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ECI. HCA (+), THC (+), SGRY (+) ENSG (+) The Employment Cost Index is both closely watched by the Federal Reserve and critical to Medicare payment updates. In the most recent release ECI accelerated its decline from 5.0% YoY in 3Q 2023 to 4.6% in 4Q 2023.
The Office of the Actuary uses a four quarter rolling average in its cost models. In 4Q 2023 the four quarter average was 5.25% YoY versus 5.0% YoY as of the 4Q. It is this release that will inform April payment update releases, to be revised once new data emerges in April and July.
(More on employment next week once I return to the immobile office)
CI. Cigna reported a nice quarter, defying the zero-sum thesis on providers and payers. The company’s enrollment in its U.S. Healthcare segment increased by 1.8 million members which stands as a reminder that health insurers are going to see some epic consolidation as Blues plans learn to compete without some of their anti-competitive practices and other lines of business like Medicare Advantage get pressure from demographic headwinds.
We covered CI’s strategy a few months ago. Link here.
CONGRESS.
Artificial Intelligence on Capitol Hill. XBI (+) On Thursday, the Senate Finance Committee will hold a hearing on the use of Artificial Intelligence tools in health care. A debate swirls around setting up a new agency to regulate AI tools or giving the Food and Drug Administration expanded powers.
Senators Elizabeth Warren, Lindsay Graham, among others are advocates for a new agency, comparing the present trend to the development of commercial aviation and the creation of the Federal Aviation Administration in 1958.
Siemen's Healthineers will be joined by some academics to discuss. The incumbency of the FDA will probably prevail, but we will watch the hearing for clues.
Meanwhile, Health and Human Services has set up an artificial intelligence task force, as required by the Biden Administration’s recent Executive Order. The charge of the task force is to develop methods to evaluate AI tools, advance drug development, improve public health and health care delivery.
GLP-1 Drug Coverage. NVO (+), LLY (+) The Congressional Budget Office’s Director, Phillip Swagel, testified before the House Budget Committee and, in response to questions, indicated the CBO was reviewing recent research on obesity and anti-obesity treatments.
In October, the CBO put out a call for research on this topic to better inform cost estimates on proposed legislation to extend Medicare coverage to anti-obesity treatments.
Expect the payers to have their say which may prolong the analysis. Anecdote from that corner of the industry suggests there is no cost savings, especially given the price of the drugs.
WHITE HOUSE.
Can’t Cut Medicare. UNH (+), ELV (+), HUM (+) ALHC (+) The White House is not making the same mistake they did last year when they proposed a 1% increase in the Medicare Advantage advance notice. Republican responded with cries of “cutting Medicare” which was met with a final rate increase of 3.32%.
For 2025, Medicare has proposed a 3.7% increase which contemplates a 2.45% cut related to the risk model revisions and 0.15% associated with lower star ratings. Total outlays to Medicare Advantage plans are expected to increase by 16B in 2025.
A number of factors are conspiring for 2024 and 2025 to relieve the usual zero sum analysis we engage in with payers and providers so caution is warranted when extrapolating 4Q results to deep into the MCO industry. Remember, the White House runs the money printer and is running for election.
Not to be too cynical.
Drug Price Negotiation. The Centers for Medicare and Medicaid sent the drug industry their first take on acceptable prices for about 10 drugs. No one is talking about price levels but the reaction from lobbyists and consultants suggest the opening bids are not ideal.
Some of the White House’s advance work, designed to counter the anti-innovation narrative that PhaRMA prefers, includes a report from the Assistant Secretary for Planning and Evaluation which concludes Americans spend 278% more for drugs than OECD countries.
Press release with links here.
Other Stuff.
Grand Jury on COVID Vaccines. The Florida Grand Jury charged with investigating PFE and MRNA's COVID vaccines released an interim report focused on issues like effectiveness of non-pharmaceutical interventions. The indicate their work is no where complete. Worth a read.
Bye Aduhelm. BIIB pulled the hotly contested Aduhelm from the market, claiming CMS’s requirement of a post-market confirmatory trials made the product unviable. Some Republican House members are blaming CMS and not the drug’s checkered path to approval.
BIIB will be reallocating resources to Leqembi and other Alzheimer’s drugs.
SCOTUS. Mark your calendars. The Supreme Court will hear FDA et al., v Alliance for Hippocratic Medicine et al, on March 26th. At issue is whether the FDA’s suspension of Mifepristone’s Risk Evaluation and Mitigation Strategy (to permit prescribing via telehealth) was lawful.
Also, to make your March more interesting, the Supreme Court will hear oral arguments in Vivek H. Murthy, Surgeon General et al., v Petitioners Missouri, et al, on March 18. In this case, the state Attorney Generals and certain individuals claim their First Amendment rights were infringed by government agencies, including the Office of the President, which directed social media platforms to delete and deamplify users and messages that contradicted official policy.
A central focus of these government agencies was information on non-pharmaceutical interventions used in the prevention of COVID. Another area of concerns was dissenting views on the safety and effectiveness of Covid vaccines.
Have a great weekend.
