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FINANCE

Healthcare and a Divided Government

What can and cannot get done and what it means for VCs

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With the November elections behind us, Washington and investors are now looking at a divided government for the next two years. The familiar refrain is that nothing will get done between a Republican House and the Biden Administration, but there are several areas where progress can be expected and would be impactful across the healthcare ecosystem.

What can get done in Congress

2022 Year-End Legislation: After the November elections, Congress must return to DC for a lame-duck session to fund the government past December 16. This must-pass vehicle creates an opportunity for healthcare legislative action including providing FDA additional authority to regulate Laboratory Developed Tests (LDTs), changes to FDA’s Accelerated Approval Pathway (in focus post-Aduhelm/ Makena), incentives for antibiotic resistant therapies and delays in a number of scheduled Medicare cuts.

2023 Agenda—focus on the must do’s and the can do’s

1. Pandemic Preparedness Act Reauthorization: Next year, authorization for the Pandemic and All-Hazards Preparedness Act (PAHPA) expires, creating uncertainty for myriad programs focused on developing, funding and acquiring medical

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countermeasures (eg BARDA/ASPR grants which early stage companies can access). While there may be significant posturing on both funding and vaccine mandates, the pandemic is still fresh in the minds of voters. This legislation will be top of mind in Congress and creates opportunities for innovators in the space to influence policy and secure funding opportunities.

2. Farm Bill: This is also up for reauthorization and given the bipartisan popularity associated with the program and money for large swaths of the country, it’s likely to be one of the few pieces of legislation that can move forward in 2023. Impacted sectors include food tech, cannabis and potentially digital assets since the bill covers the CFTC. Many in the digital asset/DeFi industry would prefer CFTC regulation, as opposed to the SEC.

Executive administrative actions

Facing a divided government and uncertain electoral prospects in 2024, the Biden Administration is likely to move forward aggressively with its policy agenda via regulatory procedures and executive action.

1. Women’s Health: Women’s health became a nationwide focus after the Supreme Court’s decision in the Dobbs v Jackson case. Expect administrative policies designed to ensure continued access to women’s health and contraception services, both of which have been a large focus for private equity and venture capital.

2. Health Equity/Food as Medicine: One the Biden Administration’s main health care priorities is health equity and they believe that nutrition / food as medicine is one way to address the disparity in health care outcomes. Will governments rely on new innovators (start-ups like Season) to solve problems they cannot address?

3. AI in Healthcare: HHS will continue to develop policies around the use of AI in health care, both from a reimbursement perspective and data privacy. We expect more clarity from HHS and FDA on reimbursement and regulatory pathways in the coming year, which will be key for this growing field.

What Black Swan events could be on the radar?

1. Debt Limit: DC has to raise the debt limit in 2023 and Republicans are already making noises about using it as leverage for spending cuts. The black swan would be if they fail to lift it causing market disruption - which could obviously impact higher risk asset classes like VC.

2. NIH Funding: GOP may leverage their pursuit of anti-Fauci hearings into defunding or lowering NIH funding, which is key for academic medical centers. With key NIH champions retiring from the Senate, there is a risk here and the impact on academic medical centers and funding are important for early stage companies. n

Jones Point consults with companies seeking to navigate the regulatory landscape and the Washington lobbying community. Their mission is to serve as a trusted guide for companies and investors navigating political and market currents.

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