Health Policy Report (11/23)

November 24, 2020

Capitol Hill Update

Congressional appropriators are working to finalize an agreement on fiscal year (FY) 2021 spending numbers with less than one month to go until the December 11 government funding deadline. The Majority Leader stated on the floor that this past week that the coming days “will tell us a lot about whether Congress can pull off the bipartisan, bicameral appropriations process.” Chairman Richard Shelby (R-AL) noted that appropriations officials have made some progress toward reaching “basic agreements in principle” on the funding allocations, yet there is no formal deal as of now. Chairman Shelby stated that he expects the talks to continue through this week’s Thanksgiving holiday.

If lawmakers are not able to reach an agreement, Congress will likely look to pass another short-term funding measure that would provide appropriators with more time to reach an agreement — possibly kicking the deadline into the new year after President-elect Joe Biden gets sworn in. Several “poison pill” issues will need to be navigated in order to reach a bipartisan compromise, however, namely on COVID-19 relief, criminal justice issues, and border security. Meanwhile, both chambers will resume legislative business on Monday, November 30 following the Thanksgiving district work period.

CMS Issues Most-Favored Nations Rule

Last Friday, the Centers for Medicare and Medicaid Services (CMS) announced a long-teased demonstration to peg reimbursements for 50 Medicare Part B drugs with the highest annual spending to prices paid in other countries (rule, press release, fact sheet). The seven-year Most-Favored Nation (MFN) model, issued as an interim final rule (IFR), will begin to phase in almost immediately, with the first performance year beginning on January 1, 2021. The mandatory nationwide demonstration, which is being conducted under the demonstration authority of the Center for Medicare and Medicaid Innovation (CMMI), will also create an alternative add-on payment for drugs paid under the model, setting a single payment based on the entire cohort of MFN drugs. There are no changes to the buy-and-bill system for Part B drugs included in the rule, meaning that providers may simply face lower reimbursements. However, the demonstration includes the possibility of a hardship exemption, under which providers could receive a reconciliation payment from CMS to make up the difference. While the demonstration would serve in part to fulfill a long-stated goal of the Trump administration, it is possible — in no small part due to the fact that it was issued without notice-and-comment rulemaking — that it will never go into effect.

Interim final rules may be issued without first proposing a rule if the agency finds good cause that notice-and-comment procedures are impracticable, unnecessary, or contrary to the public interest. CMS waived notice-and-comment procedures that are required under the Administrative Procedure Act (APA) in order to release this policy as an IFR. The agency writes that “we find that there is good cause to waive the notice and comment requirements … because of the particularly acute need for affordable Medicare Part B drugs now, in the midst of the COVID-19 pandemic.” In addition, the agency waived the delayed effective date usually required of rules, particularly major ones. The agency says that it found a delayed effective date to be contrary to the public interest for the same reasons as it waived notice-and-comment. It is highly likely, however, that stakeholders affected by the rule will challenge the decision to circumvent notice-and-comment rulemaking procedures in court.

Barring some further action, however, the rule will go into effect immediately, with the first performance year of the MFN model beginning January 1, 2021. The model will be phased in over four years, with reimbursements to providers for MFN drugs beginning as a blend of the current average sales price (ASP) methodology and the MFN price. Reimbursement for the first year will consist of 25 percent the MFN price and 75 percent ASP and the share of MFN price will increase 25 percent per year, with years 4-7 being 100 percent the MFN price. CMS estimates that the rule will create a 16 percent discount from ASP of MFN drugs in the first performance year, up to a 65 percent discount from ASP in the fourth through seventh years. CMS’ Office of the Actuary (OACT) assumes that some providers will be unable to provide drugs to their patients under the MFN model. It says that beneficiaries lacking continued availability of their drugs through their current provider or supplier may seek access outside the model, to obtain their drugs through 340B providers, or to forgo access altogether. OACT estimates that the demonstration will save $85.5 billion.

Administration Finalizes Rule to Remove Safe Harbor Protection for Drug Rebates

The Department of Health and Human Services’ (HHS) Office of the Inspector General (OIG) issued a final rule (fact sheet, press release) last Friday to amend the current Anti-Kickback Statute (AKS) discount safe harbor to remove protection for manufacturer rebates on prescriptions drugs for pharmacy benefit managers (PBMs), Part D plans, and Medicaid managed care organizations (MCO). In its place, the final rule creates new safe harbors for two additional types of arrangements — certain prescription pharmaceutical point-of-sale discounts and flat fees paid by drug companies directly to PBMs for their services. The changes made to the current discount safe harbor are effective on January 1, 2022. The remainder of the final rule is effective 60 days after it is published in the Federal Register, which is scheduled for November 30, 2020.

The President first began targeting the safe harbor protections for PBM rebates under the Anti-Kickback Statute in his Drug Pricing Blueprint released in May 2018, arguing that the current rebate system rewards higher list prices and directs savings to pharmaceutical chain “middlemen.” A proposed rule was under review by the Office of Management and Budget (OMB) for more than six months, before finally being published in early February 2019. The proposed rule would have removed safe harbor protection under the Anti-Kickback Statute for manufacturer rebates on prescriptions drugs for PBMs, Part D plans, and Medicaid managed care organizations. The administration sent a final rule to OMB for review on June 11, 2019. The following month, the White House announced that it was abandoning work on the rule, likely due to concerns that the rule would lead to higher costs for both Medicare beneficiaries and the federal government. The Congressional Budget Office (CBO) had determined that the policy would cost $177 billion over ten years and raise premiums for Medicare beneficiaries.

While no notice withdrawing the final rule ever was published in the Federal Register, the Fall 2019 OMB Unified Agenda listed the final rule as “withdrawn” on July 26, 2019. Almost exactly a year later, on July 24, 2020, President Trump signed four Executive Orders (EO) aimed at lowering drug prices. One of the EOs, “Lowering Prices for Patients by Eliminating Kickbacks to Middlemen,” sought to eliminate PBM-negotiated rebates between drug manufacturers and insurers and pass the discounts directly to patients. The EO directed HHS to complete the rulemaking process to eliminate safe harbor protections under the anti-kickback statute for PBM rebates. Prior to completing the rulemaking, the HHS Secretary was to make a “public confirmation” that the rule was “not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.” Friday’s final rule implements the Executive Order.

Accordingly, the final rule is accompanied by HHS Secretary Alex Azar’s “Public Confirmation” that it will not increase Medicare costs, premiums, or out-of-pocket costs. In contrast, analyses to this point from the CBO and CMS actuaries actually showed that it would cost a significant amount. Azar writes, however, that his “extensive experience in this field…supports my projection that there will not be an increase” in costs, not pointing to analyses that could back up the point. Furthermore, the rule says that “there is wide variation in the analyses conducted that makes it difficult to project with certainty the impact of the policy change on federal spending. The Secretary, in applying the modeling assumptions and the range of available estimates, coupled with the fifteen-year history of the program (including its competitive dynamic), has projected that there will not be an increase in federal spending, patient out-of-pocket costs, or premiums for Part D beneficiaries as required by the Executive Order.” 

The final rule is generally supported by drug manufacturers, with PhRMA, the prescription drug industry trade association, saying that “reforming our rebate system is one such approach that could help to strengthen and realign incentives in the system, as well as improve patient affordability .… we are hopeful it will guarantee that seniors will finally see the savings at the pharmacy counter from discounts their health plans negotiate with biopharmaceutical companies.” On the other hand, PBMs, insurers, and certain advocacy organizations have argued it would eliminate their only negotiating power with pharmaceutical companies. The Coalition for Affordable Prescription Drugs immediately urged the incoming Biden administration to overturn the final rule, stating it will lead to higher premiums costs for millions of older Americans and their families. Similarly, America’s Health Insurance Plans (AHIP) noted the rule will increase premiums by 25 percent and leave taxpayers responsible to pay for rising costs, and declared they will “explore all options to reverse the misguided policy and stop its implementation.” In reference to previous reports that the proposed rebate rule would increase drug prices and premiums at a hefty price to the federal government, Energy and Commerce Chairman Frank Pallone (D-NJ) and Ways and Means Chairman Richard Neal (D-MA) accused the administration of “trying to hide [the] harmful details from the public with a cringeworthy letter from Secretary Azar that wrongly tells Americans there is nothing to worry about.”

HHS Finalizes Modernization of Stark, Anti-Kickback Rules

Last Friday, the Department of Health and Human Services (HHS) published two highly-anticipated final rules designed to reduce regulatory barriers to care coordination and the transition from volume of services delivered to the value of services. The rules advanced by the Centers for Medicare & Medicaid Services (CMS) and Office of Inspector General (OIG) modernize and streamline key fraud and abuse regulations under the federal Physician Self-Referral Law (the “Stark Law”), and the Anti-Kickback statutes. [Stark: final rule, fact sheet; AKS: final rule, fact sheet]. HHS Secretary Alex Azar said, “These new regulatory reforms will mean better care, including innovative arrangements with digital technology that may help patients receive care during the COVID-19 pandemic.” With a few limited exceptions, the effective date for both regulations is January 19, 2021.

The physician self-referral law, or Stark Law, prohibits providers from referring Medicare or Medicaid beneficiaries to another provider with which they have a financial relationship. The AKS prohibits remuneration in exchange for service referrals that are payable by a federal program. The Stark Law has not been modernized since it was originally implemented in 1989, and a CMS Request for Information (RFI) issued in June 2018 revealed further clarification and guidance was needed for stakeholders to effectively operate under the regulation. A similar RFI was issued in August 2018 for the Anti-Kickback Statute, and most comments focused on parts of the statute that block providers from helping patients with transportation and other support for chronic conditions, such as heart monitors. Proposed rules to update regulations implementing both laws were released in October 2019, including new exceptions to both laws for value-based care arrangements and additional guidance to meet key requirements, although pharmaceutical manufacturers and similar entities were notably excluded from the proposed safe harbors. The Trump Administration made modernization of these rules a key part of the Department of Health and Human Services’ “Regulatory Sprint to Coordinated Care” and CMS’ “Patients Over Paperwork” initiative. These initiatives are also linked to the administration’s efforts to accelerate the transition from volume to value.

The final rules clarify CMS and OIG interpretations of existing regulations and include significant changes to the fraud and abuse regulations that will impact certain health care financial arrangements. The rules provide a framework for protecting certain value-based arrangements that incentivize care coordination, quality of care and cost containment. OIG’s Principal Deputy Inspector General, Christie Grimm said, “Providers and the health care system are still on the front lines against COVID-19, and this rule establishes flexibilities for remote patient monitoring or other arrangements to assist in the ongoing response and recovery efforts.” The administration largely finalizes the policies as proposed, with a few exceptions. 

CMS Announces New SUPPORT Act Deliverables

The Centers for Medicare and Medicaid Services (CMS) announced a call for applications for a value-based substance use disorder (SUD) management demonstration and a report to Congress on housing supports for individuals with SUD last Thursday. The Value in Opioid Use Disorder Treatment (ViT) initiative is a demonstration that will create a per-member per-month fee and an incentive payment to providers who serve fee-for-service (FFS) beneficiaries with opioid use disorder. CMS announced that applications are open for providers interested in participating in ViT, publishing a request for applications (RFA) for the demonstration. The new report to Congress outlines strategies adopted by state Medicaid programs to provide housing services and supports for individuals with SUD who are experiencing or at risk for homelessness. 

The RFA seeks applications from providers interested in participating in the ViT demonstration. CMS notes that $10 million is available in each of fiscal years 2021-2024 for the four-year demonstration. Eligible participants include physicians, physician groups, hospital outpatient departments, federally qualified health centers, rural health clinics, certified community behavioral health centers, opioid treatment programs, critical access, and community mental health centers. Participants will receive a per-member per-month fee to provide services, including services not otherwise payable under Medicare. They will also receive a variable, performance-based incentive payment. Beneficiaries who may be covered by the demonstration are enrolled in Parts A and B, not enrolled in a Medicare Advantage plan, and have an opioid use disorder diagnosis — including beneficiaries who are dually eligible for the Medicare and Medicaid programs and otherwise fit the criteria. Applications are due January 3, 2021, and the performance period is expected to start April 1, 2021.

The Medicaid report fulfills a Congressional mandate for Secretary of Health and Human Services Alex Azar to submit a report on state strategies to provide housing-related services to individuals with SUD. It focuses on five programs — Arizona, California, Maryland, Pennsylvania, and Washington State — which have experienced success in housing retention rates and reduction in emergency services utilization. Those states all used integrated care coordination strategies, peer support models, and funding coordination with other services. The report notes that states have not generally used section 1915(c) home- and community-based services waivers to cover housing-related services, though they are showing a growing interest in 1915(i) state plan amendments, which allow states to provide HCBS to individuals who meet less stringent criteria than are required by 1915(c) waivers.

HHS Calls for Input on Technology to Serve Chronically Ill, Vulnerable Populations

Last Monday, the Department of Health and Human Services (HHS) issued a call for stakeholder input on novel technologies for chronic disease management for aging populations in underserved areas. The request for information (RFI) seeks to build understanding on technologies that can assist in such management, including artificial intelligence (AI), biosensors, apps, remote monitoring, and 5G connectivity. HHS acknowledged the context of the COVID-19 pandemic and underscored that the target populations — aging populations that are underserved such as in rural areas or low-income — are at particular risk to the disease.

The RFI came from the Office of the Assistant Secretary for Health (OASH), which oversees public health efforts and is led by Admiral Brett Giroir. Payers and those connected to payment policy, such as the Centers for Medicare and Medicaid Services (CMS), are not contained in OASH, but could still utilize the information to help inform future efforts. It bears mentioning that this RFI is coming at the end of the administration, so specific policy changes are not expected to advance in the near term. However, HHS could at some future point come back around to this topic and draw from responses to the RFI to craft policy in the next administration. The RFI will be open through December 22, 2020. Interested parties may comment until midnight Eastern Time on that date.

Pfizer, BioNTech Apply for Emergency Use Authorization for COVID-19 Vaccine Candidate

Drug manufacturers Pfizer and BioNTech applied for emergency use authorization from the Food and Drug Administration (FDA) on Friday for their COVID-19 vaccine candidate — the first to do so in the race to develop a successful vaccine to curb the pandemic. The FDA announced shortly after the Vaccines and Related Biological Products Advisory Committee (VRBPAC), a panel of outside experts, would meet December 10 to review the data, offer recommendations on approval, and outline appropriate conditions on use.

The manufacturers announced last week that final results from their phase three trials showed 95 percent effectiveness with no serious side effects. It is widely expected that the FDA will issue emergency use authorization for the vaccine, and officials have said they hope to begin inoculating health workers within days of the authorization. The federal government purchased 100 million doses of the vaccine with the option to purchase an additional 500 million doses, and the manufacturers have projected they will be ready to provide the initial 25 million doses by December.

Additionally, last week, Moderna announced that preliminary results from phase three trials for their COVID-19 vaccine candidate had shown 94.5 percent effectiveness and is expected to apply to emergency use authorization as soon as it has final safety and efficacy data. The federal government has projected delivery of an additional 20 million doses of the Moderna vaccine by the end of 2020. Unlike Pfizer and BioNTech, Moderna received $955 million from Operation Warp Speed for the development of their vaccine, and an additional $1.5 billion from the federal government to purchases doses of a successful vaccine.