Takeaway: Drug prices top the list of things that will be hotly debated and acted on in 2019 but ACA constitutionality will also dominate

Note: Happy New Year! Thanks to all of you for your support of our work in 2018. Time and money are precious resources so we are grateful you choose to spend both with us.

We have lots of great plans for 2019 and look forward to helping with your research process.  ~ Tom, Emily and Andrew

We aren’t much for listicles, but the Trump era has engendered rapid and almost chaotic changes that have forced us to abandon health policy’s accepted wisdom of 30 years (or more) and, well, make a list. Here are our top five policy issues to watch in 2019 (and probably 2020).

Drug Prices. Sen. Hatch, a longtime advocate for the pharmaceutical industry has departed Capitol Hill and handed over the Senate Finance gavel to Sen. Grassley, a longtime critic of the pharmaceutical industry. House Democrats, especially the newly elected progressive wing, are making drug prices a priority in 2019. The president continues to explore and pursue administrative changes that will disrupt Medicare and Medicaid reimbursement for drugs. The venerable PhaRMA lobby struggles to get even policy errors like the Part D cliff and the doughnut hole corrected.

Oh, and there are presidential campaigns forming that are going to make the most of drug costs.

Policy debates around PBMs, distributors, manufacturers and developers will rage throughout 2019 and into 2020. Expect legislative change especially related to patent thickets and “pay-for-delay.” Administrative action like the International Pricing Model and the blurring of lines between Part B and Part D are likely.

And lawsuits. Lots and lots of lawsuits.

Antitrust Scrutiny. Another topic that ironically binds the White House to House Democrats and more than a few Republicans is concern about the over consolidation of the American economy, including the health care sector. The Federal Trade Commission has convened for the first time since 1995, a series of meetings, hearings and workshops to evaluate whether changes to antitrust policy are appropriate given the evolution of the American economy.

A report released Friday by the administration highlights the effect of consolidation on provider prices and insurance premiums. It makes several important recommendations:

  • States should modify or eliminate Certificate of Need Laws
  • Congress should amend the Federal Trade Commission Act to extend jurisdiction over Sherman Act violation to nonprofits
  • The administration should evaluate the impact of vertical and horizontal integration on prices and consumer choice

Mix in a decidedly populist mood among Republicans and Democrats as the establishment wings of both parties recedes in their influence and you have a winning issue for both side of the aisle. Changing antitrust policy is slow but expect some movement away from the laissez faire attitude that has characterized enforcement since the 1990s.

Cannabis. As states digest ballot initiatives to liberalize cannabis laws, pressure will increase on the federal government to harmonize its laws with this new permissiveness. However, with Chuck Grassley at the helm of Senate Finance, which would likely be a committee of jurisdiction, the outcome is far from assured.

House Democrats are assumed to support change – mostly in the context of criminal justice reform – but they have not made modifications of federal control of marijuana as a policy agenda item to date.

Notwithstanding the federal government’s hesitancy, we think the SAFE Act, which would liberalize banking laws in those states that have relaxed cannabis regulation, is possible and perhaps even likely.

Shayne Laidlaw and Howard Penny on the Consumer Staples team are handling fundamental coverage of the cannabis stocks. Hit them with any non-policy questions.

Data Privacy. While FB and GOOG are getting all of the attention right now, it is hard to talk about data privacy without including health care. To that point, the FTC’s recent antitrust policy hearings included discussions about predictive analytics and data security – both of which are growing in influence in health care.

The administration released an RFI a couple of weeks ago inquiring  how HIPAA might change to permit greater care coordination, among other things. Clearly, HHS is anticipating how policy changes in data security could require modifications to the regulation of PHI.

HIPAA has created a significant moat for many health care incumbents. The regulation of PHI makes it more difficult to share data between providers and between patients and providers. It has also stymied innovation in areas like telehealth and remote monitoring.

We have a lot of trouble seeing a day when Alexa will facilitate a doctor’s appointment, then fill a prescription via AMZN Prime. We do think that demands to for greater data portability and clarity on control will make advances in that direction more probable.

The Constitutionality of the ACA. The Texas lawsuit in which Judge Reed O'Connor ruled the ACA was unconstitutional without an effective individual mandate, will move a warp speed in 2019, possibly making it to the Supreme Court for the 2019-2020 session.

If the law is ultimately ruled unconstitutional the impact is not uniformly bad. Certainly, without the subsidies and cost-sharing support, the individual market to the extent it operates through exchanges, will be significantly impaired. States that expanded Medicaid may have to cut back on their programs if they lose the 90 percent federal match for expansion populations.

Disappearing also will be taxes on medical devices, drugs, health insurance and benefit rich health plans. Medicare payment reductions mandated by the ACA would also disappear. What providers may surrender in volume may be mitigated by better reimbursement and tax relief.

While we tend to be more skeptical and a little biased toward the ruling being overturned, Hedgeye’s best court watcher, Paul Glenchur (who actually has a law degree and a lot of experience with judges) disagrees. He and I will be working closely on this case throughout the year.

Again, thanks for all your support and interest in our work. We look forward to helping in 2019.

Emily Evans
Managing Director – Health Policy


Thomas Tobin
Managing Director


Andrew Freedman, CFA
Managing Director