NAM Campaign: Reform PBMs to Help Employers, Workers
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
Conferences Make Post-Pandemic Recovery
Convention halls are filling back up again following the pandemic, restoring a critical type of “economic fuel” that had been cut off for three years, The Wall Street Journal (subscription) reports.
What’s going on: Attendance at in-person business conferences is on the rise across the U.S., supporting local jobs and wages that had suffered since 2020—particularly in tourist- and conference-heavy cities such as Las Vegas.
- “Economists said that travelers provide an economic and tax boost to cities without using services, like schools. ‘They come, spend and leave,’ said Angelos Angelou, president of an economic-impact research firm that has produced reports for events and conferences like South by Southwest and Lollapalooza. ‘It’s the kind of economic bonanza that any type of city would love to have.’”
Betting big: Some municipalities are so sure the recovery is permanent that they’ve invested in new conference facilities.
- Seattle recently opened a $2 billion addition to its convention center, and last November, Dallas voters approved their own convention-center expansion—with a price tag of $4 billion—to be funded through hotel taxes.
Small-Business Hiring Slows
More small businesses are pulling back on hiring, The Wall Street Journal (subscription) reports.
What’s going on: “The portion of small-business owners who expect to expand their workforce over the next year was below 50% for the second month in a row in May, hitting the lowest level since June 2020, during the early months of the Covid-19 pandemic, according to a recent survey conducted for The Wall Street Journal.”
- Even as the economy shows signs of a slowdown, applicant pay expectations remain high—but small-business owners are “less willing to pay up for talent” as they respond to belt tightening by their customers.
The data: In March, U.S. job openings fell to their lowest level in almost two years, and the number of layoffs increased.
- However, employers added 253,000 jobs in April, mostly on the strength of service-sector gains.
What it means: “‘There is no question that CEOs are downshifting into a slowing economy,’ said Vistage chief research officer Joe Galvin. Despite caution about adding additional workers, ‘no one is willing to shed the hard-earned and expensive employees they hired,’ Mr. Galvin said. Entrepreneurs often still struggle to fill openings when workers leave, he added.”
Existing Home Sales Decline
Sales of previously owned homes declined in April to the lowest pace since the pandemic began, CNBC reports.
What’s happening: “Existing home sales declined 2.4% compared with March to a seasonally adjusted annualized rate of 5.61 million units, the [National Association of Realtors] said. Sales were 5.9% lower than in April 2021. That is the slowest rate since June 2020, which was artificially slow since the economy was struggling with sweeping shutdowns due to the coronavirus.”
- “This count represents closings during the month, so it reflects contracts likely signed in February and March, when mortgage rates were rising.”
- The average 30-year fixed mortgage rate is now around 5.45%.
Shortage continues: Existing home inventory at the end of April was at 1.03 million homes for sale, down 10.4% from two years ago.
- Limited supply kept prices higher. The median price of an existing home sold in April was $391,200, the highest on record.
What’s ahead: The National Association of Realtors said it expects “further declines” in existing home sales.
U.S. LNG Exports Set to Skyrocket by 2050
U.S. natural gas production is likely to keep growing through 2050, while LNG exports will take off, according to new forecasts from the Energy Information Association.
The gist: Natural gas production is predicted to increase 15%, while LNG exports will skyrocket 152% between last year and 2050, according to the EIA’s “Annual Energy Outlook 2023.”
- “Production growth is largely driven by U.S. LNG exports, which we expect to rise to 10 [trillion cubic feet] by 2050,” an EIA blog post explains.
Where it’s happening: “Natural gas production growth on the Gulf Coast and in the Southwest reflects increased activity in the Haynesville Formation and Permian Basin, which are close to infrastructure connecting natural gas supply to growing LNG export facilities.”
- “New liquefaction facilities in Louisiana became fully operational in 2022, ahead of schedule. In addition, new LNG trains in Texas are scheduled to be online by 2025.”
How they figured it out: This projection comes from the “reference case” in the outlook report for 2023.
- “We use different scenarios, called cases, to understand how varying assumptions affect energy trends. The AEO2023 Reference case, which serves as a baseline, or benchmark, reflects laws and regulations adopted through mid-November 2022, including the Inflation Reduction Act,” according to the EIA blog.
Permitting Reform Would Unlock U.S. Potential, NAM tells Congress
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.
Voluntary Climate Disclosures Show That SEC Rule Is Redundant
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.”
How Quantum Computing Reorganized a Pier
It might be hard to believe, but there are “more possible staff solutions than particles in the universe” for the typical factory, according to D-Wave Vice President of Quantum Business Innovation Murray Thom.
Yet thanks to quantum computing—or computers that employ the effects of quantum mechanics to operate more quickly and efficiently—D-Wave can help its customers solve this sort of knotty problem, whether they are trying to organize pallets, piers or people.
We spoke to Thom recently about the advantages of quantum as well as one of the company’s big successes, a collaboration with software company SavantX to increase the efficiency of Pier 300 at the Port of Los Angeles. Here’s what he had to say.
The future of computing is hybrid: When does it make sense to look beyond classical computing methods and add in quantum? As Thom explained, “Classical computers have to break things down into simpler steps—addition and multiplication.”
- However, a lot of logistical problems involve immense complexity. For example, let’s say you have boxes of components that must be shipped all over the country at different times. Thom puts it, “This box is going on this truck or that truck, [and that decision] affects other decision-making. It’s that cascade that makes this difficult for classical computing.”
- By contrast, quantum computers can take a huge volume of possible solutions, compare them all quickly and come up with a usable schedule
- Marrying classical with quantum computing—called quantum-hybrid technology—provides the best of both options and delivers robust solutions, said Thom.
The Port of LA: In 2018, SavantX was hired to improve the efficiency of Pier 300, which processes millions of containers every year.
- To juggle the many factors involved—trucks, containers and cranes that load the containers—and to model their movements inside a confined space, SavantX would need a lot of computing power. That’s why it brought in D-Wave.
- SavantX modeled the whole system using a digital twin of the pier, Thom explained. The digital twin allowed SavantX to run all types of simulations, some of which would never occur in the real world.
- Quantum-hybrid technology was then used to “ingest the whole problem” and configure it all at once “like a Rubik’s cube”—simulating an impressive 100,000 cargo-handling runs to find the best algorithm.
- And thanks to D-Wave’s proprietary cloud platform, no one at SavantX had to get “a degree in quantum physics,” Thom added. Instead, “the platform let them configure a solution, while D-Wave handled the complexity.”
Read the full story here.
What’s Next for WOTUS?
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.”
Manufacturing Real GDP Grew in Q4 2022
Manufacturing saw robust growth in the fourth quarter of 2022, according to newly revised real GDP estimates from the Commerce Department.
What’s going on: While the overall U.S. economy grew 2.6% at the annual rate in Q4 of last year, real GDP in the manufacturing industry rose by an annualized 5.5%. That’s a sizable increase from the 0.5% seen in the third quarter.
Q4 details: Value-added output in manufacturing increased to $2.895 trillion at the annual rate—an all-time high—from $2.809 trillion in Q3.
- Value-added output hit record levels for both durable goods (up to $1.595 trillion from $1.544 trillion) and nondurable goods (up to $1.299 trillion from $1.265 trillion).
- Manufacturing made up 11.1% of value-added output in the U.S. economy, an increase from Q3’s 10.9% and the most since 2019.
- Manufacturing gross output also rose to a record number, $7.359 trillion from $7.339 trillion at the annual rate.
However … Real value-added output in manufacturing remained lower than the record high in 2021.
- Real value-added output rose to $2.283 trillion from $2.259 trillion at the annual rate, as expressed in 2012 dollars.
- The record high, in 2021, was $2.325 trillion.
The NAM’s take: “Despite numerous challenges, manufacturing continues to prove its resilience, hitting new records for the sector’s contributions to the U.S. economy,” said NAM Chief Economist Chad Moutray. “These data also suggest that in real terms, manufacturing output has pulled back recently, which points to inflation having buoyed these numbers.”