Health Policy Report (12/23)

December 23, 2019

The Week in Review

Lawmakers completed legislative business for the first session of the 116th Congress following action on significant policy priorities to close out 2019. Late Friday, President Donald Trump signed two massive spending measures for fiscal year (FY) 2020 into law after both the national security and domestic policy "minibus" packages cleared Congress with strong bipartisan support earlier last week. The deals include several wide-ranging policy provisions pertaining to Affordable Care Act (ACA) taxes, health extenders, terrorism risk insurance, and retirement reform. Negotiators also reached an agreement on several "tax extenders" that would renew certain tax provisions that expired at the beginning of 2018 and 2019, or that were set to expire on Jan. 1, 2020.

Meanwhile, House lawmakers kicked off the implementation process for the highly-anticipated United States-Mexico-Canada Agreement (USMCA). The lower chamber passed implementing legislation for the NAFTA replacement after Democrats struck a deal on pharmaceutical, labor, environment, and enforcement provisions earlier this month. The USMCA measure cleared the House with bipartisan support and is set to be considered by the Senate in January 2020.

Additionally, President Trump became the third American president to be impeached last week after House lawmakers cleared two articles of impeachment. The president was impeached on a largely party-line basis, with Reps. Collin Petersen (D-MN) and Jeff Van Drew (D-NJ) voting against both articles and Rep. Jared Golden (D-ME) only voting for one article. The impeachment effort now heads to the GOP-controlled Senate where it is widely expected to meet with opposition. A timeline for the upper chamber’s impeachment trial is unknown as of now.

The Week Ahead

Congress has adjourned for the holiday recess and will return to Washington the week of Jan. 6 to begin the 2020 work session. The Senate will return first on Monday, Jan. 6, while the House will pick back up on Tuesday, Jan. 7. 

Congress Passes FY 2020 Appropriations, Health Policies

Congress passed two sweeping appropriations “minibuses” last week, including funding for the Department of Health and Human Services (HHS), which were signed by the president Friday afternoon. The first minibus focused on national security, encompassing the Defense, Commerce-Justice-Science, Financial Services and General Government, and Homeland Security appropriations bills, and the second comprised the remaining domestic policy and State Department bills: Labor-HHS-Education, Agriculture, Energy & Water, Interior-Environment; Legislative Branch, Military Construction-Veterans Affairs, State & Foreign Operations, and Transportation-Housing and Urban Development.

In addition to funding the government, the domestic policy minibus included a number of policy changes. These include health care “extenders” and the repeal of three Affordable Care Act (ACA) taxes, namely: (1) the “Cadillac Tax,” an excise tax on high-cost health plans beloved by health economists and hated by just about everyone else; (2) the medical device tax, a 2.3 percent tax on medical device sales; and (3) the health insurance tax, an annual tax on health plans. Oher health care policy provisions included in the funding bill were: a prohibition on stopping so-called “silver loading” in the ACA marketplaces, the CREATES Act, and long-term reauthorization of the Patient-Centered Outcomes Research Institute (PCORI). Furthermore, congressional leaders and the White House reached a deal on a number of expiring tax provisions, including a policy lowering the floor for the medical expense deduction. However, the bulk of program reauthorizations only go until May 22, 2020 — a deadline that House Speaker Nancy Pelosi (D-CA) has promised to use to push for an agreement on drug pricing and surprise billing policies.

HHS, FDA Propose Drug Importation Framework

The Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) last Wednesday took steps towards implementing two pathways for importing drugs intended for sale abroad into the U.S. The first pathway would authorize time-limited pilot projects called Section 804 Importation Programs (SIP) proposed by states, wholesalers, and pharmacies to import certain drugs from Canada — notably excluding insulins and biologics. The second would permit manufacturers to sell versions of their own Food and Drug Administration (FDA)-approved drugs intended for distribution abroad in the U.S. A notice of proposed rulemaking (NPRM) issued last week would set the framework for importation from Canada, while a draft guidance outlines how manufacturers could obtain a national drug code (NDC) in order to import certain drugs currently for sale outside the U.S. Given that many drugs are sold for less outside the U.S., the Administration hopes that these pathways allowing for importation will translate into lower out-of-pocket costs for American consumers.

“These are historic actions by HHS and the FDA, and they represent the bold nature of President Trump’s agenda for lowering drug costs,” said HHS Secretary Alex Azar in a press release. “The President has recognized the opportunity to lower costs for American patients through safe importation, and we at HHS and FDA are delivering on that possibility through a safe, commonsense approach.” However, a number of observers have expressed skepticism that SIPs can legally be implemented and that they will generate cost savings. Washington University of St. Louis Professor Rachel Sachs noted that the law requires HHS to certify both significant cost savings and no additional risk in terms of safety prior to authorizing importation, and the NPRM was unable to quantify any costs or benefits. It is worth noting that the policies rely heavily on voluntary actions and that neither the NPRM nor the draft guidance would compel anything. A spokesman for House Speaker Nancy Pelosi (D-CA) emphasized that the proposals might have little impact on insulin and instead called on President Donald Trump to support House Democrats’ recently-passed prescription drug plan, H.R. 3.

ACA Mandate Declared Unconstitutional, Case Sent Back to Lower Court

Last Wednesday, the 5th Circuit Court of Appeals issued a long-awaited ruling on Texas v. Azar finding that without a penalty, the individual mandate of the Affordable Care Act (ACA) is unconstitutional. Judge Jennifer Elrod wrote that because the ACA mandate can no longer be interpreted as a tax and there is no other constitutional power authorizing the mandate, it cannot stand. While the Circuit Court was not convinced by Judge Reed O’Connor’s analysis that the entire law must be struck down without the individual mandate, it did not give precise guidance on the scope of the law that is severable from the individual mandate. The case was thus sent back to the Court of the Northern District of Texas.

It was announced last week that the group of states led by California defending the Affordable Care Act (ACA) in Texas v. Azar is likely to file to appeal the 5th Circuit Court decision directly to the Supreme Court. A final decision has not yet been made, pending buy-in from other states defending the law. However, if the state coalition decides to move forward, action must be taken promptly. Should the Supreme Court decide to hear the case, there would likely be a ruling in the summer of 2020 and the scope would likely be limited to the constitutionality of the individual mandate — not whether the rest of the law is severable from the individual mandate.

CMS Proposes New Conditions for Coverage for Organ Procurers

Last Tuesday, the Centers for Medicare and Medicaid Services issued a proposed rule updating the Conditions for Coverage for Organ Procurement Organizations (OPO) with the goal of increasing transplant rates, reducing transplantation wait times, and minimizing the loss of discarded but viable organs. The rule focuses on OPO’s outcome measures, steering the metrics to ensure that OPO incentives are directed towards less waste and more successful transplantation. The proposal is a result of President Donald Trump’s Advancing American Kidney Health Executive Order, which directed CMS to “establish more transparent, reliable, and enforceable objective metrics for evaluating an OPO’s performance.” The proposed rule will be open for comment for sixty days — an expected deadline of February 21, 2020.

Lower Costs, More Cures Act Introduced in the Senate

A group of Senate Republicans have introduced a companion version of the Lower Costs, More Cures Act, which House Republicans offered as an alternative to Democrats’ recently-passed drug pricing bill. The group, consisting of Sens. Mike Crapo (R-ID), Mike Enzi (R-WY), Richard Burr (R-NC), Thom Tillis (R-NC), John Barrasso (R-WY) and Jim Risch (R-ID), noted the bipartisan nature of the proposals in the bill, framing it as a drug pricing alternative that would not harm innovation. The bill includes more than 40 bipartisan drug pricing provisions, many of which were advanced earlier this year by committees with health jurisdiction in both the House and Senate. Such reforms are designed to promote generic and biosimilar competition, add transparency to PBMs and pricing, prevent “gaming” of the patent system, streamline the regulation of over-the counter products, and more. The bill also includes reforms to Medicare Part D which had not been passed by any House committees, including a $3,100 out-of-pocket cap and a 10 percent manufacturer responsibility throughout the benefit. The bill also creates a new Chief Pharmaceutical Negotiator at the Office of the Unites States Trade Representative to ensure “other countries aren’t treating our innovators unfairly.”

CMS Bulletin Advises States on OUD Treatment Payment Changes

The Centers for Medicare and Medicaid Services (CMS) issued an Informational Bulletin to states detailing changes to payment for opioid treatment services for dually-eligible beneficiaries last Tuesday. On January 1, 2020, Medicare will begin to pay for programs to treat opioid use disorder (OUD) through service bundles, as outlined in Section 2005 of the SUPPORT Act and implemented in the 2020 Physician Fee Schedule Rule. Dually-eligible beneficiaries who currently receive OUD treatment through Medicaid will begin to have the treatment paid through Medicare on January 1 as well. Medication-assisted treatment (MAT), an important OUD treatment option, is currently available as an optional service for Medicaid agencies. Beginning October 2020 and ending September 2025 it will be a required benefit for categorically needy eligibility groups under Section 1006(b) of the SUPPORT Act.

CMS noted that it expects that there are a number of providers that are not enrolled in Medicare currently serving dually-eligible beneficiaries, and will not be by the time they become responsible for paying for OUD services for dually-eligible beneficiaries. As Medicaid is the payer of last resort, states are required to attempt to recoup funds that they expend when another payer — in this case Medicare — is liable for the cost.