Washington Healthcare Update

June 11, 2018

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This Week: House votes on modified recission package; Senate’s August recess cancelled; silver loading to go ahead; concerns raised on cybersecurity and HHS; 340 B penalties are delayed one more time.

1. Congress



2. Administration

3. Reports

4. Courts

1. Congress


Bicameral Letter Tells HHS to Follow Through on Cybersecurity Act of 2015; House and Senate Letter Raises Concerns: HHS Not Following Through on Cybersecurity

Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) and Reps. Greg Walden (R-OR) and Frank Pallone (D-NJ) in a letter sent to HHS June 5 raised concerns about how the department is following through on developing industry-based approaches to mitigate cyber attacks. The members of Congress asked the secretary to respond within two weeks to a series of recommendations, including a reworking of a cyber threat preparedness report required by law and updating Congress on the department’s overhaul of the Healthcare Cybersecurity and Communications Integration Center.

The members focus on a provision of the law, Section 405(b), that required HHS to report to the committees on its “preparedness” for responding to cyber threats, including coordination among its internal operations and divisions.

The letter states that the “Cyber Threat Preparedness Report” submitted to Congress last April failed to take into account the department’s dual role as regulator for the health care industry and Sector Specific Agency for helping the industry coordinate and respond to cyber and other threats under the “national critical infrastructure protection model.”

“While the CTPR provided a high-level overview of the cybersecurity responsibilities of each HHS office and operating division, the report omitted or lacked sufficient detail on many outstanding issues,” according to the letter. “For example, HHS is both a regulator of the health care sector and the Sector Specific Agency (SSA) responsible for leading and providing guidance under the national critical infrastructure protection model.”

The letter asks HHS to “make clear how it plans to carry out this dual role and clearly communicate that plan to stakeholders, who must balance the need for support from HHS during cybersecurity incidents with the perceived risk that seeking support could lead to regulatory enforcement actions.”

The lawmakers also cited recent staffing changes at the department’s HCCIC in response to allegations of mismanagement. The lawmakers pressed HHS for a prompt update on the status of the HCCIC reorganization.


August Recess Cancelled – Schumer Says Let’s Do Health Care

Senate Majority Leader Mitch McConnell (R-KY) announced June 5 that the Senate will not take its entire August recess. Instead, they will break for a week and come back to work on judicial nominations and spending bills.

Minority Leader Chuck Schumer (D-NY) in a letter to the majority leader suggested that the extra time could also be used to consider health care. In particular, Schumer would like to consider expanding tax credits in the Affordable Care Act, allow Medicare to negotiate with drug companies and allow more people access to Medicare before they reach age 65. Democrats are looking to stick the blame of rising health care costs on Republicans before the mid-term elections.

Senate Finance to Mark Up Opioid Bill

The Senate Finance Committee will mark up bipartisan opioid legislation, Tuesday, June 12, at 10 a.m. The last of the committees to mark up, the Finance Committee’s chairman’s mark includes the 22 bills introduced a few weeks ago that are bipartisan.

2. Administration

Reorganization Plans to Be Announced

The Trump administration is planning a restructuring of the federal government that would include consolidating welfare programs, such as the $70 billion food stamps program, and shifting them to the Health and Human Services Department, which would be renamed. A White House Office of Management and Budget report that is to be released this month would suggest significant changes at many federal agencies, but larger actions such as shifting multibillion-dollar programs and renaming federal agencies usually require congressional action.

Silver Loading to Continue

During a House Education and Workforce Committee hearing, HHS Secretary Alex Azar said the Trump administration will not prohibit a practice in 2019 known as “silver loading” that insurers use to implement price increases into silver-level plans in the Affordable Care Act marketplace to offset the loss of federal reimbursement for cost-sharing reduction subsidies that President Donald Trump cut off in October. Azar said that stopping the technique would require regulations that “couldn’t be done in time” for the 2019 plan period, and he declined to say if there would be a future ban on the practice.

340B Penalties Delayed One More Time

For the fifth time the administration has delayed the imposition of penalties on drug manufacturers for raising the prices of drugs in the 340B drug discount program too quickly. The rule—staunchly opposed by the pharmaceutical industry—was finalized in the last days of the Obama White House but immediately halted by the Trump administration. The drug discount program mandates that drug companies give steep discounts to hospitals and clinics that serve low-income populations. If manufacturers raise prices on drugs, they could maximize profits despite penalties.

Penalties, written into the Affordable Care Act, are now scheduled to take effect July 1, 2019. The Trump administration moved quickly as comments on the fifth delay were due just last week.

Medicare Trustees Report

CMS on June 5 highlighted findings in the Medicare trustees’ annual report that showed spending growth has slowed in the Part D retail drug benefit. A day earlier, the HHS Inspector General released a report saying that total Part D reimbursement for brand-name drugs increased 77 percent from 2011 to 2015, even though seniors filled 17 percent fewer prescriptions over the same period.

“Findings revealed that Part D drug spending projections are lower than in last year’s report because of higher manufacturer rebates, a decline in spending for hepatitis C drugs, and a slowdown in spending growth for diabetes drugs,” CMS stated in a release on the trustees’ report.

Hepatitis C drugs also are largely to blame for the spike in Part D spending that the IG found. The seemingly conflicting findings are due to different time periods covered by the trustees and the IG. The IG report covered 2011 to 2015—spending on hepatitis C drugs spiked in 2014 and 2015 before tapering off—and the Medicare trustees’ Part D findings compared actual spending in 2017 to what they had projected a year earlier.

Sovaldi hit the market in December 2013, and a competing brand was approved in December of the following year. There are now multiple hepatitis C drugs, which has brought rebated prices for the drugs way down, but Sovaldi maker Gilead had a year to charge whatever it wanted. New hepatitis C drugs cure nearly everyone, and more than 3 million Americans were estimated to be infected with the virus when those cures were approved, according to the Centers for Disease Control and Prevention. Most people infected with hepatitis C don’t know they are infected, but there was a backlog of patients during those first few years who sorely needed the new medications.

The trustees reported that premiums, government subsidies and benefit payments for 2017 were significantly lower than projected a year earlier primarily for three reasons: Drug rebates were higher than previously assumed; spending on hepatitis C drugs declined more than expected; and Medicare paid less in reinsurance in 2017 than was anticipated.

CMS Works With States to Add Work Requirements

On June 4, CMS Administrator Seema Verma said the agency is working with some states that had not expanded Medicaid, on ways to add work requirements without creating what has been described as a subsidy cliff for low-income beneficiaries.

CMS so far has approved waiver requests to add work requirements in Kentucky, Indiana, Arkansas and New Hampshire, all of which expanded Medicaid eligibility under the Affordable Care Act.

At least seven states have pending waiver requests seeking the agency’s permission to add work requirements, and more are planning to submit such requests. Among the non-expansion states seeking work requirements are Kansas, Mississippi, Utah and South Dakota.

Wisconsin is another state that did not expand Medicaid and is seeking work requirements.

CMS Releases Scorecard for Medicaid and CHIP Programs

CMS will publicly track the performance of Medicaid and CHIP programs through a new “scorecard” that ranks states on a range of quality measures—an effort to provide a better look at how well those programs are performing. The federal site consolidates data submitted by states in one location and also tracks CMS’s own performance on a few metrics, like how long it takes the agency to review waiver applications.

For now, the site is just a “conversation starter” that relies on states’ voluntary participation and doesn’t carry any threat of penalizing poor-performing programs, CMS Administrator Seema Verma said. But she added that the agency is still working on what new measures to add in subsequent years, and whether it can be used to hold states more accountable.

The National Association of Medicaid Directors panned the scorecard for rating states without accounting for differences in their Medicaid populations. “The measures remain problematic,” NAMD said, suggesting several areas for improvement. “Until these fundamental variances are addressed in the Scorecard, it will not be possible to make apples-to-apples comparisons between states.”

CMS Fills More Posts

Jenni Main has been named chief operating officer at CMS, Administrator Seema Verma announced in a staff memo today. Main is currently the agency’s chief financial officer, a post that she will retain in the newly created position. In addition, Rajiv Uppal has been named CMS’s chief information officer.

FDA Cracks Down on the Illegal Online Sale of Rx Painkillers

The FDA is cracking down on the illegal online sale of prescription painkillers, ordering nine networks that operate 53 websites to immediately stop selling potentially addictive opioids, including oxycodone and tramadol.

Those nine companies received warning letters, made public June 5, for selling unapproved and misbranded opioids, some of which are offered without a prescription. The FDA is threatening law enforcement action, including seizures and injunctions, for those who don’t comply.

The online suppliers are often foreign, making it difficult for U.S. law enforcement to crack down on the illegal flow of opioids. These websites use U.S. infrastructure while promoting the products on social media platforms. The FDA later this month will hold a meeting with tech companies to discuss ways to stop illegal internet pharmacies from advertising on social media platforms.

The FDA has worked with U.S. Customs officials to increase inspections at international mail facilities from seven people opening 10,000 packages a year to 125 opening in excess of 100,000 packages.

FDA Approves Biosimilar to Neulasta

On June 4, the FDA announced approval of the first biosimilar to Neulasta (pegfilgrastim), which reduces the chance of infection for cancer patients undergoing chemotherapy. Both the sponsors, Mylan and Biocon, and FDA hailed the approval as a step toward lowering drug prices through competition. Mylan has not announced the planned launch price.

Medicare Part D beneficiaries typically pay around $2,000 for Neulasta after their deductible has been satisfied, according to the website. The drug, which will go by the name Fulphila, will be launched in the coming weeks. If that plan bears out, Fulphila could be one of the first biosimilars to significantly break into the Medicare Part D market. Zarxio (filgrastim), one of the three biosimilars which have launched, is also sometimes covered under the Medicare pharmacy benefit.

However, Fulphila is not designated as interchangeable, so it couldn’t be automatically substituted at a pharmacy. FDA has not approved any interchangeable biosimilars, and FDA Commissioner Scott Gottlieb has said the FDA is rethinking its guidance on that topic.

3. Reports

Medicare Trustees Report

Medicare’s hospital trust fund is expected to run out of money in 2026, three years earlier than previously projected, the program’s trustees said in a new report. That conclusion is largely due to reduced revenues from payroll and Social Security taxes and higher payments than expected to hospitals and private Medicare plans last year.

The report also showed that Medicare’s total costs will grow from 3.7 percent of GDP in 2017 to 5.8 percent by 2038.

The Medicare trust fund only pays for Part A, which covers hospitalizations. The other main pieces of the program, covering physician visits, outpatient services and prescription drugs, are paid for primarily with general fund revenues.

In 2017, Medicare covered 58.4 million people, 85 percent of them seniors, at a cost of $710.2 billion.

Social Security faces depletion in 2034, the program’s trustees also said today. That’s identical to last year’s projection.

4. Courts

DOJ Will Not Defend ACA in Case Challenging Individual Mandate

On Thursday, the Justice Department told a federal court that it would no longer defend key parts of the Affordable Care Act, including the individual mandate requiring most Americans to have health insurance as well as provisions that protect people with pre-existing conditions, saying they are part of an unconstitutional scheme.

The case revolves around the issue of the individual mandate and whether it is constitutional since the penalty was zeroed out by Congress. In a previous U.S. Supreme Court case, the court found the individual mandate was constitutional because of Congress’s authority to collect taxes. With no penalty, plaintiffs argue the individual mandate is now unconstitutional.

A court ruling and appeals of any decision could delay action for several months, but if the federal court agrees with the Justice Department’s argument, it could kill crucial parts of the ACA and allow insurers to reject coverage for people because of their medical condition or history.

Maine Medicaid

Seven months after Maine voters approved a ballot measure to expand Medicaid to tens of thousands of additional residents, and Governor Paul LePage refused to do so, a state judge on June 4 ordered the governor to stop stonewalling and move ahead with the plan. It was the second victory in a week for Medicaid expansion, which became possible under the Affordable Care Act. Lawmakers in Virginia voted last week to open the program to an additional 400,000 residents. Advocates in Utah have succeeded in getting a question on the November ballot about expanding Medicaid, and similar efforts are underway in Idaho and Nebraska.

If you have any questions, contact the following individual atMcGuireWoods Consulting:

StephanieKennan, Senior Vice President

Founded in 1998,McGuireWoods Consulting LLC(MWC) is a full-service public affairs firm offering infrastructure andeconomic development, strategic communications & grassroots, and governmentrelations services. McGuireWoods Consulting is a subsidiary of theMcGuireWoods LLPlaw firm and has been named in The National Law Journal’s special annualreport, “The Influence 50,” for the past several years. In the most recentreport, McGuireWoods Consulting was ranked 15th of the 1,900 governmentrelations firms in Washington, D.C.

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