Health Policy Report (1/25)

Capitol Hill Update

The Senate will convene for legislative business this week as Democratic leadership looks to continue the confirmation process for President Joe Biden’s key cabinet nominees. After confirming both Gen. Lloyd Austin to be Secretary of Defense and Avril Haines to be Director of National Intelligence, senators will vote on Janet Yellen’s nomination to lead the Treasury Department this evening. In the House, lawmakers are not expected to convene for votes this week but will instead begin the process of organizing its committees for the 117th Congress.

Meanwhile, the new administration is focusing its efforts on clinching another round of pandemic relief aid in Congress that reflects President Joe Biden’s priorities. National Economic Council Director Brian Deese met with a bipartisan group of 16 Senators over the weekend — most of whom were involved in bringing together a $900 billion compromise bill at the end of last year —to discuss a path forward on a bipartisan relief measure. While the new President has expressed a preference for reaching a deal that has buy-in from both sides of the aisle, frustration with obstinate Congressional Republicans could force the Democratic leadership to forego regular order for the budget reconciliation process — which would allow Democratic pandemic relief priorities to pass the Senate with a simple majority rather than having to meet the usual 60-vote threshold. In either regard, Democrats will still need to navigate intraparty disagreements between centrists and progressives before a comprehensive reconciliation plan can move forward.

President Biden Issues COVID-19 Strategy, Presidential Actions

Last Thursday, President Biden released his COVID-19 strategy and signed 10 executive actions aimed at curtailing the coronavirus pandemic. The president outlined his COVID-19 strategy in a 200-page document describing the administration’s goals and containing the executive actions put in place today. The new president noted it will take months for his administration’s actions to significantly alter the trajectory of the pandemic, stating “it’s going to get worse before it gets better.” President Biden predicted an additional 100,000 American deaths during his first six weeks in office.

President Biden’s COVID-19 strategy focuses on accelerating vaccinations while slowing the spread of the virus through increased mask usage, additional testing, and other public health measures. Eight executive orders (EO), one National Security Directive (NSD), and one memorandum signed last week aim to immediately begin to blunt the impact of the public health crisis. However, many elements of the plan will require Congressional action — namely additional funding — to accomplish. It is expected that funding for vaccines will be taken up quickly, however, other items may take more time to materialize.

CMS Demonstration to Allow Part D Plans to Waive ‘Protected Classes’

Last Tuesday, the Centers for Medicare and Medicaid Services (CMS) announced new policies (Request for Applications, Fact Sheet) that will allow certain Medicare Part D plans to limit the drugs they cover. The agency released a call for applications for plans to participate in the third year of the Center for Medicare and Medicaid Innovation’s (CMMI) Part D Payment Modernization (PDM) Model, offering new flexibilities beyond what was offered in the first two years of the model, which has seen low participation so far. Specifically, beginning calendar year (CY) 2022, participating plans would be permitted to cover only one drug per therapeutic class and could treat five of Medicare’s six protected classes as if they were any other class of drug, no longer requiring coverage of “all or substantially all” of the drugs in those classes. CMS says that the sixth protected class — antiretrovirals — will also be treated as any other class for CY 2023. In exchange, plans would accept two-sided risk for the federal share of the catastrophic phase of the Part D benefit. CMS notes, however, that it has not yet waived the requirements of the Social Security Act to allow for these changes.

Under the model, plans continue to be responsible for 15 percent of spending in the catastrophic phase as under current law. However, they share in the risk in the federal government’s portion of the catastrophic phase. Currently, once a beneficiary reaches the catastrophic phase of the benefit, the federal government pays 80 percent of costs, the plan is responsible for 15 percent of costs, and the beneficiary is responsible for 5 percent. CMS calculates retrospective Spending Target Benchmarks for each plan year. CMS then shares 30 percent of the difference between the benchmark and actual spending and 50 percent of marginal savings above three percent with the plan. CMS also recovers 10 percent of the difference between the benchmark and actual spending from the plan if spending is above the benchmark. However, CMS will not apply downside risk for CY 2022, citing a recently-finalized change to the anti-kickback regulation that disallows rebates to PBMs. CMS says that it intends to monitor certain quality measures including access to prescription drugs, beneficiary complaints, and spending in Parts A and B relative to non-participating plans.

The Request for Applications (RFA) notes that no waivers under Section 1115A are being issued at this time. Instead, the document outlines waivers that are being contemplated for CY 2022. This means that the authority to waive Sections 1860D-4(b)(3)(G) and 1860D-4(b)(3)(C)(i) of the Social Security Act — which define the six protected classes and the requirement to cover two drugs per class in other classes, respectively — has not yet been exercised. These waivers would be necessary in order for CMS to move forward with these additional formulary flexibilities.  

As this model is not proposed as a rule and was not included in the typical call letter process, it is not open for a comment period. Many, but not all, demonstrations using Section 1115A are proposed through the rulemaking process. In addition, it is likely that it is not covered by the regulatory moratorium that the Biden administration imposed last week. However, since no authority has been exercised, it may be possible for the new administration to revise this guidance and associated model flexibilities without resorting to the regulatory process. In addition, the RFA states that CMS may terminate the model at its sole discretion prior to the end of the performance period.

Biden Administration Delays Implementation of 340B Drug Discount Rule

The Biden administration will delay a Trump administration rule that requires community health centers to pass 340B program discounts on insulin and epinephrine on to patients. The rule falls under the Biden administration’s regulatory moratorium, as outlined in a memo last Wednesday from White House Chief of Staff Ron Klain. The rule was originally scheduled to be effective starting January 22, 2021, but has been delayed for 60 days — until March 22, 2021. The comment period for the rule was not reopened. Stakeholders have warned the rule could raise prices for some patients, noting that the rule reflects “a fundamental misunderstanding” of federally qualified health centers and the 340B program. The delay will allow the new administration to review the rule, and the Health Resources and Services Administration (HRSA) could choose to let the rule take effect or withdraw it completely.

U.S. to Resume WHO Membership, Fauci to Head U.S. Delegation

President Biden’s COVID-19 pandemic strategy issued last week included plans for the U.S. to resume its World Health Organization (WHO) membership by immediately halting the process initiated by the Trump administration to withdraw the U.S. from WHO. Dr. Anthony Fauci will head the U.S. delegation to WHO and has already participated in the organization’s executive board meeting last Thursday. The U.S. relationship with the WHO is “one that we value deeply and will look to strengthen going