Mitigating Risks to International Investments in Health and Life Sciences

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Mitigating Risks to International Investments in Health and Life Sciences

The Challenge: Local NGOs in key regions around the world were mounting sophisticated efforts to influence government policies and actions in ways that could undermine policies that are crucial to international investment in health and life sciences. The client was seeking to better understand who was funding and supporting these on-the-ground efforts so they could anticipate and mitigate those efforts.

The Solution: We began by producing a network overview report that detailed how international groups and global funders supported and directed the activities of local, seemingly-grassroots organizations. The overview report identified the key groups involved, which countries they were active in, the funding and other technical and legal support they provided, and how the groups at various levels coordinated and collaborated to influence national government and multilateral policies.

We then stood up an ongoing monitoring program informed by the network overview to provide regular analysis on activists messaging and influence efforts, collaboration among the various groups, and communication with national government and multilateral officials.

The Result: The network overview helped the client understand the nature and scope of the challenge they were facing. The monitoring alerted the client to issues before it was too late to mitigate their impacts.

Pharmaceutical Company Facing Inexplicable Opposition to a Next Generation Drug

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Pharmaceutical Company Facing Inexplicable Opposition to a Next Generation Drug

Challenge

A pharmaceutical company had developed a next generation treatment for a significant life-threatening disease. The company’s engagement with patient advocates and other stakeholders had proven mostly successful and won them significant support for the future release of this drug. However, there was one very vocal organization that vociferously opposed this next generation treatment at the FDA and elsewhere.

Solution

We were engaged to help the firm understand the motivations of this opponent and provide a roadmap for overcoming this opposition in order to successfully win approval for this lifesaving drug. Through our research, we exposed this group’s true motivation for breaking from other stakeholders and opposing the drug. We discovered that the main source of revenue for this organization was treatment clinics that used the current generation of drug treatments that aided but did not prevent the disease. The organization had a history of similar controversy and loud objections that could reduce their credibility, as demonstrated by the range of key voices among patient advocates and other stakeholders we were able to identify who were highly critical of this organization.

Results

The materials and insights we provided allowed the pharmaceutical company to build a narrative that marginalized the organization and successfully overcame their objections.

What’s on TAP for Healthcare and Tax Reform?

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Here’s What You Need to Know

As Donald Trump is sworn into office tomorrow, eyes turn to what key industries can expect in his Administration. As part of The Administration Project (TAP), Delve has been analyzing and assessing the incoming administration’s personnel choices and policy cues to determine just that.

This week, we released the next two summaries of our insights:

  • Healthcare Issues Under The Radar: While most of the press and onlookers tracking healthcare policy under the Trump administration are focused on efforts to repeal and replace Obamacare, there are a number of other incredibly important policy fights flying under the media radar. These debates include drug pricing, Medicare reform, and major insurance company and hospital mergers.
  • Tax Reform Table Is Set, So Who Will Get To Eat? More so than at any point since the Tax Reform Act of 1986, the stars have aligned to make the collective dream of comprehensive tax reform a reality. With Republican control of the White House and both chambers of Congress, along with a cast of tax experts and dealmakers including Paul Ryan, Kevin Brady, Steve Mnuchin, Wilbur Ross, Chuck Schumer, and of course Donald Trump, the players needed to help make tax reform a reality are in place. How exactly the process takes shape will depend on a number of political variables, but the stage is certainly set for major policy action.

For a more comprehensive look at how the new Administration will impact these industries, check out our blog posts “What’s On TAP for Healthcare” and “What’s On TAP for Tax Reform.” Also, don’t forget to subscribe to TAP for weekly updates on the new Administration and access to custom research on-demand.

News You Can Use

NOT-SO-INDEPENDENT BOARD MEMBERS
Recently, the Delaware State Supreme Court issued a ruling that could imperil companies with too cozy a relationship with their supposedly independent directors. The decision found that members of the board of the online gaming company Zynga had too close a relationship with Zynga’s corporate officers (one board member even co-owned a private jet with an executive). This type of connection had not been seen as undermining independence in the past, but the Court agreed with shareholders who accused the board of breaching their fiduciary duty by allowing the company founder and controlling shareholder to trade on inside information. The long-term impact of the ruling is likely to be stricter scrutiny on boards and companies regarding the actual independence of board members. Look for concerned or activist shareholders to cast a wider net when examining such relationships in the future.

MNUCHIN MISDIRECTION OR SCHUMER SHAME?
Today the highly-anticipated confirmation hearing of President-elect Trump’s nominee to lead the Treasury Department, Steven Mnuchin, will begin and Democrats will almost certainly seek to use Mnuchin’s alleged role in the 2008 collapse of California’s IndyMac bank against him. Critics have used the collapse to tie Mnuchin to the 2008 housing crisis and home foreclosures, but a recent review of the details surrounding IndyMac’s failure reveals a different culprit – Minority Leader Chuck Schumer. The bank’s failure stemmed from a $100 million-a-day run on the bank that was prompted by a June 26, 2008 letter released by Schumer in which he told federal regulators he was “concerned that IndyMac’s financial deterioration poses significant risks to both taxpayers and borrower.” Schumer’s letter was seen as so irresponsible that the Office of Thrift Supervision specifically blamed Schumer for IndyMac’s collapse and a Democratic Comptroller of Currency called Schumer’s actions “incredibly stupid.” This example serves as an important reminder of how unreliable claims made during a confirmation hearing really can be.

THE INTERNET OF THINGS SPEAKS
If smart homes are going to become actually smart, the various “Internet of Things” devices trickling into houses will need to talk to each other. Yet, despite the growing number of home gadgets like Apple’s HomeKit, Samsung’s SmartThings, Amazon’s Alexa, Google Home, and more, a universal language between the “Internet of Things” does not exist – but it is in the works. Major tech companies including Intel, Microsoft, Qualcomm, Samsung, LG, and Sony are all quietly working toward this common language through an industry body called the Open Connectivity Foundation (OCF). The group is looking to provide the standard language for all “Internet of Things” devices to be able to communicate regardless of brand. But, with Apple and Google not participating, there is still a question of whether or not OCF can succeed. Setting up a standards body may also help these companies navigate the eventual policy and legal questions these devices raise.

IS GOVERNMENT ETHICS RIGGED?
Political commentator and longtime CPA Bruce Bialosky worries “that the entire ethics process is rigged against people who have succeeded outside government.” As he notes, “It is easy to put your net worth in a blind trust when all you have is your house, a few investments, and your multiple government pensions. But, it is a lot different when you have a boatload of money earned from a highly-successful career spanning 40 years.” The ethics bureaucracy, however, does not appreciate or care about that distinction. Their insistence that such successful businessmen who have not relied on the revolving door of Washington to build their wealth, divest entirely from it “would cause future potential citizens from ever taking important government positions.” Bialosky is certainly not “naïve as to the fact that a wealthy person may wish to become more wealthy. … But they have been asked to work for us at great sacrifice. They have multiple talents that career politicos do not. They also bring a fresh perspective. Most everyone wants to shake things up a little in Washington. … The only way to address this is bringing in fresh blood. We should not let the ethics industry stop us from having qualified people from outside government come in and do some ‘remodeling.’”

MOBILE BANKING FOR THE UNBANKED
Monese is a mobile banking app in the U.K. geared toward helping recent immigrants establish a firm financial footing in their new home. It is part of a trend of new tech companies looking to disrupt traditional banking systems while capitalizing on the underserved demographic of the less affluent, especially migrants who are bumping up against issues with confirming their identities. Having a bank account, and thus being able to have a debit or credit card, is crucial for modern existence, especially as some places around the world begin to move toward a trend of cash-free societies. Apps like Monese could provide the solution for the poorer communities that suffer in a cash-free system.

ARE WHITE COLLAR WORKERS DOOMED?
A recent study by McKinsey & Company has suggested that advancements in robotics, artificial intelligence, and machine learning could lead to a new age of automation that may endanger many white collar workers the way previous advancements have harmed manufacturing workers. The report’s key takeaway was an estimate that about half of all the activities people are paid to do in the world’s workforce, or $16 trillion in wages, could potentially be automated by adapting currently demonstrated technologies. What this figure may not be taking into account, however, is the fact that at some point, companies automating their workforce would result in a greatly diminished number of consumers who can pay for their goods and services. Going back to Henry Ford paying his factory workers enough to afford the Model T’s they were building, savvy employers have often ought to ensure their workers could afford their products, and that mentality could limit the accuracy of these predictions. Between that calculation and the churn of innovation creating new opportunities for new kinds of work, McKinsey’s Malthusian prediction seems unlikely to become a reality.

Mark Your Calendar

Friday, January 20 – Inauguration Day
Tuesday, January 31 – Year-End Federal Campaign Finance Reports Due

What’s on TAP for Healthcare?

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Repealing and replacing Obamacare has taken up most, if not all, of the discussion on health care policy. Everyone from pundits to policymakers has been attempting to predict and navigate the politics and process of how a new administration and Congress will handle the Affordable Care Act.

But, the personnel at several different agencies and commissions dealing with issues beyond Obamacare will arguably have a greater impact on the many different sectors of the health care industry. Financial stability, innovation, and care delivery to patients are all affected by agencies and policies that one may think aren’t consequential at first.

So, here are three things to watch when it comes to the Trump administration and health care:

Disruption At The FDA?: This past year, the pharmaceutical industry has taken big reputational hits due to headline-grabbing price hikes on several of their products. While most of the political criticism has come from the left, President-elect Trump said in his press conference last week that the pharmaceutical industry was “getting away with murder” with their pricing mechanisms. While this debate will continue to grab headlines, drug pricing is only one of several issues the industry is concerned about. Who the new administration may tap to head the Food and Drug Administration – the pharmaceutical industry’s chief regulator – will determine whether or not drug companies should count on regulatory disruption or conventional wisdom.

As part of The Administration Project at Delve, we’ve been following potential candidates to head the FDA, including Dr. Scott Gottelib and Jim O’Neill appear to be the main two candidates under consideration to head the FDA, and each highlights a different path for the agency. Gottelib would be a far more conventional conservative choice; he opposes efforts to expand clinical trials and has argued for adopting technology more quickly and efficiently to gather information assessing the impact of drugs. Gottelib has even criticized Trump’s previous call for the reimportation of prescription drugs in favor of allowing more flexible pricing for branded drugs.

O’Neill’s libertarian inclinations indicate he would be willing to enact far more sweeping changes; he has called for limiting the FDA’s mandate to only assessing whether drugs are safe, rather than if they are effective. This approach would likely benefit smaller biotech firms who do not have the resources to fund expensive clinical trials, but hurt big pharmaceutical companies by introducing new competition into the market. Given the President-elect’s reiteration of his critical view of the pharmaceutical industry, it appears the FDA will be a major battleground for reform under the new administration.

To Reform Medicare Or Not To Reform Medicare: If there’s one thing doctors and hospitals are much more anxious about than an Obamacare replacement, it’s the potential for Republican-led Medicare reform. This could be a serious point of contention between the legislative and executive branches over the next four years; the President-elect has said he doesn’t plan to “meddle” with the entitlement, while Speaker Ryan and many Congressional Republicans who see reforming the program as a top priority. This raises the question of whether we could see a Trump-Ryan compromise on the issue.

An argument for this compromise is bolstered based on Trump’s pick for the Center for Medicare and Medicaid Services, Seema Verma. She further demonstrates Trump’s pragmatic approach to reconcile populist ideas (such as preserving expanded health coverage in Obamacare) and conservative priorities, such as personal responsibility. Verma has already worked with then-Indiana Governor Pence to develop a Medicaid expansion plan called Healthy Indiana 2.0, mandating low-income individuals make small monthly contributions to their health-care plans to ensure they have “skin in the game and therefore an incentive to make cost-conscious healthcare decisions.” Healthy Indiana 2.0 also reimbursed doctors at the higher Medicare rate in order to encourage physicians to accept Medicaid patients. Given her past work, Verma is likely to be far more favorable towards doctors and hospitals seeking higher rates of compensation under any Medicare reforms.

Where Do Insurance Mergers Go From Here? Despite having stayed relatively quiet during much of the transition process, insurance mega-mergers between Anthem and Cigna, as well as Aetna and Humana, are still trudging through the regulatory approval process and now waiting to see how the Trump administration will greet them. The Obama Justice Department has sued to block these mergers, taking the position that consolidating the nation’s five largest health insurers into just three would be bad for consumers. It remains to be seen precisely how the Trump administration will approach these mergers and how they will handle these pending lawsuits.

To really get a sense of what will happen next with these mega-mergers, who Jeff Sessions may appoint to DOJ’s antitrust division will be one important sign. Appointments to the Federal Trade Commission will be just as critical. Joshua Wright – a former Republican member of the FTC and current law professor at George Mason University – was tapped to lead the Trump transition on FTC and antitrust issues. During his tenure at the FTC, Wright advocated for “greater use of economics in both antitrust and consumer protection cases.” This will likely be the lens by which Trump could make appointments to the commission, and economic arguments will likely be given more sway to any antitrust case.

Obamacare and its potential replacement will undoubtedly have an impact on health care providers, insurers, and innovators. But the personnel at agencies like the FDA, CMS, and FTC may be more critical to the foundation of how these sectors of the health care industry operate in the future. The Administration Project at Delve can provide you the insights on how potential candidates to these and other agencies could translate into business-disrupting policies. To learn more, click here.