Top of the Funnel | PPI
Peak Inflation? Not So Fast. (UNH (-), ELV (-), HUM (-), HCA (+), THC (+)) The PPI final demand goods index fell 1.6% in December, while services increased 0.1% In line with the latter, health care services increased 0.1%. Keep in mind that health care, excluding the federal-treasury-palooza in 2020 and 2021, has yet to see inflation of labor and supplies manifest in PPI.
Health Care is a small part of PPI so the looming threat is not a terribly big deal. It does suggest a scenario where the fed destroys everything in sight but cannot impact the health care sector, keeping PPI above desired levels.
In other words we may be passed peak for inflation but the trip back to 2% may be slower than anyone is anticipating.
CONGRESS.
Debt Ceiling. ((UNH (-), ELV (-), HUM (-) CLOV (-), ALHC (-)) It is the only topic in DC. A minority of Republicans made demands on Speaker Kevin McCarthy in exchange for their votes/abstentions. One of those related to the debt ceiling vote.
The specifics are unknown but the general thrust is not hard to figure out. Some Republicans would like to see cuts to spending. Although there are many reasons to wish otherwise, the federal government only has three budget items that change the trajectory of spending; Social Security, Health Care and Defense. Everything else is rounding error.
Not that anyone cares but former President Donald Trump called for protecting Medicare and Social Security. It is not a hard call since, as we have pointed out, those problems are going to get addressed with time and demographics.
Our top pick for budget cut targets is Medicare Advantage. It is a fat program with limited oversight. The research on the implications of payment reductions has been done by MedPAC and others so it makes legislators path more uncertain. It also has bipartisan support.
And it is easy. Everyone loves their doctor, but they hate their insurance company.
THE WHITE HOUSE.
In-VALID. (NVTA (-), MYGN (-), GH (-), NTRA (-)) The FDA is working all the angles to regulate Laboratory Developed Tests since the VALID Act was shut out in the Omnibus.
It won’t be easy.
The issue is that Congress gave the FDA the authority to regulate devices. Since then, the term “devices” has been interpreted to mean a thing that can be packaged and sold as many testing kits, like EXAS Cologuard, are.
It gets tougher when you are talking about a process like those performed in hospital labs.
So, although they may try, the FDA is probably going to need Congress or recognize this is yet another area where the law finds itself impotent in the face of technological advances.
Cannabis Research. The Office of Management and Budget cleared the FDA’s new rules on clinical research of Cannabis-derived products. This rule would relate to products that would travel the drug pathway as Jazz’s Epidolex did.
The FDA has been struggling with regulating CBD products because the data on safety is sparse. Given the competing illicit market for THC products, the incentives to investigate the safety and efficacy is low. We do expect some movement early in the year when the FDA may propose CBD-derived dietary supplements but at low levels of concentration.
Other Stuff.
Prescribe Freedom. Governor Ron DeSantis started his new term by announcing the permanent adoption of certain anti-federal covid measures such as a prohibition on vaccine mandates.
If. DeSantis makes good on the speculation he will run for president, expect medicalization of American life to be a theme. His policies thus far have expressed skepticism about the pharmaceutical industry and liberal use of drugs and surgical interventions, especially as they relate to young people.
Recent Events
Venture View with Marcus Whitney: Pitchbook’s 4Q Report, Angel and Seed V. Late Stage + Monogram Health Replay here.
Upcoming Evans
HedgeyeLive in Miami. I will presenting on the macro-themes in Health Care post-pandemic and the economic implications of the Black Death. Seriously.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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