Washington Healthcare Update

January 9, 2017

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This Week: Congress returned and started the Affordable Care Act repeal process…HRSAfinalized 340B regulations.

Health Care Reform Takeaway From the Week of January 3

  • Budget Resolution Debate Begins: The Senate began consideration of a budget resolution that would pave the way to repeal the Affordable Care Act by instructing the committees of jurisdiction (the House Ways and Means Committee; House Energy and Commerce Committee; the Senate Health, Education, Labor, and Pensions Committee; and Senate Finance Committee) to cut at least $1 billion over ten years from the deficit—i.e., repeal those portions of the ACA that can be repealed through the budget process. Those committees would have until Jan. 27 to produce legislation repealing major provisions of the Affordable Care Act. Using the reconciliation mechanism means that only 51 votes are needed to pass it in the Senate.
  • Looking Ahead: President-elect Trump plans to announce executive actions on health care within days of taking office. Stay tuned.

1. Congress



2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Rep. Price to Have HELP Confirmation Hearing

The Senate HELP Committee has unofficially set Jan. 18 as its tentativedate to hold a confirmation hearing on Rep. Tom Price (R-GA), the nomineefor HHS secretary.

Although both the Finance and HELP committees are working together closelyto vet the Atlanta orthopedic surgeon, the official confirmation vote willcome from the Finance Committee, which will process Price’s paperwork. TheHELP hearing is a courtesy. The official announcement should come thisweek.

In the meantime, Public Citizen asked both the congressional ethics officeand the Securities and Exchange Commission to investigate Price’sstock-buying activity for potential violations.

The Senate Finance Committee has not yet scheduled a confirmation hearingfor Price because Finance cannot move forward until Price has submitted allrequired disclosures. The Democrats say two ethics-related documents havenot been filed. One is Form SF278, the Executive Branch Personnel PublicFinancial Disclosure Report, which can be made public, and the second is aletter from the Office of Government Ethics certifying that Price has takensteps to avoid conflicts of interest. That letter cannot be made public.The Trump transition team has responded that Price submitted all therequired information on Dec. 21, 2016, and that Price submitted a requestto the Office of Government Ethics several weeks ago and its investigationis proceeding. Minority Leader Chuck Schumer (D-NY) has vowed to slow downthe process until the ethics questions are answered.


Sen. Grassley Asks CMS If It Fixed Rebate Misclassifications of Dilaudid, Prilosec

Drugmakers’ misclassifications of Dilaudid and Prilosec as noninnovatordrugs—making them subject to lower Medicaid rebates—could have cost CMShundreds of millions of dollars, Sen. Chuck Grassley (R-IA)said Jan. 4 in a letterto CMS Acting Administrator Andy Slavitt. Grassley, chairman of the SenateJudiciary Committee, has continued to press CMS for details on itscommunications with makers of drugs that the HHS Office of InspectorGeneral in 2009 flagged as wrongly classified as noninnovators. CMS has notconfirmed whether Dilaudid and Prilosec have been reclassified.

In his letter, Grassley asked CMS for records of CMS’s correspondence withPurdue Pharmaceuticals (maker of Dilaudid) and AstraZeneca (maker ofPrilosec). He asked Slavitt whether the agency took steps to remedy themisclassifications after OIG flagged them, and also whether—and if so, whenand how—CMS told the companies they had wrongly categorized the drugs.Grassley asked for a response by Jan. 18.

Grassley’s letter comes on the heels of the same issue involving Mylan’sEpiPen. In December, Senate Finance Chair Orrin Hatch (R-UT) and HouseEnergy & Commerce Republicans Fred Upton (MI), Tim Murphy (PA) andJoseph Pitts (PA) also wrote to Slavitt asking whether Mylan applied for anarrow exemption in a new CMS rule under which drugmakers may ask CMS totreat innovator drugs as generics for rebate purposes.

Senate Takes First Budget Procedural Vote

On Jan. 4, the Senate took its first procedural vote on the long road torepeal Obamacare. The chamber voted 51-48 on a budget resolution that willallow Republicans to use reconciliation to repeal the health care law. Avote on the actual budget—which allows for 50 hours of debate and anunlimited number of amendments—is expected sometime this week.

The vote was split along party lines, except for Sen. Rand Paul (R-KY), whosaid he would not support a budget resolution that does not balance thebudget. Sen. Dianne Feinstein (D-CA) did not vote.

The resolution instructs four authorizing committees—Ways and Means andEnergy and Commerce in the House, and Finance and HELP in the Senate—tofind at least $1 billion each in deficit reduction over 10 years and toreport to the Budget Committee by Jan. 27.

Find the Senate resolution here.

Sen. Cassidy to Join Senate Finance Committee

Sen. Bill Cassidy (R-LA) will replace retired Sen. Dan Coats (R-IN) on theSenate Finance Committee. Cassidy, a one-time Democrat who defeated formerSen. Mary Landrieu (D-LA) in 2014, served six years in the House, where hewas on the Energy and Commerce Committee and supported earmark reform andthe push for a balanced budget amendment.

Cassidy is a physician who has said he was inspired to run for office—heserved two years in the state senate—after witnessing the breakdown inhealth care in the aftermath of Hurricane Katrina.

Sens. Kaine and Young to Join Senate Health, Education, Labor, andPension Committee

Former Democratic vice presidential candidate Sen. Tim Kaine (VA) will jointhe Senate HELP Committee. Senator Todd Young (R-IN) will also join thecommittee.

In health care, the HELP Committee jurisdiction encompasses most of theagencies, institutes and programs of the Department of Health and HumanServices, including the Food and Drug Administration, the Centers forDisease Control and Prevention, the National Institutes of Health, theAdministration on Aging, the Substance Abuse and Mental Health ServicesAdministration and the Agency for Healthcare Research and Quality.

2. Administration

Expensive Cholesterol Medication To Be Forced From Market, Creating Monopoly

Sanofi and Regeneron will need to cease marketing their newcholesterol-lowering drug Praluent following a jury ruling that the companyinfringed on the patents of competitor Amgen’s drug Repatha, a U.S.district court judge said Jan. 5.

The unusual move could make it harder for payers and patients to negotiatelower costs for Repatha, the only other drug in that class on the market.Both drugs have been shown to reduce cholesterol levels more than thewidely used and relatively inexpensive statins, but have come at a steepprice of more than $14,000 a year.

Given the number of U.S. patients with cardiovascular disease, the pricingof the drugs when first approved in the summer of 2015 sparked fears thatthese medicines known as PCSK9s could be the costliest medicine for thecountry.

This summer, JAMA published a paper concluding the drugs are notcost-effective, saying the price would need to be reduced by more thantwo-thirds to meet acceptable cost-effectiveness thresholds.

The permanent injunction against Sanofi and Regeneron’s drug will takeeffect in 30 days to give the companies an opportunity to appeal or toreach a settlement with Amgen.

Third CMS Innovation Center Report to Congress Posted

On Jan. 5, the CMS Innovation Center released itsthird Report to Congress. It focuses on activities between Oct. 1, 2014, and Sept. 30, 2016, butalso highlights a number of important activities started during that timeperiod that were announced between Sept. 30, 2016, and Dec. 31, 2016. TheCMS Innovation Center’s portfolio of models and initiatives has attractedparticipation from health care providers, states, payers and otherstakeholders in all 50 states, the District of Columbia and Puerto Rico.During this period, the CMS Innovation Center has tested or announced 39payment and service delivery models and initiatives authorized underSection 1115A authority. To improve care and value, these model tests focuson reducing program expenditures while improving the quality of care.

For additional information on the portfolio of models being tested throughthe CMS Innovation Center, visit theCMS Innovation website.

HRSA Finalizes “Penny Pricing” Policy, 340B Drug Pricing Issues

On Jan. 4, the Health Resources and Services Administration (HRSA)completed a 340B rule that deals with setting prices under the drugdiscount program, finalizing the so-called “penny pricing policy.” The ruleprescribes a formula for drug manufacturers to use when estimating the 340Bprice of a new drug. The agency also said it will defer to the HHS Officeof Inspector General to determine when manufacturers “knowingly andintentionally” charge 340B providers more than the ceiling price, andtherefore are subject to penalties.

In 2015, HHS proposed the rule on setting prices for 340B drugs andpenalties for manufacturers that overcharge 340B providers, but reopenedthe rule last year to get more information on whether to continue using the“penny pricing” policy where manufacturers charge a penny for drugs whenthe ceiling price comes out below $0.01 per unit. HRSA also asked forfeedback on how to estimate the ceiling price of a new drug or determinewhen manufacturers knowingly and intentionally charge 340B providers morethan the ceiling price.

HRSA says it received numerous comments supporting and opposing thealternatives to penny pricing. Pharmaceutical Research and Manufacturers ofAmerica and the Biotechnology Industry Organization commented the policy ispunitive and could lead to providers’ hoarding drugs when they cost only apenny. Those opposed to penny pricing—which critics said leads tomanufacturers’ not being repaid the cost of the drugs—suggested insteadusing the Federal Ceiling Price, the most recent positive 340B ceilingprice from previous quarters, and the nominal price, HRSA says. Others saidthat manufacturers should be able to use any reasonable pricing method theychoose.

HRSA finalized the penny pricing policy as proposed, and said that the“long-standing policy reflects a balance between the equities of differentstakeholders and establishes a standard pricing method in the market.”

HRSA said there is no requirement in statute that the price paid must coverthe cost of the drugs—or for manufacturers to participate in 340B—anddrugmakers can control whether a drug falls under penny pricing bycontrolling a drug’s price.

“If a manufacturer does not wish to offer a zero 340B ceiling price, themanufacturer may choose not to participate in the 340B Program or may alterits drug pricing practices so as not to cause a zero 340B ceiling price,”the rule says. “For example, when AMP increases more quickly than the rateof inflation, the manufacturer must pay a greater Medicaid rebate, whichcan also cause a zero 340B price. A manufacturer can control AMP byadjusting the prices that it charges for drugs.”

340B Health, which represents 340B hospitals, says the group is pleasedwith HRSA’s decision on penny pricing, as well as HRSA’s decision to havethe OIG impose penalties on manufacturers that knowingly and intentionallyovercharge 340B providers.

In the final rule, HRSA also says that manufacturers should estimate theprice for new drugs by using the wholesale acquisition cost of the drugminus the rebate percentage until an actual 340B ceiling price can bedetermined using the average manufacturer price. Then if there is adifference, manufacturers have 120 days to give providers a refund.

HealthCare.gov Enrollment Reaches 8.8 Million

Roughly 8.8 million people have enrolled in Obamacare coverage throughHealthCare.gov for 2017, the Obama administration announced Jan 4.

The latest figures, which cover the 39 states using the federal enrollmentwebsite, include individuals who actively chose a plan as well as millionswho were automatically renewed. Compared to the same time in the 2016enrollment period, about 200,000 more people have signed up for coveragethis year.

As of Dec. 31, 2.2 million new customers had selected plans and 6.6 millionwere renewals. The CMS enrollment update came after President Barack Obamaand Vice President-elect Mike Pence had dueling Capitol Hill meetings aboutthe GOP’s plans to repeal the health care law.

HHS has predicted that 13.8 million people nationwide will choose plansduring the 2017 enrollment season, which ends Jan. 31. Theenrollment snapshot releaseddoes not account for states with their own exchanges, including Californiaand New York.

FDA Releases Guidance on Nutrition Facts Label and Serving Size Final Rules

The FDA hasreleasedtwo guidance documents on the nutrition facts label and the serving sizefinal rules, documents aimed at helping food manufacturers prepare for thesweeping update to Nutrition Facts labels set for 2018.

The agency’s 22-pagedraft guidanceon added sugars clarifies the FDA’s current thinking on a slew ofquestions, including whether fruit concentrates need to be declared asadded sugars (in some cases, yes, but it depends), or whether sugars fromfermentation count as added sugars (it depends). A separatedraft guidancedelves into serving size changes.

The agency notes that its final rules on the Nutrition Facts label andserving sizes, which were finalized in May, come into effect on July 26,2018. However, smaller businesses with annual food sales less than $10million have until July 26, 2019, to comply with the changes.

FDA will accept comments on the two documents for 60 days.

3. State Activities

Arizona: Hearing Date Set for Lawsuit Challenging Medicaid Expansion Funding Mechanism

Last week, the Arizona Court of Appeals scheduled a hearing date for theyears-long lawsuit challenging the funding mechanism for the state’sMedicaid expansion program. OnFeb. 14, judges will take the next step in Biggs v. Betlach, whichchallenges the legality of the hospital assessment that was passed in 2013to cover the state’s expansion costs. Opponents of expansion, who are beingrepresented by the libertarian Goldwater Institute, argue the assessment isillegal because it didn’t pass with a legislative supermajority requiredfor tax increases in Arizona.

Maryland: CMS Approves Maryland’s Medicaid 1115 Waiver

CMSapprovedthe Maryland’s proposed Medicaid 1115 waiver that allows payment forsubstance abuse treatment at large mental health and substance use disorderresidential treatment facilities, which was previously restricted byfederal law. The five-year waiver agreement also expands dental coverage toformer foster children until age 26. The waiver also allows the state tobegin enrolling eligible inmates leaving prison to sign up for Medicaid.

Minnesota: Gov. Dayton Proposes a 25 Percent Rebate for Certain Obamacare Customers

Democratic Gov. Mark Dayton has again proposed that Minnesota fund a 25percent rebate to lower premiums for Obamacare customers who don’t qualifyfor federal subsidies, saying it would help 125,000 people as they shop for2017 plans. But with Republicans now fully in control of the Minnesotalegislature, it appears unlikely Dayton’s plan will get through. Daytonalso indicated during a recent press conference that he’ll proposeadditional reforms to Minnesota’s insurance market later this month.

New Jersey: Gov. Christie to Discuss Opioid Policies at State of the State Address

Gov. Chris Christie is expected to discuss new policies to combat NewJersey’s opioid epidemic at his final State of the State address on Jan.10. It is one of the few remaining areas where the embattled governor canconjure up bipartisan support. Christie has focused on rethinkingapproaches to dealing with substance use disorders and nonviolent drugoffenders since taking office in 2010. At an event last month, Christieindicated the state’s attorney general will be “more aggressive” in 2017about using the statewide prescription monitoring program to identify bothdoctors and patients who are abusing prescription opioids.

North Carolina: Gov. Cooper Pursuing Medicaid Expansion Despite Uncertain Future of Program

On Jan, 4, North Carolina’s new Democratic governor said he will pursueObamacare’s Medicaid expansion, even as congressional Republicans begindismantling major parts of the health care law.

Gov. Roy Cooper told a group of business executives he will file a Medicaidstate plan amendment with federal officials to expand the program.Republicans who control the North Carolina legislature criticized theannouncement, contending that a 2013 state law prevents the governor fromexpanding Medicaid without lawmakers’ permission.

Several other governors who previously voiced support for implementingMedicaid expansion have recently halted plans due to uncertainty about theAffordable Care Act’s future. If North Carolina enacts Medicaid expansion,it would become the 32nd state to implement the optional Obamacare programproviding coverage to low-income adults.

The North Carolina Hospital Association, in response to Cooper’s comments,said that it supports expanding coverage through a plan that has bipartisanagreement.

4. Regulations Open for Comment

CMS Releases Proposed Notice With Changes to Medicaid National Drug Rebate Agreement

On Nov. 7, CMS issued a proposed notice announcing changes that would be made to the Medicaid National Drug Rebate Agreement (NDRA) for use by theSecretary of the Department of Health and Human Services and manufacturers under the Medicaid Drug Rebate Program. The NDRA is being updated to incorporatelegislative and regulatory changes that have occurred since the agreement was published in February 1991, as well as to make editorial and structuralrevisions, such as references to the updated Office of Management and Budget (OMB)-approved data collection forms and electronic data reporting. There is a90-day comment period for this proposed notice that will end on Feb. 7, 2017.

For more information, click here.

Comments Due on IMPACT Act Cross-Setting Quality Measure

On Nov. 4, CMS announced that public comments are due Nov. 17 on a cross-setting post-acute care measure under the Improving Medicare Post-Acute CareTransformation Act of 2014 (IMPACT Act) to further develop and refinethe percentage of residents or patients with pressure ulcers that are new or worsened and language modifications being explored with the term “PressureInjury.” CMS seeks feedback on potential updates to measure specifications and items used to calculate the quality measure. Visit the Public Comment webpagefor more information.

CMS Issues Interim Final Rule to Delay Inclusion of U.S. Territories inDefinitions of States and United States

CMS published the Covered Outpatient Drug Final Rule with Comment Period inthe Federal Register on Feb. 1, 2016. As part ofthat final rule with comment, CMS amended the regulatory definitions of“States” and “United States” to include the U.S. territories (AmericanSamoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Ricoand the U.S. Virgin Islands) beginning April 1, 2017. However, the agencysaid those territories could not be ready to implement the program by thisdate.

Therefore, CMS issued an Interim Final Rule with comment period that delaysthe inclusion of the territories in the definitions of “States” and “UnitedStates” from April 1, 2017, until April 1, 2020, which is effective on Nov.15, 2016. There is a 60-day comment period that will end on Jan. 17, 2017.

For more information visit theCovered Outpatient Drugs Policypage onMedicaid.gov.

CMS Issues Proposed Rule for Medicaid Managed Care Plans

CMS has issued a new proposed rule detailing regulations for pass-throughpayments to providers from Medicaid managed care plans. The guidance buildson the Medicaid managed care rule finalized by the Obama administration inMay.

Read the proposed rulehere.

CMS Announces PACE Innovation Act Request for Information

On Jan. 4, CMS released aRequest for Information (RFI)seeking public input on potential adaptations of the model of care employedby the Program of All-Inclusive Care for the Elderly (PACE) for newpopulations, including individuals with physical disabilities, under theauthority provided by the PACE Innovation Act. The PACE Innovation Act of2015 (PIA) provides authority to test application of PACE-like models foradditional populations, including populations under the age of 55 and thosewho do not qualify for a nursing home level of care, under Section 1115A ofthe Social Security Act.

The RFI includes two parts:

  • In the first part, CMS seeks comment on potential elements of a five-year PACE-like model test for individuals dually eligible for Medicare and Medicaid, age 21 and older, with disabilities that impair their mobility and who are assessed as requiring a nursing home level of care, among other eligibility criteria. We have provisionally named this model “Person Centered Community Care” or P3C. This potential model is designed to meet the requirements of a model test under Section 1115A of the Social Security Act and to adapt the PACE model of care for one population of focus. In addition to feedback on the potential elements of the P3C model described in the RFI, CMS seeks comment on the types of technical assistance that potential P3C organizations and states would require to participate in the model test.
  • In the second part of the RFI, CMS seeks information on additional specific populations whose health outcomes could benefit from enrollment in PACE-like models, and how the PACE model of care could be adapted to better serve the needs of these populations and the currently eligible population.

CMS is accepting feedback on this RFI until 5 p.m. EST on Feb. 10, 2017.Comments should be submitted electronically in PDF form toMMCOcapsmodel@cms.hhs.govwith the organization or individual submitting comments on the title of thedocument.

5. Reports

Commonwealth Fund Report Shows Repealing the ACA Could Cost 2.6 Million Job

According to a new study byThe Commonwealth Fund, repealing the Affordable Care Act could cost 2.6million jobs nationwide, with California projected to take the biggest hit.

The report, which was conducted with researchers at George WashingtonUniversity’s School of Public Health, found that California stands to losenearly 334,000 jobs in 2019, assuming federal payments are pulled backunder repeal for Medicaid expansion and premium tax credits. Gross stateproducts, a key indicator of economic health, could drop by $207 million by2023.

Researchers found that Florida would be second in the number of employmentlosses, with 181,000 jobs eliminated in 2019. Meanwhile, Wyoming isexpected to lose 4,000 positions. In gross state product losses, Texaswould be second to California at $107.4 million by 2021.

The report estimates the number of jobs lost in all 50 states and D.C.could rise to nearly 3 million by 2021, while gross state products coulddecrease by $1.5 trillion nationally between 2019 and 2023. Business outputcould drop by $2.6 trillion in that five-year period and, as a result,state and local tax revenues would drop by $48 billion.

The authors described their findings as “noteworthy in part because of thecommon (and debunked) concern that Obamacare has been a ‘job killer.’Evidence shows that job growth has been robust since the ACA wasimplemented and the economy has thrived.”

The researchers also noted the results were consistent with astudy released last monthby UC Berkeley’s Center for Labor Research and Education, which showed thatrepealing the ACA would eliminate more than 209,000 jobs in California andcost the state economy $20.3 billion in GDP.

OIG Report Finds High-Priced Drugs Threatening Medicare Part D Sustainability

According to a new HHS Office of Inspector General report, high-cost drugswere largely responsible for a huge jump in Medicare Part D “catastrophic”spending over the past five years, putting the program’s future at risk.

Federal payments for catastrophic coverage exceeded $33 billion in 2015,more than triple what the government spent in 2010. Drugs costing more than$1,000 per month accounted for two-thirds of the spending, with just 10drugs accounting for one-third of those payments.

Once Medicare Part D beneficiaries hit the catastrophic threshold, thegovernmen