Health Policy Report

February 5, 2018

The Week in Review

President Trump’s first State of the Union address on Tuesday was the main highlight from the week as the President offered a defense of his first year in office and a glimpse of the White House’s priorities for 2018. Specifically, the President took a victory lap on the Republican-led tax reform package and recent economic growth, asked for more money for the military, and after spending a great deal of time disparaging “open borders” and MS-13 gangs, pitched his immigration plan for Dreamers as a “fair compromise” — causing audible laughter from Democrats in the chamber. The reaction from Democrats signals that despite the White House’s messaging that described the State of the Union as a call for bipartisanship and cooperation, it leaves Congress little closer to any sort of deal that has jeopardized government funding over the past few weeks.

Floor action last week was limited ahead of the annual Republican policy retreat in West Virginia starting on Wednesday. For the House, that included passage of a defense appropriations bill (H.R. 695) 250-166 in a vote that was promised to House conservatives in exchange for their support of the last continuing resolution (CR). The bill would fund the Pentagon beyond existing budget caps and would not make the same investment for domestic programs, making it dead on arrival in the Senate.

The Senate confirmed David Stras to the 8th Circuit Court of Appeals on a somewhat controversial 57-41 vote, making him the first judge confirmed in more than 80 years without a “blue slip” from the home state senators in Minnesota. The blue slip rule is a traditional Senate procedure that essentially gives senators veto power over any judicial nominees in their state. On Monday, a bill (S. 2311) banning abortions in most cases after 20 weeks of pregnancy failed to reach the necessary 60 votes to pass cloture in the upper chamber, ultimately coming up short on a 51-46 vote.

The Week Ahead

Congress will face another government funding scare this week as lawmakers must pass a continuing resolution (CR) before midnight on Thursday in order to avoid a second government shutdown in less than a month. The current plan is reportedly for a spending patch that would fund the government through Mar. 22, beyond key deadlines for the deferred action for childhood arrivals (DACA) program (Mar. 5) and debt ceiling (mid-March). For that reason, House Democrats are likely to continue their opposition, while House Speaker Paul Ryan (R-WI) is reportedly facing sharp resistance from his own party as the House Freedom Caucus and other conservatives have signaled they may vote against a CR unless progress is made on their own immigration plan. With a vote tentatively scheduled for Tuesday, Republican leaders may need to make additional concessions in one direction or the other in order to ensure that another spending patch can pass the lower chamber.

The short clock will be exacerbated by the House Democrats’ planned retreat to Cambridge, Maryland starting on Wednesday. Assuming all goes well in passing a CR, the House will be likely to wrap up its legislative week on Tuesday. In addition to a government funding measure, the House is also planning to consider a pair of regulatory relief bills (H.R. 4771; H.R. 1153) from the House Financial Services Committee as well as a bill (H.R. 772) that would revise food safety disclosure requirements at restaurants.

The Senate will also have a role to play in the CR negotiations, but right now it appears that the House will be taking the lead. In immediate floor action, Senate Majority Leader Mitch McConnell has teed up a confirmation vote today (Monday) for Andrei Iancu to lead the Commerce Department’s Patent and Trademark Office (PTO).

Health Care ‘Takeaways’ from the State of the Union

President Donald Trump used his first State of the Union address (full transcript) to tout repeal of the Affordable Care Act’s (ACA) individual mandate, reiterate his promise to reduce prescription drug prices, prod Congress to pass “right to try” legislation, and vow to address the opioid epidemic with an enhanced focus on criminal justice. While the speech was relatively light on health care specifics — despite Congress spending the majority of 2017 working on ACA “repeal and replace” — the address did serve to highlight the administration’s most pressing health care priorities, even as policy specifics were sparse.

Whereas repealing the ACA stole the show of President Trump’s first address to Congress in 2017, the former pillar of the President’s agenda was reduced to a plug over rescinding the individual mandate. Although the President touted the individual mandate as the “core” of the issues surrounding the Obama-era health law, he conspicuously failed to highlight the broader “repeal and replace” efforts or latent plans to overhaul Medicaid and the Exchanges. As the President tones down the most aggressive aspects of his rhetoric over ‘Obamacare,’ chances increase that the ACA slips down on the list of GOP priorities in 2018.

President Trump continues to send mixed messages on regulating the pharmaceutical industry — contrasting harsh rhetoric with limited policy specifics and industry-friendly solutions that have focused on reducing barriers to competition. With a new HHS Secretary taking the reins this week, some uncertainty remains as to what sort of action the administration will take on one of their new “top priorities.” Meanwhile, despite bipartisan support in Congress to do something, areas of consensus have been limited to tinkering around the edges (ex. curbing REMS abuses).

The President also included a direct call on Congress to pass right-to-try legislation, as legislation has stalled in the House after easily clearing the Senate last August. The policy has been a top priority of Vice President Mike Pence, who recently met with FDA Commissioner Scott Gottlieb and House Energy and Commerce Chair Greg Walden (R-OR) on the “importance” of passing a right-to-try law. Chairman Walden has been less than enthusiastic in advancing the bill, saying at an October 2017 hearing that Congress must “strike the delicate balance of individual liberty and patient safety in public policy.” Meanwhile, Commissioner Gottlieb — a former pharmaceutical industry consultant — has recommended numerous changes to the Senate proposal, which could go a long way in assuaging the concerns of wary Republicans.

President Trump made addressing the opioid crisis a top priority, and has routinely touted a law-and-order approach to solving the opioid crisis. But health policy experts say law enforcement efforts are only one piece of a broader solution that must include access to treatment and prevention programs. He declared the epidemic a national public health emergency in October and renewed that declaration earlier this month. But so far, the president has yet to propose new funding to help states respond and has left leadership positions vacant at key agencies — a move that has roiled Democrats, who have consistently lobbied for more funding. 

Meanwhile, Trump’s new HHS Secretary is staking out a more holistic approach to addressing the opioid crisis — and is largely eschewing the criminal justice component. In a statement following the President’s address, Secretary Azar highlighted the administration’s five-point strategy to address the opioid epidemic including: (1) encompassing better treatment, prevention, and recovery services; (2) better targeting of overdose-reversing drugs; (3) better data on the epidemic; (4) better research on pain and addiction, and (5) better pain management. Funding for treatment will continue to be central to the debate, and it remains to be seen whether Congress will provide the boost that many public health advocates have been calling for. 

CDC Director Resigns Amid Stock Trading Controversy

The Department of Health and Human Services (HHS) announced Centers for Disease Control and Prevention (CDC) Director Brenda Fitzgerald would resign amid controversy that she traded tobacco stock and kept other compromising financial interests despite taking the helm at one of the nation’s leading health agencies. Politico had reported yesterday that Ms. Fitzgerald’s financial conflicts of interest — which drew criticism from Democrats after her appointment in July 2017 — had continued past her appointment and that she bought between $1,001 and $15,000 worth of stock in Japan Tobacco one month into her leadership of the CDC. Ms. Fitzgerald also bought stock in Merck & Co., Bayer, and health insurer Humana at that time.


The official announcement from HHS noted that “certain complex financial interests” would limit the ability for her to serve as CDC Director, and that she would be unable to divest from the tobacco stocks in a “definitive time period.” Critics of Ms. Fitzgerald argued her choice in stocks represented an untenable contrast to the CDC’s leadership on anti-smoking campaigns and breaks with ethical norms for public health officials. Sen. Patty Murray (D-WA), Ranking Member of the Senate Health, Education, Labor, and Pensions Committee, sent a letter to the CDC in December offering concerns on Ms. Fitzgerald’s ability to perform the role of Director given her financial interests and her recusal from “matters pertaining to cancer and opioids.” She had also been invited, but failed, to testify before Congress at least four times on various public health issues due to potential conflicts of interest. Ms. Fitzgerald claimed she was unable to divest from the contested stocks due to legal and contractual obligations.

The resignation marks another key departure for the Trump Administration’s public health team after former HHS Secretary Tom Price resigned last year over a scandal involving his travel on private jets. Price’s permanent replacement, Alex Azar, stepped into the role last week and will likely be leading the search for a new CDC Director. While subject to significant congressional oversight, the post does not require a presidential nomination or Senate confirmation.

Ms. Anne Schuchat will serve as acting director of the CDC following the resignation of Ms. Fitzgerald. Schuchat, the CDC’s principal deputy director, served as acting director last year before Fitzgerald was appointed in July.

CMS Proposes Part D Opioid Prescribing Limits, 2019 Medicare Advantage Rules

The Centers for Medicare and Medicaid Services (CMS) has posted its calendar year (CY) 2019 Advance Notice and Call Letter delineating proposed methodological and payment changes for Medicare Advantage (MA) plans, as well as key policies under Part D. Notably, the proposal does not make major changes to Part D to address prescription drug pricing or beneficiaries’ out-of-pocket costs. But the proposal does include new opioid prescribing limits under Part D, as well as changes to MA utilization of encounter data, expanding MA supplemental benefits, and reducing payments to Employer Group Waiver Plans. CMS will accept comments on the proposals until March 5, before publishing final versions on April 2. With respect to MA, CMS estimates a +1.84 percent net increase on average relative to CY 2018 due to Advance Notice policies.

CMS is proposing that Part D plans place new restrictions on opioid prescribing in 2019. Plan sponsors will be asked to prevent prescribing more than a seven-day supply of opioids for acute pain, and will have the option of setting a maximum daily dose for this seven-day supply. For non-acute pain, plans will need to have a formulary limit of 90 morphine milligram equivalents of opioids per day with a seven-day supply limit; plan sponsors will be allowed to override this request. Insurance companies will also need to create safeguards to prevent patients from receiving multiple prescriptions of long-acting opioids; pharmacists will have the ability to override this restriction.  CMS is also enhancing its overutilization monitoring system (OMS) so that it identifies high-risk beneficiaries who use drugs that can be dangerous in combination with opioids such as gabapentin and pregabalin — the monitoring system already flags concurrent benzodiazepine use with opioids. Finally, CMS is seeking feedback on whether it should add a new pharmacy quality alliance measure — measures used to evaluate Part D plans’ progress in combating the opioid crisis — to track the percentage of individuals 18 and older with concurrent use of opioids and benzodiazepine.

HHS Approves Indiana Medicaid Waiver Including Work Requirements

The Department of Health and Human Services (HHS) has approved Indiana’s 1115 Medicaid waiver request, becoming the second state to receive approval to implement work requirements for the state’s Medicaid beneficiaries since the administration released guidance on the issue last month. In order to qualify for coverage under the new plan, able-bodied individuals under 60 years old would need to work at least 20 hours a week on average, be enrolled in school, or participate in the state's job training and search program. Medicaid beneficiaries will also be required to pay tiered premiums based on income level and can be locked out for failing to pay.

The new Indiana waiver builds on the state’s Healthy Indiana Program (HIP) approved by the Obama administration in 2015 — a conservative Medicaid expansion plan spearheaded by then-Gov. Mike Pence, and developed by CMS Administrator Seema Verma, who was then a consultant. As part of the deal, Indiana expanded Medicaid coverage to an additional 240,000 people. Critics have noted the lock-out provisions are particularly austere for low-income beneficiaries, noting that about 25,000 adults were disenrolled from the program between its start in 2015 and October 2017 for failure to pay their premiums.

The waiver approval, which is effective through Dec. 2020, also includes provisions expanding access to substance abuse treatment, imposing premium increases on tobacco users, and requiring a six-month waiting period for most enrollees who don’t comply with the state’s annual process for redetermining eligibility.

E&C Health Panel Examines Drug Compounding Regulations, Enforcement

The House Energy and Commerce Subcommittee on Health held a hearing, entitled “Examining Implementation of the Compounding Quality Act (CQA),” to discuss key provisions of the Drug Quality and Security Act (DQSA).  The CQA, a product of a bipartisan effort to improve compound drug safety, was passed in 2013 in direct response to a fungal meningitis outbreak at the New England Compounding Center that led to dozens of deaths.

Following the unveiling of a plan earlier this month on 2018 priorities for drug compounding regulation, witness FDA Commissioner Scott Gottlieb said that since the enactment of DQSA, FDA has issued 24 draft and final guidances to provide clarity on compounding compliance policies, four proposed and final regulations addressing products that can or cannot be compounded or used in compounding, and a draft memorandum of understanding (MOU) with states addressing certain distributions of compounded drugs. Commissioner Gottlieb noted that FDA is working to create a flexible standard whereby if a compounding pharmacy is engaging with low-risk products, it will not see the same level of oversight as a compounder working with higher-risk products or those distributing products more frequently. Dr. Gottlieb explained that since DQSA application, the FDA has: (1) produced a body of policy documents on a scale that clearly indicates the importance of this issue for the agency; (2) convened advisory committee meetings to obtain advice on scientific, technical, and medical issues concerning drug compounding; and (3) engaged in robust inspection and enforcement of compounding pharmacies through close collaboration with state regulators and

relevant stakeholders.

Amazon, Berkshire Hathaway, JP Morgan Announce Partnership to Create Health Group

Amazon, Berkshire Hathaway, and JP Morgan Chase announced last week they would be joining forces to create a new-health care initiative for their own staff aimed at improving “employee satisfaction and reducing costs.” The health group will be independent from “profit-making incentives and constraints” in an effort to lower costs for their employees. The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost, although operations could expand to a broader population. Few details on the plan were immediately available.

The CEO of each company acknowledged that while they don't have all of the answers on controlling skyrocketing health costs, they also don't believe that such high costs are inevitable. Although health stocks, including traditional insurance and pharmacy benefit managers, initially dove following the announcement, health experts assured consumers it was too early to tell what impact the company would have on the industry.