Crystal ball gazing is invariably a perilous activity, especially in areas such as the economy, politics, and drug pricing reform, that are so prone to confounding factors. Despite this, it’s a useful exercise to predict, given what we know – historical precedent – and how we then expect the future to unfold.
In this post I’ll make some predictions on politics, the economy, and drug pricing reform, while a second post forecasts Covid-19 developments and public health.
Predictions on the economy and the 2022 midterms
The economy is experiencing an uneven recovery from the effects of the Covid-19 pandemic. Employment numbers have been robust for quite some time, and wages are increasing. But, inflation is stubbornly high, and labor and supply chain shortages threaten to hold back growth in certain sectors. And, while the stock market boom is consolation to some, there is a disconnect between what’s happening on Main versus Wall Street.
Moreover, globally there’s considerable uncertainty, exacerbated by a large set of unknowns. In fact, the biggest risks to the economy may come from geopolitical shocks: A Russian invasion of Ukraine, for example; China harassing Taiwan; tension on the Korean peninsula.
Ten months before the midterm election many pundits are predicting a Republican rout of Democrats in Congress. Well, this could very well happen. After all, President Biden’s approval ratings are poor. In addition, there are numerous vulnerable seats in Congress which Democrats will have trouble holding.
Nevertheless, 10 months are an eternity in politics. And the winds of fortune can change on a dime. Covid-19 could fade in 2022, the economy may continue to produce robust employment numbers, and inflation may diminish from its current peak. Moreover, enactment of the infrastructure bill and the possibility of passage of a slimmed down version of the budget reconciliation bill – or Build Back Better Act – could yield tangible results.
Indeed, I’ll go against the grain here and predict a sustained economic recovery with diminishing inflation (from its current peak), along with midterm election results in which Democrats maintain a slim majority in the House and a 50-50 Senate. The problem for Republicans may be that in lieu of offering constructive alternative plans on healthcare, childcare, education, infrastructure, climate change, and a host of other critical issues, they’re stuck opposing any government intervention on ideological grounds. For independents and swing voters pragmatism trumps ideology.
Drug pricing and reimbursement
For those expecting major changes in 2022 to pricing and reimbursement of pharmaceuticals landscape, they may be disappointed. The most consequential potential change to the drug pricing system – the overhaul of pharmacy benefit manager (PBM) rebates, with attendant 100% pass-through to beneficiaries – won’t happen. The Biden Administration has essentially nixed former President Trump’s executive order calling for a 100% pass-through of rebates. And, PBM rebate reform is not even stipulated in the budget reconciliation bill, or the Build Back Better Act.
Given that Senator Manchin (D-WV) has said “no” to the Build Back Better Act, the legislation’s prospects look dire. But, the bill isn’t dead yet. Senator Manchin may change his mind. He may in fact be using his “no” as a bargaining chip. A truncated budget reconciliation bill has a strong likelihood of passing.
Alternatively, popular pieces of the bill could be put forward, not in the form of budget reconciliation legislation, rather, as separate smaller bills that go through the regular process of law making.
These could include several of the drug pricing provisions as well as restructuring of the Medicare Part D (outpatient) benefit, as these are very popular among constituents. Moreover, there is strong support for certain measures, such as a $35 cap on monthly insulin out-of-pocket expenses, and a $2,000 maximum annual out-of-pocket costs for Medicare beneficiaries.
In Congress, there is also bipartisan support for shifting a substantial portion of cost management in the catastrophic phase of the Medicare Part D benefit to Part D plans rather than the federal government.
As a reminder, the prescription drug proposals included in the Build Back Better Act would allow the federal government to negotiate prices for a small number of high-cost drugs covered under Medicare Parts B and D, specifically drugs that no longer enjoy exclusivity and have no competition. Starting in 2025, 10 drugs would be selected, rising to 20 by 2028. The negotiation process would also apply to all insulin products.
The proposal establishes an upper limit for the negotiated price (the “maximum fair price”) equal to a percentage of the non-federal average manufacturer price; for example, 75% for small-molecule drugs more than 9 years but less than 12 years after FDA approval.
Notable exemptions include drugs that are less than 9 years (for small-molecule drugs) or 13 years (for biologics) from their FDA approval date, drugs with an orphan designation as their only FDA-approved indication, and “small biotechnology drugs” through 2027. These drugs are defined as accounting for 1% or less of Part D or Part B spending and account for 80% or more of the revenue of the small biotechnology manufacturer’s portfolio of approved drugs.
Even without legislation, the marketplace will continue to evolve in ways that put pressure on net drug prices. Payers in both the commercial and public spaces will increasingly resort to utilizing clinical- and cost-effectiveness to determine pricing and reimbursement of prescription drugs.
So, for example, state Medicaid policymakers have been actively pursuing ways to apply Institute for Clinical and Economic Review’s (ICER) research findings to help manage their prescription drug expenditures. The Kaiser Family Foundation found that at least 35 different states now review comparative effectiveness studies when determining their coverage criteria, with the most commonly cited studies published by ICER.
Also, biosimilars will gain even more traction across multiple therapeutic categories. Biosimilar uptake will steadily rise in 2022, and may accelerate further in 2023, for two reasons. First, more biosimilars are being approved – the most recent example being the insulin glargine biosimilar Rezvoglar in late December. Second, therapeutic interchangeability status will spur automatic pharmacy substitution.* The therapeutically interchangeable long-acting insulin product Semglee (which references insulin glargine) may offer lessons for future biosimilar launches, including biosimilars that reference Humira (adalimumab), which will be coming on board in 2023.
All in all, 2022 promises nothing earth-shattering politically or economically. On drug pricing and reimbursement, a combination of market-driven moves and legislative retooling of, among other things, insulin out-of-pocket costs, will lead to some modest changes.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
