Medical Devices and the Political Climate of 2018: An Update from the Swamp

The November midterm elections have the potential to shift the power balance, leadership, and legislative agenda of Congress, which would certainly have a sizable impact on the medical device industry. In addition to what lies ahead, current actions taken by the White House as well as the executive branch in the healthcare sphere at the U.S. Food and Drug Administration (FDA), the Centers for Medicare and Medicaid Services (CMS), the Federal Trade Commission (FTC), the Internal Revenue Service (IRS), the U.S. Securities and Exchange Commission (SEC), and the U.S. Department of Justice (DOJ) will always have an impact on the life sciences community.

Washington is ruby red with the Republicans in control of the White House and both chambers of Congress, but Democrats see an opportunity to take back control in the upcoming midterms. Democrats are hoping that a rising tide of base enthusiasm on the left, coupled with pockets of public dissatisfaction with the President in suburban America, could lead them to significant seat gains in November. There are a couple of indicators that validate their expectations, as President Trump’s approval rating hovers around 42 percent. Historically, Presidents with less than a 50 percent job approval result in an average loss of 36 seats for their party in midterm elections. This bodes well for Democrats, who only need to flip 24 Republican seats to win back the House in November. Additionally, incumbents have a significant advantage in elections but with 38 Republicans having announced they will not run in 2018, it could be another watermark of an impending “blue tide.”

On the U.S. Senate side, Democrats face more of an uphill battle. Nine Democrats are up for re-election in states that Trump won, while only one Republican, Dean Heller (R-NV), is facing re-election in a state Hillary Clinton won. Still, Democrats point to enthusiasm indicators such as the recent record 111 Democrats who ran in the Texas primary as evidence they have the upper hand.

A Democratic sweep in November could pose a new set of challenges to the medtech industry. Many Democratic politicians see the device industry and the healthcare industry as a whole in need of additional regulation. With control of the congressional committees, Democrats could bring hearings targeting oversight and price transparency in the medical technology sphere. Additionally, the industry-critical documentary, “The Bleeding Edge,” set to air on Netflix this summer, could inspire further sentiment to promote device recalls, regulation, and congressional hearings.

A Democratic majority could also threaten the fate of the medical device tax repeal, which provides relief from the 2.3 percent levy through Dec. 31, 2019. Although there are still pro-business Democrats in Congress, their voices seem to be increasingly drowned out by those further to the left. Already, four of the top potential Democratic presidential candidates in 2020 have declared they will no longer accept donations from political action committees (PACs) with ties to corporations. Corporate PACs are funded by the individual donations of an organization’s employees. Furthermore, more than one-third of Democrats in Congress have joined Senator Bernie Sanders’ (I-VT) call for a single-payer healthcare system. Such a move would drastically alter the nation’s healthcare system as we know it by eliminating all private payers, establishing draconian price controls, and stifling innovation.

In addition to Congress, the Trump administration is leading efforts to combat high prices in the healthcare industry. Health and Human Services (HHS) Secretary Alex Azar is leading the administration’s efforts to promote value-based healthcare in four key areas:

1. Allowing patients greater access to their medical records
2. Increasing pricing transparency within the healthcare system
3. Utilizing models within Medicare and Medicaid to drive value-based care
4. Reducing the burden imposed on stakeholders from government oversight

It is still up for debate whether Azar, a former pharmaceutical executive, will be a friend to the industry. Azar may also use the Center for Medicare and Medicaid Innovation (CMMI) to test conservative and/or innovative delivery and payment system reforms, or he may decide to keep CMMI intact. So far, these efforts don’t seem to be targeting devices in particular, but this could change depending on the political winds. Another one of the administration’s imperatives is combatting the opioid crisis. Device makers have an opportunity to be seen as an innovator in this sphere by developing devices that offer non-opioid pain relief alternatives.

Despite the rhetoric in the media and the conventional political climate, there are several factors that show an impending Democratic “blue wave” in the midterms may be overblown. As of April 2018, the Democrats have approximately a six-point lead in the generic ballot, which is certainly promising. It may not be promising enough, however, for them to win back the House, as Republicans have several structural advantages. With control of 32 state legislatures, Republicans have used redistricting to draw favorable maps in accordance with the 2010 census. These maps will significantly diminish sizable gains for Democrats as research suggests that Democrats will have to put up double-digit numbers in the generic ballot to win back the House. Another factor counteracting Democratic gains is that Democrats are increasingly moving away from rural areas and packing themselves into cities where large double-digit wins do not equal more Congressional seats.

A Democratic takeover of the Senate is even more of an overestimation. Although Republicans hold only a two-seat advantage in the Senate, there are 26 Democrats up for re-election compared to nine Republicans. Not only are nine Democrats up for re-election in red states, but with five of those seats (West Virginia, North Dakota, Montana, Missouri, and Indiana), Trump won by 18 percentage points or more. With a map stretched this much against them, Democrats would not need a wave, but rather, a tsunami to win the Senate.

One of several reasons cited for the “blue wave” is the belief that Democrats are more motivated, creating a voter enthusiasm gap between the left and Republicans. However, if the March 7 primaries in Texas are to be taken as an example, that is certainly not the case. While Democrats had near-record breaking turnout in the Texas primaries, the Republicans actually did, with nearly 50 percent more voters taking part in their primary than Democrats. If Democratic enthusiasm is high going into this election cycle, so is Republican enthusiasm. This facet bodes especially well for Republicans, considering they have historically turned out to vote in higher volume in midterm elections than Democrats.

Another reason to doubt Democrats’ chances is pundits overestimating the impact of President Trump’s low approval numbers. Usually, when a President’s approval numbers are as low as Trump’s, the ratings are indicative of a foreign crisis or a domestic economy in shambles. The economy under Trump has been strong thus far, with impressive gains in both employment, GDP, wage growth, and the stock market. Coupled with the success of the Republicans’ Tax Cuts and Jobs Act, consumer faith in the economy is definitely at a high.

Because of his status as an unconventional politician whose low approval numbers are mostly the result of his tweets, it is hard to pin Trump’s approval numbers and directly correlate them with individual Republican legislators. Furthermore, as Americans realized on Election Day in 2016, polling on President Trump’s popularity may be entirely inaccurate. Due to his controversial nature, support for Trump is usually around five to 10 points higher in online polls than in-person polls, because people frequently lie to pollsters. This finding might help explain why Washington’s experts got the 2016 election all wrong. The fact that insider pundits and the media have been pushing the “blue wave” narrative and its imminent certainty gives fodder to the belief that the Democrats still may have quite a lot to learn from 2016. As the outcome of the midterm elections remains uncertain, it is imperative that members of the medical device and life science community make their voices heard this November. 

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Jeffrey J. Kimbell, president and founder of Jeffrey J. Kimbell & Associates, Inc., represents over 35 clients in the life sciences community seeking legislative and policy remedies in Washington. Founded in 1998, the firm provides strategic solutions to hand-selected clients seeking creation, modification, or proper implementation of public law.

David C. Rudloff is a research associate at Jeffrey J. Kimbell & Associates, Inc. He previously worked as a litigation paralegal at Covington & Burling in Washington, D.C. Rudloff graduated from Davidson College in 2016 with a B.A. in political science.