Washington Healthcare Update

June 15, 2015

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This Week: GOP Post-King Contingency Bills Released in Both the Houseand the Senate… House E&C Committee Draft LDT Bill – Creates FDA In VitroCenter, Sets Agency Review Timeline and Defines Risk Categories… CMS ClarifiesUse of Leftover Establishment Funds, States Given More Flexibility

1. Congress

House of Representatives

Senate

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress

House

House E&C Health Subcommittee to Hold Hearing on Mental Health Legislation

The House Energy and Commerce (E&C) Subcommittee on Health, chaired by Rep. Joe Pitts (R-PA), has scheduled a hearing entitled “ExaminingH.R. 2646, the Helping Families in Mental Health Crisis Act” for Tuesday,June 16, 2015, at 10 a.m. in Room 2322 of the Rayburn House Office Building. Subcommittee members will review H.R. 2646, legislation authored by Oversightand Investigations Subcommittee Chairman Tim Murphy (R-PA) and Rep. Eddie Bernice Johnson (D-TX), as well as additionallegislationauthored by Rep. Doris Matsui (D-CA). The bipartisan legislation aims to fix the nation’s broken mental health system by refocusing programs, reforminggrants and removing barriers to care. “This legislation is not just a new bill, but marks a new dawn for mental health care in America. We are movingmental health care from crisis response to recovery, and from tragedy to triumph. The work of this committee and its members have been critical in puttingforth a foundation for all of the new and revamped provisions in H.R. 2646,” said Chairman Murphy in a statement. “The Helping Families in Mental HealthCrisis Act not only reflects the need for reform, but also provides the tools to provide comprehensive solutions to challenges—such as federal barriers andantiquated programs—we discovered when this committee began its top-to-bottom review of our nation’s broken mental health system.”

The legislative text, a witness list and witness testimony will be available here as they are posted.

Bipartisan Bill Introduced in House to Alter ACA Reporting System Rules

On June 10, Reps. Diane Black (R-TN-06) and Mike Thompson (D-CA-05) introducedH.R. 2712, the Commonsense Reporting and Verification Act of 2015, bipartisan legislation which aims to provide workable options for employers to administer and offer health coverage to their employees by creating avoluntary prospective reporting system and streamlining the reporting process for businesses under the Affordable Care Act (ACA). Under the currentreporting requirements established by the ACA, businesses are required to collect and annually report information about the coverage they offer to theInternal Revenue Service (IRS) and their employees. The information reporting is intended to verify compliance with the individual and employer mandatesestablished by the ACA, and administer subsidies through the insurance exchanges. “I’ve heard from employers of all sizes, who want to offer health care totheir employees, about the challenges they face complying with the ACA’s administrative requirements. This bill would allow employers to maintainemployer-sponsored health coverage, while reducing reporting burdens on businesses so they can focus on what they do best—creating jobs and growing ourlocal economies. Our bill would also increase consumer protections by requiring that eligibility for subsidies be based on the most recent tax data. Thiswill increase accuracy and ensure that individuals and families aren’t hit with a large and unexpected tax bill at the end of the year,” said Rep. Thompsonin a press release.Companion legislation in the Senate is expected to be released this week.

House Judiciary Committee Approves Patent Bill Sans Increased Protections for Branded Pharmaceuticals

On June 11, the House Judiciary Committee approved the Innovation Act (H.R. 9),which was introduced by Committee Chairman Bob Goodlatte (R-VA), by an overwhelming vote of 24-8. This bipartisan bill aims to combat the ever-increasingproblem of abusive patent litigation while protecting legitimate property rights. With regard to health care, the legislation voted out of committee failsto include a branded pharmaceutical industry-favored provision that exempts generic drugs and biologics from a streamlined process for challenging patents.As written, the industry carve-out, pushed by the Biotechnology Industry Organization (BIO), would exempt drug and biologics patents, covered under theBiologics Price Competition and Innovation Act (Hatch-Waxman), from inter partes review (IPR) challenges at the U.S. Patent and Trademark Office. Thebranded pharmaceutical community feels these protections are critical to protecting innovation and believes that the IPR process allows genericsmanufacturers to circumvent pay-for-delay settlements by invalidating the patent claims that are being used by the brand-name drug owner to prevent genericcompetition. Worth noting, on June 4, the Senate Judiciary Committee voted out of committee its companion bill, S. 1137, the PATENT Act, sponsored by Chairman Chuck Grassley (R-IA) andRanking Member Patrick Leahy (D-VT); the branded pharmaceutical industry circulated a proposal to members after the vote to would undo provisions in thepatent law that make it easier for generics, and potentially biosimilars, to come to the market. Sen. Orrin Hatch (R-UT) said BIO’s proposal should beaddressed before the PATENT Act reaches the Senate floor. The IPR should remain a faster, cheaper alternative to patent litigation, “but at the same timewe must also prevent bad actors from using the administrative process to interfere with a litigation system that encourages the development of cheaperlife-saving medicines,” Sen. Hatch said, referring to the legislation that he and former Rep. Henry Waxman (D-CA) co-authored in 1984. A previous amendmentthat failed to make it onto the Senate bill, authored by Sen. Thom Tillis (R-NC), would have exempted drug and biologics patents from the IPR process.

For more information on the bill, please review an official committee press release.

House E&C Committee Draft LDT Bill — Creates FDA In Vitro Center, Sets Agency Review Timeline and Defines Risk Categories

In recently released House Energy & Commerce Committee draft language addressing laboratory-developed tests (LDTs), the committee reveals possibleintentions to create a new three-way classification system for LDTs based on the different value of risk (low, moderate, high) and whether an adverseresult would have a significant effect on patient health. With the new proposed language, developers would be able to submit their tests for approval underone of the three specified categories, and the Food and Drug Administration (FDA) would have 60 days, following a meeting with the developer, to make afinal decision either accepting or rejecting the proposed classification and providing its decision rationale. Another significant measure in the proposedlanguage is the development of a priority review voucher program for high and moderate-risk tests which meet an unmet medical need and a requirement thatregulations be drafted creating a unique identification system, mandating all finished products “bear a unique identifier.” The discussion documentadditionally addresses FDA fees, but lists them as “to be supplied.” Also significant, the draft bill would create an in vitro center within FDA thatreports directly to the agency commissioner as do other agency centers. The “Center for In Vitro Clinical Tests” would be responsible for theimplementation of the new regulatory structure concerning LDTs. Worth noting, the committee included an LDT spot in its initial 21st Century Cures draftbill, but the placeholder was later scrapped due to concerns that differences would derail the bipartisan bill.

Lawmakers Introduce a Bill to Expand Coverage for Cancer Drugs

On June 11, Reps. Leonard Lance (R-NJ) and Brian Higgins (D-NY) introduced the Cancer Drug Coverage Parity Act, which aims to encourage uniform healthcoverage for different types of cancer treatment. In detail, the bill requires any health plan that provides coverage for traditional chemotherapytreatment to also provide coverage for orally administered anti-cancer medications. Worth noting, the Cancer Drug Coverage Parity Act is not a mandate, asit applies only to private health insurance plans that already offer IV chemotherapy benefits. “Many patients are now using promising oral treatments butare forced to pay astronomical out-of-pocket costs or forgo treatment altogether. We have to fix this disparity in coverage so cancer patients are makinghealth care decisions based on the best information, not which treatment fits into outdated guidelines,” said Rep. Lance in a press release. Intravenous (IV) andinjected treatment have traditionally been the primary methods of treatment; however, oral chemotherapy has increasingly become more prevalent, accountingfor 35 percent of present oncology research.

House W&M Committee Holds HHS FY 2016 Budget Request Hearing; SCOTUS Ruling Dominates Discussion

On June 10, the House Ways and Means Committee held a hearing focused on the Affordable Care Act (ACA) implementation and the Department of Health andHuman Services’ (HHS) FY 2016 Budget request. In light of the upcoming Supreme Court (SCOTUS) decision, members focused their questioning to strategicallyobtain information from Secretary Burwell on HHS’s contingency plan should the Court rule against the government in the impending case King v. Burwell later this month. Specifically, Republican members pressed hard on whether the Administration will work with Congress to addresssubsidy patches for residents in states with federally run exchanges or whether they would only advocate for a quick, one-line fix as mentioned by thepresident to the press earlier this week. GOP members are currently drafting legislation to respond should SCOTUS block subsidies in more than 30 stateswhere people buy insurance through the federal marketplace, HealthCare.gov. In her testimony, Secretary Burwell stressed that the White House would notentertain legislation that undermines the integrity of the ACA, and asserted that the Administration has yet to see a Republican-sponsored backstop billthat it could support. With regard to the budget, Secretary Burwell mentioned several key components President Obama sees as critical to achieving hisAdministration’s health care goals in the upcoming fiscal year: continuing and improving the Affordable Care Act; investing in health care research, suchas increased funding for the National Institutes of Health (NIH) and the Precision Medicine Initiative; spearheading social initiatives including combatingdrug abuse and promoting affordable childcare; and reforming Medicare and Medicaid to reduce fraud, waste and abuse.

Witness List

The Honorable Sylvia Burwell
Secretary
United States Department of Health and Human Services

For more information or to view the hearing, please visitwaysandmeans.gov.

House Veterans Affairs Subcommittee Holds Hearing on Prescription Mismanagement and the Risk of Veteran Suicide

The House Veterans Affairs oversight and investigations subcommittee held a hearing on June 10 in order to investigate prescription mismanagement and therisk of veteran suicide, following the release of a Government Accountability Office (GAO) reportfinding the need for improvements in mental health services for veterans, particularly in the area of monitoring antidepressant use among veterans. Thestudy concluded the Veterans Affairs Administration “lacks methods to track whether recommended care is provided.” According to the report, 1.5 millionveterans required care for mental health in 2013. Two topics that dominated member questioning in the hearing included veterans cut from prescription drugsabruptly and the lack of a suicide hotline available for veterans with mental illness.

Witness List

Carolyn Clancy, M.D.
Interim Under Secretary for Health
U.S. Department of Veterans Affairs

Accompanied by: Michael Valentino, Chief Consultant
Pharmacy Benefits Management Service
Veterans Health Administration, U.S. Department of Veterans Affairs

Accompanied by: Harold Kudler, M.D., Chief Consultant
Mental Health Services
Veterans Health Administration
U.S. Department of Veterans Affairs

Randall Williamson
Director
Health Care Issues

Government Accountability Office
Jacqueline Maffucci, Ph.D.
Research Director
Iraq and Afghanistan Veterans of America

For more information or to view the hearing, visit veterans.house.gov.

Senate

Senate HELP Committee Holds Hearing to Address Barriers to Health Information Exchange

The Senate Health, Education, Labor, and Pensions (HELP) Committee held a hearing June 10 to investigate the ways Congress can help solve the immediateproblems of the implementation of meaningful use Stage 3, enhancing electronic health record interoperability and increasing patient access to data as ameans of enhancing quality of care for patients. “Our goal is to identify the 5 or 6 steps we can take to improve electronic health records—a technologythat has great promise, but has, through bad policy and bad incentives, run off track,” Chairman Lamar Alexander (R-TN) said in his written openingstatement. The hearing was the first hearing in a planned series on health information technology, and Chair Alexander has also put together a bipartisangroup to work on the issue. Worth noting, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule earlier this year setting up thethird stage of the meaningful use program, which providers will have to adhere to in 2018.

Witness List

Thomas H. Payne, M.D., FACP, FACMI
Board Chair-Elect, American Medical Informatics Association
Medical Director, IT Services, UW Medicine, University of Washington School of Medicine

Craig D. Richardville, M.B.A., FACHE
Senior Vice President and Chief Information Officer, Carolinas HealthCare System
Chair, Premier Healthcare Alliance Member Technology Improvement Committee

Christine Bechtel, M.A.
Advisor, National Partnership for Women & Families
Chair, Health IT Policy Committee Consumer Workgroup, President, Bechtel Health

Neal L Patterson, M.B.A.
Cofounder, Chairman, Chief Executive Officer
Cerner Corporation

For more information or to watch the hearing, visithelp.senate.gov.

Thenext hearing in the series, entitled “Achieving the Promise of Health Information Technology: What Can Providers and the U.S. Department of Health and Human Services DoTo Improve the Electronic Health Record User Experience?,” is scheduled for Tues., June 16 at 10 a.m. in 430 Dirksen Senate Office Building.

GOP Post-King Contingency Bills Released in Both the House and the Senate

On June 9 and June 4, respectively, Sens. Bill Cassidy (R-LA) and House Budget Chairman Tom Price (R-GA) each dropped their own draft bill language thataims to provide consumers relief should a Supreme Court decision in King v. Burwell disallow federal subsidies in the 30+ states currently operatingthrough the federal exchange platform, healthcare.gov. Sen. Cassidy’s plan, the Patient Freedom Act, which has the co-sponsorshipsupport of Senate Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX) and other GOP senators, David Vitter (LA), Dan Coats (IN), SusanCollins (ME), Jim Inhofe (OK) and Mike Rounds (R-SD), would give states the option of keeping an Affordable Care Act (ACA) marketplace by establishing astate-based exchange or using existing funding to provide tax credits to create Health Savings Accounts (HSAs) for the uninsured, averaging $1,500 perperson. Moreover, should states choose the funding option, they could do away with various mandates under ACA, including the individual and employermandates and requirements for minimum essential coverage; the legislation would also equalize tax treatment, and require health providers to publish cashprices for services reimbursed from an HSA. An identical companion bill will be introduced in the U.S. House of Representatives by Rep. Ralph Abraham(R-LA).

Alternatively, Rep. Price introduced H.R. 2650, the RESCUE America’s Health Care Act, which wouldoffer refundable tax credits for health insurance coverage, with the tax value contingent on a consumer’s age (with beneficiaries over 50 years old gettingthe highest subsidy). Like Sen. Cassidy’s plan, the bill would repeal several key components of the ACA, including the insurance reforms in Title I, aswell as all of the provisions related to HSAs; moreover, the bill would require insurers to cover consumers irrespective of their preexisting conditions,so long as an individual maintains continuous health coverage for 18 months prior to his or her enrollment. Of note, an insurer could still penalizeconsumers with preexisting conditions so long as his or her condition is diagnosed by a physician within the first six months of insurance enrollment.

More information on Sen. Cassidy’s bill can be found here.

More information on Rep. Price’s bill can be found here.

2. Administration

OIG Fraud Alert Warns Physicians of Potential Exposure for Unlawful Compensation Arrangements

The Department of the Health and Human Services Office of the Inspector General’s (OIG ) June 9 fraud alert cautions that the agencyhas initiated a renewed focus on physician compensation arrangements, including medical directorships, as potentially improper payments to physicians forreferrals. OIG states that such arrangements may violate the Anti-Kickback Statute if even one purpose of the arrangement is to compensate the physicianfor past or future referrals and urges physicians to carefully consider such arrangements lest they be held liable civilly or even criminally. The fraudalert discusses the fact that OIG recently reached settlement agreements with 12 physicians who had entered into problematic medical directorships.According to OIG, the compensation paid to the physicians was above fair market value and took into account the referral volume of the physicians. Inaddition to the directorships that compensated physicians directly, OIG also took issue with office staff arrangements under which an affiliated entitypaid the salaries of physician staff. Because the physicians avoided the responsibility of paying for this staff, OIG alleged that the office staffarrangements were improper remuneration to the physicians. OIG sought to recover civil money penalties from all 12 doctors for the improper agreements. OIGdirects physicians to its guidance on the topic, including its Roadmap for New Physicians.

More detailed information on the OIG alert can be found here.

HHS Announces Results of Comprehensive Prevention Program that Helps Reduce Falls Among the Elderly Population

In a June 8 press release, the Department of Health and Human Services (HHS)announced the results of an HHS-funded study which tests the effectiveness of a comprehensive prevention program that aims to reduce both falls and theresulting use of long-term care such as nursing homes. The prevention program, which includes clinical in-home assessments of health, physical functioning,falls history, home environment and medications to create customized recommendations, was developed by HHS based on the research evidence on risk factorsand interventions. Using a randomized control trial, the program was tested among long-term care insurance policyholders age 75 and older to determinewhether the intervention was effective and, if so, the impact on long-term care utilization. The study found that the program led to significantly lowerrates of falls over a one-year study period; those who received the intervention had a 13 percent lower rate of falls, and an 11 percent reduction in riskof falling compared to the control group. Participants also had a significantly lower rate of injurious falls. Long-term care insurance claims were 33percent lower over a three-year period. The intervention, which cost $500 per person to administer, saved $838 per person. Given the impact of falls,findings from the HHS-funded study give hope for reducing the rate of falls among the growing population of older adults. “While falls are preventable, weneed to intervene at the right time in a way that is comprehensive and yet individually tailored,” said Richard Frank, Ph.D., the assistant secretary forplanning and evaluation at HHS, whose office funded the study. “Preventing falls helps everyone: the older person, their family, and the health andlong-term care systems. And this study shows that by investing in falls prevention, we can reduce long-term care use and spending.”

More background information on the design of the study can be found here. The HHS-fundedstudy appears online and in print in the June issue of Health Affairs.

CMS Clarifies Use of Leftover Establishment Funds; States Given More Flexibility

The Centers for Medicare and Medicaid Services (CMS) released new guidance June 8 in order to clarify the legal use of grants obtained under Section 1311of the Affordable Care Act (ACA) further reiterating previous statements from CMS that state-run marketplaces need an additional funding stream other thanestablishment grants to ensure their financial self-solvency in the future. The much anticipated frequently asked questions (FAQ) documentfollows a Department of Health and Human Services (HHS) Office of Inspector General (OIG) report that warned that state exchanges may be utilizing 1,311grants for noncompliant, non-establishment purposes. In the document, CMS specified that states can use the establishment grants in specific waysincluding: designing, developing and testing information technology functions; setting up federally compliant financial and program audit policies,procedures and related data systems; outreach, education and call center efforts to boost enrollment; and long-term capital planning. Furthermore, whilethe operations paid for under these Section 1211 grants must consist of establishment-related activities, they can also cover costs that indirectly supportestablishment work, such as employee salaries. Specifically, the document identifies that grant funding excludes the payment of ongoing expenses, includingrent, utilities and telecommunications. The CMS document also mentions the non-qualifying status of call center operations that “do not constituteestablishment activities” while stopping short of clarifying what those activities may include. The funding flexibility relayed in the FAQ documentsuggests that the CMS is agreeable to partner with states to allow them to utilize funds that they have already budgeted for future use. Worth noting, thisdocument provides little guidance on ensuring financial sustainability for states that may try to transition to a state-operated exchange should theSupreme Court block subsidies from federal exchanges.

HHS Releases Spring 2015 Regulatory Agenda

The Department of Health and Human Services (HHS) released its updatedSpring 2015 regulatory agenda, which list