Washington Healthcare Update

February 6, 2017

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This Week: More discussion on what a replacement plan might look like…Senate fireworkson getting cabinet secretaries confirmed…Energy and Commerce Committee tomarkup drug bill…Sen. Wyden introduces bill to weaken IPAB…OMB withdrawspending regulation on 340B.

Health Reform Takeaway

  • Rep. Tom Price clears the Finance Committee so his nomination to secretary of HHS moves forward for consideration by the full Senate.
  • Energy and Commerce subcommittees hold hearings and float drafts of bills related to Medicaid reform (previously passed in last Congress) and of bills to “stabilize” the insurance market for replacement purposes.

1. Congress



2. Administration

3. Courts

4. State Activities

5. Other

6. Regulations Open for Comment

7. Reports

1. Congress


Republican Members at Hearing Suggest States Opt Out of Medicaid Drug Formulary

Republican members of the House Energy & Commerce Committee at aFeb. 1 health subcommittee hearingasked witnesses whether state Medicaid programs would be better off if theycould opt out of the current Medicaid drug formulary and related rebateframework, which includes all FDA-approved drugs. Reps. Tim Murphy (R-PA)and Buddy Carter (R-GA) suggested formularies hurt state budgets whenMedicaid programs are forced to cover high-priced drugs.

The National Association of Medicaid Directors listed a retooling of theMedicaid drug formulary framework as one of their policy priorities for theTrump administration’s first 100 days, and said Medicaid directors needgreater authority to exclude some FDA-approved drugs from the formularylist.

Prescription drugs are optional under Medicaid statute, but all statesoffer coverage through the Medicaid drug rebate program, which sets rebatesat 23.1 percent for brand drugs and 13 percent for generics. But themandates that come with the rebate program cripple states’ abilities tofight the rising cost of prescription drugs, Medicaid directors said intheir open letter.

John McCarthy, Ohio’s former Medicaid director who implemented Medicaidexpansion under Republican Gov. John Kasich, testified at the hearing andsaid in answer to questions from Carter that he would advocate for states’ability to opt out of the formulary.

McCarthy said states—particularly large states—might have the leverage withdrug companies to get prices even lower than they are through the rebateprogram if they were able to put drug contracts up for bidding, somethinghe said would have helped him when his budget was hit by Sovaldi, thehepatitis C drug that Medicaid programs had to cover.

He said smaller states with fewer people on Medicaid would have lessnegotiating power than large states with more crowded beneficiary pools,but the key is that states should have a choice to do what is best fortheir program’s sustainability.

Other lawmakers and patient advocates are split on whether governmentprograms should negotiate with drug makers.

House Energy and Commerce Delays Taking Up Drug Pricing Bill This Week

The House Energy and Commerce Committee had scheduled a markup this week toconsider legislation to increase competition for generic drugs to preventpharmaceutical companies from increasing prices of old medicines. However,at the request of one of the co-sponsors and Democratic Leadership of thecommittee, the markup has been delayed to allow for more vetting of thelegislation.

The Lower Drug Costs Through Competition Act,introduced last week by Reps. Gus Bilirakis (R-FL) and Kurt Schrader(D-OR), would incentivize drug companies to develop generic drugs amid shortages or absence of competition.

The bill is aimed at high-priced older drugs that have lost patentprotection—like Daraprim, the drug Martin Shkreli infamously raised theprice of by more than 50-fold—and would not affect the cost of innovativenew drugs. Branded drug makers are unlikely to oppose the bill, making itmore politically feasible for Republicans to support it as President DonaldTrump targets high drug prices. Companies that apply to make a generic drugmeeting the bill’s standards would get a six-month FDA review and apriority review voucher for a six-month review of another generic drugapplication. The bill would also increase transparency around FDA’s genericdrug backlog and would require a study on drug safety programs, known asREMS, to understand whether brand companies use the programto impede generic competition.

FDA already committed to reviewing within eight months the first genericdrug application that would compete with a branded product.

Sen. Susan Collins (R-ME) introduced a similar bill in the last Congress.


Price and Mnuchin Nominees Move to the Floor

On Jan. 31, Senate Finance Committee Democrats boycotted the vote forTreasury nominee Steven Mnuchin and Health and Human Services nominee RepTom Price (R-GA). The boycott meant there was not a quorum and thecommittee could not vote. On Feb. 1, Republicans voted to suspend thecommittee rules and vote the nominees out of committee so they could beadvanced for consideration by the Senate. No Democrats attended the Feb. 1committee meeting either.

Democrats said they were boycotting the confirmation proceedings because ofconcerns that Price and Mnuchin had misled the committee, and that thenominees needed to provide more information. Democrats said in a letter toHatch that they wanted more information on Price’s privileged anddiscounted access to stocks and answers from Mnuchin on “robo-signing” andforeclosures by the bank he once led, OneWest.

Republicans slammed Democrats as being obstructionists and downplayed theirconcerns with the nominees. Both Mnuchin and Price are expected to beconfirmed because of broad Republican support

Wyden Introduces Legislation to Weaken IPAB

Sen. Ron Wyden (D-OR) introduced a bill to weaken the controversialIndependent Payment Advisory Board due to fear that President Donald Trumpmight use the board to cut Medicare payments. The Affordable Care Actcreated the Independent Payment Advisory Board as a backstop to othermeasures in the law that aim to curb rising health care costs. The boardhas yet to be triggered, but Medicare trustees stated last year that thegrowth in health care spending is expected to trigger IPAB this year.

The president appoints IPAB’s 15 members, with the advice and consent ofthe Senate. Although the ACA became law in 2010, the law states thatlegislation to strip the board’s powers may be introduced only this year,and no later than Feb. 1. Wyden introduced both a resolution, as prescribedby statute, and a bill to unwind IPAB. The resolution takes advantage of aone-time opportunity to discontinue the process, whereas the bill repealsIPAB in full.

Although legislation to repeal the automatic implementation of the board’srecommendations had to be introduced by Feb. 1, Congress may repeal theboard any time. However, the latter has not happened even though theDemocrats who championed the board are gone from office. The two partiescame close to repealing IPAB in 2012, but Democrats dropped their supportwhen Republicans insisted on offsetting the then-$3.1 billion cost ofrepealing the board with a medical malpractice measure that saved $45.5billion. Also, Republicans excluded repeal of IPAB from the budgetreconciliation bill that Congress passed in December 2015 and that isexpected to be a template for this year’s reconciliation bill to repeallarge portions of the Affordable Care Act.

Dozens Arrested in Capitol Sit-in Over HHS Nominee

Dozens of protestors were arrested Jan. 31 during a rowdy demonstration infront of Senate Finance Chairman Orrin Hatch’s office. They were protestingObamacare repeal and the anticipated confirmation of Rep. Tom Price (R-GA)as HHS secretary.

About 70 demonstrators, comprising health care workers and patients fromthe Save My Care coalition, descended on the first floor of the Senate HartOffice Building and held a sit-in, chanting “What’s your plan for healthcare? What’s your plan for us?” A spokesperson for the group saidindividuals were charged with unlawful crowding and obstruction.

The protest came just hours after Hatch’s committee was scheduled to voteon Price’s nomination to lead HHS. Senate Democrats on the panel staged asurprise walkout, demanding more details about Price’s trades in healthcare stocks. The boycott and lack of a quorum also delayed a vote onTreasury nominee Steven Mnuchin.

Hatch blasted the decision, saying he was very disappointed with hisDemocratic colleagues. The Save My Care coalition is backed by the ServiceEmployees International Union.

Senate Dems Send Letter to FDA on Hiring Freeze

Senate Democrats are worried that President Donald Trump’s federalworkforce hiring freeze will do significant damage to the FDA’s ability tocarry out its core mission and possibly conflict with a new biomedicalresearch law.

Eight HELP Committee Democrats said the directive Trump issued Jan. 25could limit reviews of new drugs and medical devices and do damage tobipartisan efforts to fill vacant positions at the agency.

Theletter, sent Jan. 30 to Acting FDACommissioner Stephen Ostroff, says the hiring freeze would conflict withthe new authorities Congress gave FDA in the 21st Century Cures Act to“attract and retain outstanding talent to help the agency meet the nextgeneration of scientific challenges.”

The hiring freeze could also conflict with new drug, medical device,biosimilar and generic user fee agreements Congress is expected toreauthorize later this year. The pacts would provide industry funding forthe FDA to hire more staff, the lawmakers added.

The lawmakers ask the FDA to provide detail about how the freeze willaffect the agency’s ability to meet its user-fee commitments with industryand how it could affect FDA’s ability to implement provisions of the CuresAct. They also want to know how many and which positions may be exempt fromthe hiring freeze.

2. Administration

Trump Administration Sends Rule to OMB on Stabilizing Markets

On Feb. 2, the Trump administration submitted a proposed rule to the Officeof Management and Budget. The rule is described as aimed at stabilizing theObamacare markets.

No details are yet publicly available on what’s in the CMS proposal. Somehave suggested the rule may deal with three areas: further restrictingspecial enrollment periods, tightening oversight of enrollees’ coverageeligibility and limiting the grace period for people who stop paying theirpremiums.

NIH Funds Recruitment for Precision Medicine Initiative

The NIH will provide up to $5 million annually over the next three years tofund outreach and recruitment for the All of Us Research Program, an effortto get a representative sample of the country into studies conducted underthe Precision Medicine Initiative.

NIH is asking universities and community groups to recruit at least 1million people. Data and biospecimens collected from volunteers over manyyears will be used in studies covering wide areas of health. NIH wants toget participation from racial and ethnic groups underrepresented in pastresearch, but community groups often lack resources to run enrollmentcampaigns.

Eligible organizations include nonprofits, community- and faith-basedorganizations, minority-serving institutions and local governments.Applications are due March 24 and the first awards should be issued in May.

For more information,click here.

President Trump Holds Meeting with Drug Manufacturers

In a meeting with pharmaceutical companies Jan. 31 President Donald Trumpcalled for lowering drug prices in Medicare and Medicaid, increasingcompetition and bidding, reforming FDA to accelerate drug approvals,letting terminally ill patients get treatments and ending foreignfreeloading of U.S.-made drugs. Trump also asked the pharmaceuticalindustry to bring manufacturing jobs back to the United States, promptingpledges from several companies to do so.

There was no specific mention of Medicare Part D drug negotiation, leadingsome to question whether Trump is still advocating the highly controversialpolicy.

In its post-meeting statement, the Pharmaceutical Research andManufacturers of America also called for reforming laws and regulationsthat prevent private companies from negotiating better deals and paying formedicines based on the value they provide to the health care system. Butthat most likely does not include Part D negotiation, which the industryhas opposed. On its website, PhRMA advocates changing rules and laws sothat drug companies can share information with insurers in advance of FDAdrug approvals. PhRMA also advocates changing the way Medicare Part B andMedicaid prices are calculated so that indication-based pricing oroutcomes-based arrangements can be factored in.

The White House meeting included Robert Bradway of Amgen, Joaquin Duato ofJohnson & Johnson, Kenneth Frazier of Merck, Robert Hugin of Celgene,Joseph Jimenez of Novartis, David Ricks of Eli Lilly, Stephen Ubl of PhRMAand House Energy and Commerce Chairman Greg Walden (R-OR).

Walden said the meeting focused on several paths to bring down drug costs,including reforming FDA, increasing competition and lowering costs forpatients who can’t afford medications.

OMB Withdraws Major Update to 340B Drug Program

The Office of Management and Budgetwithdrewa pending regulation for the 340B drug program that would have tightenedcontrols on which patients, drugs and providers qualify for steep discountson prescription medicines.

The decision will likely be viewed negatively by drug makers, who haveargued that the 340B program has become too expansive in recentyears—growing even as more Americans obtained insurance. The programmandates steep discounts on drugs to safety net providers who treat adisproportionate share of low-income patients.

Hospitals praised the Trump administration’s decision to withdraw theguidelines, saying it would have limited access to affordable drugs had ittaken effect.

The draft of the rules known as the “mega-guidance” released in August 2015aimed to strengthen requirements on the relationships between hospitals andother “covered entities” participating in the 340B program. The proposalalso called for increased documentation from hospitals and said thateligibility for discounts would be evaluated on a“prescription-by-prescription basis” rather than per individual patients.

CMS Announces DMEPOS Competitive Bidding Round 2019

On Jan. 31, CMS announced plans to consolidate all rounds and areasincluded in the Medicare Durable Medical Equipment, Prosthetics, Orthoticsand Supplies (DMEPOS) Competitive Bidding Program into a single round ofcompetition—Round 2019.

The DMEPOS Competitive Bidding Program, mandated by Congress through theMedicare Prescription Drug, Improvement, and Modernization Act of 2003(MMA), changes the amount Medicare pays for certain equipment like walkersand wheelchairs, using market-based prices, while maintaining beneficiaryaccess to items, services and quality of care. The program replaces theoutdated, inflated fee-schedule prices Medicare paid for these items withlower, more accurate prices to help Medicare and its beneficiaries savemoney while ensuring access to quality equipment, supplies and services.The program also helps limit fraud and abuse in Medicare.

CMS is required by the Social Security Act to recompete contracts under theDMEPOS Competitive Bidding Program at least once every three years.Suppliers must then compete to become a Medicare contract supplier bysubmitting bids to provide certain items in CBAs.

CMS also announced several updates to the DMEPOS Competitive BiddingProgram for Round 2019. For example, CMS is adding insulin pumps andsupplies as a product category to be bid in the national CBA. CMS is alsoadding 10 new CBAs to the program for the Continuous Positive AirwayPressure (CPAP) devices and related accessories product category only. Infive of these ten new CBAs, payment for the CPAP device, relatedaccessories and services will be made on a bundled, non-capped monthlyrental basis, while payment in the other five CBAs will be made on a cappedmonthly rental basis like all other existing CBAs.

CMS is also including a lead item bidding methodology for certain items inRound 2019 in which suppliers will bid for a lead item within a grouping ofsimilar equipment that takes into account the costs of furnishing all ofthe equipment in the grouping. The single payment amount for the otheritems within the grouping will be based on their relative differences infees when compared to the lead item.

Round 2019 bidders must also obtain a $50,000 bid surety bond for each CBAin which it submits a bid, as required by the Medicare Access and CHIPReauthorization Act of 2015. Bid surety bonds will be forfeited for bidderswho do not accept a contract for a competition (CBA and product categorycombination) in which the bidder’s composite bid for the competition is ator below the median composite bid rate for all bidding entities included inthe calculation of the single payment amounts within the competition.

For more information,click here.

FTC Probing Mylan Over EpiPen

The FTC is probing whether Mylan illegally blocked competition to itslife-saving EpiPen, the company said Jan. 30.

The FTC is investigating whether Mylan made small changes to the allergytreatment to effectively shield it from cheaper rivals. The FTC is alsolooking at whether Mylan entered into any agreements that delayed cheaperversions of the EpiPen from coming to market.

Mylan denied any wrongdoing. “Mylan received an information request fromthe FTC months ago as part of a preliminary investigation,” the companysaid in a statement. “Any suggestion that Mylan took any inappropriate orunlawful actions to prevent generic competition is without merit.”

The company, which has faced backlash for repeatedly raising EpiPen prices,claims its treatment has always faced competition. It also said Teva haspatent licenses that will allow the company to launch a generic alternativeyears before the EpiPen’s patents expire.

3. Courts

Former Tenet Executive Indicted for Defrauding Medicare, Medicaid

John Holland, a former senior vice president of operations for TenetHealthcare Corporation’s southern states region, was indicted on fourcounts for his alleged role in a $400 million scheme to defraud Medicareand Medicaid, theJustice Department said Feb. 1.

Holland allegedly paid bribes and kickbacks for patient referrals over a13-year period from about 2000 to 2013, and concealed the activity bycircumventing internal accounting controls and falsifying company books andrecords. The kickbacks and bribes helped Tenet bill the Georgia and SouthCarolina Medicaid programs for more than $400 million, and Tenet obtainedmore than $149 million in Medicaid and Medicare funds based on the patientreferrals, the indictment alleges.

Holland also falsely certified to HHS that Tenet was complying with termsof participation in Medicare and Medicaid and with a corporate integrityagreement. Tenet received more than $10 billion in payments from federalhealth care programs during the four years the agreement was in effect, theJustice Department said.

4. State Activities

California: Workers Air Concerns Over Rising Health Care Costs

More than 1,000 workers and union leaders attended a meeting Feb. 1 in SanFrancisco with officials from the Department of Managed Health Care to airtheir concerns about rising health care costs. The meeting was the firstannual public meeting mandated by a 2015 state law that requires healthplans to publicly explain how they set premiums. Rate review alreadyexists in the small group and individual markets, but California regulatorshave no authority to reject rate hikes.

Meanwhile, California lawmakers are trying to keep the pressure ondrugmakers. Democrat Jim Wood, chairman of the Assembly health committee,introduced a bill, AB 265, which would prohibit the use of coupons forpharmaceutical drugs when other FDA-approved options are cheaper. Medicareand Medicaid already prohibit the use of coupons. Massachusetts bannedtheir use in 2012, and there is similar legislation in New Jersey. The head of California’s Senate health committee, Sen. Ed Hernandez, hasalready reintroduced a version of his drug-pricing transparency bill thatwas shelved last year.

Florida: Gov. Scott Proposes Cuts to Hospitals’ Medicaid Payments

Florida Gov. Rick Scott has proposed deep cuts to hospitals’ Medicaidpayments in his $83 billion budget released last week. Scott, a formerhospital executive, has proposed changing the state’s Medicaid law to lowerthe minimum and maximum amounts an HMO must pay a hospital to participatein its network. Scott’s proposed changes would generate $581 million inMedicaid savings.

Hawaii: Lawmakers Attempt to Save Major Parts of ACA

Hawaii lawmakers are already trying to save major parts of the ACA. Billsintroduced in the House and Senate include an individual mandate andconsumer protections, including the prohibition on insurers denyingcoverage based on pre-existing conditions and lifetime maximums forcoverage. The bill also allows young adults up to age 26 to stay on theirparents’ health insurance and ensures that women are not chargedmore than men for insurance.

Texas: Officials Requesting Continued Funding for 1115 Waiver

Texas officials haveasked CMS to keep funding thestate’s Medicaid 1115 waiver—which spends billions of dollars to coverhospitals’ uncompensated care costs and delivery system reformefforts—through September 2019. Under the extension, those programs wouldboth be funded at $3.1 billion for 2018 and then prorated for eight monthsafter that. The Texas waiver is now set to expire at the end of theyear.

In arguing for the extension, state officials say providers “require alevel of financial and operational security” to keep serving Medicaidenrollees and the uninsured while Republicans in Washington work throughObamacare repeal and develop new policies for 1115 waivers. But the Obamaadministration sought to clamp down on these types of waiver requests fromstates, arguing that supplemental funding for hospitals should not pay forexpenses that would otherwise be covered through Medicaid expansion.

Nevada: Gov. Sandoval Proposes $20 Million Cut in Mental Health Funding

Nevada Gov. Brian Sandoval has proposed to cut $20 million in state mentalhealth funding, including eliminating 112 jobs across the state, arguingthat the Medicaid expansion has insured more people and decreased demandfor services. The proposal is part of hisbudget blueprintfor next year. The budget does include a $173 million boost for Medicaid,which may include mental health services. Health officials say since Nevada expanded Medicaid, fewer people are seeking state-provided mentalhealth services.

New Jersey: State Legislature to Vote on Drug Addiction Reform Bill This Week

The New Jersey Legislature will vote on a bill this week to implement partsof a drug addiction reform plan that Gov. Chris Christie proposed lastmonth. The bill would mandate insurers cover 28 days of inpatient treatmentwithout prior authorization or medical necessity review. Christie says itwill be the “most aggressive law in the country in terms of providingaccess to care.” However, once passed, it would only apply tostate-regulated health insurance plans, which account for around 30 percentof the total market. Two other states—New York and Massachusetts—requirestate-regulated health plans to cover 14 days of treatment. The same billalso limits initial opioid prescriptions for acute pain to a five-daysupply.

5. Other

Biden Foundation Established to Champion Equal Rights

Former Vice President Joe Biden and former second lady Jill Biden announcedFeb. 1 that they would be launching a foundation to champion equal rightsfor all people.

The Biden Foundation will advance issues important to the former vicepresident, such as supporting theCancer Moonshot Initiative, the Violence Against Women Act, the U.S. Military, equal rights andaffordable education, focusing on community colleges.

“The Biden Foundation is an educational foundation dedicated to exploringthe ways that everyone — no matter their income level, race, gender, age orsexuality — can expect to be treated with dignity and to receive a fairshot at achieving the American dream,” the announcement read.

In a video announcing the foundation, Biden said he was “more optimistic”than he had ever been, praising the millennial generation as “the mostopen, most tolerant, most generous generation in American history.” Hediscussed the societal evolution on gay marriage as an example of howsocietal shifts are possible.

The foundation’s board will include longtime Biden adviser and former Sen.Ted Kaufman, Valerie Biden Owens, the vice president’s sister and otherformer Biden aides and supporters.

6. Regulations Open for Comment

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

On Nov.