Spending Bill Finally May Move; Drug Industry Could be Vulnerable
Author: Greg Valliere
July 8, 2022
THE KEY, AS USUAL, is unpredictable West Virginia Democrat Joe Manchin, who has blocked much of the bill. But he’s now negotiating seriously with Senate Majority Leader Chuck Schumer. Manchin may agree to a $1 trillion spending bill but a lone holdout — Sen. Kyrsten Sinema of Arizona, another Democratic maverick — could doom the measure.
BUT WASHINGTON INSIDERS think bill could pass; the Democrats desperately need to enact something. Lobbyists point to four key elements to watch:
1. The likelihood that Obamacare subsidies could expire this fall, which would generate a public uproar and hurt Republicans just as they approach a takeover of the House. An Obamacare extension is included in this bill.
2. The possibility of tax hikes, which has lobbyists on alert. Somewhat higher taxes on wealthy individuals and highly profitable corporations could be in a final bill; a
global tax deal, stalled for the past year, has a chance of inclusion but our take is
that this provision may be too complicated to pass this fall.
3. A host of new spending proposals, including environmental provisions that are still
evolving. A tax break for electric cars may die, as will spending for child tax
credits, education and senior home support.
4. But still very much alive is a provision allowing Medicare to negotiate prices for
the 10 most popular drugs — a foot in the door for the government, which could gradually ratchet up price controls.
THREE MAJOR COMPLICATIONS: The first one is time — there isn’t much left, as Congress returns next week but then leaves in early August on a five-week break. By mid-September, the focus will be on getting home for election campaigning. The second potential complication is whether the Senate parliamentarian rules that the drug pricing provision meets the “reconciliation” test to evade a filibuster.
FINALLY AND MOST IMPORTANTLY, MITCH McCONNELL is threatening to block a popular bill to fund U.S. manufactures who compete with China. This bill would send $52 billion to semiconductor chip makers, but McConnell — who initially supported the measure — wants assurances that Democrats won’t use the reconciliation process to pass the Build Back Better bill. Without using that tactic, the measure would fail.
CONFUSED YET? Sorry, this is a very complicated dance. The bottom line is that a
spending bill is still alive and may move later this month; the obstacles would
become more apparent this fall.
IN THE MEANTIME, the drug industry won’t be be out of the woods any time soon. The conventional wisdom in this town is that the industry has excellent lobbyists and a ton of cash for TV ads blasting price controls as stifling innovation. Those two
weapons have consistently killed drug price reforms in recent years.
BUT THE CONVENTIONAL WISDOM may not be correct this time; the industry may escape price controls, but that’s a very close call. At the least, the pharmaceutical industry may face “headline risk” for the next few months.
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