Health Policy Report

The Week in Review

The week’s biggest headline came out of the Supreme Court on Wednesday when Associate Justice Anthony Kennedy announced he will retire on July 31 after three decades on the nation’s highest court. The 81-year-old has been the Court’s most important figure in recent years, acting as the critical swing vote in 5-4 decisions on some of the Court’s most consequential cases, including on same-sex marriage, campaign finance, abortion protections, and last week, upholding President Trump’s travel ban affecting predominantly Muslim countries. The White House and Senate Majority Leader Mitch McConnell (R-KY) have both indicated that they will try to confirm a new justice before this fall’s midterm elections, despite calls from Senate Minority Leader Chuck Schumer (D-NY) to delay the confirmation process in order to give voters a voice in the decision – a logic that McConnell used in blocking the consideration of Merrick Garland’s consideration after Justice Antonin Scalia died in early 2016. In any case, the back-and-forth over filling Kennedy’s seat is sure to be a dominant narrative in the coming weeks.

In Congress, the House faced another busy week that was highlighted by the overwhelming failure of a compromise immigration package designed to unite Republicans around a set of reforms to the legal immigration system in exchange for permanent legal status for the so-called Dreamers. The bill’s failure means the myriad of immigration-related problems that have captured headlines over the past year are likely to continue without a legislative solution before this fall’s midterm elections. Other more successful work in the House included the approval of a Motion to Go to Conference on the National Defense Authorization Act and passing the FY19 defense appropriations bill (H.R. 6157) by a wide bipartisan margin, 359-49.

In the Senate, lawmakers approved both an appropriations “minibus” (H.R. 5895) and the upper chamber’s version of the farm bill (H.R. 2) on bipartisan votes. The farm package is notable for lacking some contentious language on work requirements for food stamp programs that was included in the House version, setting up what is likely to be a contentious conference process later this month.

Finally, last week’s significant week in Washington was coupled with a bombshell in Tuesday’s primary elections when Rep. Joe Crowley (D-NY) – the No. 4 Democrat in the House – was beaten by progressive newcomer Alexandria Ocasio-Cortez for the Democratic nomination in New York’s 14^th congressional district. The 28-year-old Ocasio-Cortez was an organizer for Sen. Bernie Sanders' (I-VT) presidential campaign and ran on a platform of generational, racial, and ideological change. Rep. Crowley is the first House Democrat to lose a primary in 2018, a loss that marks the most significant for a congressional incumbent since former House Majority Leader Eric Cantor (R-VA) lost to Rep. Dave Brat (R-VA) in Virginia’s 7th congressional district in 2014.

The Week Ahead

Washington’s manic week is now followed by a weeklong recess for the July 4^th holiday. Senate Majority Leader Mitch McConnell (R-KY) has indicated that the Senate will consider judicial nominations when they return on Monday, July 9, while the House is due to return on Tuesday, July 10.

CMS Announces Decisions on MA, OK Medicaid Drug Pricing Waivers

The Centers for Medicare and Medicaid Services (CMS) has released a trio of Medicaid decisions that color the administration’s posture as it relates to key prescription drug pricing issues. While the agency denied a proposal from Massachusetts to limit prescription drug coverage in the State’s program, it backed a plan that will allow Oklahoma to enter into value-based purchasing (VBP) arrangements with drug manufacturers. The agency also released a letter to all states reiterating that states must cover drugs approved through the Food and Drug Administration’s (FDA) accelerated approval program.

First, CMS denied an application from Massachusetts requesting the ability to exclude certain Medicaid-covered outpatient drugs through a closed formulary, as well as the State’s request to move childless, nondisabled adults with incomes above FPL into subsidized commercial plans bought through the state’s Exchange. CMS said it would be willing to consider similar demonstrations under certain conditions: states could exclude coverage of certain drugs if they negotiate directly with drug companies and forego the automatic rebates required by Medicaid law. Currently, Medicaid plans get mandatory discounts of 23 percent for branded products or the best price offered to private payers — whichever is lower.

Additionally, CMS approved Oklahoma’s State Plan Amendment that authorizes the state to negotiate supplemental rebate agreements (SRAs) for pharmaceuticals involving VBP arrangements with manufacturers. The proposal could allow the State to produce extra rebates if clinical outcomes are not reached.

While CMS denied Massachusetts’s high-profile Medicaid proposal, the Trump administration has embraced similar ideas that would allow states to negotiate directly with pharmaceutical companies. As part of its fiscal year 2019 budget — and again in their recent drug pricing blueprint — the administration calls for a new Medicaid demonstration authority that would allow for up to five states to opt out of the Medicaid Drug Rebate Program, negotiate their own rebates from drug manufacturers, and impose “closed” drug formularies for beneficiaries. The has proposal faced opposition from industry groups and drug companies, who worry that states would use this authority to limit or deny coverage of high-priced drugs.

HHS Secretary Azar Confirms HHS Rewriting Anti-Kickback Guidelines

Department of Health and Human Services Secretary Alex Azar said last Tuesday that the health agency would be rewriting safe harbor guidelines for anti-kickback restrictions to let drug makers base the price of drugs on how well they treat the patient. A Healthcare Leadership Council Official confirmed that the HHS Inspector General is preparing to solicit feedback on the law’s application to value-based pay arrangements for drug reimbursement. The branded pharmaceutical industry raised concerns that a proposal from Sec. Azar to get rid of Medicare Part D rebates is inconsistent with the administration’s focus on value, but the health secretary and FDA Commissioner Scott Gottlieb have said they would allow rebates in value-based arrangements.

Commissioner Gottlieb also made comments last week asking the HHS Office of the Inspector General to “affirmatively state that drug value-based pay is legal.” OIG has not taken a position on drug makers’ requests to exempt value-based pay arrangements from anti-kickback law, according to the most recent semiannual report to Congress.

Justice Department Announces Over 600 Charges in Health Care Fraud Crackdown

The Department of Justice last Thursday announced 601 charges in the “largest health care fraud takedown in American history.” Attorney General Jeff Sessions announced the investigation into over $2 billion in alleged fraud, including offenses by over 65 doctors, pharmacists, nurses, and other licensed medical professionals. Those charged were accused of cheating federal health programs, including Medicare and Medicaid, through false billing practices for often medically unnecessary services or those never provided. In "many" cases, the DOJ said, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so the providers could submit fraudulent bills to Medicare. The Attorney General called the fraud a “betrayal of vulnerable patients and theft from the taxpayer.”

Those charged also included 162 defendants, including 76 doctors, suspected for their roles in prescribing and distributing opioids and dangerous narcotics. The investigation into illegitimate opioid prescriptions spanned 30 state Medicaid programs and numerous enforcement agencies, and accounted for 13 million illegal opioid dosages. HHS Services also announced that since July 2017, it has excluded over 2,700 individuals and 587 providers from Medicare and Medicaid “for conduct related to opioid diversion and abuse.” Attorney General Sessions reported that enforcement has already resulted in lower billing levels in some government health programs, with billings for Medicare Parts A and B dropping by 20 percent in districts with fraud strike forces. Without alleging criminal activity by patients, the report also identified nearly a half-million Medicare beneficiaries said to be receiving regular opioid dosages since 2016 that exceed prescribing guidelines issued by the Centers for Disease Control and Prevention.