Top of the Funnel: Macro + Earnings
PPI. Input costs for pharmaceutical manufacturing decelerated again and are now in their historical zone of 2-3%. At hospitals, however, the PPI for treating neoplasms reaccelerated in September to 3.24% from 1.52% on a YoY basis.
CPI. One would think that if the GLP-1 drugs were going to have such sweeping implications of retail, restaurants, consumer staples and industrials, the increased spending would show up somewhere. Anywhere.
In fact, CPI of Medical Commodities which consists largely of pharmaceuticals, declined 0.29% MoM in September. CPI measures consumer cost-sharing which on a $1000/mo drug is not going to be nothing. Personal Consumption Expenditures showed a deceleration in its quantity index MoM in August. In other words there is precious little macro data to support the wide-ranging impacts described by management everywhere except insurance companies that have no interest in paying for it.
Instead it appears the management teams have so little respect for the sell-side that they are telling taller tales than usual.
CPI for Medical Care Services accelerated MoM by 0.32%, something we have been waiting for as 2022's inflation starts to wash through. An important data point to support this thesis is the ECI number on the 31st.
UNH. (+) Management reported a beat and tweaked the low end of the guidance. Like you we tend to listen to UNH's commentary on utilization since they have a broad, if not deep view, of the health care ecosystem. They again mentioned utilization by the Medicare population of outpatient services, especially for orthopedic and cardiac. They indicated no change in acuity with care patterns consistent with historical trends.
Of course, they were asked about those GLP-1 drugs that appear to be responsible for saving or crushing the American economy, depending on the waist size of your customers. Management said they were focused on price and were working with manufacturers to make the drugs more accessible. You should probably read and understand that strategy as a. restricting access and b. negotiating the mother of all incentive packages.
Other call out of note is the increase in commercially insured book. This disclosure is consistent with what out Insured Medical Consumer model is telling us.
CONGRESS.
Speak Now. It looks like neither Steve Scalise nor Jim Jordan will be Speaker of the House. As we wait for a new candidate to emerge, we remind your that part of this little dust-up is over budget issues including reducing the deficit, which means threat to health care.
WHITE HOUSE.
Vaccine Uptake. PFE (-) Via Twitter CDC Director, Mandy Cohen announced that 7M Americans received the recently approved COVID booster. That is about 900k behind our model which estimated a 2.4% uptake by October 13th.
At the same period during the bivalent booster roll-out, about 12M shots had been administered.
We should expect $PFE to revise their COVID revenues on the 3Q call.
Making Stuff Up. CMS announced this week that 2024 Part B premiums would increase about $10/mo. Deductibles would increase $14/year. The administration is projecting increases in spending – good news for the service providers – and claims it is also meant to remedy the 340B drug payment policy required by the courts.
Like their claim last year that Aduhelm would drive up premiums, part of this year’s excuse is pretty hard to swallow. In response to the court’s adverse ruling, CMS proposed a o.5% rate cut to offset the re-redistribution of related revenue. It also claimed at the time, that CMS cure for the court’s decision would be budget neutral.
Apparently not.
The most likely culprit here is high costs as payment updates respond to inflationary trends.
Digital Health Ad Comm. Amidst the chaos of the digital health world, the Food and Drug Administration announced they are putting together an Adcomm to support their regulation of new fangled stuff like machine learning, artificial intelligence and other digital health technologies.
This announcement comes as Congress appears to want to take a bit of a hands off-approach to regulation to watch things unfold.
