Regulatory and Legal Reform

Update: The National Association of Manufacturers has called on congressional leadership to support and advance legislation aimed at reforming the pharmacy benefit manager market in a later dated November 7th. Click here to read the letter. Click here to take action.

Pharmacy benefit managers—companies that were first established to manage the cost of prescription drugs—are contributing to soaring health care costs and driving up the price of medications. These entities cannot go unchecked, and Congress must act, an NAM ad campaign launched Thursday is advocating.

What’s going on: The campaign, which includes both TV and digital ads, calls out PBMs—“middlemen owned by large health insurers”—for pocketing sizeable discounts from drug manufacturers rather than passing on the discounts or rebates to workers or employers.

• “America’s manufacturing workforce has struggled with skyrocketing health care costs driven by insurer-owned PBM middlemen for far too long,” said NAM President and CEO Jay Timmons.
• “Manufacturers are committed to providing quality health care benefits to our employees, so we need reforms to stop insurer-owned PBMs from keeping discounts and driving up prescription drug costs.”

Why it’s important: PBMs emerged in the late 1960s as a way of helping insurance companies and employers contain spending on prescription medications—but their business model has evolved significantly in the past half-century.

• Now just a few PBMs—subsidiaries of bigger health care firms—control up to 89% of the prescription drug market and operate with limited federal oversight.
• And they exert even more control in the industry by steering business toward specific pharmacy networks, frequently ones owned by their parent companies.

Congressional moves: Congress is considering various legislative solutions to address PBM rebate, fee and payment structures.

The last word: “Manufacturers support reforms to the PBM model that increase transparency, ensure pharmaceutical savings are passed from the PBM to workers and plan sponsors and delink PBM compensation from the list price of medication,” said NAM President and CEO Jay Timmons. “Congress must reform the PBM system so employers can negotiate, compete and achieve profit savings.”

NAM in the news: POLITICO’s Influence newsletter highlighted the NAM’s campaign.

Tell Congress To Reform PBM’s Today

A continuous regulatory onslaught is hamstringing the permitting process for U.S. energy and infrastructure projects—and thus reducing manufacturing competitiveness and harming the U.S. economy, NAM Vice President of Energy & Resources Policy Brandon Farris told Congress on Tuesday. 

What’s going on: By consolidating and cleaning up our infrastructure permitting regulations, the U.S. can advance multiple top policy priorities, Farris said at “The Next Fifty Years of the Clean Water Act: Examining the Law and Infrastructure Project Completion,” a hearing of the House Committee on Transportation & Infrastructure’s Subcommittee on Water Resources and Environment.

• “Streamlining and modernizing our nation’s permitting laws and procedures will help us advance many of our nation’s shared priorities, improving the quality of life for all communities; modernizing our infrastructure; achieving energy security; ramping up critical mineral production; enhancing manufacturing competitiveness and creating manufacturing jobs in the U.S.,” Farris said. “These are goals that all Americans can support.”

Why the wait? Current wait times for the approval of critical manufacturing facilities, roads, bridges and more are needlessly lengthy, and they’re forcing business overseas, Farris continued.

• “Why should we settle for a permitting process that can take 10 or 15 years to approve essential projects?” he asked, adding that in Australia, a country with similar environmental protections, approvals take about two to three years.
• One manufacturer of critical raw materials for semiconductors recently told the NAM that “because of the regulatory uncertainty in obtaining a Clean Water Act section 402 permit in a timely manner . . . they are going to build a facility in the E.U.” instead of the U.S.

Steps to success: Manufacturers are urging legislators to take several actions to rectify the broken system. These are:

• Consolidate permitting processes—with enforceable deadlines—for the siting of new energy projects and their infrastructure;
• Speed up the approval process for transportation-infrastructure projects;
• Commit to developing our resources to strengthen U.S. supply chains for the critical minerals vital to national security;
• Ensure that the Biden administration follows congressional intent on all streamlining efforts, including the One Federal Decision, a Transportation Department approach that seeks to expedite certain federal environmental reviews.

The last word: “Permitting reform will help us achieve more—more manufacturing, more domestic energy production, more inputs and raw materials and more jobs,” Farris concluded. “And our country and the world will be better off if we and our allies do not depend on our authoritarian rivals for energy and other natural resources.” 

Washington, D.C. –  A new report conducted by Oxford Economics and commissioned by the National Association of Manufacturers warns that the Environmental Protection Agency’s proposed air quality regulations for particulate matter (PM2.5) are projected to threaten $162.4 billion to $197.4 billion of economic activity and put 852,100 to 973,900 current jobs at risk, both directly from manufacturing and indirectly from supply chain spending. In addition, growth in restricted areas may be constrained, limiting investment and expansion over the coming years. Due to these limited opportunities for expansion or investment, these areas in nonattainment could lose out on an additional $138.4 billion in output and 501,000 jobs through 2027.

Overall, the regulations could make it extraordinarily difficult to create new manufacturing jobs and protect existing manufacturing jobs in areas out of attainment. The regulations could also prevent much needed infrastructure improvements in these areas. This is because compliance with the regulations could require restricting manufacturing operations, resulting in fewer jobs, less investment and higher costs for consumers and families.

“Improving air quality in the U.S. is a top priority for manufacturers, and we’ve worked for years to make progress in delivering some of the cleanest manufacturing processes in the world,” said NAM President and CEO Jay Timmons. “This analysis makes clear these new regulations will weaken our ability to invest in the technology and processes that would continue to reduce emissions—while jeopardizing high-paying manufacturing jobs. We need to let manufacturers do what they do best: innovate and deploy modern technologies to protect the environment, while creating jobs and strengthening the economy.”

Key Findings:

• The regulations create a total economic exposure of $87.4 billion for manufacturing economic activity, equal to 2.4% of the U.S. manufacturing sector’s gross value added.
• The number of manufacturing jobs associated with this exposed activity is 311,600, or 1.9% of all U.S. manufacturing employment.
• Manufacturing in the U.S. exposed to the proposed standard supports between $75 billion and $110 billion in GDP and between 540,500 and 662,300 jobs in the U.S. through supply chain spending.
• Due to limits on expansion and investment, the proposed rule would put at risk approximately $138.4 billion of gross value added (in 2021 prices) and 501,000 jobs in 2027 in areas of nonattainment.
• Under the proposed rule, 200 counties could be placed out of attainment.
• California’s manufacturing sector will be most exposed, followed by Michigan and Illinois.
• Manufacturing operations in the U.S. are environmentally cleaner than the global average.

Find the latest information on the NAM’s efforts to oppose top-down air regulations, including statements from manufacturing leaders, here.

-NAM-

The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs nearly 13 million men and women, contributes $2.90 trillion to the U.S. economy annually and accounts for 55% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org.

Yesterday, the U.S. Securities and Exchange Commission finalized a rule that requires new disclosures from companies conducting stock buybacks.

The background: Stock buybacks are a commonplace practice that allow companies to ensure that their cash reserves are being used effectively. Returning capital to shareholders benefits both the company and its investors by increasing shareholder returns, enhancing capital formation and ensuring efficient capital allocation.

• Over the past few years, however, policymakers and regulators have taken steps to discourage buybacks, and the SEC has now finalized a rule targeting them.

The burden: The SEC’s rule imposes several new burdens on manufacturers conducting buybacks:

• A requirement that companies disclose detailed buyback data from each day of a fiscal quarter—imposing significant costs and dramatically increasing the complexity of businesses’ quarterly filings
• A requirement that companies provide disclosures justifying their buybacks, which could further politicize these capital allocation decisions
• New disclosures related to companies’ stock buyback programs and transactions by company management and boards of directors

The pushback: The NAM spoke out against the SEC’s rule when it was proposed last year, detailing the harm it would do to manufacturers.

• In particular, the NAM called on the SEC to reverse its proposed next-day disclosure requirement, which would have mandated upward of 250 new SEC filings per year for many public companies.

The result: Thanks to the NAM’s advocacy, the SEC’s final rule left out the daily disclosure requirement—a significant victory for manufacturers.

• However, companies will still be required to track daily buyback activity to comply with the quarterly day-by-day reporting mandate.
• In addition, the final rule maintained the proposal’s burdensome requirement that companies describe the “objectives or rationales” for any stock buybacks as well as the “process or criteria” used to set buyback targets.

The next steps: Most domestic companies will be required to provide daily buyback data in their Q4 2023 filings, meaning that daily tracking will begin in October 2023 and be reported to the SEC in early 2024. Most foreign companies will be required to comply in their Q2 2024 filings.

The last word: “The NAM is disappointed that the SEC has chosen to unjustifiably punish manufacturers for returning capital to their shareholders,” said NAM Managing Vice President of Tax and Domestic Economic Policy Chris Netram. “Manufacturers, investors, retirement plans and the entire economy benefit when companies can efficiently allocate capital via share repurchases.”

Further reading: The SEC rule is not the only action targeting buybacks in the past few years. The Inflation Reduction Act included a new tax on buybacks—which the NAM also opposed. It is currently engaging with the IRS to minimize the harm done to manufacturers by the tax. Read more here.

As a family-owned small business that works with giant, complex industries like aerospace and medical devices, Westminster Tool knows its ability to innovate is what sets it apart. The 25-year-old company makes complex injection mold systems, composite tooling and components—including devices used in medical transplants and high-performance plastic parts for military aircraft.

• “We’re constantly looking to improve ourselves,” said Westminster Tool Chief Financial Officer Colby Coombs. “We’re always looking to push technological advancements, bring products to market faster, improve quality and reduce cost.”

So when a harmful R&D tax change went into effect, it caused real problems for the Connecticut-based company.

The change: Until recently, businesses could deduct 100% of their R&D expenses in the same year they incurred the expenses. But since last year, the tax code has required businesses to spread their R&D deductions out over a period of five years, making it much more expensive upfront to invest in the kind of innovation at which Westminster Tool excels.

The impact: As a result of the policy shift, Westminster Tool has found itself paying significantly more in taxes—and having to scale back its ambitions.

• “The impact has been large,” said Coombs. “Because of this change, I had to reconsider a contract that was going to mean new jobs and diversification just based on the cash flow that I needed in order to pay the government.”
• “Ultimately, this law may prohibit me from hiring more people, training more people in new skills, investing in our community and bringing in new work stateside.”

The uncertainty: As a result of uncertainty, small businesses are being forced to hold off on investments they can no longer afford.

• “I am at the mercy of this law, waiting to see how it plays out before I can make any large-scale investment in our business,” said Coombs. “It is putting massive pressure on our ability to grow and be an employer of choice in our community.”

The urgency: Coombs also emphasized the international nature of the challenge. With so many global competitors—especially those based in China, which provides a super deduction for manufacturers—an inability to invest in R&D will hurt manufacturing in the U.S.

• “If Congress doesn’t do the right thing this year, this is going to be a job growth prohibitor or a job killer,” said Coombs. “We are trying to compete with international competitors that aren’t hamstrung by this problem. If Congress fails to fix this issue, it will drastically impact my ability to compete with the global powers in our industry.”

The small business effect: Coombs notes that small businesses in particular will be harmed by this change, since they don’t have the cash reserves to take on significant new expenses.

• “Small companies don’t have the balance sheets to handle this,” said Coombs. “We are doing the best we can to survive, to represent our state, to make advancements and offer the best job opportunities we can. This law is prohibiting me from doing what we’re striving to do.”

The last word: “Failure by Washington to reverse this change will put companies underwater and out of business,” said Coombs.

You can find more information and ways to take action at the NAM’s R&D Action Center.

Reforming the permitting process for infrastructure projects could raise standards of living in America, unlock the full potential of ambitious recent legislation and make us less dependent on hostile foreign nations—all while making manufacturing in the U.S. more competitive, NAM President and CEO Jay Timmons told lawmakers yesterday.

What’s going on: Timmons gave testimony at “Opportunities to Improve Project Reviews for a Cleaner and Stronger Economy,” a hearing of the U.S. Senate Committee on Environment and Public Works, where he stressed the need to fix the needlessly time-consuming, complex permitting system.

• “For manufacturers, permitting reform is essential for our ability to compete in the global economy,” he said. “If we want more critical minerals for chip manufacturing, more domestic energy development and transport . . . more manufacturing facilities and jobs back home, better highways, bridges, airports [and] waterways, then we need permitting reform to make them a reality in the near future.”

Cut the wait: There is no reason for projects to take a decade or more to get approval, Timmons said.

• “If Washington could streamline the process—like manufacturers do in our businesses every single day—we could do more for this country,” Timmons continued, citing a White House Council on Environmental Quality report which found that environmental impact statements take an average of four-and-a-half years to complete.
• Timmons noted that in the case of one project, permits “from the U.S. Army Corps of Engineers were delayed a year due to the failure of the U.S. Fish and Wildlife Service to complete a required informal consultation under the Endangered Species Act.”

What to do: Timmons urged senators to work together to realize the following manufacturing priorities for permitting reform:

• Consolidated permitting processes with enforceable deadlines
• Fast approvals for transportation infrastructure projects
• A commitment to developing homegrown critical resources
• A moratorium on federal-agency regulations prior to the implementation of current standards
• Congressional assurance that lawmakers will hold the administration to recent and future statutory streamlining efforts

Protecting our values: Leaner, more efficient permitting and a commitment to sustainability and other American values can go hand in hand—and that’s exactly what manufacturers want, according to Timmons.

• “Manufacturers have a deep commitment to environmental stewardship, and we do not believe corners should be cut,” he said. “We believe in protecting our community, our neighbors and our environment. Reform is about . . . ensuring that this country—a democracy rooted in free enterprise—isn’t outpaced or outflanked or overtaken by nations that don’t share our values, don’t respect the environment or don’t recognize the dignity of human rights.”

NAM in the news: Bloomberg Law previewed Wednesday’s Senate hearing and wrote about it afterward.

• The offices of Sens. Shelley Moore Capito (R-WV), Kevin Kramer (R-ND) and Cynthia Lummis (R-WY) highlighted Timmons’ Senate testimony following the hearing.

An aggressive climate-disclosure rule proposed by the Securities and Exchange Commission hasn’t yet become law, but many companies are already adopting climate-disclosure practices and methodologies, according to The Wall Street Journal (subscription).

• Companies’ efforts to adopt climate strategies appropriate for their businesses, as well as the evolving methodologies for such reporting, are clear indications that the SEC’s costly and overly restrictive climate-reporting mandate is not necessary, said NAM Senior Director of Tax and Domestic Economic Policy Charles Crain.

What’s going on: “The Securities and Exchange Commission’s rule—which would require public companies to report climate-related risks and emissions data, including so-called Scope 3 emissions that come from a company’s supply chain—is expected to be brought in soon. … [But] [s]ome businesses have for years pursued carbon-related goals without the government forcing their hand,” according to the Journal.

• Manufacturers have led the move toward sustainability, with many having already begun to track and curb their emissions and work with their suppliers to do the same.

Why it’s important: “[G]roups from private manufacturers to egg farmers have balked at the cost and complexity of complying with a Scope 3 mandate from the SEC. The regulator has estimated its plan will raise the cost to businesses of complying with its overall disclosure rules to $10.2 billion from $3.9 billion, an additional cost of about $530,000 a year for a bigger business.”

• Manufacturers have urged the SEC to drop the Scope 3 reporting mandate. Some say it unfairly “creates a risk of double counting, because the supply-chain emissions of one company are the in-house emissions of another,” according to the Journal.
• While SEC Chair Gary Gensler told the House Committee on Financial Services earlier this month that the rule is not intended to burden private companies, “[m]andatory Scope 3 reporting would represent a costly, uncertain and ultimately infeasible standard for public issuers as well as the small and privately held businesses within their supply chains,” NAM Managing Vice President of Tax and Domestic Economic Policy Chris Netram told the same committee.

The last word: “Manufacturers [are] leaders in combatting climate change and making the necessary disclosures about this important work,” said Crain.

• “The SEC’s attempt to mandate a top-down, uniform approach to this evolving field would dramatically increase costs and legal liability for manufacturers—without improving information availability for investors or helping companies achieve their sustainability goals.”                          

The Federal Trade Commission is proposing to ban noncompete agreements, but doing so would disrupt the operations of most manufacturers, according to the findings of a recent NAM poll.

What’s going on: In February, the NAM polled manufacturing leaders to learn their thoughts on the impact of the FTC’s proposed rule, which would prohibit employers from imposing noncompete agreements on employees. Among the poll’s key takeaways:

• Approximately 70% of respondent manufacturers use noncompete agreements.
• The ban would cause a disruption for approximately 66% of manufacturers.
• The majority of manufacturers—about 89%—said they use noncompetes that last from six months to two years.
• Approximately half of manufacturers polled said a ban would have a negative impact on their investment in training and related programs.

Why it’s important: “Manufacturers use noncompete agreements only for select workers handling their most sensitive information, which cannot be allowed to fall into competitors’ hands,” said NAM Vice President of Infrastructure, Innovation and Human Resources Policy Robyn Boerstling.

• “These agreements are critical for protecting intellectual property. Banning them would force companies to completely change the way they operate and the way teams work together—disrupting workplaces, jeopardizing their ability to develop important new products and ultimately hurting customers.”

What should be done: If the FTC insists on moving forward with a noncompete rule, it should withdraw its current proposal and put forth a more tailored version “with exemptions clearly articulated and justified for the public’s consideration,” NAM Director of Labor and Employment Policy Brian Walsh told the agency.

The future of the Biden administration’s too-stringent rule governing the “waters of the United States” remains unclear following the president’s veto of legislation that would have overturned it, according to E&E News’ GREENWIRE (subscription).

What’s going on: “Republican lawmakers pushed almost immediately for a veto override targeting the…WOTUS rule on Thursday in the hours after President Joe Biden nixed a resolution that would roll it back.”

• A Republican-led measure in the House and Senate using the Congressional Review Act to block the overly restrictive WOTUS rule passed both chambers of Congress last month.
• House Republicans say they will push for a veto override.

Why it’s important: The Biden administration’s version of the rule replaced NAM-backed regulations from the previous administration.

The background: The Supreme Court is expected to make a decision this year on Sackett v. EPA, a case brought by an Idaho couple who have been blocked from building a house on their land for more than 15 years after the Environmental Protection Agency said part of the property was a wetlands.  

• The NAM and many GOP congressional leaders previously urged the administration to await the ruling on this case before releasing a final WOTUS rule.
• Issuing a new rule prior to a Sackett v. EPA decision only confuses things for manufacturers, making hiring and investment more difficult, NAM Senior Vice President of Policy and Government Relations Aric Newhouse said in December, following the release of the new rule.

What’s next: While “the fate of WOTUS remains murky as ever,” according to the article, several states have frozen the new rule.

• “Texas and Idaho secured an injunction on March 20, the day WOTUS took effect in the rest of the country. Those states are now subject to 1986 regulations, while the other 48 states are operating under the Biden administration’s definition—a split that has left the regulated community baffled as to how to operate nationally.”

The NAM says: “By vetoing the bipartisan Congressional Review Act on the WOTUS rule, the president removed an item that manufacturers greatly desire: regulatory certainty,” said NAM Vice President of Energy and Resources Policy Brandon Farris.

• “While the country awaits the decision in Sackett v. EPA, numerous investments in much-needed energy and infrastructure projects may be put on hold due to confusion over the new definition and potential added costs of compliance.”

The NAM is opposing the reintroduction of legislation that would institute “card check” and other labor policies harmful to manufacturers.

What’s going on: A coalition of nearly 100 organizations including the NAM urged Congress last week to reject the Protecting the Right to Organize Act, introduced in the House in February by Rep. Robert C. Scott (D-VA).

• “This bill would limit workers’ right to secret ballot elections, trample free speech and debate, jeopardize industrial stability, threaten vital supply chains, limit opportunities for small businesses and entrepreneurs, cost millions of American jobs and greatly hinder the economy,” they told Congress.

What’s in it: This legislation would significantly worsen—not improve—conditions for employees, the coalition argued. It would:

• Limit workers’ free speech and remove the right to vote via secret ballots.
• Hand confidential worker information over to unions without employee consent.
• Allow unions to choose bargaining units that maximize their chances of winning elections.
• Eliminate right-to-work laws.
• Allow intermittent strikes and remove bans on unions boycotting companies that do business with those engaged in an active labor dispute.

The cost: “The economic impact of the PRO Act would be catastrophic,” the coalition continued, citing one study which “found that the bill’s independent worker reclassification provision alone could cost as much as $57 billion nationwide, while the joint-employer changes would cost franchises up to $33.3 billion a year, lead to over 350,000 job losses, and increase lawsuits by 93%.”

In the spotlight: Many provisions of the PRO Act were raised during a hearing Wednesday of the Senate Health, Education, Labor and Pensions Committee chaired by Sen. Bernie Sanders (I-VT)—demonstrating that this issue and this legislation will remain a top priority for him and others in the Senate.