Top of the Funnel: Macro + Earnings
PCE. Prescription drug prices took another turn up in August reflecting primarily an acceleration in prices. The quantity index was mostly unchanged. CPI-U from October 2023 will start influencing Medicare rebates next month so between now and then we should continue to see higher inflation.
PCE for health care was generally flat sequentially with a little uptick in the price index. We will see if it holds.
PFE. On Wednesday, I took a look at the prospects for PFE’s commercialization of its COVID products and what it means to the 2023 guidance. The bumpy roll out this month does not bode well but before that public acceptance was deteriorating around the world. Can the base business make it up? Not while revenue diversions are chewing through price increases.
Alternative scenarios welcome. Set up conversation using Calendly here: https://calendly.com/eevans_hp/30min.
Somewhat related to my point that PFE's base business is getting the middleman treatment as rebates, chargebacks, performance bonuses et al have dug into their top line. A report from the American Enterprise Institute this week analyzes rebates etc., for the obesity drugs and supports that thesis in part. With four products on the market, establishing share takes giving up part of the $1000 top line. In the case of these drugs - to the tune of 70%. Read it here.
CONGRESS.
Shutdown Showdown. ENSG (+), WELL (+) If it is avoided this weekend, it will only be temporary. Funding a war in Ukraine, a bipartisan favorite on the Senate side, is in a face-off with increased border security. The Senate wants to retain support for Ukraine and objects to meddling in the White House’s border policy. The House wants just the opposite.
For the most part, health-related agencies will carry on during a shut-down. However, administrative functions will slow or cease and that includes publication of the Federal Register.
CMS has yet to finalize a few rules that normally go into effect in January. The much-watched nursing home minimum staffing rule may be delayed into next year. As a general rule, I add a day of delay for each day of shut-down.
Grant applications and approval at NIH will also slow. However, oversight of Medicaid redeterminations will continue, as clarified by CMS this week.
No one is Surprised. It seems like it is only a matter of time before we all recognize that “Value-based Purchasing” was a political heuristic, not a real thing that could be accomplished in a meaningful scalable thing. It was, after all, just another way to describe rationing of health care. It is probably long-overdue and necessary rationing but rationing all the same.
The Congressional Budget Office reported this week that the Centers for Medicare and Medicaid Innovation contributed $5.4B to the federal deficit instead of the $2.8B in savings originally projected for the period 2011-2020.
Interestingly, the CBO offers its take on the effects of ending CMMI’s statutory authority. A new analysis from the CBO like this one makes that more likely not less.
Read it here.
THE WHITE HOUSE.
Obesity Drugs. NOVO (-), LLY (-) One of Washington’s many consultancies, Manatt released a report arguing that Medicare Part D could cover obesity drugs like Wegovy with a few tweaks of CMS’ interpretation of “obesity.”
The report argues that CMS could get around Congress’ express prohibition on Part D reimbursement for weight loss products by redefining obesity as a chronic condition. For that reason you may see use of the term “has obesity” instead of the more common “obese.”
For health policy people recently focused on health equity, the argument for high BMI as a chronic condition is appealing. However, it is a stretch when it comes to challenging Congress’ authority.
It should be noted that the hype, including the aforementioned report, reminds us of how Artificial Intelligence will save the tech sector. This misplaced enthusiasm probably says more about the diminishing outlook for bio-pharma then the realistic prospects for weight loss drugs.
Debate This. A second debate was held on Wednesday evening for the oh-too-big Republican field. Continuing the trend in recent years, interest in health care has diminished. Part of the problem is that the moderators have no idea what they are asking about and their research team, if they have one, must be populated by 10-year olds.
Former Vice-president Pence was asked about whether the popularity of the Affordable Care Act meant Republicans needed to drop their objections. As Governor of Indiana, Pence had expanded Medicaid under the ACA which made the question a stupid one. Additionally, objections to the ACA have not exactly been front and center for Republicans in years.
Notwithstanding that low information moment, Nikki Haley used her health minutes to endorse price transparency, a major focus of House Republicans. It is a trend we are following closely.
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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