Washington Healthcare Update

March 6, 2017

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This Week: Congress returned from recess…Preparing for ACA repeal and replacement…President addresses a joint session of Congress.

Heath Reform Takeaways

  • House Energy and Commerce Committee prepares for a markup this week—although nothing has been announced officially.
  • Another senator questions repealing Medicaid expansion.

1. Congress



2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


House Energy and Commerce Committee Reviews Bill to Incentivize Generic Drug Development

On March 2, the House Energy and Commerce Committeereviewedthe “Lower Drug Costs through Competition Act,” a bill aimed atincentivizing generic development. The bill, sponsored by Reps. KurtSchrader (D-OR) and Gus Bilirakis (R-FL), aims to tackle drug pricing byincreasing generic drug availability through the creation of a new genericpriority review voucher.

During the hearing, FDA drug center chief Janet Woodcock told congressmenthat more than 180 off-patent drugs are currently without genericcompetition. She did caution, however, that the review times mandated bythe bill—H.R. 749—could be impossible for the FDA to meet. Stakeholdersalso criticized the bill for mandating a study on the abuses of the RiskEvaluation and Mitigation Strategies (REMS) system, which they say coulddiscourage more sweeping reforms of the system.

Woodcock also cautioned at the hearing that there are a number of drugs forwhich a generic is the sole source, because the brand drug has beenwithdrawn from the market. “There may well be other generics that are solesource where the innovator has withdrawn. Because right now there are 546drugs where the brand name has withdrawn from the market and some of thosemay only have one generic,” Woodcock said.

Energy & Commerce Committee Chairman Greg Walden (R-OR) praised thebill at the hearing, which he previously tried to push through without amarkup.

Theatrics Highlight Lack of Transparency Regarding ACA Bill

On March 2, Sen. Rand Paul (R-KY) demanded to be shown the House GOP’supdated draft bill to repeal and replace parts of the Affordable Care Act.Paul criticized the earlier leaked draft because of its inclusion ofrefundable tax credits. House Energy & Commerce ranking Democrat FrankPallone (NJ) also tried to find the updated draft and slammed the GOP forlack of transparency, but House Energy and Commerce Committee Chair GregWalden (R-OR) said committee Republicans and staff were continuing torefine the draft and it wasn’t ready to be distributed.

While standing outside a room where the bill allegedly was being kept, Paulheld an impromptu press conference in which he slammed House Republicansfor not letting him see the updated draft and said he would continuepressing to see it. He also expressed frustration about the prospect of theSenate having to accept the House version.

Pallone also attempted to find the bill at a room in the Capitol and thenwent to Walden’s office looking for it. He complained about the lack oftransparency while searching for the bill and stressed that Democrats gaveRepublicans 30 days to review the Affordable Care Act while it was underconsideration.

Rep. Paul Tonko (D-NY) also attempted to enter the room where the draftbill reportedly was housed and was told the bill was not in there. He saida markup is expected to be held March 8 where the bill would be read, butsaid there has been no official notice. Tonko specifically stressed that hewanted to see the Medicaid reform portion of the bill.

Walden issued a statement saying the process wasn’t irregular. “Reportsthat the Energy and Commerce Committee is doing anything other than theregular process of keeping its members up to speed on latest developmentsin its jurisdictions are false,” Walden said.

“We are continuing to work on drafting and refining legislative language toprovide relief from a failing law. Part of that process is giving committeemembers and staff the opportunity to work closely together to draft a billthat reflects the concerns of our constituents and reflects our mandatefrom voters to repeal and replace Obamacare. Simply put, Energy andCommerce majority members and staff are continuing to discuss and refinedraft legislative language on issues under our committee’s jurisdiction,”Walden added.


Senate Finance Committee Approves Verma’s Nomination for CMS Administrator

On March 2, the Senate Finance Committee advanced Seema Verma’s nominationto lead CMS in a 13-12 vote along party lines.

Verma will play a key role in shaping Republicans’ Obamacare replacementplan and overhauling Medicaid. Verma has worked with several Republicangovernors to adopt conservative reforms in their Medicaid programs,including cost-sharing and work incentives.

The committee originally convened on March 1 to vote on the nomination buthad delayed a final vote because there weren’t enough Republicans present.Verma is expected to be confirmed on the Senate floor.

In aquestion and answer document from the SenateFinance Committee, CMS Administrator-nominee Seema Verma deferred toCongress on a vast majority of questions from members.

Verma gave longer answers to questions about Medicaid waivers compared tomost of her other responses to Senate Finance Committee members’ questions,and she emphasized giving states the flexibility to alter their programsmore than she emphasized giving state residents the opportunity to weigh inon those changes.

House Republicans’ designs for a Medicaid financing overhaul do not sitwell with some Senate Republicans because they do not want their states tolose the high federal match rate for residents who are covered underMedicaid expansions, and some Republican governors in states that expandedMedicaid also are apprehensive about capping federal funding of theirMedicaid programs.

Nevada expanded Medicaid, and Sen. Dean Heller (R-NV) asked writtenquestions of CMS Administrator-nominee Seema Verma about the prospect ofcapping Medicaid funding, Nevadans losing exchange-plan subsidies and womenlosing birth control and preventive services. Verma’s written responsestates that she is open to block grants, per-beneficiary caps and “otherinnovative ideas,” but she said Medicaid reform is up to Congress and thatCMS would merely offer technical assistance.

Verma helped several states obtain Medicaid waivers, and throughout herresponses to the many questions about Medicaid waivers and financingreforms she stressed that innovation starts locally.

Verma said making the process of getting waivers transparent and consistentwould be one of her top priorities. Most Republicans, including Sen. JohnCornyn (R-TX) asked how Verma plans to make it easier for states to securewaivers. Cornyn said some states have been operating under waivers fordecades and that one-third of Medicaid spending goes to Medicaid programsoperating under waivers.

Democrats were more concerned about public transparency and enabling inputfrom beneficiaries. Sen. Ron Wyden (OR), the ranking Finance CommitteeDemocrat, asked Verma if she supports making states disclose waiverrequests prior to submitting them to CMS and requiring that states respondto public input. Verma said stakeholders must have a chance to provideinput, but she said states should not be mired in paperwork.

Republican Senators Concerned About Medicaid Expansion Repeal

Sen. Shelley Moore Capito (R-WV) is the latest Republican senator toexpress strong resistance to repealing Obamacare’s Medicaid expansion,putting repeal of the provision in serious doubt.

As of now, the House legislation would repeal the Medicaid expansion. ButCapito, whose home state of West Virginia expanded Medicaid, is just thelatest Republican senator to express concern with repealing it.

Sen. Lisa Murkowski (R-AK) said recently that she would not vote toeliminate the expansion if her legislature wants it kept in place. Sen.Susan Collins (R-ME) has expressed the same concerns. Republicans can onlyafford to lose two votes to pass a bill through reconciliation in theSenate.

2. Administration

Insurers Write CMS to Express Support for Medicare Advantage Program

The largest insurance companies in the country are worried about the futureof the Medicare Advantage program. There are currently 19.6 million privateMedicare enrollees—nearly twice the number of individuals who signed up forcoverage through Obamacare exchange markets for this year. That translatesto roughly $200 billion in annual revenue for insurers.

Those figures have been on an upward spiral for some time. The number ofprivate Medicare customers increased by 7.6 percent over the last year andhas more than doubled during the past decade.

On Feb. 28, a letter expressing support for the program sent to acting CMSAdministrator Patrick Conway garnered more than 200 signatures from membersof both political parties and across the ideological spectrum.

This year’s proposed payment rule was released at the beginning of Februaryand it included no significant changes. However, insurers still see a causefor concern in the rule, which is that payment levels aren’t keeping upwith expected cost increases. Thus the industry is pushing forchanges when the final payment notice is released at the beginning ofApril.

Many health plans would like to fix a problem in the cap on MedicareAdvantage payments. Under current rules, plans that qualify for qualitybonus payments under the star rating system don’t always get all of themoney that they are entitled to. This is because bonus payments are countedagainst the payment cap.

For Humana alone, the cap cost $200 million in bonus payments last year.But many smaller plans are affected financially too. Insurers stress thatbeneficiaries are the ones getting shortchanged; the bonus payments coverthe cost of additional benefits insurers add to enhance the quality oftheir MA plans, such as dental and vision coverage, which not all policiesoffer.

Health plans are also seeking to unlink performance audits, which trackaccess to medical care and contract compliance, from quality star ratings.Both Cigna and Humana have seen major downgrades in their star ratings forthis year stemming from problems uncovered through audits. Insurers arguethat plans are being penalized twice and that the issues uncovered throughaudits do not necessarily affect quality.

Another area of concern for insurers is the use of “encounter data”—paidclaims data—used in the funding formula to determine how much insurers arepaid per beneficiary. They argue that the data does not provide an accurateassessment of their enrollees’ medical needs and results in lower payments.

HRSA Delays Implementation of 340B Rule

The Health Resources and Services Administration (HRSA) delayedimplementation of the 340B ceiling price and manufacturer civil monetarypenalties rule until March 21, in line with the regulatory freeze PresidentDonald Trump implemented shortly after taking office. The regulation wasoriginally set to go into effect on March 6.

The rule deals with setting prices under the 340B drug discount program. Itfinalized the so-called “penny-pricing policy” that drug makers oppose andlaid out a formula for drug manufacturers to use when estimating the 340Bprice of new drugs.

“The temporary delay in the effective date of this final rule is necessaryto give Department officials the opportunity for further review andconsideration of new regulations, consistent with the Assistant to thePresident and Chief of Staff’s memorandum,” the Federal Register noticesays.

The notice also says that although the rule will be effective March 21,“HHS recognizes that the effective date falls in the middle of a quarter.As such, HHS plans to begin enforcing the requirements of this final ruleat the start of the next quarter, which begins April 1, 2017.”

The White House’s regulatory freeze put a 60-day hold on regulations thathad been finished but not implemented when Trump took office. CMS alsodelayed the cardiac care bundle rule until March 21.

U.S. and EU Finalize Agreement on Pharmaceutical Inspections

On March 2, the United States and the European Union finalized an agreementto recognize each other’s pharmaceutical good manufacturing practicesinspections—a move FDA officials say will let the agency focus its limitedforeign inspection resources on areas like China and India where drugmanufacturing has greatly increased. The effort—known as the MutualReliance Initiative (MRI)—was launched in May 2014 to increase FDA’scollaboration with Europe on drug quality efforts.

FDA said the agreement will help prevent duplication of drug inspections,lower inspection costs and “enable regulators to devote more resources toother parts of the world where they may be a greater risk.”

The document, “Amended Sectoral Annex for Pharmaceutical Good Manufacturing Practices(GMPs),” explains that a joint sectoral committee will be set up to monitoractivities performed under the annex. The committee will be charged withdeveloping and updating a list of recognized authorities, providing a forumto discuss issues related to the annex, considering the status and takingdecisions on inclusions products listed in the annex, and adoptingappropriate complementary technical and administrative arrangement toeffectively implement the annex.

“The Committee shall be co-chaired by a representative of the FDA for theUnited States and a representative of the EU who each shall have one votein the Joint Sectoral Committee. The Joint Sectoral Committee shall makeits decision by unanimous consent. The Joint Sectoral Committee shalldetermine its own rules and procedures,” the document says.

The annex also says that all parties should maintain an alert system sothat other parties can be made aware of defects, recalls, counterfeit orfalsified products, or shortages and other quality or non-complianceissues.

For a related press release,click here.

FDA Report Shows Generic Drug Approvals at Record High

According to a new FDA report out Feb. 24, generic drug approvals are at arecord high. More than 800 generic drugs were approved in 2016, up from 726the previous year. Seventy-three of those approvals were the first genericversion of a drug to reach the U.S. market. First-time generics, inparticular, help reduce the cost of high-priced branded drugs, FDA’sgeneric drug office head Kathleen Uhl wrote in an accompanying blog post.Although 2016 was a productive year for the FDA, it was not the agency’smost prolific with regard to first-time generic approvals—FDA signed off on90 first generics in 2015, 17 more than in 2016.

To see the report,click here.

Rare Disease Group Issues Statement on President Trump’s Address toCongress

The country’s main advocacy group representing rare disease patientscontradicted President Donald Trump’s claim in his State of the Unionaddress that a “slow and burdensome” FDA approval process is slowing downmedical advances.

“We agree that FDA review processes can be improved upon to expedite thedevelopment and review of orphan drugs,” the National Organization for RareDisorders (NORD) said in aMarch 1 statement. “Yet we disagree with the President that restraints must be slashed, orthat the approval process at the FDA is preventing advances from reachingthose in need.”

NORD cautioned against Trump’s calls for loosening FDA requirements,warning that lower safety and efficacy standards will just threaten thepopulation with unsafe, ineffective therapies.

NORD added that FDA already shows “an incredible amount of flexibility” inapproving treatments for rare diseases. Between 2008 and 2013, 87 percentof applications for rare disease treatments received an expedited FDAreview compared to only 35 percent of treatments for common diseases.

The group also emphasized that fully staffing and funding the FDA wouldallow the agency to get drugs to patients faster. It is still unclear howTrump’s executive order calling for a hiring freeze will affect the agency,which has hundreds of vacant positions. Trump’s budget proposal would alsorequire substantial cuts to most domestic programs like FDA.

3. State Activities

Arkansas: Arkansas House Approves Bill to Freeze Enrollment in Medicaid Expansion

The Arkansas House has approved legislation that would freeze enrollment inthe state’s Medicaid expansion program. Underthe bill, Arkansas would not approve any new enrollment after July 1. However, itis not likely to become law because Gov. Asa Hutchinson opposes it.Enrollment in Arkansas’s Medicaid expansion has gone beyond initialestimates, causing concerns from Arkansas Republicans that the statewill not be able to cover its share of costs starting this year.

Florida: Safety Net Hospitals Ask for Increase in Supplemental Medicaid Money

Florida’s safety net hospitals are pushing for a $1 billion increase insupplemental Medicaid money the state receives from the federal governmentto cover the health care costs of low-income and uninsured residents. TonyCarvalho, president of the Safety Net Hospital Alliance of Florida,recently said that Florida should receive at minimum $1.6 billion insupplemental payments, known as low income pool (LIP) funding, up from the$608 million that Florida now receives. The association met with theFlorida congressional delegation earlier this week to express their supportas the state negotiates a new Medicaid 1115 waiver with the Trumpadministration. The current waiver, which includes LIP funding, expiresJune 30.

Montana: Bill to Make “Death With Dignity” Practice Illegal Dies in the House

A bill that would have made it illegal for terminally ill patients toobtain life-ending medication from a physician didn’t clear final passagein the Montana House. The legislation said the “death with dignity”practice goes against public policy, and physicians who help terminally illpatients end their lives with medication wouldn’t have been protected fromhomicide charges. The Montana Supreme Court ruled in 2009 that allowingterminally ill patients to receive life-ending medications was not againstpublic policy and it protected physicians from prosecution.

New Jersey: Gov. Christie Wants Health Insurer to Help Pay for Drug Addiction Reform Plan

New Jersey Gov. Chris Christie made an odd request during his annual budgetaddress last week: singling out Horizon Blue Cross Blue Shield of NewJersey, Christie attempted to pressure the state’s largest insurer intoestablishing a “permanent fund” from its surplus to support health care forthe state’s poorest residents. The governor did not specify a fundingamount. However, he said the fund, which he wants set up by June 30, couldhelp pay for his drug addiction reform plan, including inpatient andoutpatient rehab for both uninsured residents and low-income Medicaidenrollees.

North Carolina: Gov. Cooper Includes Medicaid Expansion Funding inBudget Plan

North Carolina Gov. Roy Cooper’s first budget plan includes Medicaidexpansion funding, although Republicans who control the state Legislatureare unlikely to support the proposal. One of Cooper’s first actions asgovernor was to try to expand Medicaid, but statehouse Republicans sued theDemocratic governor to block it. Federal officials agreed to not act onCooper’s request for roughly another two months.

4. Regulations Open for Comment

CMS Proposes Rule for Prosthetics and Orthotics Suppliers

On Jan. 11, CMS issued a proposed rule that would implement statutoryrequirements and specify: the qualifications needed for practitioners tofurnish and fabricate prosthetics and custom-fabricated orthotics, and forqualified suppliers to fabricate prosthetics and custom-fabricatedorthotics; accreditation requirements that qualified suppliers must meet inorder to bill for prosthetics and custom‑fabricated orthotics; requirementsthat an organization must meet in order to accredit qualified suppliers tobill for prosthetics and custom-fabricated orthotics; and a timeframe bywhich qualified practitioners and qualified suppliers must meet theapplicable licensure, certification and accreditation requirements. Thisrule would also remove the exemption from quality standards andaccreditation that is currently in place in accordance with Section1834(a)(20) of the Act for certain practitioners and suppliers who furnishor fabricate prosthetics and custom‑fabricated orthotics. In addition, thisrule also includes authority for the Centers for Medicare & MedicaidServices (CMS) to revoke the Medicare enrollment of Durable MedicalEquipment, Prosthetics, Orthotics and Supplies (DMEPOS) suppliers that submit claims for items that donot meet the requirements of the statute and this proposed rule.

Only qualified practitioners who furnish or fabricate prosthetics andcustom‑fabricated orthotics and qualified suppliers that fabricate or billfor prosthetics and custom‑fabricated orthotics would be subject to theserequirements.

CMS will accept comments on the proposed rule until March 13, 2017, andwill respond to comments in a final rule.

To see the proposed rule,click here.

FDA Releases Draft Guidance for Interchangeable Biosimilars

On Jan. 17, FDA outlined the criteria companies must meet to get a copycatbiologic deemed interchangeable with its branded counterpart, acertification that paves the way for the cheaper products to beautomatically substituted at the pharmacy level under state laws.

To get this designation, a biosimilar sponsor must show that its productcan be expected to produce the same clinical result as the branded biologicin any given patient, for all of the drug’s approved uses, and that thereare no risks if a patient is switched back and forth between theinterchangeable biosimilar and the branded biologic,per draft guidancereleased by FDA.

Interchangeable biosimilars are expected to offer greater savings to thehealth system than biosimilars that lack this designation. Without theinterchangeability designation a doctor must proactively write aprescription for the biosimilar.

The guidance outlines the types of studies and scientific data thatcompanies will need to submit to FDA to get an interchangeable designation.When companies seek that designation, FDA recommends they seek approval forall of the branded biologic approved uses.

FDA is requesting comments on the draft guidance as well as a number ofquestions outlined in aFederal Register notice. FDA wants to know how it should regulate manufacturing changes ofinterchangeable products that occur after approval. The agency also wantsto know how it should handle interchangeable designations if a brandedbiologic gets another use approved for the drug, after the interchangeablebiosimilar is cleared by FDA.

FDA Releases Draft Guidance on Off-Label Drug Communication

On Jan. 17, FDAissued draft guidancethat gives drug and device companies more flexibility to communicateoff-label information about their products and avoid charges ofmisbranding. The new policy allows companies to promote a drug or devicewith information not on the agency-approved label as long as thatinformation is truthful and non-misleading and is consistent withFDA-approved labeling.

Companies have asked FDA for clarity on marketing policies after a 2012U.S. Court of Appeals decision ruled that under the First Amendment thegovernment could not prohibit and criminalize the truthful off-labelpromotion of FDA-approved drugs.

The guidance outlines how FDA will determine whether a company’scommunication is consistent with FDA’s required labeling. For example,companies will not be permitted to communicate information about the drugor device related to a use that has not yet been approved by FDA. They alsocan’t promote a patient population for the drug or device that has not beencleared by the agency.

The agency offers some examples of information companies could communicatethat could be consistent with its FDA-required labels. For example, FDAsaid companies can promote testimony of patients who used the drug for itsFDA-approved uses, such as the product’s effect on patients’ dailyactivities. Companies could also communicate long-term safety and efficacyinformation about products that were approved for chronic use based on asix-month trial, if the company now has data on the drug lasting a coupleof years, FDA added.

The guidance also outlines the type of scientific data companies need tosupport their off-label claims. Comments on the draft are due in 60 days.

CMS Proposes Average 0.25 Percent Hike for Medicare Advantage Plans

On Feb. 1, the Trump administration issued guidance that proposes updatesto the methodologies used to pay Medicare Advantage plans and Part Dsponsors. The guidance calls for raising Medicare Advantage payments anaverage of 0.25 percent.

Health plans take in roughly $200 billion a year from the government toprovide care for seniors enrolled in private Medicare plans. There arecurrently more than 18 million people enrolled in Medicare Advantage,accounting for roughly a third of all of the program’s beneficiaries. Morethan 1 million seniors have been added to private Medicare plans in thepast year, continuing a trend of robust growth that goes back a decade.

“These proposals will continue to keep Medicare Advantage strong and stableand provide high quality, affordable care to seniors and people living withdisabilities,” said Patrick Conway, acting administrator of the Centers forMedicare and Medicaid Services.

Obamacare included