NVCA Today

With the selection of Senator Barack Obama as the President-elect, the November 4th election has set the nation on a new course for both domestic and international policy decisions. And, as discussed in NVCA's post-election report, whether Republican or Democrat, the Washington policy-making community has at last stopped holding its collective breath and is moving forward with what it knows best: mapping out scenarios under which policy programs will rise or fall.

With speculation rampant about the President-elect's priorities, his transition team and policy advisors have already begun sounding out stakeholders and we believe that, unlike past Presidential transitions, the details of many of his proposals will begin to crystallize over the next two months. What follows is a discussion of some of the areas in which NVCA anticipates critical action for our industry.

Economic Stimulus:

At his first post-election press conference, President-elect Obama left little doubt that his initial focus will be on providing the economic stimulus necessary to keep the country from moving further into recession. Although Congress may attempt to pass a stimulus package before year-end, bets are high that Congress will be unable to come to terms with the outgoing Bush Administration on an acceptable deal. Beyond righting the markets generally, the venture industry should watch for inclusion of incentives for investment in small business - a campaign promise of the Obama-Biden team that could be included in a stimulus bill.

Tax Policy:

The Obama-Biden tax plan (not including the health policy sections) contains three critical components for the venture industry: increasing the capital gains tax to 20% for families with income over $250,000; closing the "loophole" of carried interest as capital gains; and, perhaps most intriguingly, eliminating capital gains tax for entrepreneurs and investors in small business. While Rahm Emanuel, the President-elect's designee as White House Chief of Staff, has prominently argued that tax reform will remain a top priority for the incoming Administration, the manner in which tax reform is developed and unveiled will have tremendous implications for the shape of the congressional elections in 2010. Despite assertions that changing the taxation of carried interest is a "done deal," we believe that many Members of Congress understand the complexity of this issue both technically and politically. Increasing capital gains across the board and repealing some of the Bush Administration tax cuts for the top income brackets may offer a more palatable early step to address tax reform. NVCA also views the President-elect's statements on investment in innovation and small business as positive developments, but will be continuing our outreach to Congress and the new Administration's transition team to reinforce the understanding of the venture industry's role in building the economy.

Prospects for Comprehensive Health Care Reform in the New Congress-Impact on Medical Innovation

Key Congressional leaders and health policy advisors from the Obama campaign have been working to develop a consensus around a comprehensive health care package that they plan to introduce early in the new Congress. The package is part of a budgetary and economic plan to help rein in health care costs and broaden access to coverage. The early signs of consensus seem to be centered around a package that would be based on a public-private hybrid model: preserving the current private sector delivery system, while developing a strengthened public sector framework that includes important reforms to the Medicare program focused on access, affordability, and quality. The 111^th Congress will likely focus on the weakened economy before addressing comprehensive health care reform, but incremental reform is very possible. 

The incremental steps will likely include early action on a Medicare payment reform package that includes legislation to reauthorize the widely popular State Children's Health Insurance Program (SCHIP), addressing Medicare payment for physicians who face a looming cut of approximately 20% in January 2010, and giving Medicare the power to negotiate drug prices directly with the pharmaceutical companies.

NVCA's key priorities in this debate are to ensure that any reform package includes changes in coverage and payment policies to facilitate the wide-spread adoption of new technologies and therapies that improve the quality and reduce the cost of health care. NVCA wants to ensure that all patients will have appropriate access to new medicines and treatments that will improve the effectiveness and reduce the cost of America medicine.

The following issues are key health legislative issues the will seriously be debated in the New Year that could have a significant impact on venture capital investment in life sciences:

Comparative Effectiveness Research

Central to the discussions on controlling costs through improved quality are proposals for increased comparative effectiveness research (CER). There is broad consensus emerging in the Senate that CER must be part of the solution to rising health care costs. However, there is not yet consensus on what "comparative effectiveness" means, or on how it would be implemented. One key point of discussion on this issue will be whether price and cost are explicitly included in the scope of work of CER. NVCA supports the general concept of CER as long as CER is done for all technologies and therapeutics (both old and new), and that CER research does not include cost-effectiveness determinations in its definition.

Scoring New Technology

Given the importance of budget scoring in health care legislation, any proposal must be able to demonstrate cost savings or budget neutrality. Although Congressional Budget Office (CBO) Director Peter Orszag has stated that he wants to develop a more "collaborative" model for scoring health care legislation, the CBO remains unwilling to "score" future savings from the application of health care technology that reduces current costs or avoids future costs. CBO wants quantitative data to demonstrate that savings from technology and other systems reforms are real before they score such proposed savings. CBO has stated that it intends to release two volumes outlining the "scorable" budgetary impact of a wide variety of health care and payment reform proposals before the end of the year. This continues to be problematic for the introduction of new technologies and therapeutics.

Health Care System Efficiencies

Many Congressional leaders and President-elect Obama recognize that there are fundamental flaws in the existing health care system that needs to be addressed in order to achieve comprehensive reform. These include value-based payment reform, chronic disease management, prevention and wellness benefits, medical adherence management, and health information technology, all of which NVCA supports.