Top of the Funnel: Macro + Earnings
PCE. HCA(+), THC (+), SGRY (+) As other spending falters, health care takes a starring role. Health care personal consumption expenditures are now up 6.85% in September versus a year ago, an acceleration from 4.85% in August.
Prescription drugs, probably driven by inflation incentives in the Inflation Reduction Act increased to 10.74% YoY.
HCA. The fateful decision HCA made to go joint with Envision on an EmCare emergency solution continues to nag. The company’s solution appear to be bringing the ER docs in-house for all practical purposes and dissolving the line between an ER doc and a hospitalist. The former is under the auspices of the No Surprises Act, the latter is not.
Payers would then lose the leverage they have under the NSA, to demand as a starting point for network negotiations, the median in-network price. HCA would lose the high priced codes for ER care, potentially. In the end, it isn’t much different than what American Physicians Partners has done.
The policy issue is that ERs are likely to be staffed at the bare minimum to meet requirements of coverage and not much more.
CNC. It is probably appropriate to be a little cautious about CNC’s below market Medicaid enrollment losses. They have exposure to California which has slow-walked the redetermination process. It is a state where activists are particularly active, requiring the state to tip toe through disenrolling people.
There is a scenario where redeterminations extend past the middle of 2024 but the end result will be lower enrollment, barring significant employment losses.
On the other hand, the commercial gains in membership are worth noting. The macro trend in commercial coverage indicate a return to growth of commercially insured individuals after years of languishing.
4Q 2023 Themes. On Wednesday, I covered the five major themes informing our work, Inflation, Insured Medical Consumer coverage, the Biotech/Biopharma meltdown, the nonprofit hospital distress, and the blocked exit that is antitrust enforcement. Replay and timestamps here.
CONGRESS.
Curtains on the Speaker Drama. The United States House of Representatives selected Rep. Mike Johnson this week after 22 days of trying to figure it all out. Relative to Rep. Kevin McCarthy and Rep. Steve Scalise, Johnson is more conservative. So, no surprise that he began his tenure with a call for a fiscal commission.
Because of Johnson’s conservative stance on a number of hot-button health care issues, a fiscal commission is being interpreted as cover for Medicare cuts. Johnson says no and in the past his interest seems to be focused primarily on the working age populations covered by the Affordable Care Act.
Fiscal Commissions do not have a great track record, but they are useful for identifying areas of agreement and possibilities for compromise, which, believe it or not, happens.
In the meantime, expect a CR to keep the trains running until January or April.
NIH Confirmation. LLY (+/-) NVO (+/-) NIH nominee, Monica Bertagnolli offered some commentary on obesity, suggesting NIH needed to do more work. Drug makers are pressuring Congress, which is pressuring the CBO to change its scoring approach by treating obesity as a disease.
(The CBO is asking for more research.)
Not everyone is on board. The Department of Defense will only prescribe Ozempic after exhausting a series of other options and considers obesity a risk factor for other conditions that threaten battle readiness.
Nursing Facility and Home Care. Well (+/-), ENSG (+/-) Unfortunately, this issue has and will continue to be partisan, which leaves too little room for producing actual policy. At the Energy and Commerce Health Subcommittee hearing, Republicans took the side of the industry and pointed out the impossibility of meeting requirements proposed for Long-term services and support.
Democrats, led by Rep. Frank Pallone castigated the majority over their inability to produce an alternative.
Letters have been sent requesting a delay in finalization of both rules, but we tend to think partisanship will win the day, at least for now. We watch closely the White House’s approval rating which translates into influence on Capitol Hill.
More NIH Drama. (ILMN (+), PACB (+), ARE (+) Republicans on the House Energy and Commerce Committee are tossing around the threat of subpoena for NIH regarding gain-of-function research in monkeypox. The House is already hot about senior NIH officials openly seeking to evade open records laws through use of Gmail (yes, the super secure data mining app at Google!)
Only brick on the load that may demand reform of the entire enterprise were power to change hands…
WHITE HOUSE.
Vaccine Push. PFE (-) The new CDC Director Mandy Cohen was making press rounds this week and disclosed that about 3.6% of the population had taken the latest COVID booster. That puts the uptake slightly behind pace of our model with 8% uptake and well behind – about half expected – of the uptake in PFE’s guidance.
With about half of uptake occurring in the first 55-56 days of rollout, it will be very difficult to make up the difference without a substantial change in attitude. The CDC has already indicated their advertising budget is thin, leaving outreach to fall on PFE’s advertising line.
Slow Your Roll. NVAX (-), PFE (-) BNTX (-), MRNA (-)The Food and Drug Administration has issued updated guidance on development of COVID vaccine products, advising the industry that the goal in development should be direct evidence of safety and efficacy rather than a reliance on immunogenicity.
Are they responding to public ridicule about mouse data in bivalent booster? Or is the recent submission (finally) of PFE’s post-marketing subclinical study suggesting it is time to be more careful?
This news comes as BNTX and PFE report positive top line data for a combined Flu/Covid shot
Time will tell but the free wheeling days may be drawing to a close.
OTHER STUFF.
Have a great weekend. If you want to talk more about any of the above, or anything, book 30 min here.
Emily Evans
Managing Director – Health Policy
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