HHS proposals, possible congressional legislation may hurt healthcare credit ratings, S&P says

Proposals from HHS as well as possible congressional legislation could harm the creditworthiness of certain healthcare subsectors, according to a new report from S&P Global Ratings.

"Overall, we think it is challenging to pass any major healthcare regulation in the current political environment," S&P credit analyst Ji Liu said in a news release.

"However, there are some proposals that have gathered bipartisan support that we view as possible candidates to move forward. Some of the smaller bills could be included in the omnibus appropriation bills in September," Mr. Liu added.

Five takeaways from the report:

1. There are various House proposals to improve drug competition. These include the CREATES Act, which seeks stricter rules regarding anti-competitive behaviors of brand name drug manufacturers, as well as a bill to ban the "pay-for-delay" practice,  in which brand name drugmakers pay generic manufacturers to delay production of off-patent drugs.

2. S&P said the bills that target anti-competitive behavior "could have a relatively high chance to move forward and could have modestly negative effects on branded pharmaceutical companies." However, it does not expect the proposals would necessarily lead to negative rating actions.

3. Congress also is increasing efforts to curb surprise billing. S&P said outsourced physician staffing companies such as Envision Healthcare Corp. and Team Health Holdings, as well as emergency air and ground medical service providers such as Global Medical Response and Air Methods Corp., could be hurt by such legislation. But the ratings agency noted that “the exact impact on individual companies' ratings is unclear now and depends on the details of the final legislation.”

4. A bill proposed in Congress last month seeks to eliminate prescription drug rebates in the commercial market. S&P said it believes this would put rating pressure on pure-play middle-market pharmacy benefit managers such as WD Wolverine Holdings and MedImpact Holdings.

5. Out of all the government proposals and possible congressional legislation, S&P considers the repeal of the ACA and "Medicare For All" the least likely to be implemented in the next few years.

Access the full report here.


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