Washington Healthcare Update

February 8, 2016

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This Week:Congress and the administration focus on the opioid addiction epidemic… Override of the president’s veto of legislation that would have repealed theAffordable Care Act fails, to no one’s surprise… Senate committee continues to work on “Cures” legislation… and HHS announces 12.7 million people signed upfor 2016 health plans.

1. Congress

House of Representatives


2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress

House of Representatives

House Republicans Fail to Override Veto of Obamacare Repeal Bill But Replacing Affordable Care Act Remains Top of GOP Agenda

On Feb. 2, House Republicans failed to override President Barack Obama’s veto of their bill repealing major pieces of the Affordable Care Act. The repeallegislation is viewed by Republicans members of Congress as a blueprint for unraveling the law should a Republican become president. The House voted241-186, falling short of the two-thirds majority needed to override a veto. Three Republicans voted in support of President Obama’s veto.

House Speaker Paul Ryan (R-WI) has promised that House Republicans will present an Obamacare alternative in 2016 — GOP leadership has made the same promisebut failed to deliver during the six years since the law passed. Congress approved the Obamacare repeal measure through reconciliation in January, and itwas the first major repeal bill to arrive at the president’s desk for a veto.

Rep. Pat Tiberi (R-OH), chairman of the Ways and Means Committee Subcommittee on Health, has said that delivering a replacement plan outlined by SpeakerPaul Ryan at the recent GOP retreat is his first priority. He hopes the House will pass the plan before the Republican Convention in July.

Oversight Investigation Finds Turing and Valeant Purchased Drugs to Increase Profit

On Feb. 2, House Oversight Committee ranking member Elijah Cummings (D-MD) sent a memo to committeemembers regarding their investigation into Turing Pharmaceuticals. The committee obtained more than 250,000 pages of company documents and found thatTuring and former CEO Martin Shkreli were explicit about their plans to purchase a life-saving drug for the purpose of increasing the price dramatically tomake profits.

The review of documents found that Turing executives underestimated the backlash in response to raising the price of the off-patent drug Daraprim by 5,000percent — from $13.50 to $750 per tablet. One email reveals how the company expected almost all of its earnings from the price increase to be saved asprofit. “We raised the price from $1,700 per bottle to $75,000… So 5,000 paying bottles at the new price is $375,000,000 — almost all of it is profit,” Shkreli wrote.

Internal documents show that Turing officials never intended to decrease the price of Daraprim as Shkreli publicly promised following the widespreadobjections to the price increase. Turing executives counted on Shkreli — due to his experience hiking drug prices while at Retrophin — to successfullyraise Daraprim’s price without creating significant pushback from patients and payers.

Cummings also released amemo on hisinvestigation into Valeant Pharmaceuticals Feb. 2. The Oversight Committee, in reviewing more than 75,000 pages of documents, found Valeant purchased twoheart drugs — Isuprel and Nitropress — in order to dramatically increase their prices (by 525 percent and 212 percent, respectively).

According to Cummings’ investigation, Valeant Pharmaceuticals used patient assistance programs to justify raising prices of older drugs while increasingits revenues by driving patients into closed distribution systems. Valeant CEO Michael Pearson used this pricing strategy with more than just these twodrugs — from 2014 to 2015, Valeant increased the prices of more than 20 other drugs by over 200 percent. The company identified revenue goals first, thenset drug prices to reach these goals.

The committee’s findings come as Valeant is facing a federal probe regarding its pricing and distribution practices.

While the Oversight Committee’s investigation focuses on these two companies, Cummings said the results “show that these tactics are not limited to a fewbad apples but are prominent in the industry.”

The committee held a hearing with Turing executives testifying on Feb. 4. For more information on the hearing, click here.

Energy and Commerce Committee Grills CMS on Medicare’s Biosimilar Reimbursement Policy

On Feb. 4, the House Energy and Commerce Subcommittee on Health held a hearing entitled “Examining Implementation of the Biologics Price Competition andInnovation Act.” Lawmakers grilled CMS Deputy Administrator Sean Cavanaugh about the Medicare reimbursement policy, opposed by members of both parties,designed to drive down the prices of biosimilars. Under the policy, reimbursement will be determined by combining the average price of biosimilars thatcopy the same brand-name biologics. Members raised concerns that the unique qualities of the biosimilars were not properly considered by CMS, and thatunique price calculations for individual biosimilars are key to ensuring competitive reimbursement. Chairman Emeritus Joe Barton (R-TX) asked Cavanaugh ifthe agency has plans to revisit how these drugs are priced — Cavanaugh noted that CMS will monitor the market closely and there is a possibility ofrulemaking in the future.

The U.S. Food and Drug Administration (FDA) drug center Director Janet Woodcock also testified at the hearing. She warned that FDA might not be able tokeep up with biosimilar applications as they become more frequent due to lack of previous congressional assistance — only one application has been approvedso far. She also noted, however, that FDA is beginning to collect a modest amount of user fees from biosimilar makers — $6 million in 2013, $13 million in2014 and $23 million in 2015.

For more information or to view the hearing, click here.

House Energy and Commerce Committee Seeks Input on Site-Neutral Payment Issue

The House Energy and Commerce Committee said they are staking their jurisdictional claim over a hospital payment issue that has been a priority for theWays and Means Committee. Chairman Fred Upton and health subcommittee leader Joe Pitts today sent a letter tohealth care groups asking for input on policy changes related to site-neutral payments, after last year’s budget deal included a cut to Medicare paymentsfor services provided in hospital outpatient departments.

Hospital groups have been lobbying Hill aides for a “fix” to the provision, arguing that outpatient departments that were under construction at the timethe budget deal was enacted should be exempt from the future cuts.

Ways and Means Committee Chairman Kevin Brady has committed to examining a fix this year, and Rep. Pat Tiberi, who chairs that panel’s health subcommittee,said he is also working on a fix.

Upton and Pitts write in their letter that their committee has received a great deal of feedback on the provision since it was enacted. They ask foradditional comments by Feb. 19.

To see the press release, click here.

Ways and Means Chair Kevin Brady Not Interested in Curbing Drug Prices

On Feb. 1, House Ways and Means Chair Kevin Brady (R-TX) said he isn’t interested in legislation to curb drug prices. He noted that the committee isconvinced that competition and choice drive affordable drug prices, but that it will help create more competition by speeding up drugs approvals, as theHouse did in its 21st Century Cures bill. House Republicans met on Feb. 4 to discuss their alternative to the Affordable Care Act (ACA). The timeline andsubstance of the legislation have yet to be determined.


Senate Judiciary Committee Delays Opioid Legislation Markup

Senate Judiciary Committee postponed a markup on theComprehensive Addiction and Recovery Act, the first major piece of legislation to address the growing opioid epidemic. The legislation would direct theadministration to issue grants to states and organizations for opioid educational, preventive and treatment programs.

The Senate Judiciary Committee rescheduled the markup to Feb. 11. Committee aides cited jurisdictional and policy differences that needed to be settled asthe cause of the delay. The bill is backed by numerous Republicans and Democrats in the Senate, but the White House may be more hesitant.

The Obama administration announced its own $1.1 billion proposal to combat the opioid epidemic, which focuses mainly on medication-assisted treatmentprograms and expanding access to care.

Sen. Murray Introduces Legislation to Improve Medical Device Safety

On Feb. 4, the Senate Health, Education, Labor, and Pensions (HELP) Committee ranking member Patty Murray (D-WA) introduced legislation, the PreventingSuperbugs and Protecting Patients Act, to give additional tools to review and ensure the safety of medical devices. This legislation follows a probe intoan outbreak of antibiotic-resistant infections caused by duodenoscope devices used to treat conditions of the pancreas. Murray’s legislation:

1) Gives FDA authority to deny a 510(k) submission (required in order to sell certain devices) based on whether the manufacturer’s cleaning instructionswork in real-life conditions and whether the manufacturer can give clear data showing the device can be cleaned between each use.

2) Requires the FDA to update its guidance to clarify when manufacturers are required to get clearance from FDA to market modified devices.

To see Sen. Murray’s press release, click here.

Senate HELP Committee Chairman Alexander May Introduce NIH Funding Language Before Cures Markup

The Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) may introduce draft language on mandatory funding forthe National Institutes of Health (NIH) before a March 9 markup of the Senate counterpart to the House-passed 21st Century Cures legislation. The NIHInnovation Fund would not be an actual bill, but Alexander could release the language to extend the conversation on the topic. At a hearing last year,Alexander was open to the idea of additional funding for NIH, but asked questions about where the money would go and how they could ensure the funds werespent properly. Ranking member Patty Murray (D-WA) has made the inclusion of mandatory funding for NIH and FDA in the Senate Cures bill a requirement forher support of the package.

2. Administration

CDC Releases Elder Abuse Surveillance Recommendations

On Jan. 29, the Centers for Disease Control and Prevention (CDC) released theElder Abuse Surveillance: Uniform Definitions and Recommended Core Data Elements. These recommendations establish and normalize consistent definitions and data elements in order to make it easier to better understand and moreeffectively combat elder abuse. They define terms such as “abuse” and “neglect” in order to allow for easier comparison of data from differentjurisdictions or sources. CDC worked with a wide range of stakeholders, including the Administration for Community Living (ACL), to develop theserecommendations, which are consistent with ACL’s National Adult Maltreatment Reporting System (NAMRS) initiative.

Obama Administration Proposes New Funding to Address Opioid Epidemic

On Feb. 2, the Obama administration proposed $1.1billion in new funding to combat the country’s prescription opioid abuse and heroin use epidemic, a public health problem that has drawn major attention inthe 2016 presidential campaign as overdose deaths increase. According to the CDC, opioids were involved in 28,648 deaths in 2014 — a 14 percent spike indeaths from the drugs. The proposal would expand access to medication-assisted treatment for substance abuse. The president’s FY 2017 budget will include$920 million over two years to support cooperative agreements with states to expand the medication-assisted treatment.

Republican and Democratic presidential candidates have been advertising their own proposals to address the epidemic, especially in New Hampshire, the hostof this week’s primary. New Hampshire has one of the highest overdose death rates inthe country, with more than 350 fatal opioid overdoses last year, according to the CDC.

Around 2.2 million people need treatment for opioid abuse nationwide, but only 1 million get it, according to HHS Secretary Sylvia Burwell. The budgetincludes a $90 million increase for efforts across the Departments of Justice (DOJ) and Health and Human Services (HHS) to expand drug overdose preventionstrategies, make medication-assisted treatment programs more available, improve access to the overdose-reversal drug naloxone and support enforcementactivities.

The administration is also seeking $10 million to help distribute the Strategic Prevention Framework for Prescription Drugs to address the risk of theover-prescription of painkillers by primary care doctors.

Congress is also considering bipartisan proposals to fight the epidemic, and approved an additional $100 million to that end in the year-end budget deal.The Senate Judiciary Committee will mark up the Comprehensive Addiction and Recovery Act on Feb. 11.

Obama Budget Will Propose Changes to Cadillac Tax

President Obama’s impending budget request will reportedly propose changing his Cadillac tax on costly health benefits. According to Jason Furman, head ofthe president’s Council of Economic Affairs, the administration’s plan will adjust the 40 percent excise tax to account for regional differences in healthcare costs around the country — Congress recently decided to delay implementing the current tax for two years, until 2020.

“The most significant provision specifies that in any state where the average premium for ‘gold’ coverage on the state’s individual health insurancemarketplace would exceed the Cadillac tax threshold under current law, the threshold would instead be set at the level of that average gold premium,”Furman wrote in the New England Journal of Medicine.

CMS Creates Rural Health Council

The Centers for Medicare and Medicaid Services (CMS) is creating a rural health council to help promote a strategic focus on access, economics andinnovation issues across rural America. The council will review regulations for their impact on providers in rural areas and make recommendations forrural-based health policies.

The council’s goals are 1) improving access to health care in rural settings, 2) supporting the rural health care economy and 3) making sure the healthcare innovation agenda appropriately fits rural health care markets. Individuals in rural areas are older, have lower incomes and are more likely to lackinsurance. Close to 2 million people in rural areas around the country have signed up for coverage on an Obamacare exchange and if states expand Medicaidthere will be millions more. CMS Acting Administrator Andy Slavitt noted that 10 rural Maryland hospitals have multi-payer global budgets and that CMS isexploring ways to expand that model to other rural parts of the country.

For more information, click here.

CMS Indicates One-sided ACOs Will Not Be Included in Alternative Pay Models

Officials from the Centers for Medicare and Medicaid Services (CMS) said they do not plan to count bonus-only accountable care organizations (ACOs) asalternative pay models in the approaching physician pay system. CMS says the law doesn’t allow the inclusion of one-sided risk model ACOs as alternativepay models, which would get pay increases for certain physicians. “My understanding from our lawyers is that it would be a tough sell to make Track 1 fitinto that legal statutory definition,” CMS Medical Officer Terri Postma said Feb. 1. Track 1 is a model in the Medicare Shared Savings Program that offersbonuses for cutting spending, but does not penalize providers for missing spending and quality-of-care goals — Postma does not believe Track 1 will fitinto the legal definition of an alternative pay model.

CMS is currently putting together the rules and working on how to define the term alternative pay model.

FDA Announces Opioid Action Plan

In response to the opioid epidemic, the US Food and Drug Administration (FDA) released an action plan to reassess the agency’s approach to opioid medications. RobertCaliff, FDA’s deputy commissioner for medical products and tobacco, along with other FDA leaders, headed up this call to action. The action plan comesafter the White House announcement of a $1.1 billion initiative to fight the epidemic, focused on increasing access to medication-assisted treatment. Theplan also follows the news that three Senate Democrats — Bernie Sanders, Ed Markey and Joe Manchin — planned to put a hold on Califf’s nomination to be FDAcommissioner.

The FDA plans to:

  • Expand the use of advisory committees
  • Develop warnings and safety information for immediate-release (IR) opioid labeling
  • Strengthen postmarket requirements
  • Update the Risk Evaluation and Mitigation Strategy (REMS) Program
  • Expand access to abuse-deterrent formulations (ADFs) to discourage abuse
  • Support better treatment
  • Reassess the risk-benefit approval framework for opioid abuse

According to anti-addiction advocates, the step that could have the largest impact is FDA’s plan to reassess the risk-benefit approval framework for opioidabuse. Califf said that approvals should reflect the larger public health impact, not just the safety of a drug for an individual patient.

To see the press release, click here.

Eli Lilly, Anthem Push Policy Solutions to Increase Innovation in Drug Pricing

On Jan. 29, Eli Lilly and Company and Anthem released a memo asking Congress and the administration to ease legislative and regulatory burdens, to make iteasier for drug manufacturers and health plans to communicate about emerging products before U.S. Food and Drug Administration (FDA) approval. Their statedpolicy goal is as follows: Clarify federal law to confirm that manufacturers may speak openly with health plans about drugs going through the FDA approvalprocess, particularly with regard to product efficacy, safety and pharmacoeconomic information. The companies suggest two major public policy solutions toincrease innovation in pharmaceutical pricing:

1) Allow for more robust communication between health plans and drugmakers before a drug is approved; and

2) Address legal and regulatory barriers — including those posed by anti-kickback laws and Medicaid best price policy — that prohibit value-based paymentarrangements.

“While the rest of the health care system is moving toward paying for value, payments for drugs continue to be stuck in a 20th century construct thatfocuses on price, regardless of the health outcomes of each patient,” Anthem’s former chief medical officer Sam Nussbaum and Eli Lilly Senior VicePresident David Ricks say in a recent Health Affairs blog.

SAMHSA Releases Proposed Changes to Mental Health Data-Sharing Rule

On Feb. 5, the Substance Abuse and Mental Health Services Administration (SAMHSA) released its proposed update to 42 CFR Part 2 — the Confidentiality ofAlcohol and Drug Abuse Patient Records regulations. The rule governs how data on patients’ mental health can be shared. The goal of the proposed changes isto facilitate information exchange within new health care models while giving patients new rights to know where their data goes. If patients sign a waiverallowing their data to be generally shared, they can ask providers to disclose which organizations acquired the data. Also, the proposal would giveresearchers additional access to Medicare claims data concerning patients with mental health or substance abuse disorders — researchers have complainedthat the current law suppresses this data.

For more information, click here.

3. State Activities

Arkansas: Gov. Hutchinson Talks Extension of Medicaid Expansion

On Feb. 1, Arkansas Gov. Asa Hutchinson met with officials from the U.S. Department of Health and Human Services (HHS) to discuss expanding the privateoption — the state’s version of Medicaid expansion — beyond 2016. In December, Arkansas submitted an application to extend its 1115 Medicaid waiver and thegovernor outlined revisions he will be asking for in a letter to HHS Secretary Sylvia Burwell. Those includework-training referral requirements, required premiums for those with incomes above the federal poverty line, and support for employer-sponsored healthinsurance (when offered).

California: California Pays Insurers Millions for Hepatitis C Drugs

California paid private health plans $387.5 million to cover high-cost hepatitis C treatments for only 3,624 Medi-Cal beneficiaries between July 2014 andNovember 2015. Most Medi-Cal beneficiaries are in private managed care plans that are paid a flat rate per member each month — however the state begansupplemental payments when the health plans raised alarm about the high cost of the new drugs. The funding will continue next year, as California’s healthcare agency has budgeted $303.4 million in supplemental drug payments for health plans for 2016–2017. This is the first time the state has paid extra moneyto plans covering expensive drugs.

Idaho: Idaho Senate Committee Hears Medicaid Expansion Plan

On Feb. 1, Idaho’s state legislature held its first hearing on a Medicaid expansion bill. The Senate Health and Welfare Committee took testimony at thehearing on the proposal to expand Medicaid. This expansion would provide health insurance to 78,000 adults in Idaho who are in the so-called gap group —working adults who do not qualify for Medicaid but do not earn enough to get subsidized insurance on the state health insurance exchange. Committeechairman Lee Heider called it an informational hearing and no vote on the legislation took place because the governor is expected to make a proposal soon.

Kentucky: 10 Health Systems Creating a Statewide Collaborative

Ten health systems in Kentucky are joining a collaborative to improve the state’s poor health outcomes. The group consists of 55 hospitals and will sharebest practices in an effort to reduce costs of care. According to the inaugural executive director, William Shepley, the collaborative will first focus onways to improve cost inefficiencies by probing purchasing policies.

Louisiana: Gov. Edwards Pulls Medicaid Expansion Hiring Plan

Louisiana Gov. John Bel Edwards pulled his plan to hire 248 new health department employees for his Medicaid expansion effort as he works to getRepublicans on board. The new workers would have handled enrollment of the thousands of people expected to qualify for Medicaid after expansion. Thegovernor wants more time to speak with members of the joint House and Senate budget committee — the House’s committee members were named less than 24 hoursbefore the scheduled hearing on the plan. The new workers would cost $10.3 million this budget year including salaries, benefits, training and equipment.Of that $10.3 million, $7.3 million would have been paid by the federal government.

Minnesota: Uncertain Future for Minnesota’s Health Exc