Washington Healthcare Update

September 26, 2016

Pardon Our Dust

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This Week: Keeping the federal government funded after Sept. 30 remains a focus… Democrats not on board with Continuing Resolution rolled out Sept. 22 containing Zikafunding and CARA “down payment” but nothing for Flint, Michigan’s water crisis…The price of EpiPens continues to be fodder for hearings and reports…SenateFinance asks for OIG review on what CMS knew and when they knew it about EpiPens’ Medicaid rebate…House passed three health care bills.

1. Congress

House of Representatives


2. Administration

3. Courts

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress

House of Representatives

House Passes Three Health Bills

The Continuing Access to Hospitals Act (H.R. 5613) exempts small rural hospitals and critical access hospitals from rules that require direct physiciansupervision for outpatient therapeutic service. Congress has made the same exemption in the past.

The Sustaining Healthcare Integrity and Fair Treatment Act (H.R. 5713) would delay the “25-percent” rule for long-term care hospitals. It also narrowlyexempts four types of long-term care hospitals from site-neutral payment efforts.

The Expanding Seniors Receiving Dialysis Choice Act (H.R. 5659) permits Medicare beneficiaries with end-stage renal disease to enroll in Medicare Advantageplans beginning in January 2020.

House Oversight Committee Holds Hearing on Rising Price of EpiPens

On Sept. 21, the House Oversight and Government Reform Committee held a hearing concerning EpiPen and its cost to consumers. Mylan CEO Heather Breschtestified.

To watch the hearing, click here.

Energy and Commerce Committee Launches Review of FDA’s Office of Criminal Investigations

On Sept. 21, the House Energy and Commerce Committee announced it is investigating the FDA’s Office of Criminal Investigations, following reports of moraleand management problems there.

In a letter to the FDA, Chairman Fred Upton (R-MI) and Oversight and Investigations Subcommittee Chairman Tim Murphy (R-PA) point to reports by the GAO in2010 and the HHS OIG in 2012 that flagged concerns about the office, including a lack of performance standards and the use of law enforcement agents fornon-criminal investigations, among other problems.

The letter also notes that the FDA let the director of the Office of Criminal Investigations relocate a field office in Miami, FL, and that this raisesquestions about the current management model for the OCI. The lawmakers are also seeking answers by Oct. 12 to a long list of questions about what FDA hasdone in response to the GAO’s and HHS OIG’s recommendations on the matter.

House Energy and Commerce Republicans Warn Against Using DOJ Funds to Settle Risk Corridors

On Sept 20, the House Energy & Commerce Republicans warned HHS Secretary Sylvia Burwell that the department would circumvent Congress if it draws froma Justice Department judgment fund to settle insurers’ lawsuits over the lower-than-expected risk corridor payments. CMS told insurers in a Sept. 9 memo itwas open to settling the suits but didn’t elaborate. The lawmakers also want to know how CMS will follow through on its stated obligation to make insurers“whole” under the corridor program.

The members, House Energy and Commerce Chairman Fred Upton (R-MI), health subcommittee Chairman Joseph Pitts (R-PA), oversight & investigationssubcommittee Chairman Tim Murphy (R-PA), Rep. Leonard Lance (R-NJ) and Rep. Morgan Griffith (R-VA) said CMS appeared to signal it is eyeing Congress’Judgment Fund—which has a permanent appropriation—as a means to repay insurers through a settlement. Such action would circumvent congressional action toblock funding for risk corridors, they say. It is also unclear whether use of the Judgment Fund would even be allowed in this situation. DOJ guidelines saythat the fund is not supposed to become available just because an agency does not have the funds to pay a judgment.

The lawmakers also raised concern with Acting CMS Administrator Andy Slavitt’ s testimony during a hearing on Sept. 4 that the agency is obligated to paythe risk corridor money.

“During the joint hearing, U.S. Rep. Morgan Griffith asked Mr. Slavitt if CMS takes the position that insurance plans are entitled to be made whole on riskcorridors payments, even if there is no congressional appropriation to do so. Mr. Slavitt responded under oath: ‘Yes, it is an obligation of the federalgovernment.’ Mr. Slavitt also testified that the DOJ had reviewed the Sept. 9, 2016, CMS memorandum that invited insurance companies to settle with CMS,”the lawmakers wrote.

The GOP lawmakers said Slavitt agreed to give the names of individuals at CMS and HHS who have spoken to the Department of Justice about insurancecompanies’ lawsuits about risk corridor payments, a list of insurance companies that have sued CMS or the United States or intend to, and a list ofinsurance companies that have asked about settlements to risk corridor payment lawsuits, including those CMS referred to the DOJ.

However, the lawmakers stated that CMS only provided a list of companies that have sued the United States over risk corridor payments. They demanded thatCMS provide by Oct. 4 Slavitt’ s explanation of how CMS intends to pay for its stated obligation to pay insurers, whether the agency thinks it legal to usethe Judgment Fund to pay settlements, and the data missing from the first request.

House Judiciary Subcommittee Holds Hearing on Treating the Opioid Epidemic

The House Judiciary Subcommittee on Regulatory Reform, Commerce and Antitrust Law held a hearing concerning competition in the market for addictionmedicine. Witnesses were:

Anne McDonald Pritchett, Ph.D.,Vice President, Policy and Research, Pharmaceutical Research and Manufacturers of America

David Gaugh, R.Ph.,Senior Vice President for Sciences and Regulatory Affairs, Generic Pharmaceutical Association

Mark Merritt, President and Chief Executive Officer, Pharmaceutical Care Management Association

Eric Ketcham, M.D.,Medical Director, Emergency Department and Urgent Care, American College of Emergency Physicians;Co-Medical Director , EMS San Juan Regional Medical Center

Prof. Robin Feldman, Esq., Harry and Lillian Hastings Professor of Law; Director of the Institute for Innovation Law, UC Hastings College of Law

For more information, click here.


Government Funding or Shut Down?

With the end of the government’s fiscal year on Sept. 30, Republicans released the text of the Continuing Resolution designed to fund the governmentthrough Dec. 9. Although the CR contains funding to tackle the Zika virus, it does not contain funding to address the lead contamination crisis in Flint,Michigan, and continues a prohibition on the SEC’s ability to require corporations to disclose political spending. As a result, not all Democrats are onboard. A few senators have announced they will break ranks with their party – Florida Democrat Bill Nelson will back the CR since it includes Zika money;South Carolina Republican Lindsey Graham will oppose it, since it does not fully revive the Export-Import Bank. The Senate is scheduled to hold a cloturevote on the bill Sept. 27 at 2:15 pm.

Senate Finance Republicans Ask for OIG Review of EpiPen Medicaid Rebates

Senate Finance Committee Republicans areasking HHS’s Inspector General to review CMS’s oversight of Medicaid rebates,specifically the ones Mylan paid for its EpiPen. “Manufacturer rebates play an important role in helping to offset the ever-increasing costs ofprescription drugs to the Medicaid program,” the letter says. “The recent controversy surrounding Mylan’s prescription drug product EpiPen raises questionsabout the controls in place to ensure that drug manufacturers are paying appropriate rebates.”

CMS may have known since 2014 that EpiPen was incorrectly classified as a generic. The letter notes that Mylan has previously been subject to enforcementfor misclassifying a brand drug as a generic. It was one of four companies that in October 2009 entered into a $124 million settlement agreement to resolveclaims it violated the False Claims Act by failing to pay appropriate rebates to state Medicaid programs.

Republicans on the House Energy and Commerce Committee have also requested HHS OIG oversight on the issue.

Senate Passes Short-term Reauthorization of FDA Pediatric Review Voucher Program

On Sept. 22, the Senate used its hotline process to pass a reauthorization of FDA’s pediatric review voucher program until the end of the calendar year,leading Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander (R-TN) to call for quick House passage of the short-termauthorization.

Sens. Bob Casey (D-PA) and Johnny Isakson (R-GA) attempted to push their bill to reauthorize the program for five years through the same process lateWednesday (Sept. 21), but Sen. Bernie Sanders (I-VT) objected and the debate shifted to drug pricing and 21st Century Cures funding for the NationalInstitutes of Health and FDA.

2. Administration

CMS Says Medicare Advantage Premiums to Decrease

On Sept. 22, the Centers for Medicare and Medicaid Services announced the average Medicare Advantage monthly premium will slightly decrease to $32.59 in2017. That’s $1.19 less than the average premium this year, a 4 percent decrease. The average premium for private Medicare enrollees has decreased by 13percent since passage of the Affordable Care Act, CMS said. The share of Medicare beneficiaries choosing private plans over the traditional fee-for-serviceprogram continues to soar. Medicare Advantage enrollment is projected to hit 18.5 million next year, accounting for roughly one-third of all beneficiaries.

For more information, click here.

FDA Announces Competition to Develop Mobile App for Opioid Antidote Naloxone

On Sept. 19, FDA announced a competition for development of a mobile phone app that can connect opioid users experiencing an overdose with nearby carriersof the prescription drug naloxone—the antidote for an opioid overdose.

The FDA, along with the National Institute on Drug Abuse (NIDA) and the Substance Abuse and Mental Health Services Administration (SAMHSA) announced the2016 Naloxone App Competition in order to bring together computer programmers, public health advocates, clinical researchers, entrepreneurs and innovatorsto help combat the opioid crisis. The contest was unveiled as part of the White House’s Prescription Opioid and Heroin Epidemic Awareness Week, which isbeing used by the White House to ratchet up pressure on Congress to approve the $1.1 billion in mandatory funding for opioid treatment, as proposed in thepresident’s 2017 budget.

For more information, click here.

FDA Approves First Drug to Treat Duchenne Muscular Dystrophy

On Sept. 19, FDA granted accelerated approval to Sarepta’s Duchennemuscular dystrophy treatment after receiving mounting political pressure by lawmakers and patient advocates. FDA’s drug center Director Janet Woodcock,with the help of Commissioner Robert Califf, overruled the drug’s review team, which had raised concerns about the drug’s effectiveness. This Duchennemuscular dystrophy treatment, eteplirsen, is now the first drug approved for the rare genetic disease that usually causes death in patients in their 20s or30s.

This approval comes after FDA advisers voted against FDA approval of the drug in April. The advisers said Sarepta had not provided “substantial evidence”that the drug effectively treats the disease. FDA’s briefing documents issued ahead of the panel also indicated the agency was not convinced the drugwarranted approval.

The accelerated approval means FDA concluded eteplirsen is reasonably likely to improve patients’ lives or longevity. Sarepta will have to conduct anadditional clinical trial as a condition of full approval to confirm the drug’s clinical benefit. If that fails, FDA can withdraw the drug’s approval.

3. Courts

Federal Judge Denies HHS an Extension to Reduce Medicare Billing Appeals Backlog

On Sept. 19, a D.C. federal judge refused to give government officials more time to reduce a million-claim backlog of Medicare billing appeals lodged byhospitals, calling proposed fixes either inadequate or unlikely to materialize. The ruling from U.S. District Judge James E. Boasberg rejected a requestfrom the U.S. Department of Health and Human Services to pause litigation brought by the American Hospital Association. HHS wanted to put things on holduntil October 2017 to see if administrative and legislative fixes would produce results, but Judge Boasberg concluded that the fixes are not sufficient andtherefore waiting does not make sense.

The judge scheduled a hearing for Oct. 3 to discuss next steps. In a Sept. 19 statement, AHA Assistant General Counsel Lawrence Hughes said that theassociation is “very pleased with the decision” and “will have concrete recommendations to offer the administration at the upcoming status hearing.”

4. State Activities

Colorado: ACLU Sues Colorado Medicaid Over Hepatitis C Treatment Restrictions

On Sept. 19, the American Civil Liberties Union (ACLU) of Colorado filed a federal class action lawsuit against thestate’s Medicaid agency over restrictions on hepatitis C treatments. The Colorado Department of Health Care Policy and Financing recently relaxed itspolicy to allow Medicaid enrollees with a liver fibrosis score of F2 to receive the drug—previously it only included the sickest patients, with a score ofF3 or F4—but the ACLU argues the new policy still is not inclusive enough. Other states facing a lawsuit over access to hepatitis C treatments includeIndiana, Massachusetts, Pennsylvania and Washington.

Iowa: Iowa Supreme Court Asked to Overturn Gov. Branstad’s Closure of Mental Health Institutions

On Sept. 14, the Iowa Supreme Court was asked to decide if Gov. Terry Branstad violated state law last year by using his line-item veto authority to closetwo state mental health institutions. Branstad was sued by 25 state lawmakers and the American Federation of State, County and Municipal Employeesfollowing his decision. The plaintiffs’ attorneys argue the governor should have asked the state legislature to modify the statute. But a lower court sidedwith the Republican governor, saying that his authority to veto spending bills supersedes a section of state law requiring the state to operate four mentalhospitals.

Minnesota: State Regulators Fail to Recruit Insurers to Join the MNsure Health Exchange

State regulators have come up short in their efforts to recruit more insurers to join the MNsure health exchange ahead of the 2017 open enrollment season.Officials made a concentrated effort after Blue Cross Blue Shield of Minnesota announced it would drop many of its individual market plans—though it willcontinue to sell individual HMO plans. The Minnesota Department of Health said it will continue to seek out more insurers but that it is unlikely coverageoptions will come together for the upcoming enrollment period.

Missouri: State Legislature Overrides Veto

The Missouri legislature recently overrode a veto on a bill that allows for Medicaid patients to be billed for missed appointments if they do not cancelwithin 24 hours. Gov. Jay Nixon vetoed the bill in July, writing at the time, “While these kinds of market-based reforms and incentives may be acceptablein the context of an expanded Medicaid population that includes more working Missourians, they are cruel and punitive when imposed solely on some of ourvery poorest and most vulnerable citizens.” Gov. Nixon is the most overridden governor in state history.

Nevada: Head of Nevada Health Exchange Leaving for New Job

Bruce Gilbert has resigned as the executive director of Nevada’s exchange to take a position with TriHealth, a health system in Ohio. The state exchangeboard met Sept. 20 to discuss appointing a successor.

New York: AG Files Lawsuit Claiming Anticompetitive Practices by Suboxone

According to a federal lawsuit filed by New York Attorney General Eric Schneiderman and 35 other attorneys general, the maker of Suboxone, a blockbusterdrug that helps people control their opioid addiction, engaged in anticompetitive business practices, coercing patients to use an oral strip because thetablets were set to face generic competition. The tablets were first approved in 2002 and the Food and Drug Administration granted the pills orphan drugstatus, which protected the company’s market exclusivity through 2009.

The lawsuit alleges Indivior switched to a dissolvable film strip to prevent other companies from providing a generic form of the pill. The company alsotold the FDA the pill might be dangerous because it could wind up in the hands of children. At the time, FDA officials were skeptical of this argument butordered the manufacturer and any generic manufacturers to participate in a shared Risk Evaluation and Mitigation Strategy. Invidior then asked the FDA todelay approving a generic until it could be proven there was no risk to children. This was all in a way to delay approval of generic versions of the drug,according to the lawsuit.

The FDA denied this petition and approved generic versions in 2012. By then, according to the lawsuit, Indivior had already gotten out of the pill marketand switched to manufacturing the strips.

The company is also facing an investigation by the Federal Trade Commission over Suboxone and multi-district litigation by purchasers of the drug, accusingthe company of similar deceptions.

Oregon: Oregon, Oracle Reach Settlement Over Botched Rollout of Oregon’s Exchange

On Sept. 15, Oregon and Oracle reached a $100 million settlement related to the botched rollout of Oregon’s exchange. Per the agreement, Oracle will giveOregon $60 million in free customer service support; a $10 million grant for science, technology, engineering and math programs in Oregon schools; and $25million to reimburse the state for litigation costs. The two entities had been locked in a legal battle for years after the ACA marketplace failed tolaunch in 2013. A year later, Oregon switched to HealthCare.gov.

For more information, click here.

5. Regulations Open for Comment

IRS, Treasury Release Proposed Rule on QHP Benchmarks

The IRS and Treasury Department, in a proposed rule released July 6, proposed toalter how qualified health plan (QHP) benchmarks are determined so that theyaccount for the costs of pediatric dental benefits. If finalized, the rule wouldgo into effect for the 2019 plan year.

Although pediatric dental care is one of the 10 “essential health benefits” thatplans are required to cover under the Affordable Care Act (ACA), several plansdo not include such coverage, and consumers instead buy stand-alone dentalproducts. Meanwhile, the marketplace determines the amount of tax credits afamily can receive to cover the cost of coverage based on the second-cheapestsilver-level plan.

However, as the proposed rule said, “because qualified health plans that do notoffer pediatric dental benefits tend to be cheaper than qualified health plansthat cover all ten essential health benefits, the second lowest-cost silver plan(and therefore the premium tax credit) for taxpayers purchasing coverage througha Marketplace in which stand-alone dental plans are offered is likely to notaccount for the cost of obtaining pediatric dental coverage.”

Treasury and IRS added that the existing rules “frustrate” the goal of makingall essential health benefits affordable to those receiving premium tax credits,so the administration wants to update its interpretation to ensure all 10services are addressed.

“Consistent with this interpretation, the proposed regulations provide that fortaxable years beginning after December 31, 2018, if an Exchange offers one ormore silver-level qualified health plans that do not cover pediatric dentalbenefits, the applicable benchmark plan is determined by ranking (1) thepremiums for the silver-level qualified health plans that include pediatricdental benefits offered by the Exchange and (2) the aggregate of the premiumsfor the silver-level qualified health plans offered by the Exchange that do notinclude pediatric dental benefits plus the portion of the premium allocable topediatric dental benefits for stand-alone dental plans offered by the Exchange,”the proposal said.

The rule aims to create the ranking by adding the premium for the lowest-costsilver plan that does not include a pediatric dental benefit to the premium forthe cheapest stand-alone dental plan, and the premium for the second-cheapestsilver plan without pediatric dental benefits to that of the second-loweststand-alone dental plan. The second-cheapest amount from this combined rankingwould be the taxpayer’s applicable benchmark plan premium, the rule said.

CMS Releases Proposed Mandatory Bundled Payment Program

On July 25, CMS proposed new models to mandate bundled payments for cardiaccare. This is the agency’s second program requiring providers to accept setpayments for an episode of care. CMS also proposed extending its existingmandatory bundled payment initiative for hip replacements to other hipsurgeries.

CMS clarified that under the new Medicare physician payment system starting in2018, both mandatory bundled payment models could qualify as AdvancedAlternative Payment Models, which would allow participating physicians to beexcluded from a new proposed quality reporting program and instead receive alump-sum payment from Medicare.

The agency also announced a new initiative to encourage hospitals to increasecardiac rehabilitation, in hopes of improving patient outcomes and reducingreadmissions.

To see the proposed rule,click here. CMS will accept comments on the proposed rule until 5 p.m. onOct. 3.

IRS Publishes Draft Regulations on Reporting of Catastrophic Health Coverage

The Internal Revenue Service (IRS) published newdraft health coverage reporting regulationsin the Federal Register on Aug. 2. The new draft regulations call for the healthinsurers that sell catastrophic medical insurance to report any catastrophiccoverage they have provided to the enrollees and the IRS on Form 1095-B. Therule would first apply to the coverage in effect in 2017—issuers would then sendout the first catastrophic plan 1095-B forms in early 2018.

Catastrophic plans are higher-deductible, lower-value plans that insurers cansell to people under 30, and to people of any age who earn too much to qualifyfor ACA exchange plan premium subsidies. The new draft regulations also call forthe government agencies that offer Basic Health Plans—which are similar tomanaged Medicaid programs for people who earn too much to qualify forMedicaid—to report Basic Health Plan coverage to the IRS.

A third piece of the draft regulations clarifies that an employer providing twoor more types of coverage that come under the minimum essential coverage ruleswould just have to report the richest form of coverage.

Comments on the draft regulations are due by Oct. 3.

UNOS Proposes Changes to Liver Transplant Policies

The United Network for Organ Sharing (UNOS) is proposing changes to thegeographic regions for liver transplants to better match organ supply withdemand and make access more equitable. Currently, there exists a wide variationin a transplant candidate’s chance of receiving an organ in a timely way, basedon where the patient lives and the location of the transplant hospital wherethey are listed. Some patients may not get organs until they are much sickerthan are patients awaiting transplants in different regions.

HHS Proposes Updates to Title X Rules

On Sept. 2, HHSproposed to preclude Title X grant recipients from using criteria intheir selection of family planning providers that are unrelated to theability to deliver services effectively.

Since 2011, 13 states have attempted to restrict participation by familyplanning providers in Title X based on factors unrelated to their ability toprovide services. The Title X program provides funding for certain familyplanning services, including STD screening and treatment, but funding is notused to pay for abortions. Although Planned Parenthood is not mentioned byname in the proposed rule, it has often been the subject of defundingactions by states and Congress.

In the proposed rule, HHS said the effects already felt by the restrictionsin many states justify the department’s rulemaking. HHS said grantrecipients that do not provide services directly would also be required tofollow the updated standards when choosing subrecipients.

HHS also proposed that a tiered structure governing how funds aredistributed would not be allowed unless it can be proven that aprovider in a top tier delivers Title X services more effectively than alower-tier provider. According to the Guttmacher Institute, a researchorganization that supports reproductive rights, four states have a p