According to the WSJ, Trump plans to issue an executive order today directing federal agencies to initiate regulations that require HC payers and providers to reveal the details of their pricing contracts. As expected, industry groups, including both payors and providers, are pushing back claiming transparency on discounts will hurt competition and ultimately cause costs to go up and the article notes that it is “unclear how aggressive the order will be because of the pushback from industry”. At the end of the day the devil will be in the details here in terms of what the providers/plans are forced to disclose and the ability of members to use it to make better/lower cost consumption decisions over time.
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This Wednesday (06/26/19) Warren, O’Rourke and Booker will face off at the first 2020 democratic primary debate along with seven others, followed by Biden, Sanders, Harris, Buttigieg and six others at a second debate the following night – see more on page 2. Healthcare will undoubtably be one of the key topics in the upcoming debates as the candidates split on whether they want a system that builds on the existing employer-based system or replace it entirely with a single-payer structure – see page 5 for the stance of the current lead Democratic candidates. While the recent polls have been relatively stable, look for potential volatility into the first Democratic debates as Biden is expected to be the primary target of his fellow Democrat candidates – given the current solid lead and his more moderate position on certain topics, including healthcare. As we highlighted in our previous work and illustrated on page 8, history would argue for volatility in the polls before all is said and done despite Biden’s large lead. That said we continue to see little chance of significant change, instead the concern is simply the 12-18 month timeline of uncertainty before elections.
In June Individual Med Adv enrollment increased 7.5% y/y and Group Med Adv enrollment increased 8.5% y/y, producing total y/y Med Adv growth of 7.7% – 8.4% ex. MN market which declined y/y due to the ongoing cost plan conversion. ~65.0% of total Med Adv enrollment of 22.5M lives were in our covered co’s vs 61.1% of 20.9M lives a year ago. See Page 2 for data by plan and email us for tracking spreadsheet.
HHS’s proposed rule to eliminate safe harbor protection for drug rebates from manufacturers to PBMs for Part D / Managed Medicaid and replace them w/ POS discounts has reached the White House's Office of Management and Budget yesterday (06/10) for final review.
Since entering the race on April 25, Biden has rapidly solidified his status as the front-runner for the 2020 Democratic Presidential nomination, with a lead of 16.8 points (vs. 18.4p 1-week ago / 17p 2-weeks ago) according to the RCP’s national polls – see slide 3. There was no noticeable change in the polls over the past two weeks with Sanders remaining a distant second and Warren / Harris sitting in third / fourth. While the polls have been relatively stable, look for potential volatility into the first Democratic debates scheduled for June 26-27 and July 30-31, respectively – we discuss the change in the debate rules this year on page 2.
The Kaiser Family Foundation recently published two interesting analyses on how the Medicare Advantage landscape has evolved over time from different angles. One historical analysis of 2010-2016 data is particularly interesting, illustrating that seniors new to Med Adv are still choosing MA at a rate below the overall industry penetration. While increasing materially over this period the analysis shows only 29% of seniors new to Medicare choose MA plans in 2016 vs. 31% industry penetration. This is counter-intuitive to many given one would expect younger seniors to be more familiar with managed care in general and therefore more open to the benefits of Med Adv. However, we would note that there are a couple of reasons why this might be the case: (1) the only time a senior can be assured of getting Med Supp w/o underwriting and at best price is when they age in, likely leaving more seniors choosing Med Supp right out of the gate and (2) it is possible that seniors
CMS sent a letter to Part D plan sponsors on Monday (5/20/19) notifying that “no changes to the current Anti-Kickback Statute (AKS) rules will be finalized prior to June 4, 2019”. This is consistent with CBO’s expectation that the final rule is not expected to be released before mid-June “on the basis of the typical timeline for a rule to move from proposal to implementation”. We note that the HHS OIG website has a final action date of 11/00/2019 for the proposed rule (see Page 2), which potentially means the final rule won’t be available before November – we are working to confirm this w/ the agency.
Wolfe Research Senior Healthcare Analyst, Justin Lake, hosted a webcast to discuss the Democratic primary landscape, what the path to clarity is, what it will take to get material healthcare reform passed, thoughts on impact to economics and stocks from various outcomes.
While uncertainty remains, we continue to see low probability of significant change in HC regulatory landscape post-election and investors generally agree. The bigger roadblock to stock price performance in our view is the 18-month timeline to 2020 election clarity. Our analysis of prior presidential primaries back to 2008 indicates it will likely be early 2020 before market feels confident in who the Dem nominee will be despite Biden’s current strong lead in the polls. We will be hosting a webcast Monday 5/20 at 11AM ET to discuss our thoughts slides begin on pg. 2 of this note.
Today (5/16/19) the Kentucky Cabinet for Health and Family Services (CHFS) and Department of Medicaid Services (DMS) released its Medicaid Managed Care re-procurement RFP. There are currently 1.22M enrollees statewide, with WCG / CVS-AET / HUM / ANTM from our coverage universe managing significant amounts of enrollment along with NFP plan Passport. With this new RFP the DMS will contract with up to 5 insurers statewide consistent with the number of current incumbents. The KY DMS will also award one of the selected MCOs to provide services in a new Foster Care program called Supporting Kentucky Youth (SKY), which we est. to be a $150M oppy. Most importantly the new contract will now require PBM pricing transparency from MCOs which will have to disclose all contracted PBM terms to the state and utilize a pass-through pricing model where plan’s drug reimbursement to PBM must = PBM’s reimbursement to pharmacy.
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