Chart of the Week
CONGRESS.
Infrastructure Year. The running joke in Washington is about the perpetually present but never effective Infrastructure Week, an event meant to highlight the need for brick and mortar improvements. After years of joking, now it is all anyone talks about, especially since the term now extends to “human infrastructure.” The White House has proposed, and Speaker Nancy Pelosi appears to agree, that Congress will consider two bills this year; one focused on infrastructure which extends to the research and scientific capabilities of the U.S., including pandemic preparedness; the other on education, other health priorities and child care.
Otherwise, quiet as we await Congress’ return next week.
THE WHITE HOUSE.
Budget. The White House released its FY 2022 budget outline today for discretionary spending (i.e., not Social Security and other mandatory programs). I know, I know, White House budgets don’t get enacted. True, but they do express the priorities of a president and for that reason worth reading. Here are some highlights:
- $8.7 billion an increase of $1.6B, for the Centers for Disease Control and Prevention. The White House claims it is the largest request in two decades. You need only look at their website to know that is true. Money would be used to support core public health capacity and modernize data collection
- $51B for the National Institutes of Health an increase of about $9B and more good news for ILMN, TXG and other stuff needed for research.
- $65M increase for rural broadband access
- $551M for Home and Community-based Services in Medicaid
- $2.7B to continue implementation of the CERN system at the Veterans Affairs
- $10.2B for the National Science Foundation, a $1.7B increase for research and science education
While many of these priorities echo the American Jobs Plan, these amounts are in addition to any legislative response to that proposal.
Missing from the budget request is anything related to drug prices. They are certain to appear as everyone from Speaker Pelosi on down has promised it.
More detail will be forthcoming as the White House watches who salutes this flag going up the flagpole. In the meantime, the emphasis on domestic programs is probably long overdue and now more easily accomplished since deficits seemed to stop mattering last year.
Regulatory Agenda.
Medicare Rule-A-Rama. CMS rolled out proposed payment rules for Inpatient Rehabilitation Facilities (EHC); Skilled Nursing Facilities (ENSG, GEN); and Hospice providers (AMED, CHE). CMS proposed the following payment increases:
- 2.2% for IRFs after deducting a (0.20%) multifactor productivity adjustment
- 1.3% after accounting for a 0.80% forecast error and 0.20% multifactor productivity adjustment
- 2.3% for hospice after (0.20%) multifactor productivity adjustment
Under normal circumstances, these increases would be routine. Unfortunately, labor disruptions in the health care sector have sent wages climbing, making it unclear if there will be much, if any, margin in Medicare patients, barring some – err – coding adjustments.
Direct Contracting Model. CMS released its complete list of Direct Contracting Entities under the new Global and Professional Direct Contracting Model. The group only grew by net of two providers, including CLOV. Interestingly it appears a few dropped out including aglion health which has an S-1 pending and buzzy Cityblock in Massachusetts. Looks like HUM is jumping into the fray in a few select counties. Cano and Oak Street also stuck around. Feel free to compare to list released last year.
Programs like these take time to mature, so don’t expect great things in the near term.
OTHER STUFF.
Vaccines. JNJ continues to experience some production issues, which only highlights the ongoing concerns that American supply chains need to up their game, assuming they remember how. There should be some hiccups next week in the roll-out.
Meanwhile PFE has applied for an EUA for teenagers 12-15 years old.
Grail. The FTC released its complaint, heavily redacted, intervening in the ILMN/Grail merger. A close reading suggests that FDA approval was closer at hand than originally thought (and as we suspected based on ILMN's scramble to acquire them after reducing their stake.) The stock answer from the company appears to be "vertical merger challenges are rarely successful." True perhaps, until it isn't. Best not to count on such certainty with a new attitude toward anti-trust evolving
ESG Investing
Racism as a Public Health Threat. Yesterday, CDC Director, Dr. Rochelle Walensky declared racism a serious public health threat and unveiled a website, "Racism and Health." Her move follows NIH's new program titled "Ending Structural Racism," especially as it relates to funding. The declaration appears to be opening the door for more significant policies around social determinants of health - something we hasten to add has not yet arrived at a commonly understood definition or attached to specific policies, making it hard to see next steps, if any. The CDC has thus far also pointed to additional funding for community health centers and local health departments.
Regardless of the formal policies that develop, the focus on racial disparities in health care are here to stay. These new policies, assuming they develop in concrete form, provide a basis for ESG analysis we lack at the moment.
SPAC AND S-1 CORNER.
You can access the updated SPAC spreadsheet here. Not much new this week.
Traditional S-1s worth noting:
Artiva Biotherapeutics, Inc.. Developer of off-the-shelf, allogeneic, natural killer (NK) cell-based therapies that are safe and accessible to cancer patients. (Goldman)
Kraig Biocraft Laboratories. Developer of high strength fibers using recombinant DNA technology for commercial applications in technical textile, including genetically engineered silkworms that produce spider silk to create our recombinant spider silk.
Privia Medical Group. A “technology-driven, national physician-enablement company that collaborates with medical groups, health plans, and health systems to optimize physician practices, improve patient experiences, and reward doctors for delivering high-value care in both in person and virtual care settings.” (Goldman)
Rapid Therapeutics Science Laboratories. Biotech firm specializing in aerosol delivery of non-psychoactive cannabinoids (NPC)2 to the blood stream though the pulmonary route of administration. (Maxim Group LLC)
Werewolf Therapeutics., Inc.. Biotech firm pioneering the development of therapeutics engineered to stimulate the body’s immune system for the treatment of cancer (SVP Leelink)
If you are investing in SPACs but not super familiar with health care, hit and we can help.
Upcoming Events.
The Persistence of COVID-19 Testing | DGX, LH, EXAS, OPK. Wednesday, April 14, @12:30 p.m. (Add to Outlook Calendar)
Recent Events.
Unplugged subs had a treat this week from venture capitalist, Marcus Whitney, who helped me go through all the base effects of policy, federal funding and tradition/training/convention that influence his work and should be considered in yours. Institutional subs, especially if you have a private strategy, might enjoy this video as well. Replay here.
Tweet of the Week
Have a great weekend.
Emily Evans
Managing Director – Health Policy
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