Washington Healthcare Update

July 23, 2018

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This Week: More rules to OMB…House overhauls OTC drug rules…HELP Committee looks at drug costs…FDA outlines reorganization

1. Congress



2. Administration

3. Courts

1. Congress


House Approves New Over-the-Counter Drug Rules; Passes FDA Animal Drug User Fee Program

The House of Representatives approved the first major change to federal regulation of the over-the-counter drug industry in 40 years. The bill, H.R. 5333, creates a $134 million, five-year FDA user fee program that adds roughly 100 employees to help oversee the $32 billion industry. The bill would also shorten OTC drugs’ market exclusivity and broaden the agency’s ability to pull products with ingredients it deems unsafe. The Senate has a similar bill, S. 2315.

The House also passed by voice vote July 16, legislation to reauthorize FDA’s animal drug and animal generic drug user fee programs. Funding expires for the program Sept. 30, but if reauthorization isn’t signed by the end of the month FDA will be forced to warn employees of potential furloughs.

The bipartisan Animal Drug and Animal Generic Drug User Fee Amendments (ADUFA/AGDUFA) act of 2018 was reported to the House by the House Energy and Commerce Committee in May with an amendment that would expand conditional approval of new animal drugs to apply to major uses and minor species. As of now, FDA’s approval pathway only applies to animal drugs intended for minor species or minor uses in major species.

In the Senate, the HELP Committee passed a similar version of the House bill in February. It is unclear when the full Senate will consider the proposal.

Ways and Means and HHS in Talks Over Risk Adjustment

House Ways and Means Committee Chairman Kevin Brady (R-TX) said that he is working with Health and Human Services Secretary Alex Azar and other HHS officials to restart Obamacare risk-adjustment program payments, after the Trump administration’s suspension of the payments this month drove insurers to warn of increased premiums. Brady said the Trump administration wants to restore the $10.4 billion in payments but when asked whether the House will address the issue when it is scheduled to vote on several health care-related bills next week, he said, “That I don’t know.”

Ways and Means Subcommittee on Health Holds Hearing on Stark Law

As part of its review of the Stark Law and its impact on value-based health care, the Ways and Means Subcommittee on Health held a hearing July 17. Testifying at the hearing were:

Eric Hargan
Deputy Secretary, Department of Health and Human Services

Gary M. Kirsh, M.D.
President, The Urology Group

Mike Lappin
Chief Integration Officer, Advocate Aurora Health

Brian DeBusk, Ph.D., M.B.A.
President and Chief Executive Officer, DeRoyal

Claire M. Sylvia
Partner, Phillips & Cohen LLP 

House Energy and Commerce Committee Approves Pandemic Preparedness Bill

The House Energy and Commerce Committee moved a bipartisan bill on pandemic preparedness on July 18. The Pandemic and All-Hazards Preparedness and Advancing Innovation Act of 2018, H.R. 6378, would enhance responses to bioterrorism attacks and pandemics like Zika and Ebola. The legislation reauthorizes programs including the Hospital Preparedness and the National Advisory Committee on Children and Disasters, as well as the authority for the Temporary Reassignment of Federally Funded Personnel. It also authorizes additional resources for the development of countermeasures to respond to pandemic influenza and emerging infectious diseases within Biomedical Advanced Research and Development Authority (BARDA). The bill did not include a provision that would have provided incentives to drug companies to develop antimicrobial drugs because the panel lacked consensus on that.

Ways and Means Human Resources Subcommittee Announces Hearing

Ways and Means Subcommittee on Human Resources Subcommittee will hold a hearing entitled, “The Opioid Crisis: Implementation of the Family First Prevention Services Act (FFPSA)” on July 24 at 10:00 a.m. in 1100 Longworth House Office Building. This hearing will review the Department of Health and Human Services’ s ongoing progress implementing recently enacted legislation to address family substance abuse issues, improve child well-being, support kin caregivers and strengthen families.

Hearing to be Held on 21st Century Cures Act

The House Energy and Commerce Health subcommittee will hear on July 25 from FDA Commissioner Scott Gottlieb and National Institutes of Health Director Francis Collins about the work being done to implement provisions of the 21st Century Cures Act.

During its July 25 hearing, Gottlieb and Collins will provide the subcommittee with an update on the implementation of Cures, which was signed into law in December 2016.

Many of FDA’s remaining priorities for 2018 are expected to be met by December, including:

  • Sec. 3011: Qualification of Drug Development Tools. FDA must hold a public meeting to garner input on a new qualification process for biomarkers and other drug development tools and publish taxonomy on drug development tools for public comment.
  • Sec. 3022: Real World Evidence. The agency must develop and begin to implement a framework to evaluate the use of real-world evidence to support new indications for previously approved drugs or to support post-approval study requirements.
  • Sec. 3023: Protection of Human Research Subjects. HHS must submit a report to Congress on the progress being made to harmonize differences between the human subject regulations under the Common Rule and the Food, Drug and Cosmetic Act. FasterCures points out that, in February, FDA announced it is amending its regulations for accepting data from clinical investigations for medical devices. “FDA recognized its [Cures’] obligation to harmonize the differences between the HHS human subject regulations and FDA’s human subject regulations. FDA will be working with others at HHS in carrying out this statutory directive,” the organization says.
  • Sec. 3036: Standards for Regenerative Medicine and Regenerative Advanced Therapies. FDA and HHS in conjunction with the National Institute of Standards and Technology and other stakeholders must begin coordinating and prioritizing the development of standards and consensus definitions to support the development, evaluation and review of regenerative medicines.
  • Sec. 3044: Susceptibility Test Interpretive Criteria for Microorganisms; Antimicrobial Susceptibility Testing Devices. FDA must submit a report to Congress on how the agency is implementing Cures requirements to update susceptibility test interpretive criteria for antimicrobial drugs.
  • Sec. 3060: Clarifying Medical Software Regulation. The agency must issue a report on the current state of health-related software and the regulation of such products.


Health, Education, Labor and Pensions Committee Holds Hearing on Drug Costs

The Senate HELP Committee held a hearing on July 17 entitled “Reducing Health Care Costs: Eliminating Excess Health Care Spending and Improving Quality and Value for Patients.” The chairman of the committee, Sen. Lamar Alexander (R-TN), focused on two categories of wasted spending: (1) Spending on unnecessary tests, procedures and drugs; and (2) spending on services that could’ve been prevented with better care upfront.

View the hearing.

HELP Committee to Vote on Pharmacy Gag Rules

The Senate HELP Committee will vote July 25 on legislation authored by Sen. Susan Collins (R-ME) that would eliminate so-called pharmacy gag rules. The legislation, S 2554, would outlaw gag clauses in contracts, freeing pharmacists to tell consumers if paying the retail price of a prescription drug costs less than paying their health insurance copay. The panel will also mark up bills that would support sickle cell research and consumers with limited dental health access, as well as a House plan to reauthorize support for congenital heart failure patients.

2. Administration

HHS Directs FDA to Look at Importing Drugs

On July 20, the U.S. Department of Health and Human Services announced it was directing the FDA to examine the feasibility of importing drugs from other countries to combat major price increases or difficulties accessing certain medicines.

Specifically, the FDA was directed to establish a working group that would consider ways to safely import drugs into the U.S. in instances where price increases for medicines that are only produced by a single manufacturer put the products out of reach for people who may need them. Importation would only be used when a particular drug is not protected by a patent or exclusivities and would serve as a stopgap measure while manufacturers work to introduce their own medicines and facilitate competition, the agencies said.

While it is currently illegal to import drugs into the U.S. that have not been approved by the FDA, the agencies said the working group would consider whether allowing drugs from other countries would be beneficial to patients and would take place only in instances where safety and effectiveness can be assured.

In addition to addressing the safety aspect of drug importation, the working group will also examine how it and HHS would determine public need, and how to balance and promote competition in these instances from FDA-approved sources. The agencies noted that any importation would be temporary until “adequate competition” enters the market.

CMS Sends Risk Adjustment Rule to OMB But Says It’s Just an Option

On July 18, CMS sent an interim final rule clarifying the Affordable Care Act’s risk adjustment payment methodology to OMB for clearance. CMS says, however, it may not be finalized and is one of several options being considered as the courts sort out conflicting rulings. 

Some Republican senators, including Senate health committee Chair Lamar Alexander (TN) and John Barrasso (WY), also are urging the administration to quickly resolve the issue resulting from conflicting court rulings.

Drug Rebates Rule at OMB

HHS’s Office of Inspector General has sent a proposed rule to OMB that calls for removal of a safe harbor protection for drug rebates paid to insurance plans and pharmacy benefits managers.

The rule title says it will also create a new safe harbor protection but provided no other details. President Donald Trump’s drug-pricing blueprint said his administration was looking at tackling the rebate safe harbor.

CMMI Director to be Point Person on Value-Based Care

HHS Secretary Alex Azar announced that CMMI Director Adam Boehler will be in charge of the department’s broader value-based care agenda, naming him today as a senior advisor for value-based transformation and innovation.

The new role will make Boehler the top staffer responsible for day-to-day work on HHS policies designed to shift providers away from the traditional fee-for-service health system and toward paying more based on the quality of care delivered.

HHS officials in recent months have telegraphed plans to overhaul longstanding regulations like the Stark Law and HIPAA that they view as impeding the move to value-based care. Azar and others have also warned that providers participating in new value-based payment arrangements that they’ll soon need to take on more accountability and generate faster results.

FTC Comments on Trump’s Drug-Pricing Blueprint

FDA regulatory processes may be erecting “undue barriers” to cheaper versions of biologics the FTC said today in comments on President Donald Trump’s drug-pricing blueprint.

The FDA should change the way it names biosimilars, the FTC said, because assigning every product a unique suffix may cause physicians to mistakenly believe the medicines are clinically different than the brand-name products on which they’re patterned. This can lead to diminished adoption of the cheaper medicines, as well as unnecessary costs and conflicts with global naming conventions for the drugs. In Europe, biosimilars with distinct nonproprietary names are less commercially successful than biosimilars with the same name as the branded biologic, FTC said.

A biologic and all therapeutically suitable biosimilars should have the same active ingredient name, FTC said.

FTC also pushed FDA to quickly issue final regulations on interchangeable biosimilars. Getting an interchangeable designation will help facilitate automatic substitution by pharmacists. This should increase acceptance and market penetration of the copycat products, boosting consumer savings, furthering biosimilar development and creating greater price competition, FTC said.

The commission further asked FDA to reconsider its preference for completed studies comparing biosimilars with samples of the brand-name biologic sourced from the United States. This would include reconsidering FDA’s requirement for expensive bridging studies when the company uses a European version of the biologic. These changes would make it easier for biosimilar-makers to acquire samples of the brand biologic.

FTC also pushed for FDA and Congress to do more to crack down on the misuse of FDA safety systems known as REMS. Brand-name drug makers sometimes use REMS to block access to generic competition.

The FDA Plans Reorganization

The FDA is planning to consolidate some operations and create interdisciplinary food and drug policy offices.

The plan creates two new entities for food and drug policy—the Office of Clinical Policy and Programs and the Office of Food Policy and Response—that take over some duties now handled by a pair of offices dealing with medical products and tobacco and food and veterinary medicine.

Staff and critical duties from the two existing offices would be transferred into the agency’s centers, such as those focused on biologics, devices, veterinary medicine—and the Office of Regulatory Affairs.

The new clinical policy office would cover orphan products, pediatric therapeutics and combination products, Gottlieb said. It would also oversee an agency wide Patient Affairs and Health Providers Affairs Program that would be established under the plan.

Elsewhere, separate offices dealing with minority’s and women’s health, which both currently report directly to the commissioner, would be overseen by the Office of the Chief Scientist, currently Denise Hinton.

The proposed changes would also merge U.S. and global policy groups under the newly named Office of Policy, Legislation and International Affairs. Other measures include consolidating the operations office and strengthening the Office of External Affairs.

The plan is subject to review by HHS but doesn’t require congressional approval. Gottlieb said he hopes to begin implementing the changes by October.

3. Courts

Hospitals Lose in 340B Case Because of Lack of Standing

A federal appeals court has upheld a ruling that will allow the Trump administration to begin cutting $1.6 billion from a federal drug discount program.

The three-judge D.C. Circuit Court of Appeals panel today confirmed that the American Hospital Association and other hospital groups lack standing to challenge the planned reductions to the 340B drug discount program, in line with a lower court decision issued last December.

The ruling means that HHS can proceed with a Medicare rule designed to slash payments to providers for certain drugs under the 340B program by nearly 30 percent, a move the agency argues will bring hospitals’ pay more in line with their cost of buying the drugs.

Provider groups have contended that the deep cuts will force some hospitals to leave the 340B program or close altogether, and that HHS overstepped its bounds by cutting payments without congressional authorization.

Case Dismissed on CSRS

A federal court in California on July 18 dismissed a case brought by 18 Democratic attorneys general challenging the Trump administration’s decision last year to end the ACA’s cost-sharing reduction payments to insurers, but the court leaves the door open for the attorneys general to refile their case if HHS moves to block the silver-loading workaround that has made up for the lack of CSRs. On June 12, HHS Secretary Alex Azar told lawmakers that HHS would not change silver-loading in 2019 since there is not enough time to go through the rulemaking process before plans solidify their rates.

Any action to prevent states from silver-loading would materially change the circumstances in the case by triggering significant increases for consumers across all metal tiers, and further destabilize the markets, the AGs told the court.

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

Stephanie Kennan, Senior Vice President

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