Sure, the health-care industry isn’t terribly enthused about the GOP plan to ditch Obamacare’s mandate to buy insurance. But the sweeping tax overhaul is otherwise a pretty big boon for it.
Lowering the corporate tax rate from 35 percent to 21 percent — as the measure passed by the House and then the Senate yesterday would do — holds the biggest benefits for companies that generate most of their profit domestically, such as health insurers and pharmacy-benefit managers. But it also promises more flexibility for massive pharmaceutical and biotech companies, which base some of their earnings offshore to avoid higher U.S. corporate taxes.
“Tax reform, I think, is definitely a positive for the industry long-term — although there are still some near-term disruptions that might be slightly negative for them,” said Arthur Wong, director of health-care corporate ratings for Standard & Poor’s.
Republicans are seeking to rapidly approve their tax plan this week, anxious to at last hand President Trump a major legislative victory before everyone leaves town for the holiday break. Both chambers passed the legislation yesterday, with all but 12 House Republicans voting for it (the measure didn’t garner a single Democratic vote).
Yet the House must vote again today on the bill, after the Senate parliamentarian ruled Tuesday afternoon that three provisions violated the Byrd Rule guidelines for what can fit into a budget bill and still pass with a simple majority. If all goes smoothly, Trump is expected to sign the measure soon afterward.
“This is one of the most important pieces of legislation Congress has passed in decades … for all those millions of Americans struggling paycheck to paycheck, help is on the way,” House Speaker Paul Ryan (R-Wis.) said after the vote Tuesday. “This is a good day for workers and a great day for growth.”
Much has been made of how the tax bill repeals the Affordable Care Act’s individual mandate to buy health-care coverage. It’s certainly a big deal -- the mandate was long viewed as key to creating healthy insurance risk pools -- yet the long-term effects of its repeal are debatable. Although the Congressional Budget Office says 13 million fewer Americans would be insured without the mandate, independent analyst S&P has estimated it would result in only 3 to 5 million fewer people who are insured.
But here’s an effect of the tax overhaul that is clearer: It means more money in the pockets of insurers and probably drugmakers, too.
It’s true that most companies don’t actually pay the full 35 percent corporate tax rate under current law because of various tax carve-outs. But tax experts say even with those exceptions disappearing, companies will hold on to more of their profits in the new regime. UnitedHealth Group, for example, had a 32.5 percent income-tax rate in the third quarter.
Analysts predict that health insurers and pharmacy-benefit managers will see profits 10 to 15 percent higher under the tax overhaul – money they could potentially put into lowering premiums for customers.
The major for-profit insurance companies would see their earnings per share rise anywhere from 24 to 62 percent, according to Cowen’s health-equity research team (although that projection assumes a 20 percent corporate rate, not the 21 percent Congress settled on.)
The benefits of the new tax rules to the pharmaceutical industry are a little more indirect, analysts say, as Amgen, Gilead Sciences, Johnson & Johnson and other major players have long based some operations in other countries with lower corporate tax rates. That has resulted in a huge supply of overseas cash reserves for these companies that want to avoid paying the high U.S. corporate rate.
The new GOP plan would eliminate the current U.S. corporate rate for companies’ future overseas profits under a new “territorial” tax system similar to that of most other countries. And current reserves would be taxed at just 15.5 percent when they’re brought back home – giving drug companies an infusion of new funding to put into research and development of new medications, acquisitions or paying higher dividends, for example.
“I think that’s the big benefit for the big pharma companies and biotech – they have access to freer moving of that cash,” Wong told me.
The Biotechnology Innovation Organization, which represents biotech companies, called the original Senate version of the tax overhaul "pro-growth" for its treatment of corporate taxes.
"By lowering America’s corporate tax rate, maintaining the R&D Tax Credit, and moving the U.S. to a territorial tax system, the proposal will make the U.S. more competitive on the world stage and support American jobs and manufacturing," the group said in a statement in November.
Yet in Washington, the big lobbying arms of the drug and insurance industries have stayed mostly silent about changes to the corporate tax code, weighing in on only the health-care-specific elements of the tax overhaul. Both America’s Health Insurance Plans and the Pharmaceutical Research and Manufacturers of America declined to comment on impending lower tax rates.
“I think they’ve been pretty quiet as a whole, knowing the train has left the station and there’s going to be some benefit for them,” said Ipsita Smolinski, managing director at the health-care consulting firm Capitol Street.
|You are reading The Health 202, our must-read newsletter on health policy.|
|Not a regular subscriber?|
AHH: Yesterday, the FDA approved a first-of-its kind gene therapy for a rare form of childhood blindness. It’s the first time a gene therapy has been approved in the United States for an inherited disease, our colleague Laurie McGinley writes. But it comes at a stratospheric cost. While the Philadelphia-based Spark Therapeutics says it will not announce the cost of its childhood-blindness treatment until January, analysts speculate it could run as much as $1 million to treat both eyes, Laurie reports.
The form of blindness treated by the new therapy is very rare. About 1,000 to 2,000 people in the United States have inherited retinal disease related to a faulty gene. Luxturna, the new treatment, is injected into the eye and uses a benign virus to deliver healthy copies of the gene to the retina.
"While Luxturna does not represent a cure or result in perfect vision, it can substantially improve eyesight, according to researchers involved in its development," Laurie writes. "Children with the gene mutation often are diagnosed at an early age with disorders such as Leber congenital amaurosis or retinitis pigmentosa. Over time, their limited vision typically gets worse, resulting in night blindness and a loss of peripheral and central vision. Eventually, almost all end up completely blind."
An FDA advisory panel unanimously recommended in October to approve the treatment, which is expected to be available at select facilities starting late in the first quarter of 2018.
OOF: The pharmaceutical industry’s biggest trade group spent $57 million on federal and state lobbying last year as the industry faced criticism over rising drug prices, Kaiser Health News’s Jay Hancock reports. It was the Pharmaceutical Research and Manufacturers of America's biggest spike in lobbying spending since 2009, when it geared up for the ACA debate.
“PhRMA has always responded by increasing its resources" whenever Washington talks about cutting drug prices, former PhRMA CEO Billy Tauzin told Jay. Jay details new filings showing where PhRMA's money went last year:
- Big checks went to national political groups backing congressional, presidential and state candidates. American Action Network got $6.1 million, the Republican Governors Association got $301,375 and the Democratic Governors Association got $350,000.
- It spent $7 million on the “Go Boldly” ad campaign.
- $2 million went to groups representing patients with various diseases, some of which deal with high drug costs.
- PhRMA collected $271 million in member dues and other income in 2016, up from $220 million in 2015.
OUCH: More U.S. workers are dying on the job from alcohol and drug use, the Wall Street Journal reports. "The number of U.S. deaths at work from unintentional drug and alcohol overdoses jumped more than 30% in 2016, according to new government data, showing that the nation’s struggle with a deadly opioid epidemic is migrating to the workplace," Harriet Torry writes.
According to the Bureau of Labor Statistics' National Census of Fatal Occupational Injuries, 217 workers died on the job last year as a result of unintentional overdose from the nonmedical use of drugs or alcohol. That's up from 165 in 2015.
--The tax train is moving steadily down the tracks, but you couldn't say the same for the rest of Republicans' year-end tasks. A ton of priorities -- including funding the Children's Health Insurance Program and community health centers and paying extra Obamacare subsidies -- remain up in the air as Congress struggles over a measure to keep the government funded past Friday and a $81 billion disaster aid package.
It's now looking like Congress will fund the government only until Jan. 19, Politico reports. That throws funding for CHIP into even more chaos, now 80 days since the state-run program technically expired. In November, the House passed a bill to provide the funds but Democrats opposed it over the pay-fors.
Yesterday, parents took their case to Capitol Hill, pleading with Congress to provide the funding before their kids lose health coverage, the New York Times' Robert Pear reports. "To parents of sick children, the gamesmanship in Washington was incomprehensible, especially as Congress was working to pass a $1.5 trillion tax cut with little worry over its cost to the Treasury," Robert writes.
“I am here to call on the Senate to do the right thing and invest in our nation’s true future, invest in the children, to save CHIP and to save children’s lives,” Utah resident Sonja Reynolds told Robert. Of Reynolds' five children, all of whom are on CHIP, two have Crohn's disease and must get regular infusions of Remicade, an expensive biologic drug.
--More and more states are warning their residents they'll be forced to suspend CHIP if Congress doesn't provide them funding soon. This week, the Alabama Department of Public Health posted a notice on its website saying that it would freeze enrollment Jan. 1 and would not renew any coverage after that date with a reauthorization bill. Last week, Virginia sent letters last week to parents of 68,000 children telling them coverage would stop at the end of January unless Congress took action. Yesterday, Connecticut joined the throng, posting a notice on its website saying its extra funding is expected to run dry by Jan. 31.
--For all their disagreements over how to fund CHIP, at least lawmakers pretty much agree the program should be reauthorized. Extra Obamacare subsidies, known as cost-sharing reductions, are another matter. Senate Majority Leader Mitch McConnell (R-Ky.) has promised to add the payments to a year-end bill, in order to win Sen. Susan Collins's (R-Maine) vote for the tax overhaul. But that provision appears dead in the House.
Conservatives are resistant to the CSRs, which would help Obamacare marketplace insurers bring down costs, for two main reasons -- they view the payments as propping up President Obama's health-care law, and they're under pressure from antiabortion groups to make sure abortion-restricting Hyde language is attached.
“We’re supposed to stand firm. That’s the deal, we were all told that’s what we agreed to stand for as conference just two weeks ago,” top Freedom Caucus member Jim Jordan (R-Ohio) told Politico. “We’ll see what they send back. But if it’s got Alexander-Murray on it, that’s a big problem for a lot of us. Certainly the Freedom Caucus.”
“I don’t know if I can vote for it at this point. I haven’t made a decision,” Republican Study Committee Chairman Mark Walker (R-N.C.) said. “But we also have major problems with the CSRs [cost-sharing reductions], as well, … coming back from the Senate.”
--A few more good reads from The Post and beyond:
- The American Enterprise Institute holds an event on “New thinking about poverty and economic mobility” on Jan. 18.
Senate Republicans pass GOP tax bill early Wednesday morning:
House Democrat on tax bill: "How the Grinch stole middle-class tax cuts:"
Here's a look at six people who won the Internet in 2017:
Seth Meyers on the words the Trump administration told the CDC to replace: