Trump's Sights Set On Payers And Pharmas, But Medtechs Must Not Be Complacent

It's been a big month for plans intended to shape the future of health care in the US, with the Trump Administration showcasing its ACA replacement bill and issuing budget proposals. At this stage, it's hard to peg winners and losers and although the focus is squarely on insurance, the medtech sector should guard against complacency, says ZS Associates' Brian Chapman.

A month after Donald Trump's election as US President last November, In Vivo asked Brian Chapman, ZS Associates' principal and leader of the firm's medical products consulting practice, for an early take on how medtech businesses and the sector in general would be affected by decisions likely to emerge from the new US administration and its three-line Republican monopoly. (Also see "US Medtech Under Trump: Below The Radar Or In The Line Of Fire?" - In Vivo, 12 Dec, 2016.)

At that early stage, it was hard to make any predictions, although the laser focus was already on insurance reform. Pharma is a target too, but dismantling the Affordable Care Act was certainly the grandstand election pledge. In the semi-background, the US medtech sector was - and is - content to keep a low profile, while hoping for action to repeal the ACA's 2013 medical device excise tax. Equally, it hopes the decisions taken will not destabilize hospital buying patterns.

Three months on, Chapman's early assessment of medtech being under the radar of the new US administration remains as valid as it was then. But while the tax seems very likely be repealed – the wisdom for which he feels is perhaps not cast in iron (regardless of the fervency of industry's lobbying effort) – the insurance reforms planned under the proposed American Health Care Act (AHCA) will likely have a negative effect on hospital finances. (Also see "GOP Action To Push Through ACA-Replace Bill Threatens Device Tax Repeal" - Medtech Insight, 9 Mar, 2017.)

In a March 14 White House listening session on US health care, Department of Health and Human Services secretary Tom Price, MD, sat with Trump and Vice-President Pence and described the AHCA as a vehicle to let market forces lower the cost of care, bring down premiums and deductibles, and preserve the doctor-patient relationship.

An HHS statement said while the ACA had given Washington power over health care, leaving patients and providers with less choice over medical decisions, the AHCA would give patients freedom to choose coverage. But the administration's FY 2018 "budget blueprint" would curtail HHS's own freedoms – cutting its spending by 17.9%, and that of National Institutes of Health budget by 22%. Planned FDA cuts have not been detailed as yet.

This recent activity – the pace of which has been fast and furious – is Trump and Republicans’ way of showing that they are following through on their pre-election promises, even if some of the edges have blurred, and some major promises have been faced down perhaps never to re-emerge.

For Chapman, this recent activity – the pace of which has been fast and furious – is Trump and Republicans’ way of showing that they are following through on their pre-election promises, even if some of the edges have blurred, and some major promises have been faced down perhaps never to re-emerge. Retaining a healthy skepticism, Chapman believes the President's goal is "to appear to have achieved what he said he would."

But health care is going to be a real test – ACA insurance premiums were higher for known reasons (including covering people with previous conditions) – but that is an issue that is not dramatically being addressed at present. How to pay for health care will likely be a defining issue for the current Congress, and is doubtless seen as risky territory by many Republicans who are now "owning an issue that they may not be able to solve," says Chapman.

Outside the hospital market, some of the major wrangles concern pharma, but chiefly they are around who and how health care is being paid for – ultimately how insurance is funded. And the arguments here are whether it's federal- or state-funded; individual- or employer-funded; funded by high- or low-income earners; and even whether the (healthy) young or (less healthy) older population should fund it.

But for Chapman, this essentially is an exercise in dividing up the same content as the ACA was seeking to do – pushing around the same balloon that represents the 17.8% of US GDP that goes towards health care. "That won't change much."

But some changes have happened – and some others look set for change, as Chapman notes.

One is Scott Gottlieb's [MD] recent appointment as FDA Commissioner. His was a name to emerge late in the running for the post, and he will very likely be focused on the pharma market.

It will be both interesting and possibly concerning to see how he reacts to and then accommodates "budget blueprint" outline plans that call for a doubling of FDA medical product user fees (to $2 billion) in 2018. The already-agreed but as-yet-unconfirmed extension of the MDUFA medical device user fees program would appear to be at risk. But Congress has yet to review these proposals.

No hearings have been held on the MDUFA, but the Senate Health, Education, Labor and Pensions (HELP) committee scheduled a session to address reauthorization of all FDA user fee programs on March 21.

There is no obvious reason for FDA medtech regulation to change substantially, says Chapman, who notes the successful industry outreach and partnership approach favored by Center for Devices and Radiological Health (CDRH) chief executive Jeff Shuren, MD. His is a non-punitive style that has driven a more proactive and collaborative environment between industry and regulator.

Seema Verma's recent confirmation as CMS administrator is astute, in that she understands the interface between state and federal reimbursement issues, but how she will cope with the capping of Medicaid two years down the line will be interesting to watch. How the administration will cope with 52 million US health care uninsured in 2026 - the March 13 estimate of the Congressional Budget Office (CBO) under the AHCA, will be equally so.

"Health care in the US will be a flashpoint for at least the first two years of the Trump administration" - Brian Chapman.

The key issues relevant to medtech now are: will hospitals be compensated for procedures done on uninsured individuals who show up at hospitals? This is an issue that potentially slows down revenues and changes the financial health of a hospital. On top of that, some semi-elective procedures could be impacted; and will the device tax be abolished permanently.

But another issue – that of Price's skepticism about national-scale demonstration programs (such as the Comprehensive Care for Joint Replacement model that aims to support more efficient care for beneficiaries) – might also bring some surprises in a market that has taken the lead in outcomes-based care. Chapman notes that with Price leading HHS, there will likely be fewer major departures from the traditional fee-for-service model like CJR. However, he predicts CMS will continue to emphasize, and pay for, outcomes and quality.

For Trump, health care will be tough, and it's still not 100% clear what his ideas are. But also, his term started three months ago, and the effects of much of what is being proposed will not kick in immediately. "As we learn more, it seems likely that health care in the US will be a flashpoint for at least the first two years of the Trump administration," says Chapman.

The main battleground will be insurance design, but medtech should ensure its doesn't become complacent, says Chapman. He adds, "A lot of the action is going on in the insurance market, and we'll probably stay under the radar. Even hard lobbying by the medtech industry would probably fail to be heard above the noise of what's going on elsewhere – principally over the issue of where the burden of payment will fall."