Hello, and welcome back to this week’s edition of the Gist Weekly, where we deliver executive-level commentary and insights from the healthcare industry right to your inbox. As always, we appreciate your continued readership and invite you to forward this email to friends and colleagues—please encourage them to subscribe as well!
In the News
What happened in healthcare recently—and what we think about it.
- Department of Health and Human Services (HHS) announces next round of drugs selected for Medicare drug price negotiations. Last Friday, in one of the outgoing Biden administration’s final acts, the Centers for Medicare & Medicaid Services (CMS) released the list of 15 drugs for the second round of price negotiations ahead of the Feb. 1 deadline. After targeting drugs that were heavily utilized by Medicare beneficiaries in the first round of negotiations, the second round skews toward higher-priced, lower-utilization drugs. Seven of the selected drugs are utilized by 35,000 or fewer enrollees. These drugs include treatments for chronic conditions such as Type 2 diabetes and asthma, as well as some cancer medications. As expected, Novo Nordisk’s blockbuster GLP-1, which is heavily utilized and costly to CMS, was selected for this round’s list. Despite pharmaceutical companies’ ongoing legal objections, if drugmakers choose to participate, negotiations will occur throughout 2025 and the new prices would go into effect in 2027.
- The Gist: The potential cost savings of negotiating the prices of these drugs, especially GLP-1s, is significant. Between Nov. 2023 and Oct. 2024, these medications accounted for $41 billion, 14% of Part D prescription drug costs. Accompanied with the proposed rule that would allow Medicare to cover drugs prescribed for weight loss, negotiating a lower price for Ozempic and Wegovy sets the stage for a dramatic increase in coverage, which could unlock even greater demand. However, HHS Secretary nominee Robert F. Kennedy, Jr., has voiced skepticism about GLP-1s. Despite Kennedy’s potential reservations, his job, if he is confirmed, would be to implement President Trump’s agenda. Trump withdrew support for a similar policy during his first term, but so far appears unlikely to repeal a program that is popular with voters and is a substantial cost saver for the federal government.
- Health policy a focus in President Trump’s first days. Since his inauguration on Monday, President Trump has undertaken a series of actions with wide-ranging effects on healthcare. On his first day in office, Trump started the process of withdrawing the United States from the World Health Organization (WHO). Trump was critical of the WHO’s response to Covid-19 and sought to leave the international health authority in his first term. Trump also withdrew several of President Biden’s healthcare-related executive orders. These include shortening the enrollment period for marketplace insurance, eliminating three Center for Medicare and Medicaid Innovation drug pricing models that were in development and terminating an order directing federal agencies to establish a regulatory framework for artificial intelligence safety and transparency. On Tuesday, the White House directed federal health agencies to pause all external communications. The directive applies to both scheduled and urgent communications and has no stated end date.
- The Gist: Even though immigration is President Trump’s top issue, healthcare remains a priority given the issue’s importance to voters. When he arrived in Washington 8 years ago, repealing the Affordable Care Act (ACA) was Trump’s main healthcare priority, leaving less time for other health policy efforts. Now, Trump is demonstrating his ability to navigate the federal bureaucracy to remake policy. The communications pause is expected to be temporary, but this is certainly an issue to watch. Should a health crisis emerge, continued silence from the federal government would kneecap its ability to respond, hurting providers seeking to deliver the highest level of care. A prolonged pause would also likely further erode the public’s confidence in health professionals at a time when mistrust is increasing.
- ACA marketplace sees record enrollment for 2025. Last Friday, CMS announced that a record 24.2 million consumers enrolled in health insurance through ACA health exchanges during the 2025 Marketplace Open Enrollment Period between Nov. 1, 2024, and Jan. 15, 2025. This figure includes 3.9 million new consumers and illustrates the program’s growing popularity following a lackluster Former Biden administration officials credited enhanced subsidies, which are set to expire at the end of 2025, as a key reason behind record enrollment.
- The Gist: The ACA is more popular than ever before. Despite Medicaid redeterminations, the uninsured rate remains below pre-pandemic levels, and the exchanges continue to attract new consumers. President Trump appears unlikely to seek repeal of the ACA (at least for now), but he has already sought to weaken the law. He has shortened the open enrollment period and reduced funding for organizations that help consumers enroll. Enhanced subsidies, which have kept premiums manageable for many enrollees, still hang in the balance. These subsidies are on the chopping block in order to offset costlier aspects of Trump’s legislative agenda; however, some conservative legislators have voiced concerns about gutting the popular law. In the meantime, providers should stand ready to support patients through potential coverage changes and interruptions.
Plus—what we’ve been reading.
- No more pharma ‘free ride’? Published earlier this month in the Wall Street Journal, this piece makes the case that US consumers have been subsidizing the pharmaceutical industry and inexpensive healthcare in other countries. The United States plays a pivotal role in global drug development, with US patients paying drug prices that are about three times higher than those in other countries. Critics argue that the US system’s lack of stringent drug price controls leads to excessive spending on drugs with limited benefits, with comparatively lower prices globally being an inevitable result. Notably, the United States comprises only a little over a quarter of the global economy, yet contributes about 70% of pharmaceutical profits. While the Trump administration appears ready to revive its efforts to reduce drug prices, the authors’ questions of “how much medical innovation does the world need and how much should it be funded” remain unanswered.
- The Gist: President Trump has long complained that the United States is being “ripped off” by other countries and his arguments are not all that different from his critiques on global defense spending. However, this “free-riding” problem is largely a self-inflicted result of the incentives baked into the US healthcare system; that the US system rewards innovation while other countries balance cost and effectiveness over populations. These different values make persistent inefficiencies and inequities in the US system more challenging to address meaningfully. In the meantime, providers should remain attentive to shifting national attitudes on drug pricing and be ready to support patients should federal policy changes lead to unintended consequences.
Graphic of the Week
A key insight illustrated in infographic form.
Hospital and health system M&A trends in 2024
This week’s graphic highlights data from Kaufman Hall’s recently released 2024 Hospital and Health System M&A in Review report on the current dynamics in health system merger and acquisition (M&A) activity. With 72 announced transactions in 2024, the volume of health system mergers is ticking back up and trending towards pre-pandemic levels. The average size of the smaller party involved in the transaction was $559M, a figure similar to that of 2023 yet elevated when compared to the years leading up to the pandemic. Most notably, after emerging as a prominent trend in 2023, financial distress continues to be a key driver behind M&A activity. Distressed M&A activity reached an all-time high in 2024, with more than 30% of all transactions involving a financially distressed party as well as the average revenue of this party nearly tripling to $401M. Additionally, 62.5% of announced transactions involved a divestiture. While improved industry outlooks from the rating agencies signal a better 2025, the M&A landscape in 2024 suggests that recovery continues to be uneven, and systems will likely continue to search for stronger partners that can help them expand their offerings while pursuing financial stabilization.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
While rating agency downgrades continued to outpace upgrades in 2024, the gap between the two appears to be closing.
In her latest blog, Kaufman Hall’s Lisa Goldstein summarizes the rating agencies’ actions from 2024 and provides five key takeaways. The good news: as in past years, rating affirmations represented the overwhelming majority of rating actions, and all three rating agencies (Fitch, Moody’s and S&P Global) have now moved from negative/deteriorating to stable/neutral outlooks for the not-for-profit hospital and health system sector.
On Our Podcast
The Gist Healthcare Podcast—all the headlines in healthcare policy, business, and more, in ten minutes or less every other weekday morning.
A document circulating on Capitol Hill outlines trillions of dollars in possible federal spending cuts from Republican lawmakers, most of which come from healthcare. Coming up on Monday on the Gist Healthcare podcast, Michael McAuliff, politics and policy reporter for Modern Healthcare, joins host J. Carlisle Larsen to talk more about these potential federal healthcare cuts.
To stay up to date, be sure to tune in every Monday, Wednesday, and Friday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
Thanks for reading! We’ll see you next Friday with a new edition. In the meantime, check out our Gist Weekly archive if you’d like to peruse past editions. We also have all of our recent “Graphics of the Week” available here.
Best regards,
The Gist Weekly team at Kaufman Hall
