Washington Healthcare Update

June 27, 2016

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This Week:Sit-in for 25 hours in the House forces early recess…Sit-in delays vote on DME cuts…Medicare Trust Fund will run out of money in 2028, two years fasterthan predicted in last year’s report…House passes Zika funding package, but it is unlikely to pass the Senate.

1. Courts

2. Congress

House of Representatives


3. Administration

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Courts

Supreme Court Asks Solicitor General to Weigh in on Sandoz v. Amgen

On June 20, the Supreme Court asked the solicitor general to weigh in on Sandoz v. Amgen before it decides whether to take up the case. The casecould affect how soon less-expensive versions of some biologic medicines reach patients. Sandoz’s version of Amgen’s Neupogen, which treats a side effectof cancer chemotherapy, was the first copycat biologic approved under a law that is part of the Affordable Care Act (ACA). The Federal Circuit’s decisionin the case gave a win to both the biosimilar industry and the branded companies.

Sandoz petitioned the Supreme Court for a writ of certiorari regarding the Federal Circuit’s ruling that biosimilar companies must wait until they receiveFDA approval before sending the company that makes the original biologic a 180-day notice of intent to market—this ruling gives brand companies an extrasix months of market exclusivity.

In response, Amgen opposed Sandoz’s petition, arguing that the BPCIA explicitly allows notice of commercial marketing only after FDA approval. Amgen alsofiled a conditional cross petition arguing the court should reject the Federal Circuit’s ruling that biosimilar makers do not have to engage in apatent-sharing process with the branded biologic maker they want to copy.

Supreme Court Rules in Favor of USPTO in Patent Review Case

In Cuozzo Speed Technologies v. Lee, the Supreme Court recently ruled thatdecisions from the U.S. Patent and Trademark Office’s (USPTO) patent appeals board are made using the right standard and cannot be reviewed by courts.

The case raised the issue of whether the appeals board is correct to use the PTO’s own agency standard when determining whether an invention can bepatented. Critics argued the board should adopt a lower standard used by federal courts, and they asked the Supreme Court to decide whether appeals boarddecisions can be reviewed by federal courts. The life sciences sector has argued that legitimate patents are too often invalidated by the board, which wasestablished by the 2011 America Invents Act.

The Supreme Court sided with the USPTO on both questions. Justice Breyer’s majority opinion approved of the USPTO’s approach of applying the broadestreasonable interpretation (BRI) standard to interpret patent claims—finding it a “reasonable exercise of the rulemaking authority that Congress delegatedto the Patent Office.”

The Court was unanimous as to the BRI standard—however, Justices Samuel Alito and Sonia Sotomayor dissented from the no-appeal ruling, arguing that theappeals board’s operation should not be exempt from judicial review.

2. Congress

House of Representatives

GOP Releases Alternative to Affordable Care Act

Republicans have released an alternative to the Affordable Care Act (ACA) in a June 22 white paper. The plan would make changes to Medicare and Medicaidand would allow association health plans (AHPs), buying across state lines and high-risk pools, among other changes. Many of the ideas have been brought upin the past in various contexts.

For more details on the GOP health reform plan, click here.

Small Business Healthcare Relief Act Passes House

A bipartisan bill—the Small Business Healthcare Relief Act(H.R. 5477)—passed the House of Representatives by voice vote on June 21. The legislation would restore small employers’ abilities to help their employeespurchase health coverage using Health Reimbursement Arrangements (HRAs) so they can choose a quality, affordable health insurance plan that fits theirindividual budget and health care needs.

Reps. Charles Boustany (R-LA) and Mike Thompson (D-CA)’s version of the bill was approved by the House Ways and Means Committee on June 13. Sens. ChuckGrassley (R-IA) and Heidi Heitkamp (D-ND) introduced the Senate version of the bill (S. 3060), making it identical tothe House text to ease chances of Senate passage.

HRAs were discouraged because they did not meet the Affordable Care Act’s (ACAs) requirements for employer-sponsored health plans. Employers who disobeyguidance are charged $100 per day, per employee—totaling up to $36,500 per year effective July 2015.

Under the new legislation, small businesses and local governments with fewer than 50 workers would be able to put pre-tax dollars toward a definedcontribution for an employee’s health costs. Workers could use HRA money to buy individual market plans and pay for certain out-of-pocket costs if theyhave insurance that meets ACA standards. Employers would not be fined for offering HRAs.

Democrats supporting the bill highlighted it as one that would build on existing health care reform without undermining the ACA.

House Approves Conference Report to Fight the Zika Virus

On June 23, the House approved a Zika funding package, the product of a House-Senate conference report that was crafted hours earlier. The House votewas rushed—lawmakers began voting at 2:55 a.m. and there was no debate on the measure. Democrats stressed they are not totally onboard.

The $1.1 billion package includes:

  • $476 million to the Centers for Disease Control and Prevention (CDC) for mosquito control;
  • $230 million to the National Institutes of Health (NIH) for vaccines;
  • $165 million to the State Department and USAID to respond to outbreaks overseas; and
  • $86 million for emergency response research through the Biomedical Advanced Research and Development Authority.

The package is partially funded by about $750 million from unallocated Ebola and ACA funds, as well as $100 million from HHS’s administrative fund. It willnow go to a Senate vote, where Minority Leader Harry Reid (D-NV) has already declared the proposal dead.

Democrats are unhappy with the funding level. It is almost one billion dollars short of what the administration’s public health experts have said isnecessary to successfully combat the Zika virus. In addition, the White House does not like the fact that it takes funds from other priorities.

Adding to their differences, Democrats are also angered by the reproductive language in the bill.

“A narrowly partisan proposal that cuts off women’s access to birth control, shortchanges veterans and rescinds Obamacare funds to cover the cost is not aserious response to the threat from the Zika virus,” Reid said in a statement. “In short, Republicansare trying to turn an attempt to protect women’s health into an attack on women’s health.”

This means that issue will not be resolved for some time. The House is on recess until July 5, which leaves the House and Senate few days to work beforethey are both scheduled to leave until Labor Day.


Senate Majority Leader McConnell Appoints Conferees on CARA Act

Senate Majority Leader Mitch McConnell (R-KY) appointed Republican Sens. Chuck Grassley (IA), Lamar Alexander (TN), Orrin Hatch (UT) and Pete Sessions (TX)and Democratic Sens. Patrick Leahy (VT), Patty Murray (WA) and Ron Wyden (OR) as conferees on S. 524—the Comprehensive Addiction and Recovery Act (CARA).The motion to start conference passed on the Senate floor June 16 by a vote of 95-1. Two days prior, Democratic Sen. Jeanne Shaheen (NH) said the delay incommencing a House-Senate conference to merge the chambers’ respective opioid bills was due to disagreements over how many Senate conferees—both Democratsand Republicans—should be appointed.

In a motion on the floor June 16, Shaheen called for funding for prevention, treatment and recovery for state and local efforts—the motion was agreed to66-29.

Sen. Sheldon Whitehouse (D-RI) offered a motion to instruct Senate conferees to press for key Senate provisions in their negotiations. The provisionsinclude: rejecting proposals that would replace the individual prevention, treatment, law enforcement and recovery programs authorized in CARA; authorizinggrants to states to strengthen the use of and make improvements to prescription drug monitoring programs; and addressing the unique needs of ruralcommunities. The motion was adopted 72-24.

The House appointed its conferees in May. House Speaker Paul Ryan (R-WI) chose Energy and Commerce Committee Chair Fred Upton (R-MI) to spearhead effortsby the House to merge its opioid legislative package with that passed by the Senate. He appointed 21 House Republicans in total. Democratic Leader NancyPelosi (CA) named 14 Democrats to serve on the conference committee.

Senate Democrats Oppose Insurance Megamergers

A group of Senate Democrats is calling on the Justice Department to block the Anthem-Cigna and Aetna-Humana mergers. Their letter cites concerns aboutjobs, higher premiums and health care costs for consumers and businesses. “Highly concentrated markets rarely benefit consumers, and we believe thatmerging four of the five largest national health insurers will likely increase premium prices and health care costs to consumers and businesses, diminishcompetition and choice, and decrease access to quality health care,” according to the letter. Democrats who signed the letter include: Richard Blumenthal(CT), Al Franken (MN), Elizabeth Warren (MA), Sherrod Brown (OH), Edward Markey (MA), Dianne Feinstein (CA) and Mazie Hirono (HI).

To see the full letter, click here.

Senate Passes Patient Access to Durable Medical Equipment Act

On June 21, the Senate passed the Patient Access to Durable Medical Equipment (PADME) Act (S. 2736), which delays durable medical equipment (DME) supplier payment cuts inrural and non-competitive bid areas for one year. The cuts are set to be implemented July 1. CMS was required to adjust Medicare fee schedule amounts fornon-competitive bid areas by Jan. 1. The agency decided to phase in changes to the DME fee schedule rates during the first half of 2016 so that the ratesin all areas would be based on a 50/50 blend of current rates and adjusted rates. Stakeholders have been pushing lawmakers to pass legislation to put offthe cuts scheduled to go into effect July 1.

The Senate bill would delay the second payment cut for DME in non-bid areas for 12 months; lock in the bid ceiling for future rounds of bidding at the bidrates in effect on July 1; require CMS to solicit stakeholder input and take into account travel costs, volume, clearing price and information on thenumber of suppliers in a bid area as part of rate setting in January 2019 and after; and push up the date when Medicaid reimbursement will match Medicarecompetitive bid rates from January 2019 to October 2018.

The House intended to vote on a bill—H.R. 5210—to delay the DME cuts innon-competitive bid areas on June 22, but Democrats conducted a sit-in on the House floor before the vote could occur. Without passage of the bill in theHouse, CMS will go forward with the next phase of cuts July 1. It is unclear when the House will take action now.

3. Administration

FDA Approves Zika Vaccine Clinical Trial

On June 20, Inovio Pharmaceuticals and GeneOne Life Scienceannouncedthat they have received FDA approval to initiate a phase I human trial of a Zika vaccine. The phase I trial will be used to determine the safety andtolerability of the vaccine, its proper dosing and whether it can produce a good immune response. If it is successful, later trials will be designed toshow whether the vaccine can protect patients against the virus.

The trial will include 40 patients who will be injected in the next few weeks—interim results should come out later this year. The vaccine is beingdeveloped with academic collaborators in the U.S. and Canada.

FDA Holds Public Meeting on Over-the-Counter Monograph User Fees

FDA recently held a public meeting to gather stakeholder input on the potential developmentof a user fee program for over-the-counter (OTC) monograph drugs. Stakeholders across the board agreed in theory on the need for a user fee program toprovide supplemental funding for congressional non user fee appropriations. Stakeholder opinions differed, however, on how user fees should be assessed.They also raised concerns that a Prescription Drug User Fee Act (PDUFA)-type model could lead to industry consolidation.

FDA has a staff of only 18 full-time employees regulating a market of more than 100,000 products. In addition, Congress appropriated only a little over $8million for OTC products in fiscal year 2016 and current staff levels make it difficult to address public safety issues, finalize monographs that have beenoutstanding for decades and keep up with scientific advancements and innovation in the field.

Janet Woodcock, head of FDA’s drug center, said user fees have been used effectively in other arenas the center regulates, such as the Prescription DrugUser Fee Act (PDUFA) and the Generic Drug User Fee Act (GDUFA). While they will need to be structured differently for OTC drugmakers, user fees for OTCproducts could be a “triple-win” for industry, the agency and consumers, she said.

The Consumer Healthcare Products Association (CHPA), a trade lobby for the OTC industry, said it is open to a user fee program but said it must be designedin a way that does not discourage innovation.

CHPA points out that programs like PDUFA and GDUFA were created to address specific problems like new drug application (NDA) and abbreviated new drugapplication (ANDA) backlogs, and a major component of these programs is an application fee. For OTC products however, most are marketed under the monographsystem—which FDA points out is not product specific but ingredient specific—that does not require premarket approval.

Facility fees and product listing fees were proposed as ways to adapt the user fee model to OTC products, but many stakeholders worried that a facility feewould lead companies to consolidate their manufacturing facilities, which in turn could lead to shortages.

The National Consumers League (NCL) stressed that user fees should also be structured on a tiered or sliding scale so that small firms are not adverselyaffected. NCL also said performance goals could include the agency’s committing to finalizing a certain number of outstanding monographs a year andproducing an annual report on how the user fees have improved the OTC program.

But some individual companies making OTC products said during the public comment period of the meeting that user fees should not be used to finalizeoutstanding monographs. This, they said, should be done at taxpayer expense through adequate appropriations from Congress.

NIH Advisory Panel Approves First CRISPR Human Trial

On June 21, an NIH advisory committee approved a proposal to allow the first clinical trial using the CRISPR gene editing tool. The committee’s approval isa crucial step forward for the gene editing field, which hopes to capitalize on CRISPR’s precision, speed and low costs to address a broad array ofdiseases. However, the study still needs FDA approval of an investigational new drug application to proceed.

The trial will be run by the University of Pennsylvania with funding from Facebook cofounder Sean Parker. It is small and designed to test whether CRISPRis safe for use in people. It proposes to edit two genes in patients’ own blood cells to help fight three types of cancer: myeloma, melanoma and sarcoma.

The committee made several suggestions: that the trial better account for certain financial conflicts of interest and better protect and serve trialparticipants; that UPenn, which has financial interest in the product, might need to be excluded from being a study site; that patients should be told thisis an early-phase study and is very unlikely to benefit them personally; and that the study should provide better coverage for patients’ care as well ashousing to ensure financial burden is not a limiting factor for participation.

With the exception of one abstention, every member of the advisory committee approved the study.

NIH Finalizes Single IRB Policy for Multi-Site Research

On June 21, NIH issued final policy on the use of a single institutionalreview board (IRB) for multi-site research—the policy seeks to eliminate duplicative IRB review in order to reduce “unnecessary administrative burdens andsystemic inefficiencies without diminishing human subjects protections,” according to the policy document. This move comes as the House-passed 21st CenturyCures legislation urges the use of centralized IRBs for device clinical trials. The policy takes effect May 25, 2017, and will not affect ongoing,noncompeting awards already in place until the grantee submits a competing renewal application.

In order to address stakeholders’ concerns, NIH plans to release guidance before the policy goes into effect, addressing, among other topics:

  • How costs associated with a single IRB (sIRB) may be charged direct versus indirect costs;
  • Considerations in selecting a single IRB;
  • The content of the sIRB plan that must be submitted with applications and proposals;
  • The process for submitting a request for an exception, and process for how NIH will review those requests;
  • The roles and responsibilities of the sIRB and participating sites;
  • A model authorization agreement that lays out the roles and responsibilities of each signatory;
  • Models for gathering and evaluating information from all the reliant sites about community attitudes and the acceptability of the proposed research; and
  • A model communication plan that identifies when and which documents are to be completed and shared with those involved so each can fulfill its responsibilities.

NIH anticipates that there will be challenges associated with implementation, but says they should be short lived.

Medicare Fraud Strike Force Charges Individuals for $900 Million in False Billing

The Medicare Fraud Strike Force has charged 301 individuals, including 61 doctors, nurses and other licensed medical professionals, for their participationin health care fraud schemes that involved over $900 million in false billings. The operation is the largest—in terms of dollars and geographicspread—conducted by the joint HHS-Justice strike force.

The charges include unnecessary drugs prescribing, money laundering, false claims submissions and bribery. Criminals are increasingly targeting MedicarePart D, Lynch said, with growing use of stolen identities for fraudulent prescriptions. The Justice Department and HHS have also seen an increase in thenumber of cases involving compounded medication; the high costs of these compounded drugs make them more attractive for criminals, Lynch said.

From 2013 through 2015, Justice and HHS investigators recovered $6.10 for every dollar they spent on fighting health care fraud, Burwell said. That doesnot account for fraud that was deterred by prosecutions. She credited the ACA with new tools and resources that have helped achieve this recovery.

Medicare Trust Fund to Run Out of Money in 2028

Medicare’s hospital trust fund is expected to run out of money in 2028, according tothe new trustees’ reportreleased June 22. In last year’s report, trustees predicted Medicare would no longer be able to fully pay for beneficiaries’ hospital bills in 2030.

The report also showed that Medicare’s total costs will grow from roughly 3.6 percent of GDP in 2015 to 5.6 percent in 2040. Recently, increases inMedicare spending have come from an influx of new people signing up for the federal program as well as from rising drug costs, the trustees said. However,Medicare has not grown fast enough to trigger Obamacare’s controversial Independent Payment Advisory Board (IPAB), which would be empowered to make cuts tothe program. As the trustees predicted last year, they don’t expect the panel will be needed until 2017.

Key findings by the trustees include:

Medicare Solvency.The report says Medicare will be insolvent two years earlier than predicted in the last two Medicare trustees’ reports due to lower estimated payroll taxesand a slower decline in inpatient stays. The report still estimates the hospital trust fund will last longer than predicted by the Congressional BudgetOffice (CBO), which estimated the trust fund would run out in 2026.

Treasury Secretary Jack Lew said the report confirms that Medicare remains “secure in the medium-term” and said there is some time to address fiscalchallenges to Medicare. However, Lew cautioned that Congress should not wait until the eleventh hour.

Medicare Spending Growth Rates.CMS touted the slow estimated per enrollee spending growth rate, as the estimated 4.3 percent estimated per enrollee spending growth rate over the next 10years is expected to be lower than the growth in overall per capita national health expenditures. The report says that 2017 will be the first year thegrowth rate is expected to trigger IPAB. The Affordable Care Act (ACA) created the board to keep the growth of per person Medicare spending in check whenother payment and health care delivery reforms are not adequate. Medicare trustees predicted last year that the board would be triggered in 2017, butrising health care costs, a good share of which have come from increased drug spending, had some worried that IPAB could be triggered this year.

Drug Costs.The trustees highlighted the growth in prescription drug costs. The estimated Part D average annual increase in spending for the next five years is 10.6percent, the report says. Democratic presidential candidate Hillary Clinton has proposed a drug price containment plan, and Republican presidentialcandidate Donald Trump has backed Medicare drug price rebates.

Part B Premiums.The report indicates that Part B premiums could increase for about 30 percent of beneficiaries next year, as the so-called “hold-harmless” provision goesinto effect. Last year, lawmakers used the Bipartisan Budget Act to avert Medicare Part B premium spikes for about 30 percent of beneficiaries who do nothave their Part B premiums deducted from their Social Security benefit. Beneficiaries who have their premiums deducted from Social Security are protectedso that when the Part B premium increases are greater than the annual cost-of-living adjustments (COLAs) in Social Security, those seniors do not have topay the premium increases. The Bipartisan Budget Act would also protect beneficiaries in 2017 if the COLA for Social Security is 0 percent, the trustees’report says, but the trustees estimate that the COLA would be 0.2 percent and the Bipartisan Budget Act protections would not apply.

To see a related press release,click here.

4. State Activities

Arizona: Health Officials Find State Vaccine Laws Being Avoided

Arizona health department officials say public schools are not following vaccine laws—about 30 percent of Arizona kindergartners who enrolled during themost recent school year without measles vaccines did not have exemption forms. Also, the Arizona Department of Health Services found hundreds of schoolswere not requiring parents to turn in signed waivers when they enrolled their unvaccinated children in 2015. Under state law, schools are required tosuspend unvaccinated students without signed exemptions.

California: Board of Covered California Approves $320 Million Budget

The board of Covered California health exchange approved a $320 million budget for next year that includes a large increase for the website’s eligibilitytools as well as additional funding for outreach to underserved communities. This new budget comes right after the state passed a law that will helpundocumented immigrants enroll in health coverage on the exchange—without subsidies. The largest increase is $6.5 million to maintain the web-based systemto determine eligibility. The budget provides $7.25 million for the navigator program to reach out to underserved groups (a $2.75 million cut from thisyear).

California: State Regulator Approves Aetna-Humana Merger

On June 20, the California Department of Managed Health Care (DMHC) approvedAetna’s $37 billion acquisition of Humana.