Washington Healthcare Update

August 1, 2016

Pardon Our Dust

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This Week: Congress is in recess until after Labor Day.

1. Courts

2. Congress


3. Administration

4. Other

5. State Activities

6. Regulations Open for Comment

7. Reports

1. Courts

Federal Judge Rules Federal Government Cannot Fine Lawmaker for Refusing Contraception Coverage

Federal Judge Jean C. Hamilton recently ruled that the federal government cannot fine a Missouri state senator for not having an insurance policy withcontraception coverage. State Sen. Paul Wieland objected to having any birth control coverage in the health plan he bought for his family through theMissouri insurance plan for state employees.

“The only way [the Wielands] can comply with their religious conscience is by dropping their insurance altogether, which would result in them foregoing avaluable job benefit; in the assessment of thousands of dollars per year in fines pursuant to the individual mandate; … and in leaving their daughterswithout health insurance,” Judge Hamilton wrote in her opinion.

The contraception mandate has been one of the most contentious pieces of the Affordable Care Act, sparking dozens of lawsuits from employers who do notwant to comply because of religious opposition to birth control. But this ruling marks one of the few cases in which an individual—as the recipient ofhealth insurance coverage—successfully sued the federal government over it. The Supreme Court ruled in 2014 that closely held for-profit businesses do nothave to comply with the coverage requirement. Earlier this year, the Supreme Court sent a case filed by religious nonprofits back to the lower courts insearch of a compromise that would allow employees to receive coverage without violating employers’ religious beliefs.

It is unclear whether the Obama administration will appeal the Missouri judge’s decision.

DOJ Files Lawsuits Against Anthem, Aetna

On July 21, the Justice Department filed lawsuits against Anthem and Aetna to stop their acquisitions of Cigna and Humana, respectively.

To see the complaint against Anthem,click here.

For the complaint against Aetna,click here.

Theranos Customer Files Lawsuit Claiming Medical Harm From Blood Test

On July 19, a Theranos customer filed a lawsuit against the startup and Walgreens in Arizona, alleging the company’s faulty blood tests caused him to havea heart attack. The lawsuit filed in the U.S. District Court in Arizona is now one of nine civil suits against Theranos. The case appears to be the firstone alleging specific medical harm.

According to the lawsuit, the Arizona man—identified as R.C.—received lipid and A1C blood tests that used Theranos’ “tiny drop” finger prick method at aWalgreens in the state. The results came back normal, leading R.C.’s doctor to recommend that he maintain his current medications. A month later, R.C.suffered a heart attack and was hospitalized, at which point new tests suggested the Theranos test was inaccurate.

Walgreens formally ended its three-year partnership with Theranos in June after both the Centers for Medicare and Medicaid Services (CMS) and the Food andDrug Administration (FDA) issued sanctions on the company and banned its founder, Elizabeth Holmes, from running any labs for two years. Theranos hadpreviously claimed its blood analysis could test for hundreds of diseases, but it later voided thousands of test results from 2014 and 2015 to comply withthe investigations.

R.C. is seeking class-action status for his case, along with costs, restitution and damages.

Cigar Trade Groups File Lawsuit Against FDA Over Final Deeming Rule

On July 15, Cigar Rights of America, the International Premium Cigar & Pipe Retailers Association and the Cigar Association of America sued the U.S.Food and Drug Administration (FDA) over its plan to regulate premium cigars under the final “deeming” rule issued in May. This lawsuit is the most recentchallenge to the rule, which asserts FDA authority to regulate e-cigarettes, hookahs, cigars, pipe tobacco and other products under the Tobacco ControlAct. The premium cigar industry did not receive an exemption from pre-market review requirements in the rule. The lawsuit claims that the FDA ruleincorrectly subjects new products to stricter regulation than those that were on the market already and imposes a tax on cigars by charging user fees forFDA review, among other things. The vaping industry has already sued.

2. Congress


Republican Senators Write Letter to Obama Administration on Reinsurance Program

The chairman of the Senate Homeland Security and Governmental Affairs Committee—Sen. Ron Johnson (R-WI)—says the Obama administration is violating the textof Obamacare’s reinsurance program to pay health insurers at the expense of taxpayers. In a letter to HHS Secretary Sylvia Mathews Burwell, ChairmanJohnson and Sen. Ben Sasse (R-NE) said that “all told, the American taxpayers will receive only $500 million in payments under the transitional reinsuranceprogram for benefit years 2014 and 2015 instead of the combined $4 billion required by Congress in the ACA.”

In an investigation led by Sasse on the reinsurance program, Republicans argue that the ACA requires a certain amount of money collected for thereinsurance program be sent back to the insurers and another amount sent to the Treasury—both are on a sliding scale over three years.

Republicans argue that HHS collected much less in contributions than the law required and shortchanged the Treasury.

They say the agency prioritized paying insurers but not taxpayers, which is “not consistent with the law.” The Republicans argue that the law says someportion of the payments must go to taxpayers.

CMS Administrator Andy Slavitt testified in April that the agency followed the rulemaking process when implementing the program and after the first year’scollections fell short, made adjustments for later years.

To see the letter,click here.

3. Administration

FDA Finalizes Guidance on General Wellness Products

On July 28, FDA issued final guidance clarifying the varieties of “general wellness” products—low-risk products that promote a healthy lifestyle—that canbe marketed without FDA oversight. They include apps, recordings, video games and other items that make general health claims. Products that make specificclaims will escape FDA review as long as they are based on generally accepted medical information. Products that claim to treat or diagnose specificdiseases—such as an app claiming to treat autism—do not fall under “general wellness” and could be regulated. Developers must ensure their products are lowrisk, to be exempted from FDA review.

To see the guidance,click here.

FDA Releases Guidance on Use of Real-World Data for Development of Medical Devices

According to new FDA guidance, medical device companies could be able to use “real-world” data to receive FDA approval for a new use of a device. FDA saidin the guidance that real-world data from clinical practice may also be used to receive a new claim about the effectiveness of a product, as a controlgroup in a clinical study to support device approval, to fulfill post-marketing study requirements or for public health surveillance efforts, among otheruses.

Real-world data is collected during the care and treatment of patients, including information pulled from prospective observational or registry studies,retrospective database studies, health care claims and electronic health records. FDA said its determination on whether it accepts data depends on whatregulatory use it is intended to support.

To see the guidance, click here.

FDA Releases PDUFA Agreement

The FDA recently outlined an agreement it reached with the pharmaceutical industry on the agency’s performance goals and industry user fees from 2018 to2022. The agreement is commonly referred to as the “goals letter” or “commitment letter.” The Prescription Drug User Fee Act (PDUFA VI) letterrepresents months of negotiations between FDA and regulated industry and public stakeholders. It is a major step toward the reauthorization of user feelegislation that Congress needs to pass before October 2017.

The PDUFA letter only outlines FDA’s agreement with the branded drug industry—it still needs to finalize negotiations with biologic and generic drugmakers,as well as device companies. The agreements provide certain standards FDA agrees to meet in its review of applications for drugs and medical devices inexchange for industry user fees. It also lays out how long approvals will take and how FDA staff will interact with the companies.

The letter does not say what the drug industry has agreed to pay.

CMS Finalizes Hospice, Rehab and SNF Payment Rules for FY 2017

On July 29, CMS finalized fiscal year 2017 Medicare payments for hospice, inpatient rehabilitation facilities and nursing homes.

Hospices will see a $350 million increase in their payments for 2017, a 2.1 percent bump. CMS also said as early as next year, it willbegin publicly displaying quality measures and other data.

Rehab facilities will see a $145 million boost, or 1.9 percent.

Payments toskilled nursing facilities will rise by $920 million, or 2.4 percent.

CMS Extends Moratoria on New Medicare Part B Enrollment on Some Providers

On July 29, CMS announced it is extending for six months and expanding statewide the temporary provider enrollment moratoria on new Medicare Part Bnon‑emergency ground ambulance suppliers in New Jersey, Pennsylvania, and Texas and home health agencies (HHAs) in Florida, Texas, Illinois, and Michigan.Additionally, the statewide expansion also applies to Medicaid and CHIP. CMS also announced the Provider Enrollment Moratoria Access Waiver Demonstration (PEWD), which gives CMS the ability to allow for provider and supplier enrollment exceptions in the moratoria areas if access to care issues areidentified and for the development and improvement of methods of investigating and prosecuting fraud in Medicare, Medicaid, and CHIP.

For more information on the extension and statewide expansion of the temporary moratoria, the lifting of temporary moratoria on Part B, Medicaid, and CHIPemergency ground ambulance suppliers, and the PEWD, click here.

Medicare Part D Premiums Remain Stable for 2017

On July 29, Medicare announced that the average basic premium for a Medicare Part D prescription drug plan in 2017 is projected to remain relatively stableat an estimated $34 per month. This represents an increase of approximately $1.50 over the actual average premium of $32.56 in 2016.

To view the Part D Base Beneficiary Premium, the Part D National Average Monthly Bid Amount, the Part D Regional Low-Income Premium Subsidy Amounts, the DeMinimis Amount, the Part D Income-Related Monthly Adjustment Amounts, the 2017 Medicare Advantage Employer Group Waiver Plan Regional Payment Rates, andthe Medicare Advantage Regional Benchmarks, click here and select “2017.”

CMS Increases Medicare Payments for Inpatient Psychiatric Facilities

On July 28, CMS announced it will increase Medicare payments for inpatient psychiatric facilities by 2.2 percent (or by an estimated $100 million). Theincrease includes freestanding psychiatric hospitals, psychiatric units at acute care hospitals or critical access hospitals for discharges. The paymentincrease applies to FY 2017 beginning Oct. 1.

For more information, click here.

CMS Announces Participants in Initiatives to Prevent Heart Attacks and Strokes

On July 21, the Centers for Medicare and Medicaid Services (CMS) announced 516 awardees in 47 states, Puerto Rico and the District of Columbia to helpreduce the risks for heart attacks and strokes among millions of Medicare fee-for-service beneficiaries. The health care practitioners participating in theMillion Hearts® Cardiovascular Disease Risk Reduction Model will work to decrease cardiovascular disease risk by assessing an individualpatient’s risk for heart attack or stroke and applying prevention interventions.

Currently, health care practitioners are paid to screen for blood pressure, cholesterol or other risk factors individually. In testing a new approach,practitioners participating in this model’s intervention group will use a data-driven, predictive modeling approach to generate personalized risk scoresand develop specific plans in partnership with patients to reduce the risk of having a heart attack or stroke.

Overall, nearly 20,000 health care practitioners and more than 3.3 million Medicare fee-for-service beneficiaries will participate in the five-year model.Health care practitioners in the intervention group will work with beneficiaries individually to identify the best approach or approaches to reducing theirrisk of having a heart attack or stroke—for example, smoking cessation interventions, blood pressure management or cholesterol-lowering drugs oraspirin—and will explain the benefits of each approach. Each beneficiary will receive a personalized risk modification plan that will target their specificrisk factors. Organizations in the intervention group will be paid for reducing the absolute risk for heart disease or stroke among their high-riskbeneficiaries.

This model is part of Million Hearts, a broad national initiative co-led by CMS and CDC to prevent one million heart attacks and strokes by 2017. For moreinformation on the Million Hearts initiative, click here.

For additional information about the model, including a fact sheet and a list of participants, click here.

CMS Approves Arizona’s Plan Allowing New Enrollment in CHIP Program

On July 25, the Centers for Medicare and Medicaid Services (CMS) announced that it has approved Arizona’s plan to allow new enrollment in the Children’sHealth Insurance Program (CHIP) after enrollment was frozen for several years. Now all states provide CHIP coverage to eligible children.

Beginning on July 26, the state ended the existing enrollment freeze and began accepting new applications. Children ages birth through 18 with income above133 percent up to and including 200 percent of the federal poverty level (FPL) are eligible to enroll in the state’s CHIP, known as KidsCare. Children willbe able to access services beginning Sept. 1, 2016.

CHIP covers a broad set of health benefits for children, including dental care, that are often out of reach for many families who cannot afford otherhealth coverage. This is especially true for children with special health care needs, as CHIP programs cover physical, occupational and speech and languagetherapies.

The state estimates that approximately 30,000 to 40,000 children will become eligible for coverage in KidsCare.

For more information, click here.

HHS Joins Partnership to Speed Up Development of New Antibiotics

HHS is joining U.S. and international groups to help speed up the development of new antibiotics as the threat of antibiotic-resistant infections grows.The new public-private partnership hopes to make antibiotic development a more striking space for private investment. It will focus on pre-clinicaldiscovery and development of new antimicrobials, funding research, and development and technical assistance to companies.

The partnership’s goal is to push drug candidates through the early stages of development, so they will then gain more investment for advanced developmentand approval by FDA and the United Kingdom’s drug regulator. HHS’s Biomedical Advanced Research and Development Authority is going to provide up to $250million over five years for the project, called the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator. NIH’s National Institute ofAllergy and Infectious Diseases will also provide research and technical support.

The U.K.’s ARM Centre, a public-private group that works on antibiotics and diagnostics, will provide up to $100 million. The Wellcome Trust—a globalcharitable foundation that works on medical challenges—will also provide funding. All four groups will share joint oversight of the project.

FTC Requiring Teva to Divest Almost 80 Generic Drugs

On July 27, the Federal Trade Commission (FTC) announced it is requiring Teva—thecountry’s biggest generic drug company—to divest nearly 80 generic drugs to competitors as a condition of acquiring the generic pharmaceutical businessAllergan. This is the largest drug divestiture in a pharmaceutical merger case. If finalized, it would settle FTC claims that the proposed $40.5 billionacquisition of Allergan’s generic drug business would be anticompetitive. Teva will divest to 11 companies antibiotics, oral contraceptives, cancer,diabetes and Parkinson’s disease treatments, among other drugs.

Following the acquisition, FTC estimates Teva will have 22 percent of the generic market share in the U.S., up from 13 percent. Despite this acquisition’scombining two large generic suppliers, FTC said the industry as a whole is relatively unconcentrated. More than 200 companies sell generics in the U.S andthe top five companies account for only about half of generic sales.

FTC Comments on Nurse Practice Authority Proposed Rule

The Federal Trade Commission’s staff submitted written comments insupport of a proposed rule that would allow the VA to grant “full practice authority” to four categories of advanced practice registered nurses, as long asspecific background requirements are met. This regulation would allow nurses employed by the VA to give certain services without clinical oversight fromphysicians.

IRS Denies Tax-Exempt Status for Commercial ACO

On June 10, the global law firm Dentons posted a memo to the National Association of ACOs saying “it is clear that the IRS will not grant tax exempt statusto an ACO engaged in primarily non-MSSP activities.” This memo follows the IRS’s decision to deny a commercial accountable care organization tax-exemptstatus earlier this year, even though ACOs participating in the Medicare Shared Savings Program are eligible for tax-exempt charitable status. The law firmsays this decision raises questions about how different types of ACOs are treated as far as their tax status.

“This is the first public guidance from the IRS regarding a non-MSSP (or commercial) ACO and calls into question whether such ACOs can qualify fortax-exempt status due to substantial non-charitable activities,” the Dentons memo says. But the memo also notes the case involves a single IRS denialletter issued to a taxpayer and the IRS interprets and applies the tax laws to the taxpayer’s specific set of facts. “Therefore, the decision is notprecedential for other taxpayers and only the ACO that the PLR is issued to is bound by the IRS decision,” the memo adds.

The IRS position is unclear with respect to granting tax exemptions, especially when there is a mix of MSSP and non-MSSP activities performed by an ACO.

Insurance Industry Comments on CMS Interim Rule on Special Enrollment Periods

In May, the Centers for Medicare and Medicaid Services (CMS) issued aninterim final rule that stated that as of July 11 there would beonly six circumstances in which a person can buy coverage outside of open enrollment. The insurance industry, however, is concerned that CMS did not go farenough in the rule to ensure that the circumstances won’t be abused by those seeking to game the system. Particularly, some health plan critics want CMS toensure people are actually eligible for a special enrollment period before allowing them to enroll in coverage.

According to comments from the Blue Cross Blue Shield Association (BCBSA), limiting the permanent move special enrollment period (SEP) to consumers who canprove that they were previously insured is a good step, but “we recommend eligibility for all SEPs be verified before coverage is effective.” BCBSA alsosuggests that CMS require a person to have had coverage within the past 30 days rather than 60 in order to help promote continuous coverage.

Cigna goes a step further, saying a person who will be moving and will need the SEP should be required to maintain their coverage at least until the dateof the move. For individuals who move to the U.S. from outside the country, Cigna says it wants to make sure they submit proof that they are indeedcurrently living in the U.S.: “We believe such requirements could help deter incidents of medical tourism, where individuals move to the United States andclaim residency in state solely to obtain coverage to receive care,” David Schwartz, head of global policy at Cigna said in a comment.

Cigna also notes there is no guidance on how the exchange or issuers should validate SEP eligibility for transient people who do not have a fixed address.CMS should identify criteria for this situation, as the lack of rules has created an incentive for “patient brokering” and other questionable practicesthat could destabilize the risk pool, Cigna says.

America’s Health Insurance Plans (AHIP) says in comments that while it approves of the changes in the rule, it still believes pre-enrollment verificationis “critical to ensure appropriate use of SEPs and promote continuous coverage.”

Additionally, AHIP says CMS’s verification process for FFM states should not restrict off-exchange issuers from implementing their own processes aspermitted by the states. State-run exchanges “should continue to have the flexibility to implement their own verification processes, includingpre-enrollment verification, as determined by the SBM,” AHIP says.

AHIP’s verification recommendations include:

  • Develop HealthCare.gov messaging.
  • Simplify the eligibility determination notice.
  • Facilitate a successful document submission process.
  • Adopt a risk-based approach for eligibility verification.
  • Develop a robust and effective process to review documentation.
  • Further develop CMS program integrity tools related to fraudulent enrollments.
  • Conduct extensive outreach and education training.

Industry Lobbies and Non-Profits Comment Together on FDA Compounding Guidance

BIO, the Generic Pharmaceutical Association (GPhA), PhRMA, Pew Charitable Trusts, the American Public Health Association and the Trust for America’s Healthall came together to submit 10 pages of comments on three recently released FDA guidance papers. The guidance papers clarify rules put in place tostrengthen FDA oversight of compounding after a national meningitis outbreak linked to contaminated compounded drugs in 2012.

Following is some of what they’d like to see change:

  • They argue FDA needs a stricter definition of “anticipatory compounding” to prevent pharmacies from conducting large-scale manufacturing activities when they are supposed to be compounding only in limited quantities—under the current proposal, compounders could base their anticipatory compounding limits on past volumes, but this could reward compounders who were operating improperly before the 2013 law that strengthened FDA regulation of the industry.
  • They say FDA should require