrative state.
President Biden’s efforts to reverse a decade of IRS guidance and fix the “family glitch” is now imperiled. HHS’ interpretation of the “No Surprises Act” which has EVHC flirting with Chapter 11 might also be threatened.
Other Stuff
Recent Events
2Q 2022 Macro Update on U.S. Medical Economy; Employment, Inflation, Mortality & Insurance Risk.
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
PFE: Bad for America (joking, but only kind of). Tuesday July 13 @ 10am ET. Note: This event is being rescheduled from June 28th due to a delay in the roll-out of CDC new mortality dataset. Link here. See invite next week.
Calendar. You can find 2022 here with searchable ticker list.
Have a great weekend long weekend.
Emily Evans
Managing Director – Health Policy
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