Crystal ball gazing is invariably a perilous activity. Conventional wisdom suggests that in health and the economy there is only one way for 2021 to go and that is up. Surely, there are valid reasons to be cautiously optimistic about 2021. Nevertheless, just as no-one could have known in December of 2019 that a novel coronavirus would sweep around the world and wreak havoc, we can’t know with certainty which exogenous shocks to the economic and healthcare systems may occur in 2021, or, for that matter, how long existing, structural problems will persist.
The economy is experiencing a bumpy recovery, but many sectors – especially services, such as tourism, transportation, lodging, and restaurants – are still barely limping along. Given a decimated small business sector and crippling state and federal deficits, 2021 isn’t going to be smooth sailing, at least not on Main Street. And, while the stock market boom is consolation to some, the disconnect between what’s happening on Main versus Wall Street will likely widen.
The Covid-19 pandemic will leave an indelible mark in the U.S. and across the globe. There have been more than 350,000 deaths in the U.S. alone, with tens of thousands more to die this month, and perhaps as many as several hundred thousand more fatalities projected this year.
The pandemic will eventually begin to fade in 2021, but it will be an excruciatingly tough slog. The first half of 2021 will be particularly difficult. A combination of continued efforts at mitigating the spread of the virus and the rollout of multiple vaccines will eventually subdue Covid-19, but this may not occur until the third quarter.
Vaccine uptake will face significant obstacles. Recent Covid-19 vaccination distribution problems highlight inadequacies in federal and state governance, but also the U.S. public health system writ large. In December, tens of millions of doses of Covid-19 vaccines were shipped, but poor planning and distribution have led to an inefficient, sub-par process of inoculating high priority groups.
The Covid-19 crisis has exposed major defects in U.S. public health. Especially early on, the public health system failed to provide adequate personal protective equipment, testing, and contact tracing. Throughout the crisis it has also been deficient in consistent messaging at the state and federal levels. Regarding the vaccination campaign, on the demand side, vaccine hesitancy is an obvious challenge that messaging is supposed to address. On the supply side, other major hurdles must be overcome, including distribution, bottlenecks in the pharmacy supply chain, storage, and a detailed plan for prioritizing at-risk groups. It is hoped states, counties, and municipalities will come around towards implementing evidence-based prioritization and distribution plans. However, impediments to efficient delivery will continue to crop up, given the glaring issues in states’ preparedness at this point in time.
Despite the doom and gloom surrounding Covid-19, there may be a few silver linings to the pandemic. The crisis exposed flaws in the American public health infrastructure and messaging, which legislators and policymakers will now seek to redress. There are many vexing problems in public health of which the Covid-19 response is but one example. The stubborn long-term decline in life expectancy in the U.S. is a result of multiple deep-seated issues plaguing the country; from the diseases of despair – drug overdose, alcoholism, and suicide – to problems of access to healthcare to persistent socioeconomic inequalities. It’s very likely the Biden Administration will prioritize these issues early in the Administration, as a way of beginning to rectify decades of neglect of public health.
Of all industries that needed a public image boost the pharmaceutical industry got one from an all-out effort to develop Covid-19 therapeutics and vaccines. Dozens of firms have been active in Covid-19 therapeutic and vaccine development. At the same time, Food and Drug Administration approvals for non-Covid-19 indications are still humming along. In 2020, there were 53 new approvals, many of which are orphan and cancer drugs, which continues a long-term trend in these disease categories.
Perhaps the most prominent positive development to emerge from the Covid-19 pandemic is the revival of the public-private partnership. The ability of governments and the pharmaceutical industry to collaborate successfully on vaccine development in an incredibly short span of time could reinvigorate cooperation in other areas of drug and vaccine development. HIV vaccine and neglected tropical diseases come to mind.
The federal government hasn’t just been involved in Covid-19 drug and vaccine development. It has also been instrumental in establishing procurement and payment systems for approved products targeting Covid-19.
Besides the Covid-19 realm, the federal government continues to be a key player in promulgating new payment models in Medicare and Medicaid. In recent years, the Department of Health and Human Services has signed off on a number of state-based initiatives with respect to value-based contracting. These include Louisiana’s subscription model for hepatitis C medications and Oklahoma’s novel value-based contracting initiative.
In 2020, the Trump Administration made several important policy changes to facilitate value-based contracting in the public sector. Perhaps the most noteworthy example was that it altered the Medicaid best price rule. Rather than only allowing one best price for each drug, the Centers for Medicare and Medicaid Services (CMS) is permitting arrangements in which there is more than one price for a drug, based on health outcomes. This represents a capstone on the value-based contracting front, and may usher in a new wave of innovative payment models in the ever-expanding Medicaid program.
However, for those expecting major changes in 2021 in the pricing and reimbursement of pharmaceuticals landscape, they may be disappointed. It’s unlikely the pharmacy benefit manager rebate system will be overhauled, the Trump Administration’s executive order notwithstanding. Although this order is due to go into effect in January 2022, it may not survive the transition to a Biden Administration, or court challenges.
Nor should we expect the proposed mandatory demonstration project (“most favored nations”) to peg Medicare Part B (physician-administered) drug prices to an international price index (IPI) to successfully fend off legal as well as logistical challenges.
Nevertheless, some version of the H.R. 3 legislation (Lower Drug Costs Now Act), which contains IPI elements, could pass in 2021, but will face a steep uphill battle in the Senate.
Several of the biggest reform measures regarding drug pricing and reimbursement this year may occur in Medicare Part D – the prescription drug benefit. The Senate bill S.2543 (Prescription Drug Pricing Reduction Act), co-sponsored by Senators Grassley (R – Iowa) and Wyden (D – Oregon), restructures the Medicare Part D (outpatient) drug benefit, capping maximum annual out-of-pocket costs for Medicare beneficiaries at $3,000, and shifting a substantial portion of cost management to Part D plans rather than the federal government. This piece of legislation stands a chance of passage in 2021.
Also, it’s expected the Biden Administration will initiate a discussion on a possible expansion in Medicare by way of reducing the age of eligibility to 60. Physician and patient support for Medicare eligibility at 60 is growing. And, there may even be bipartisan backing in the House and Senate for a modest expansion of Medicare.