ab Global Research |19 April 2021 Healthcare a Likely Pay-For in Infrastructure, but Meaningful Reform Unlikely Our DC Healthcare Policy panelists expressed some doubt that major Healthcare reform would be achieved as part of the Infrastructure Bills proposed by the Administration, as they think Speaker Pelosi and President Biden are likely to prioritize getting an Infrastructure package passed vs. getting bogged down into Healthcare policy debates, and slim Democratic majorities in the Senate/House make agreement on a larger reform package difficult. That said, they expect some lift to the corporate tax rate (potentially mid-20s) and other targeted Healthcare items to be used to pay for the Bill. Panelists think MA rates are likely to come under pressure (though not until the 2023 plan year), a Public Option plan would be difficult to pass (though more aggressive public options could be pushed at the state level via CMS Waivers), and delays to 2022 PAMA cuts are unlikely (given strong industry earnings from COVID testing). Utilization Trajectory Uncertain; Specialty Pharmacy/Behavioral/Digital in Focus In our Employee Benefits panel, there was a clear focus with regards to benefit design on filling gaps in mental health, continued use of telemedicine, as well as diversity and inclusion, though not necessarily richer benefits. COVID has delayed 2022 planning and RFP processes, and none of our panelists could yet estimate cost utilization for 2022, each suggesting going back several years to see overall trend lines. We did sense sponsors are still focusing on addressing access issues and more aggressively controlling Specialty Rx spend. Overall, there was openness to newer care delivery models and digital health point solutions, which was echoed by our Telehealth panel with the President of the American Telemedicine Association. Telehealth panelists indicated payers, employers, and providers are increasingly looking to expand virtual care into more complex, integrated use cases to support value-based care, and that new market entrants (including tech companies) are helping to accelerate the pace of innovation and focus on patient/provider experience. MSD 1Q Dental growth with strong implant demand; clear aligner TAM robust Overall trend was fairly consistent with 1Q21 revenue/"productivity" up ~5% y/y, and the preference for single-visit dentistry continued. Implant demand continues to outpace the market, and our experts believe the clinical impact of treatment delays will support durable, acute demand into the out years. Mr. Richichi (CEO, Dental Associates of CT) is skeptical the "Zoom effect" for clear aligner demand, but he believes the marketing done by ALGN and DTC competitors has increased overall awareness of clear aligners in time. On the DTC clear aligner side, Nick Greenfield (CEO, Candid Co) pointed to the superior patient experience driving the higher price point vs peers ($2,400 vs $1,900). Treatment length is currently limited for Candid to ~7 months given aligner limits and margin requirements, but he believes Candid's growing dataset of high trim line treatment (no attachments or IPR) will increasingly bear fruit over time vs peers whose data of similar cases is limited.Equities Americas Healthcare Kevin Caliendo Analyst [email protected] +1-212-713 3630 Adam Noble Associate Analyst [email protected] +1-212-713-9495 Andrea Alfonso Associate Analyst [email protected] +1-212-713 1342 Brett Gasaway Associate Analyst [email protected] +1-212-713 4820 This report has been prepared by UBS Securities LLC ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 16. UBS doe