Notes from the Road.
Technically, a trip to Capitol Hill does not constitute being on the road. It is more like down the road – or more accurately, the Avenue. With Congress back in session, the end of the federal fiscal year looming, a once-in-a-lifetime kind of presidential campaign underway and Americans generally in a bad mood, I thought it might be a good use of time to make the rounds with staff of leadership offices and major committees and a Member or two to see what they are thinking about the next three to six months. As it happened the MYL CEO was on the testifying about the price of EpiPens which made everyone want to talk about Pharma. Most of these conversations are pretty general and high level. But health care is almost 20 percent of the American economy so it winds its way into even high level, general conversations. Below are some notes that capture much of the trends and ideas:
The presidential campaign
- Clinton finds herself in a competitive race because she is such a weak candidate
- Clinton is not expected to have a mandate from the electorate so major changes to the ACA will be tough
- No one (on the Hill) is afraid of her
- Some Republicans think of Trump as an “empty vessel” into which they can pour their own policy ideas (like House Republicans’ A Better Way)
- Other Republicans think Trump is too unpredictable for any prognostication about what he might do on health care (or anything else)
- Trump has no network of policy people to support him if elected
Pharma
- The issue is not developed enough in terms of what solutions are possible politically or otherwise
- A Republican close to leadership called price hikes “a legitimate concern” but not sure what to do
- The Sanders/Warren wing of Democrat Party advocate for extreme measures like price controls which makes it difficult for moderates to consider other possibilities
- Republicans are getting a little irritated with an industry they have long supported due to the steady drip of bad PR like the EpiPen price hikes
- Pharma has defined success in the Part B Drug demo as complete repeal or withdrawal. If they lose, does rep take a hit?
- Notwithstanding the sequence of bad PR moves, and damaging headlines, most people think Pharma still has enough influence and power to fend off any significant assaults but they are losing friends for certain
- Possible punishments for Pharma include greater transparency in R & D, resolving the generic backlog and eliminating pay for delay
Changes to ACA
- Democrats say they would consider tweaks to the law but could not articulate any specific changes they would consider
- Freedom Caucus (shorthand reference to hard right conservatives) still want repeal and replace which is a non-starter for Democrats
- Republican leadership says that repeal via reconciliation could happen but the problem is there would be a vacuum left. One staff member called it “the toughest puzzle piece.”
- Republican leadership thinks ACA will fail especially with departure of Obama people who have affixed Band-Aids to keep it going
- The next two years will be tough for health care with a divided Congress unable to do much of anything about it
- Cuts to Medicare Advantage in Puerto Rico are leading to a humanitarian crisis
- Republicans are staking their claim on 2018 when the electoral map changes dramatically
Year-end budget negotiations
- Continuing Resolution until December
- December could see a large bill and include tax extenders, health care provisions (please see our note on this topic)
- What happens will depend on leadership election dynamics as Ryan attempts to keep Freedom Caucus under control and maintain Speakership
- Democrats want an active lame duck and President Obama will want to play heavily as this is last chance to influence
- Republicans’ chief demand in lame duck is spending caps remain pretty much where agreed to as part of two year deal except for increase in defense spending
- If no year-end deal, another CR to March which may coincide with debt ceiling vote (though extraordinary measures may extend debt ceiling until September)
To bring it all home for the health care investors, it looks like the year-end spending bill may have a few health care provisions that could be important for individual sectors but macro changes to the ACA are unlikely between now and the end of 2018. With little relief for health insurance cost sharing for on and off-exchange plans, the high deductibles will be exerting their influence on the market. The next two years will be very interesting.
