Health Policy Report

The Week in Review

House lawmakers completed work on the lower chamber’s version of the National Defense Authorization Act (NDAA), passing the $733 billion measure to end last week’s work session. Prior to final passage, the House tacked on several provisions— including: (1) repealing the 2002 Authorization for Use of Military Force (AUMF); (2) preventing the Trump administration from deploying troops to the U.S.-Mexico border; and (3) requiring Congressional authorization for use of military force against Iran — aimed at sweetening the measure to appeal to skeptical progressive lawmakers who had the potential to tank the bill. Negotiations between the House and Senate are expected to begin soon as both chambers will need to reconcile their respective versions.  

Additionally, the House cleared seven Financial Services bills under suspension of the rules. This included a resolution that encourages the Securities and Exchange Commission (SEC) to collaborate with state securities regulators to protect investors, as well as a legislation requiring the Department of Housing and Urban Development to discount Federal Housing Administration (FHA) single-family mortgage insurance premium payments for first-time homebuyers who complete a financial literacy counseling program. Lawmakers also cleared a suspension bill out of the Judiciary Committee that would extend the compensation fund for victims of the Sept. 11 terrorist attacks through 2090.

In the upper chamber, Senators resumed their push to clear the presidential nominations queue. In addition to several judicial nominees, the Senate approved nominations of three executive branch officials including: (1) Robert King to be Assistant Secretary for Postsecondary Education at the Department of Education; (2) John Pallash to be an Assistant Secretary of Labor; and (3) Peter Wright to be an Assistant Administrator for the Office of Solid Waste at the Environmental Protection Agency (EPA).

The Week Ahead

Both chambers of Congress will return to action this afternoon. In notable House floor activity this week, Democratic leadership has queued up a bill that would repeal the Affordable Care Act's (ACA) so-called "Cadillac tax." Designed to penalize employers that provide their workers with expensive benefits, the 40 percent excise tax has been a target for repeal by lawmakers on both sides of the aisle. By passing the bill under suspension of the rules, House Democrats can circumvent the need to offset revenue – a requirement that has thwarted action on the Cadillac tax for years – although it remains to be seen whether the House will, in fact, do so. And assuming the bill does make it through the House, it remains to be seen if the House bill will be taken up in the Senate without an offset.

In addition to the 22 suspension bills slated for consideration this week, the House is also expected to consider a bill out of the Education and Labor Committee that would raise the minimum wage to $15 per hour by 2025. Other notable legislation on the House floor this week include a measure authorizing appropriations for U.S. intelligence operations and a resolution holding Attorney General William Barr and Commerce Secretary Wilbur Ross in contempt of Congress for failing to comply with subpoenas issued by the Committee on Oversight and Reform. Meanwhile, Senators are expected to resume consideration of pending presidential nominations.

White House: ‘Rebate Rule’ is Dead

The Trump administration is shuttering its effort to overhaul the prescription drug rebate system, dealing a major blow to one of its signature drug pricing initiatives. The rebate overhaul had been a significant priority for Health and Human Services (HHS) Secretary Alex Azar and was applauded by the pharmaceutical industry for realigning incentives for “middlemen” in the drug supply chain. But the proposal was met with resistance from Joe Grogan, the Domestic Policy Council, and other fiscal hawks who balked at the policy’s $177 billion CBO estimate. Just a month ago, HHS sent a final rule to the White House’s Office of Management and Budget (OMB) for review.

The White House’s decision to scrap the rebate rule represents a significant blow to Secretary Azar, who has been frustrated on multiple occasions by opposing forces in the White House. Privately, Secretary Azar had been a vocal supporter of the rebate rule, and until recently, had opposed policies such as international reference pricing and drug importation. With the rebate rule now off the table, HHS will be under increasing pressure from the White House to move forward on those other signature initiatives. In particular, President Trump recently promised action on a “favored nations” policy — a possible reference to the administration’s International Pricing Index (IPI) proposal.

District Court Judge Rules Against DTC Drug Advertisement Rule

In a blow to the Trump Administration, a federal judge ruled Monday that the administration could not require drug manufacturers to disclose list prices in pharmaceutical advertisements for consumers. U.S. District Court Judge Amit Mehta explained that the Department of Health and Human Services (HHS) lacks the authority to require pricing information in television advertisements under the Social Security Act, but did not comment on the merit of the argument from drug companies that the HHS rule violated their First Amendment rights. Judge Mehta wrote that, ultimately, such a decision rests with the legislative branch – not with HHS. An HHS spokeswoman noted that the administration wasn’t surprised by the objections “from certain special interests,” and said the health agency is working on “many different avenues” for delivering transparency.

Drug manufacturers Amgen, Merck, and Eli Lilly and the Association of National Advertisers sued to stop the administration’s rule, arguing that it was outside of the authority of CMS and in violation of First Amendment rights. The suing parties had asked for a delay in the rule’s implementation pending further litigation, but Judge Mehta struck down the rule on the basis that “HHS cannot do more than what Congress has authorized” despite its potential to bring down drug prices. Explicit Congressional authorization to require price disclosures in DTC advertising would likely quell the concerns raised by Judge Mehta, and such language has already been introduced by Sens. Chuck Grassley (R-IA) and Dick Durbin (D-IL). As Congress intensifies its focus and negotiations on drug pricing proposals, the court decision could elevate the pressure to advance the Grassley-Durbin bill. Separately, HHS has said that the health agency will collaborate with the Department of Justice on “next steps related to litigation”, which appears to signal the administration’s interest in exploring the value of appealing the ruling to the D.C. Circuit Court of Appeals.

President Trump Calls for Kidney Disease Innovation, Payment Reform

Last Wednesday, President Donald Trump issued an executive order directing the Department of Health and Human Services (HHS) to overhaul the nation’s system kidney disease treatment. Individuals with end stage renal disease (ESRD) are eligible for Medicare regardless of their age, meaning that HHS has outsized influence in directing and developing care for kidney disease. The executive order calls for payment reforms to incentivize home dialysis and to facilitate kidney transplants. Additionally, the Administration called for a new system of getting artificial kidneys to patients in order to spur development of the technology.

At the same time as the White House issued the executive order, HHS released a rule describing five new payment models that address the President’s call for restructured incentives in kidney care. Four of the five models are based on the recently-proposed Primary Care First (PCF) and Direct Contracting (DC) models. The executive order and accompanying rule seek to incentivize slowing the progression of kidney disease and reducing the use of outpatient dialysis centers. The federal government has expressed concern that current Medicare payment policy encourages dialysis in outpatient centers, accounting for 88 percent of dialysis patients in 2016.

The aim of CMS’s proposed models is “to improve the quality of life for kidney disease patients by preventing disease progression, encouraging transplants over dialysis, and if dialysis is needed, more convenient home-based dialysis to improve health outcomes,” explained Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma. Still, such a significant change will not be easy, as many people with end-stage kidney disease are coping with other serious health conditions or are facing other problems that may make it hard to take advantage of alternative treatments.

HHS to Host Quality Summit to Streamline Federal Quality Programs

Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan announced Tuesday that the administration would form a summit to streamline and improve quality programs across the federal government. The Quality Summit will comprise key industry stakeholder and government leaders who will focus on how current HHS quality programs can be further evaluated, adapted, and streamlined to deliver a “value-based care model focused on improving outcomes for American patients.” Quality programs under the Centers for Medicare & Medicaid Services (CMS), Agency for Healthcare Research and Quality (AHRQ), Centers for Disease Control (CDC), Health Resources and Services Administration (HRSA) and Indian Health Service (IHS) will be on the table. Deputy Secretary Hargan and Dr. Peter Pronovost — Chief Clinical Transformation Officer of University Hospitals — will chair the Quality Summit. HHS will accept nominations for Quality Summit participants until Wednesday, July 31.

Deputy Secretary Hargan noted that the quality programs across HHS have not been subject to a “systematic objective external review” since their inception, and the agency is undertaking the review to ensure quality and promote transparency for all patients served by the programs. In a press release, he said that the Quality Summit will strengthen patient protections and improve value by reducing costs and “onerous requirements” placed on providers. Hospitals, quality researchers, and ambulatory surgery centers have been supportive of the effort to align HHS quality programs. They have also contended that streamlining the programs will help consumers make better care decisions. Health care stakeholders, including those in support of the effort, have warned that the executive order’s six-month deadline will be challenging.

Federal Appeals Court Begins to Hear ACA Case

A panel of three justices in the fifth U.S. Circuit Court of Appeals hinted they may rule that the Affordable Care Act’s individual mandate is unconstitutional, although they were unclear about whether they would overturn the entire law. Two Republican-appointed judges on the panel questioned attorneys defending the health law about whether Congress intended to invalidate the entire law when the penalty for the individual mandate was eliminated, and whether the law would be able to stand on its own if the mandate was declared unconstitutional. Attorneys defending the law argued that the mandate penalty was a suggestion, and not a command, but Judge Jennifer Elrod pointed to Chief Justice Roberts’ 2012 opinion explaining the natural understanding of the individual mandate is a command to buy insurance. Judge Kurt Engelhardt indicated he thinks Congress should find a solution to the issue, but was limited on what it could do through the budget reconciliation process. Judge Carolyn King, the lone Democratic appointee on the panel, did not ask either side any questions. Although legal experts on both sides of the aisle initially said the lawsuit is unlikely to succeed, the line of questioning has caused many to reconsider that position.