Health Policy Report

March 12, 2018

The Week in Review

A late-breaking foreign policy development on Friday became the main headline of the week as President Trump accepted an invitation to meet North Korean leader Kim Jong Un to negotiate the future of the rogue state’s nuclear program. The meeting would be the first time a sitting American president has negotiated directly with a North Korean head of state, and some analysts fear that the hermit kingdom has little intention of dismantling its nuclear program. A date and details for the meeting have not yet been set, although the South Korean announcement suggests it will occur by May of this year.

The President made another major announcement on Thursday by officially committing to place tariffs on imported steel and aluminum. The tariffs — which can unilaterally be implemented by the White House under national security authority — are designed to protect American materials manufacturers from foreign competition, primarily coming from China. Free trade advocates fear that the move could trigger a global trade war as nations move to enact their own penalties on American exports, such as agricultural products, automobiles, and intellectual property. The President suggested that the tariffs will commence within the next month.

A bipartisan banking regulatory relief bill (S. 2155) is making its way through the Senate after cloture was invoked on the motion to proceed last Tuesday on a 67-32 vote. The bill’s consideration will extend into a second week as lawmakers continue to negotiate what may be included in the final package. The proposed changes are aimed at recruiting eventual approval from House Republicans, while ensuring that the 17 Democrats who voted in favor of the bill’s motion to proceed maintain support for final passage.

There were also two significant departures officially announced last week, namely Sen. Thad Cochran (R-MS) and White House National Economic Council Director Gary Cohn. Sen. Cochran will step down next month due to health issues, opening a key leadership post on the Senate Appropriations Committee that Sen. Richard Shelby (R-AL) is expected to fill. Cohn’s announcement was more surprising, and is assumed to be related to the White House’s decision to move forward with implementing steel and aluminum tariffs, which he opposed.

The Week Ahead

The Senate’s consideration of the regulatory relief bill (S. 2155) crafted by Banking Committee Chair Mike Crapo and supported by many moderate Democrats will continue for a second week as lawmakers continue to negotiate what may be included in the final package. Senate Majority Leader Mitch McConnell (R-KY) has filed cloture for the bill’s substitute amendment and a vote is expected at 5:30 p.m. today. Senate negotiators will continue their work in considering further amendments that may be inserted into the final package, but there is no agreement yet on which, if any, will ultimately be included. On its current path, the bill will likely see a final up-or-down vote on Thursday.

Floor action in the lower chamber this week could include a vote on the $1.3 trillion omnibus spending bill, as House Majority Leader Kevin McCarthy (R-CA) has indicated that he would like to bring up the bill ahead of the Mar. 23 deadline for government funding. While Republicans are optimistic that the spending bill can pass by the end of next week, Democrats remain skeptical over provisions related to funding for Planned Parenthood and family planning programs. As behind-the-scenes omnibus negotiations continue, the House will also vote on updated “right-to-try” legislation that would give terminally ill patients access to experimental drugs that have not been approved by the Food and Drug Administration (FDA).

Finally, a special election that has gained national attention is due to be held tomorrow in Pennsylvania’s 18th congressional district. Recent polling shows that Democratic Candidate Conor Lamb, a former Marine veteran and attorney, has narrowed the gap considerably against his Republican opponent Rick Saccone — a Representative in the Pennsylvania State House. A Lamb victory would score a huge upset win for Democrats in a district that President Trump won by 20 points. Both parties view the special election as a chance to show momentum ahead of the 2018 midterm elections. 

House to Vote Tuesday on Updated 'Right to Try' Legislation

House Republicans have announced they will vote Tuesday on a updated version of the Right to Try Act, legislation aimed at letting very sick patients request access to experimental treatments that have not yet been approved by the Food and Drug Administration (FDA). The Senate unanimously passed a version of the “right-to-try” proposal in August, but the legislation languished in the House until President Donald Trump called for passage of the bill in his State of the Union address.

The House version of the legislation, introduced by House Energy and Commerce Committee Chairman Greg Walden (R-OR) is more limited than the Senate-passed measure championed by Sen. Ron Johnson (R-WI). Chairman Walden’s version is designed to ensure that the FDA has more oversight of the process, reflecting input from FDA Commissioner Scott Gottlieb. Like the Senate bill, it includes liability protections for drug companies and providers who decide to use the process. Updates to the bill to address added patient safety include requiring drug companies to notify FDA within seven days of providing the medicine and requiring immediate notification to FDA of any adverse events. The House bill also limits the process to patients who are likely to die “within a matter of months” or “severely premature.”

Insurer Cigna to Acquire Pharmacy Benefit Manager Express Scripts

It was reported last week that health insurer Cigna will buy pharmacy benefit manager (PBM) Express Scripts for $52 billion in cash and stock in a deal valued at $67 billion including debt. Express Scripts is the largest PBM in the country, and was the single major drug middleman left independent of an insurer after the CVS-Aetna merger last year. Health insurer Anthem had previously partnered with Express Scripts, and the deal comes a year after Cigna’s attempt to purchase Anthem was blocked by federal regulators.

Cigna will reportedly attempt to lower costs by putting health insurance and pharmacy claims under the same umbrella and give themselves more leverage in price negotiations with drug manufacturers. Express Scripts is responsible for the prescription plans of more than 80 million Americans. Antitrust experts warn federal and state officials may be reluctant to approve the deal because it would leave no other large independent pharmacy managers for smaller insurers.

HHS Secretary Azar Says Administration Committed to Value-Based Care

In one of his first major speeches to stakeholders, Secretary Azar delivered remarks at the Federation of American Hospitals squarely focused on the unfulfilled promise of initiatives to transition to value-based systems of care. In a statement which seemed directed to the broader health care stakeholder community, Azar stated, “This administration and this President are not interested in incremental steps. We are unafraid of disrupting existing arrangements simply because they’re backed by powerful special interests.” The Secretary thus warned industry, providers, and other stakeholders that HHS will not back down from outside pressures.

Sec. Azar called out the need to pay for outcomes and wellness rather than paying for procedures and sickness, and identified using the value-based transformation of our entire healthcare system as one of his top four priorities for the department. He noted the others as (1) combating the opioid crisis; (2) bringing down the high price of prescription drugs; and (3) addressing the cost and availability of insurance, especially in the individual market.

Secretary Azar laid out four areas of emphasis vital to this effort, including: giving consumers greater control over health information through interoperable and accessible health information technology; encouraging transparency from providers and payers; using experimental models in Medicare and Medicaid to drive value and quality throughout the entire system; and removing government burdens that impede this value-based transformation. Secretary Azar said that the web of negotiated discounts currently makes it impossible to reward value and that the system “too often generates profits for middlemen rather than savings for patients.” He called on providers, insurers, drug makers and pharmacies to be more transparent on their pricing of services and products. If they aren’t, Azar threatened, the government has plenty of levers to pull to help drive change. Additionally, he called Accountable Care Organizations results “lackluster” as providers were not given new meaningful space to experiment.

FDA Commissioner Champions Biosimilar Development, Questions Rx Rebate Model

Last Wednesday, Food and Drug Administration (FDA) Commissioner Scott Gottlieb delivered a speech at the America’s Health Insurance Plans’ (AHIP) National Health Policy Conference which was billed as “Capturing the Benefits of Competition for Patients.” At the start, Commissioner Gottlieb acknowledged that it was unusual for the FDA to be wading into drug pricing issues, but he noted that the issue required their attention. He reiterated the administration’s commitment to “market-based incentives” and support for innovation, but noted the what he sees as a current imbalance between incentives for innovation and competitive marketplace. In particular, Commissioner Gottlieb discussed the as-yet unrealized public health benefits of biosimilars and challenges the industry faces in bringing such products to market. He stated, “We’re committed to advancing policies that help make that process more efficient. But the cost of developing biosimilar drugs is always going to be substantially more expensive than copying a small molecule drug. At the same time, biosimilars not only present opportunities for significant cost savings, they can dramatically expand patient access to therapies.”

Commissioner Gottlieb briefly reviewed the steps FDA is taking to make the development process for biosimilars more efficient and called on payers to support these efforts where appropriate.  Commissioner Gottlieb was also critical of the pharmaceutical supply chain, and advocated for companies to move away from rebate-based contracts, suggesting that the current “payment scheme might quite literally scare competition out of the market altogether.” Commissioner Gottlieb specifically called out pharmacy benefit managers (PBMs), suggesting that the rebates they negotiate are often not passed along to patients.

CMS Administrator Stresses Meaningful Use, Patients First at HIMSS

On March 6, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma delivered remarks at HIMSS, the annual health technology gathering, where she discussed the launch of the administration’s “MyHealthEData Initiative” and the revamping of several existing CMS programs, including the Blue Button 2.0 effort and the Meaningful Use program for hospitals. Administrator Verma noted that last year President Trump issued an Executive Order promoting health care choices and competition in the interest changing the rate of growth of health care spending. She reiterated the administration’s focus on moving to value-based care, and announced that CMS has adopted an approach called “Patients Over Paperwork.” She noted patients and providers identified the inefficiencies of electronic health records (EHRs), and explained that outdated HER technology and the inoperability of data between provider systems result in duplicities in services and costs.

Administrator Verma announced the launch of the MyHealthEData Initiative, and described it as a government-wide initiative that will break down the barriers that prevent patients from being able to access their medical records. She declared that MyHealthEData will “unleash data to trigger innovation,” and advance research to cure diseases and provide more evidence-based treatment guidelines that ultimately will drive down costs and improve health outcomes. Privacy and security will be the center of the efforts, according to Administrator Verma, and CMS will be completely aligned with, VA, the NIH, and ONC, and the rest of the government. Additionally, she said CMS will be announcing a complete overhaul of the Meaningful Use program for hospitals, and the Advancing Care Information performance category of the Quality Payment Program, and the new direction will not only reduce time and costs, but will also be laser focused on increased interoperability and giving patients access to their data across all of CMS’ programs.

CMS Rejects Idaho Proposal to Offer Non-ACA Compliant Health Plans

The Centers for Medicare and Medicaid Services (CMS) has rejected Idaho’s proposal to allow for the sale of insurance plans that do not meet the consumer protections required under the Affordable Care Act (ACA). A letter sent to the State last Thursday from CMS Administrator Seema Verma noted that the administration was required to uphold the current law — although they oppose it — and promised to work with the states to give them “as much flexibility as permissible under the law to provide their citizens the best possible access to healthcare.” Under the ACA, states are seen as the primary enforcers of the law’s private insurance rules, with federal authority to step in if basic health protections are not upheld across all plans. Although much of the letter is spent upholding that ideology, HHS suggests that the contested plans could be permissible under the exemption for short-term plans, as outlined in a proposed rule last month.

Officials with Blue Cross of Idaho had announced in February that they would take up the State on their controversial offer to sell health insurance plans that do not meet all of the requirements of the Affordable Care Act. Critics of the proposed health insurance plans claimed that offering beneficiaries low cost non-ACA compliant plans would push young healthy people to leave the Exchange market, in turn driving up costs for those who remain. Supporters argued that this is already occurring, and the Blue Cross program would have offered options for those who earn too much to receive support to help them afford ACA coverage.

Trump Administration Approves Arkansas Work Requirements, Forgoes Decision on Expansion

Last Monday, the Centers for Medicare & Medicaid Services approved a 1115 waiver request from Arkansas to impose work Medicaid work requirements for select populations of beneficiaries, but failed to approve the State’s proposal to roll back Affordable Care Act (ACA) Medicaid expansion. Arkansas is now the third state to pursue Medicaid work requirements under the Trump administration, and will require that tens of thousands of able-bodied Medicaid beneficiaries between the ages of 19 and 49 to participate in job training or search activities, schooling, or volunteer activities a minimum of 80 hours a month. Indiana and Kentucky have also received innovation waivers including proposals for Medicaid work requirements approved by CMS recently. According to a Department of Human Services spokeswoman, the requirements will begin in June for people ages 30 to 49, and the state estimates that nearly 40,000 of the 98,000 Medicaid expansion recipients will need to start complying.

The state had also requested to roll back Medicaid eligibility for individuals with incomes up to 138 percent of the federal poverty line – as designated by the ACA – to only cover those with incomes up to 100 percent of poverty. The eligibility change would have kicked 60,000 individuals out of the state’s Medicaid program. CMS Administrator Seema Verma noted that while the request to roll back expansion was denied, the administration was “continuing to work through the issues on that.”

UnitedHealthcare to Pass on Savings From Drug Rebates to Consumers

Last Tuesday, one of the nation’s largest health insurers said it would begin to pass on savings from discounted prescription drugs directly to the consumers who purchase them. United Healthcare President Dan Schumacher said the new policy will apply to more than seven million individuals currently enrolled in the company’s fully insured plans as soon as the beginning of next year. He clarified that those in plans with high deductibles who buy drugs with large rebates will see the greatest savings.

The announcement comes amid criticisms that consumers don’t directly see the savings health insurance companies negotiate with drug manufacturers. Insurers have long claimed that the savings from rebates are used to lower overall premiums, however. The Trump administration recently raised a policy proposal to require private drug plans under Medicare to pass on savings to individuals at the pharmacy counter. HHS Secretary Alex Azar championed the United Healthcare announcement in a statement last week, calling it “a prime example of the type of movement toward transparency and lower drug prices for millions of patients that the Trump administration is championing.”