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House Passes Bill That Would Rein in PBMs

The House passed a health care package on Monday that includes measures to curb some practices by pharmacy benefit managers, according to STAT News.

What’s going on: The Lower Costs, More Transparency Leadership Act, which passed on a bipartisan vote, “would equalize payment between hospital outpatient departments and doctors’ offices for administering medicines in Medicare, rein in some practices by pharmacy benefit managers and codify health care price transparency rules.” 

  • The vote on the measure was scheduled for September originally but was pushed back amid a larger funding dispute.

What it means: The package would prohibit PBMs from “spread pricing”—or charging Medicaid more than they pay pharmacies for medications.

  • It would also require PBMs, “clinical lab test providers, imaging providers [and] ambulatory surgical centers … to be more transparent about their pricing.”

What’s next: “Some community health advocates hope Monday’s vote will jump-start negotiations with the Senate, where leaders have signaled they’re looking for more than what’s in the House bill,” POLITICO reports.

Our view: “House passage of the Lower Costs, More Transparency Act is a step forward for PBM transparency, but Congress must continue to advance reforms that ensure PBMs pass on prescription drug discounts directly to plan sponsors and patients as well as delink their compensation from the list price of drugs,” the NAM said on Tuesday.

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Retailers Whittle Down Holiday Offerings

This holiday season, instead of overstocking shelves with merchandise, retailers “have pared back their inventories while trying to focus their supply chains more tightly on products that shoppers want,” The Wall Street Journal (subscription) reports.

What’s going on: “Many retailers have spent much of the year working through the stockpiles from last year and now say they have cleaned up their distribution centers and their balance sheets.”

  • After the global pandemic, sellers bulked up their stocks in case of another major supply chain disruption—but it was a “strategy that left many companies saddled with goods.”

A different holiday season: Owing to high inflation and more spending on services than goods, “[h]oliday retail sales in the U.S. are expected to grow at a slower rate this year.”

  • “The National Retail Federation predicted sales will rise between 3% and 4% over 2022 to between $957.3 billion and $966.6 billion. Last year, holiday sales grew 5.3% to $936.3 billion.”

​​​​​​​ What they’re doing: Retailer strategies for this year include paying close attention to consumer trends and offering “variety [over] redundancy.”

  • Said one retailer’s CEO, “The customer today does not want an endless aisle. They want the best aisle.”
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U.S., Others Release AI Safety Guidelines

The U.S. and 17 other countries have agreed to “a set of guidelines to ensure AI systems are built to ‘function as intended’ without leaking sensitive data to unauthorized users,” The Hill reports.

What’s going on: The 20-page document—unveiled last Sunday and published jointly by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency and the UK National Security Centre—enumerates recommendations for everything “from AI system design and development to its deployment and maintenance.”

  • The agreement discusses threats to AI systems, how to protect AI models and data and how to release and monitor AI systems responsibly.
  • Other signatories include Canada, Australia, Germany, Israel, Nigeria and Poland.

Why it’s important: “This is the first time that we have seen an affirmation that these capabilities should not just be about cool features and how quickly we can get them to market or how we can compete to drive down costs,” said U.S. Cybersecurity and Infrastructure Security Agency Director Jen Easterly.

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California Emissions Law Will Harm Manufacturing

Large companies that do business in California will soon be required to report their greenhouse gas emissions to state regulators thanks to a new state law, according to USA Today.

What’s going on: “Signed by Gov. Gavin Newsom on Oct. 7, SB 253 requires the California Air Resources Board to form transparency rules for companies with yearly revenues exceeding a billion dollars by 2025. The first of its kind law in the U.S. will
impact over 5,000 corporations both public and private … ”

  • Under the law, by 2026 major companies will need to report the amount of carbon produced by their operations and electricity.
  • By 2027 they will need to disclose “Scope 3” emissions, or those attributable to their customers and suppliers.

Why it’s important: The effects of the law on manufacturing will be ruinous and widespread, according to Conference of State Manufacturers Associations Chair and Utah Manufacturers Association President and CEO Todd Bingham.

  • “Manufacturers are committed to commonsense regulations that protect consumers and the environment,” Bingham said. “California’s new law is unworkable and makes it more difficult for manufacturers to grow, invest and hire—not just in the state, but across the country.”
  • COSMA members serve as the NAM’s official state partners in driving manufacturing-friendly policies at the state level.

Costly and inaccurate: “[M]anufacturers will spend millions of dollars to fulfill [SB 253]’s requirements,” Lance Hastings, president of the California Manufacturers & Technology Association (an NAM state partner), said in a September statement. “The uncertainty and reliability of this data and the process required to comply with the legislation will not produce complete, accurate or comparable disclosures.”

  • Last month, the CMTA submitted a request for veto of the California law to Gov. Newsom.

The SEC: The California measure follows the September finalization of a similar rule from the Securities and Exchange Commission that “require[es] publicly traded companies to disclose their emissions and climate-related risks to investors.”

  • The rule—which the NAM has been actively working against—not only requires numerous unfeasible moves, but also imposes significant financial burdens on manufacturers, the NAM has said.

What should be done: “We hope California’s devastating policy is reversed and are grateful for the NAM’s coordinating efforts against regulatory overreach at the national level,” Bingham continued.

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FCC Seeks to Reinstate Net Neutrality Rules

The Federal Communications Commission voted late last week to advance a proposal that would reinstate Obama-era net neutrality rules, according to The New York Times (subscription).

What’s going on: “The commissioners at the Democratic-led agency voted 3 to 2 along party lines to kick off a monthslong process to bring back so-called net neutrality regulations.”

  • In an NAM-supported move in 2018, the previous administration repealed net neutrality regulations put into place by President Obama in 2015, saying they stymied innovation.

Why it’s important: Last week’s proposal—which telecommunications companies have pledged to fight—“will ultimately enable the agency to categorize high-speed internet as a utility, like water or electricity. … The agency will then be able to police broadband providers for net neutrality violations.”

  • That’s precisely why the proposal to restore the rules is problematic, critics say. A trade group representing telecom firms “wrote letters this week to the House and Senate Intelligence Committees warning of ‘mission creep’ by the F.C.C.”
  • In 2017, then-FCC Chairman Ajit Pai said net neutrality laws amounted to “special interests [who] weren’t trying to solve a real problem but [were] instead looking for an excuse to achieve their longstanding goal of forcing the Internet under the federal government’s control.”

Government overreach: Indeed, the 2015 net neutrality rules—very similar to the ones now being advanced—were a prime example of agency overreach, said NAM Chief Legal Officer Linda Kelly in 2018.

  • The 2015 FCC’s “heavy-handed approach … was neither appropriate nor necessary for the rapidly evolving, highly competitive broadband market,” Kelly said.
  • Net neutrality laws also decrease investment in broadband, the NAM has told policymakers.

Up next: The FCC will take public comments on the proposed rules. The commission could vote to adopt new regulations as soon as early next year.

The last word: “Manufacturers are disappointed the FCC is moving forward with its proposal to regulate 21st-century broadband with rules designed for the era of the rotary phone,” said NAM Vice President of Domestic Policy Charles Crain. “Reinstating this misguided, overreaching policy of the past is a recipe for stymied innovation and outdated infrastructure.”

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Hydrogen Growth Demands Permitting Reform

Hydrogen demand is likely to skyrocket in the next few decades—if permitting delays and other setbacks don’t stymie it, according to WSJ Pro (subscription).

What’s going on: “A new report from consulting firm McKinsey forecasts a fivefold rise in hydrogen demand to 600 million metric tons a year by 2050, if climate change is limited to 1.5 degree Celsius. On current trajectories, however, that supply could be between 175 million to 291 million metric tons a year if steps aren’t taken to speed up permitting and lower both equipment and investment costs, the report warned.”

  • The report identified three major challenges to meeting the rising demand: increased costs, a slow permitting process and “lack of access to capital,” which can be attributed largely to higher interest rates.

Incentives abound: Government incentives for hydrogen are on the rise. Up to $300 billion has been made available worldwide for hydrogen-energy projects this year, a sixfold increase from 2021.

  • Last week, the Energy Department announced $7 billion in subsidies to create seven clean-hydrogen “hubs” in the U.S.

More support required: More action from government is still needed—particularly when it comes to allowing hydrogen projects to proceed.

  • “Faster permitting times are needed to bring more hydrogen projects online, as well as the renewable energy to power their electrolyzers, industry experts say. A recent report from the International Energy Agency said current project lead times are too long and can act as a barrier to clean hydrogen uptake.”

What we’re doing: Manufacturers have long been urging policymakers to fix the broken U.S. permitting system.

  • The NAM recently laid out a multistep plan for Congress “to modernize and update our nation’s antiquated permitting system.”
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Powell: Further Rate Hikes Possible

The still-robust U.S. economy and tight labor market could mean further interest rate hikes, Federal Reserve Chair Jerome Powell said Thursday, Reuters (subscription) reports.

What’s going on: “We are attentive to recent data showing the resilience of economic growth and demand for labor,” Powell said during a talk at the Economic Club in New York. “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

  • The Fed’s aim in raising rates has been to reduce inflation to 2%.
  • Since it began raising rates in March 2022, however, unemployment has stayed largely steady, and “economic growth has generally remained above the 1.8% annual growth rate Fed officials see as the economy’s underlying potential.”

A delicate balance: While Powell said there is evidence of a cooling labor market, the Fed must account for new “uncertainties and risks”—including the Hamas–Israel war—as it seeks “to balance the threat allowing inflation to rekindle against the threat of leaning on the economy more than is necessary.”

  • Data since the central bank’s last meeting, in September, have shown unexpected U.S. job growth and surprisingly strong retail sales, “offering inconsistent signals about whether inflation is on track to return to the Fed’s 2% target in a timely manner.”

Hike likely: Most Reuters-polled economists expect the Fed to raise interest rates at its next meeting on Oct. 31–Nov. 1.  

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How Manufacturers Can Unlock the Power of Data

Manufacturers are using data to improve everything from their supply chains to their workplace culture—and more. Data can lead the way to new innovations, new business models and even new revenue streams. Yet, many manufacturing executives say they are not scaling data-driven use cases successfully, meaning that much of the information they do collect is going to waste.

So how can companies get the most out of their data and ensure they aren’t losing out on key insights?

A unique event hosted by the Manufacturing Leadership Council, the NAM’s digital transformation division, aims to answer these questions and more. “Manufacturing in 2030: The Coming Data Value Revolution,” which will be held on Dec. 6–7 in Nashville, Tennessee, will explore the ways manufacturers can unlock value from their data to boost productivity, value and competitiveness.

On the agenda: This event will have three key areas of focus:

  • Data value: Attendees will learn what the future holds for data monetization, data ecosystems and data-driven innovation.
  • People and process: They will also hear about the future workforce, including emerging and evolving job roles, data-driven leadership and data culture.
  • Technology and data: And lastly, they will peek into a future where artificial intelligence, data visualizations and the industrial metaverse are part of our everyday manufacturing world.

M2030 agenda highlights: The presenters will also share practical insights that participants can put into action right away.

  • In “Capturing Intelligence for Business Model Innovation,” IDC’s Bob Parker will examine digital maturity and the future of enterprise intelligence. Parker will explain how to create new business models through enhanced customer experience, as well as how to capture and leverage economies of intelligence.
  • In “The Rise of Data Ecosystems,” John Dyck of the Clean Energy Smart Manufacturing Innovation Institute will deliver a practical explanation of Manufacturing-X, Gaia-X and Catena-X as well as their goals and challenges. Dyck will discuss trends driving data-sharing initiatives as well as related technical and governance issues.
  • In “Building Great Supply Chain Visibility by 2030,” Supply Chain Insights’ Lora Cecere will address why 80% of the data being generated from supply chains isn’t being used well enough. Cecere will also explore how data can be used to create more resilient supply chains by 2030.

The bottom line: Advanced technologies are only part of the digital transformation story. Manufacturers who want to get ahead need to understand data’s role and value, not to mention how people, process, technology and even data itself will evolve by 2030.

Sign up: Registration is open for Manufacturing in 2030: The Coming Data Value Revolution. Click here to learn more. 

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NAM Sets the Policy Agenda for Manufacturing in the U.S.

The NAM is the voice of the manufacturing industry in the United States, speaking out on issues that matter to the men and women who make things in America. As times change, new issues arise, and to stay up to date with the needs of its members, the NAM updates its policy position documents accordingly.

That process—now underway for 2023—takes place with our member companies every four years under the guidance of the NAM Board of Directors. Here’s what you need to know.

The timeline: Proposed changes have been distributed from the NAM policy teams to the respective policy committees, and members have until Oct. 31 to provide their feedback.

  • Shortly after Oct. 31, NAM policy committees will convene to consider the proposed changes and any subsequent suggested edits. If needed, working groups will be organized to consider new or revised language on specific issues.

The result: The NAM policy committees will recommend new policy language to the NAM Board based on their engagement with member companies.

  • At the February 2024 board meeting, the NAM Board will finalize and approve the policy positions that will guide the NAM for the next four years.

How to participate: Member companies can choose which policy committees they serve on, so as the policy update process commences, companies should contact their membership directors to ensure they are aware of the various policies and committees that may be most important to their own businesses.

The last word: “Our member companies are at the center of this policy update process,” said NAM Managing Vice President of Policy Chris Netram. “The NAM fights every day for a policy agenda that supports manufacturing growth, and this is a critical opportunity for manufacturers across the country to have their say on the issues that matter to them.”

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Study: Tax Policy’s Harm Will Grow

The economic impact of allowing a stricter interest deductibility limitation to remain in effect could be devastating, according to a new EY analysis prepared on behalf of the NAM.

What’s going on: Failure to reverse the stricter limitation that went into effect in 2022 could result in the following losses in the U.S., according to the study:

  • 867,000 jobs
  • $58 billion in employee compensation
  • $108 billion in gross domestic product

More costly every year: Those figures have roughly doubled since the 2022 EY analysis released last year.

  • Last year, EY estimated that leaving the stricter limitation in place would result in 467,000 lost jobs, $23.4 billion in lost employee pay and $43.8 billion in lost GDP.

The background: Prior to 2022, companies could deduct interest of up to 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).

  • However, since 2022, the deduction has been limited to 30% of earnings before interest and tax (EBIT), a significant change that disproportionately affects manufacturers, given their capital-intensive investments.

What can be done: “A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs,” said NAM Managing Vice President of Policy Chris Netram.

  • “Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy. Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”

NAM in the news: POLITICO Pro’s Morning Tax newsletter (subscription) covered the study’s release.

Further reading: Visit the NAM’s interest deductibility page to learn more about this issue and how the NAM is taking action.

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