Washington Healthcare Update

February 1, 2016

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This Week:Because of the Blizzard of 2016—also known as “Snowzilla”—in Washington, D.C., and other parts of the East Coast, this is a combined issue… The House ofRepresentatives opted not to come back to town until next week because of the snow… The federal government was closed for two days… The Senate delayedreturning by a day… But it was still a busy time for health policy.

1. Congress

House of Representatives

Senate

2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress

House of Representatives

Reps. Upton and Brady Subpoena Treasury Regarding ACA Cost-sharing Reduction Program

House Energy and Commerce Committee Chairman Fred Upton (R-MI) and House Ways and Means Committee Chairman Kevin Brady (R-TX) both issued a subpoena toSecretary of the Treasury Jack Lew for documents regarding the cost-sharing reduction (CSR) program—part of the Affordable Care Act (ACA)—which givessubsidies to some low-income people covered by Obamacare to help them pay for medical care. The committee chairmen say that the administration has refusedrepeated requests for information and documents on the program. They have also requested documents from Health and Human Services (HHS) Secretary SylviaBurwell. Burwell agreed to provide a briefing on the issue, putting a subpoena threat on hold to give HHS another chance to provide the requestedinformation.

The committee leaders are concerned that the administration is paying subsidies to insurance companies under the health care law without approval fromCongress; the expenditures have totaled more than $5 billion to date and are estimated by the Congressional Budget Office (CBO) to amount to $170 billionover the next 10 years. The committees first requested documents on Feb. 3, 2015, then on July 7, 2015, and once more in December 2015. In the most recentletter, the chairmen are requiring Treasury to comply with their requests by Feb. 3, 2016.

Click hereto see a press release and complete timeline of events.

To read all the letters, click here.

Former Turing CEO Shkreli to Appear Before Oversight Committee Feb. 4

The House Oversight Committee subpoenaed former Turing Pharmaceuticals CEO Martin Shkreli to appear at a hearing on recent drug price increases on Jan. 26,2016. Because of snow, the hearing has been postponed to Feb. 4. However, Shkreli’s lawyers asked the committee to excuse him from the hearing because of afederal court order from another case that prohibits his traveling outside New York City. He must receive permission from the court to travel, but neitherShkreli nor his representatives have attempted to get that permission. Shkreli’s lawyers have suggested that he will plead the Fifth. However, Oversightstaff said the subpoena still requires him to show up at the hearing, even if he does so plead.

Nancy Retzlaff, chief commercial officer at Turing, and Howard Schiller, interim CEO at Valeant, are both scheduled to testify at the hearing. Valeant isanother company that has been on the burner for dramatically raising prices of off-patent drugs.

Here is the full list of witnesses:

Dr. Janet Woodcock
Director, Center for Drug Evaluation and Research
U.S. Food and Drug Administration (FDA)

Mr. Howard B. Schiller
Interim Chief Executive Officer
Valeant Pharmaceuticals International, Inc.

Mr. Martin Shkreli
Former Chief Executive Officer
Turing Pharmaceuticals LLC

Ms. Nancy Retzlaff
Chief Commercial Officer
Turing Pharmaceuticals LLC

Mr. Mark Merritt
President and Chief Executive Officer
Pharmaceutical Care Management Association

For more information, click here.

Senate

Senate Committee on Homeland Security Looking into Co-Ops

The chairman of the Senate Committee on Homeland Security and Governmental Affairs, Wisconsin Sen. Ron Johnson, is asking the Centers for Medicare andMedicaid Services (CMS) to provide information about the Affordable Care Act (ACA) co-ops—including copies of loan agreements, a list of plans that havebeen put under “enhanced oversight” and details on plans to recover funding from failed insurers. Johnson requested the information two days before theSenate Finance Committee held its own hearing on the co-ops. To read his letter, clickhere.

Senate Finance Committee Holds Hearing on Obamacare Co-Ops

On Jan. 21, the Senate Finance Committee held a hearing entitled “HealthcareCo-Ops: A Review of the Financial and Oversight Controls.” Acting Administrator for the Centers for Medicare and Medicaid Services (CMS) Andy Slavitt wasthe sole witness in the hearing, which addressed the program’s failures. Twelve of the 23 co-ops started with $2.4 billion in Obamacare loans have failed,forcing 600,000 exchange customers to find new plans. Most of the remaining startups continue to suffer, with a combined $200 million in losses through thefirst nine months of 2015.

Committee Chair Orrin Hatch (R-UT) blamed the program’s problems on CMS, which he said encouraged the co-ops to use “creative accounting” to cook theirbooks. Other members defended the Obama administration, arguing that Congress gave the program no financial flexibility.

Slavitt said his focus was on creating better oversight practices for the program. He also said he would like to loosen the capital rules for co-ops andhelp them attract greater investment, or find partners to merge with. These issues will all be addressed in guidance for the co-ops that Slavitt said wouldbe released soon. CMS is also working with the Department of Justice (DoJ) to see how much of the $1.2 billion of federal dollars funded into the co-opscan be recovered. Slavitt declined to say which co-ops may face legal action. Read his testimony here.

Senators Wyden, Grassley Request Information on Sovaldi Report

Senate Finance Committee Ranking Member Ron Wyden (D-OR) and senior committee member Chuck Grassley (R-IA) sent a letter to the health careand patient community requesting feedback on policy questions raised in theirreport, “The Price of Sovaldi and Its Impact on the U.S. Health Care System,” from Dec. 1, 2015. This report examined how Gilead Sciences, Inc., developed,priced, marketed and sold the hepatitis C drug Sovaldi (and later Harvoni). The senators ask for information “about how to address the financial impact ofhigh prices of breakthrough drugs, ensuring patient access, and improving marketplace transparency.”

Congress, Democratic presidential candidates and the administration have kept rising drug prices in the spotlight, but none have taken concrete action onthe matter. Grassley and Wyden argue that the price of hepatitis C medications is to blame for patients’ not receiving the drug.

Senate HELP Committee Will Piece Together Medical Innovations Bill, Work Toward Mental Health Bill Markup

On Jan. 19, the Senate Health, Education, Labor and Pensions (HELP) Committee announced they will not immediately put forth a companion to the House’s 21stCentury Cures Bill and will instead consider several smaller bills that have bipartisan support. There will be three executive markup sessions on numerousbipartisan bills. So far, Committee Democrats have committed to only the first markup on Feb. 9. Partisan disagreement on major subject areas such as drugpricing and funding has led Senate HELP Committee Chairman Lamar Alexander (R-TN) to take a fragmented approach. Alexander said he hopes to pass enoughsmaller bills to match the House Cures bill that passed the lower chamber this summer.Click hereto see the press release and list of bills to be considered at each markup session.

The HELP Committee also held its first hearing on mental healththis year, questioning experts and hinting at legislation they want included in a bill. Committee members and witnesses discussed increasing access tomental health care in rural areas, reducing the stigma around mental health and addressing the shortage of providers, among other issues. Sens. BillCassidy (R-LA) and Chris Murphy (D-CT) are working on a bill with Alexander and Ranking Member Sen. Patty Murray (D-WA), S. 1945, which will most likelypair with a reauthorization of the Substance Abuse and Mental Health Services Administration.

Holds Placed on Califf’s FDA Nomination and Sen. Manchin Threatens Filibuster

Sen. Bernie Sanders (D-VT) has placed a hold on Robert Califf’s nomination to lead the U.S. Food and Drug Administration (FDA), citing his ties to the drugindustry. Sanders said in a statement that the next FDA commissioner should work to lower drug prices, “implement rules to safely import brand-name drugsfrom Canada and hold companies accountable who defraud our government.” Sanders voiced his support for Sen. Edward Markey (D-MA), who issued a hold onCaliff’s nomination until FDA changes its approval process for opioid painkillers. Califf’s nomination also faces a hold from Sen. Lisa Murkowski (R-AK),who is asking FDA to require labeling of genetically modified salmon.

Sen. Joe Manchin (D-WV) announced that should the nomination come to the Senate floor for consideration, he would filibuster. Manchin doesn’t think Califfwould be steadfast enough in preventing the abuse of opioid painkillers. “The FDA and Commissioner’s number one priority should be public health and it isinappropriate for the FDA Commissioner to have had such close financial ties with the pharmaceutical industry,” Manchin said.

Sen. Shaheen Asks for a Federal Response to the Zika Outbreak

In a letter on Jan. 27, Sen. Jeanne Shaheen (D-NH) called on Cabinet officials to coordinate a federal response to the Zika outbreak with the same urgencyas when the Ebola outbreak began in West Africa. The letter—sent to HHS Secretary Sylvia Burwell and the heads of the Homeland Security and StateDepartments—asks that the officials detail any additional resources or authorities they might need from Congress.

2. Administration

Insurance Mega-Mergers Will Get Review by States

Antitrust experts and consumer advocates are asking state regulators to examine the blockbuster insurance mergers that would reduce the number of nationalhealth plans from five to three. They argue that these mergers threaten to leave consumers with fewer choices and higher prices. There has been increasedattention on whether the Justice Department will block Aetna’s $37 billion acquisition of Humana and Anthem’s $54 million takeover of Cigna on antitrustgrounds. However, health plans are usually regulated by the states, which have a broader mandate to assess issues raised by the deals.

David Balto, an antitrust lawyer and former federal regulator, asked the National Association of Insurance Commissioners to create a working group thatwould help state regulators conduct reviews. He is also working with consumer groups concerned about the mega-mergers. Regulators are looking into morethan just antitrust concerns—consumer protection issues such as bolstering benefits and limiting premium increases may be addressed. Individual states andregulators can demand concessions if they feel that their consumers would be better served as a result, according to antitrust expert Leemore Dafny.

Consumer advocates pointed out that Aetna and Humana combined would control two-thirds of the Medicare Advantage market in the state of Virginia, accordingto a letter written to the Virginia Bureau of Insurance. The groups wrote, “If the market becomes so concentrated that dominant insurers are able toeliminate or unduly restrict broader-network options that would be harmful for consumers who are willing to pay more and want a broader network.”

Public hearings have been held on the mergers and more are planned in numerous states, including California, Wisconsin and Connecticut.

FDA Incentivizes More Information Sharing on Medical Device Cybersecurity Vulnerabilities

On the first day of the U.S. Food and Drug Administration’s (FDA) two-day meeting on medical device security, attendees focused largely on the steps thatcould be taken to better address vulnerabilities in devices, with information-sharing organizations discussed as a key route for encouraging morecollaboration from manufacturers. FDA, in its recent draft guidance on postmarket management of cybersecurity for medical devices, suggested waivingreporting requirements for vulnerabilities that do not result in serious injuries, so long as the manufacturer is a member of an Information Sharing andAnalysis Organization (ISAO). At the meeting, attendees worried that participation in such organizations would be a major change for companies that havetraditionally kept vulnerability information secret.

According to panelists at the meeting, the difficulty in establishing ISAOs is creating the appropriate environment for information sharing. It is notknown what would constitute an ISAO and what kind of information would need to be shared to qualify under FDA’s guidance. FDA hopes to bring the securitycommunity together to a degree that researchers, regulators and manufacturers can have transparent conversations about vulnerabilities. Several ISAOs existthat have the necessary government structure for non-disclosure agreements to allow for a collaborative environment. FDA is attempting to determine whatincentives would bring stakeholders together.

FDA previously issued guidance on cybersecurity in the premarket phase—this focused on addressing vulnerabilities in the design and approval phases. Ananalysis by FDA of 85 510(k) submissions from October 2014 to October 2015, however, shows that 69 percent should have included cybersecurity informationand only 47 percent did (28 out of the 59 submissions).

CMS Schedules Webinars on Covered Outpatient Drugs Final Rule

CMS will host the following webinars to provide an overview of theCovered Outpatient Drugs final rulewith comment that was displayed in the Federal Register on Jan. 21, 2016.

Wednesday, Feb. 10, 2016, 12:30 – 2:00 p.m. ET: This webinar will be geared toward drug manufacturers and those with responsibilities or involvement in government pricing/programs. CMSwill provide a broad overview of the final rule with comment, the focus of this webinar will be manufacturer reporting requirements and rebaterequirements, including topics related to Average Manufacturer Price (AMP), best price, 5i drugs, authorized generics, covered outpatient drug definition,innovator multiple source drug and single-source drug definitions, drugs approved exclusively for pediatric indications, and line extension drugs.

Thursday, Feb. 11, 2016, 12:30 – 2:00 p.m. ET: CMS states that this webinar will be geared toward the pharmacy industry including retail community pharmacies and pharmacy trade organizations.CMS will provide a broad overview of the final rule with comment, the focus of this webinar will primarily be within the area of pharmacy reimbursement,including the federal upper limits (FULs), Actual Acquisition Cost, Professional Dispensing Fee, and Reimbursement for Federal Discount Programs (340B) andFederal Supply Schedule (FSS).

Please visit theCovered Outpatient Drugs Policy pagefor more details on the final rule with comment.

CMS Defends Legality of 1115 Waivers

Beneficiary advocates are expressing concerns over the legality of certain Medicaid demonstration waivers (1115 waivers) approved by the Centers forMedicare and Medicaid Services (CMS), including those requiring premiums, cost-sharing, lock-outs and nonemergency visits and transportation. Advocatessuch as Leonardo Cuello of the National Health Law Program have legal concerns about many waivers granted to states—including ones to Iowa, Michigan,Indiana and Montana—that let those states charge beneficiaries premiums. Medicaid does not permit states to charge premiums to beneficiaries with incomesless than 150 percent of the federal poverty level, so states must get 1115 demonstration waivers to charge premiums. Indiana goes further and locksbeneficiaries out of Medicaid for six months if they don’t pay their premiums (even if they offer to pay back what they owe). Advocates argue that thispolicy shouldn’t be allowed.

CMS points to its ongoing evaluations of the waivers to quell concerns, and stresses it will continue working with states to create individual programswhile also ensuring consumer protections are maintained. CMS also notes that Indiana is the only state with a lock-out period, which is being evaluatedwith the creation of a control group, in compliance with federal law. Advocates argue, however, that CMS is not complying with the minimum requirements of1115, which include promoting Medicaid objectives. Overall, advocates agree that it is important to test whether certain waiver requirements, includingpremiums, copays and health behaviors, are good for the program in the long run.

CMS Releases Final Medicaid Outpatient Drug Rule

On Jan. 21, the Centers for Medicare and Medicaid Services (CMS) published a final rule on Medicaid coverage of outpatient drugs. The ruleincludes reforms to the rebate and reimbursement systems for Medicaid prescription drugs, which will save federal and state governments an estimated $2.7billion over five years. The “Covered Outpatient Drugs” rule implements changes made to Medicaid drug coverage under Obamacare by providing further detailon how reimbursements and rebates are calculated. This is part of CMS’s efforts to help ensure affordability and accessibility of prescription drugs, whilealso supporting pharmaceutical innovation. CMS says the rule will close loopholes, incentivize pharmacies to utilize generic drugs by ensuring properreimbursements for their cost and give territories additional tools to manage Medicaid drug costs.

Registration Now Open for CMS Risk Adjustment Forum

The Centers for Medicare and Medicaid Services (CMS) announced that registration is open for its all-day risk adjustment forum scheduled to take place onMar. 31 in Baltimore, MD. Stakeholders are invited to the public session to review plan experience over the past two years and to talk about potentialchanges to the risk adjustment methodology for plan years starting in 2018. Registration for the event will end Mar. 23.

CMS Outlines Six Priorities to Reduce Disparities in Medicare

On Jan. 26, the Centers for Medicare and Medicaid Services (CMS) laid out six priorities in “The CMS Equity Planfor Improving Quality in Medicare.” The priorities are as follows:

  1. Expand the collection, reporting and analysis of standardized data
  2. Evaluate disparities impacts and integrate equity solutions across CMS programs
  3. Develop and disseminate promising approaches to reduce health disparities
  4. Increase the ability of the health care workforce to meet the needs of vulnerable populations
  5. Improve communication and language access for individuals with limited English proficiency and persons with disabilities
  6. Increase physical accessibility of health care facilities

CMS also said it will work to understand how Medicare programs have affected disparities, and is performing a separate evaluation and report to be releasedlater this year. CMS also released a new guide forreducing readmissions for racially diverse patients as part of its plan to reduce health disparities.

CMS Announces Draft Medicaid Federal Upper Limits (FULs)

The Centers for Medicare and Medicaid Services (CMS) announced that the final Medicaid Average Manufacturer Price-based Federal Upper Limits (FULs) will bereleased in late March and made effective on April 1. The FULs were laid out in a recently released rule on Medicaid outpatient drugs, which also definesAverage Manufacturer Price (AMP)—a key metric for determining pharmacy reimbursement for specific generics subject to the FULs. The Affordable Care Act(ACA) requires CMS to recalculate the FUL amounts, because they sometimes exceeded the market prices for multiple-source drugs.

CMS gave states a one-year transition period for the new FULs, so they can file new state plan amendments to adopt new pricing; the states will essentiallyneed to plug the new FULs into their systems while working on plan amendments. CMS’s final rule also includes an exception to the FUL calculation, whichallows for a higher multiplier to calculate the FUL based on the acquisition costs for specific multiple source drugs. States will have up to 30 days toimplement the FULs after they become effective.

CMS Issues Final Rule With Face-to-Face Requirements for Home Health Services

On Jan. 27, the Centers for Medicare and Medicaid Services (CMS) released a final rule issuing requirements that physicians must document aface-to-face encounter with Medicaid patients before ordering home health services or certain related medical equipment. This rule also explainsdefinitions related to the home health benefit and expands the home health benefit to include coverage of more medical supplies and equipment.

CMS Releases First Home Health Patient Experience of Care Star Ratings

On Jan. 28, the Centers for Medicare and Medicaid Services (CMS) introduced the first patie