Health Policy Report

July 16, 2018

The Week in Review

The domestic news highlight of the week was President Trump’s primetime announcement of D.C. Circuit Judge Brett Kavanaugh as the nominee to replace Anthony Kennedy on the Supreme Court. Kavanaugh, who will likely start his lifetime term at age 53, comes with the sterling credentials expected of Supreme Court nominees having graduated from Yale Law School, published a number of influential legal articles and spent over a decade on the nation’s second-highest court. However, Democrats are expected to take issue with the political positions on his resume, such as serving in a lead role of Ken Starr’s investigation into former President Bill Clinton and being White House Staff Secretary under President George W. Bush. Senate Majority Leader Mitch McConnell (R-KY) is hoping to shepherd Kavanaugh through the confirmation process before this November’s midterm elections.

Floor action last week lacked any big-ticket legislative items, although the Senate was able to work through three executive nominations and pass language in a “motion to instruct conferees” that recommended the Senate include language giving Congress some oversight of the President’s unilateral power to implement tariffs due to national security concerns. The language – which is largely viewed as a response to President Trump’s recent tariffs against China and Western nations – was passed 88-11, but does not carry the force of law.

President Trump was back in the headlines on Wednesday when he started his weeklong foreign trip to Europe. His first stop was in Brussels, Belgium for the 29th North Atlantic Treaty Organization (NATO) Summit, which focused on the President’s criticism of Western allies for not spending enough on defense and Germany specifically for relying on Russian gas exports. The President’s visit to London later in the week also came with some controversy as President Trump sharply criticized U.K. Prime Minister Theresa May’s plan for Brexit and threatened to undermine a proposed post-Brexit trade deal between the U.S. and Britain. The President walked back those remarks later in the week and insisted that he had a positive relationship with his British counterpart, but he then described the European Union as being among America’s leading “foes” in another interiew.

The Week Ahead

House lawmakers are set to return to their appropriations work this week with scheduled consideration of a “minibus’ that includes the Interior-Environment and Financial Services-General Government appropriations bills. As compared to the last minibus, this appropriations bill carries more contentious policy riders, such as subjecting the Consumer Financial Protection Bureau (CFPB) to the congressional appropriations process. Also on the House docket is a resolution that would express the sense of Congress that a carbon tax would be detrimental to the U.S. economy. The resolution is sponsored by 45 Republicans and will likely face Democratic opposition on the chamber floor.

Meanwhile, the Senate has lined up consideration of four nominations, two for the executive branch and two to serve as federal judges. The executive nominations are Scott Stump to be an Assistant Secretary for the Department of Education, and Randal Quarles to be a Member of the Board of Governors for the Federal Reserve. Quarles has already been confirmed as the central bank’s vice-chair for supervision, but needs a separate approval from the Senate in order to be on the Board of Governors.

Finally, President Trump will wrap up his European trip with a visit to Helsinki, Finland. He is set to hold bilateral talks with Russian President Vladimir Putin in the Finnish capital today, which will take on added significance given the Trump Administration’s alleged connections to the Kremlin and recent indictments of Russian operatives by special Counsel Robert Mueller. Lawmakers in Congress have pressed President Trump to hold Putin to account over Russian meddling in the 2016 election, although the President has already suggested that there would be little he could do beyond saying “don’t do it again.”  

CMS Releases MPFS and QPP Proposed Rules

Last week, the Centers for Medicare and Medicaid Services (CMS) released its proposed rules for the calendar year (CY) 2019 Medicare Physician Fee Schedule (MPFS) and Quality Payment Program (QPP). The agency said in a press release that the proposed rules would fundamentally improve the nation’s healthcare system and “help restore the doctor-patient relationship.” The proposed rules updates rates and policies applicable to Medicare physicians and other professionals under Medicare as of Jan. 1, 2018. The MPFS dictates Medicare rates and policies under Part B, while the QPP implements two key value-based payment programs: the Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). Comments on the proposed rules are due by Sept. 10 2018.

Department of Health and Human Services (HHS) Secretary Alex Azar framed the proposals as delivering on two of the Department’s top priorities: (1) creating a value-based healthcare system for the 21st Century, and (2) making prescription drugs more affordable. CMS Administrator Seema Verma explained to stakeholders in a phone call that the proposals also include expanding access to virtual care by establishing Medicare payment for telemedicine, and improved interoperability in electronic health management.

Among the key changes, the proposed rule would reduce provider reimbursement rates for new drugs under the Medicare Part B by three percent. Currently new drugs are reimbursed at the wholesale acquisition cost plus six percent, but the rule, if finalized, would mandate the change for the first three months a drug is on the market before reimbursing drugs at the average sales price plus six percent. The Trump administration first floated the change in its fiscal 2019 budget proposal released in February, and the idea has been previously recommended by MedPAC. The proposals would also reportedly scale back the amount of information providers must submit, simplify the billing process and collapse four separate levels of documentation requirements into just one. The change would also eliminate a series of varying Medicare pay rates in favor of a single payment level. The regulations also seek feedback on the creation of a new Medicare bundled payment for the care and management of substance use disorders to aid the fight against the opioid crisis.

House W&M Committee Passes Bills on HSAs, Cadillac Tax, Employer Mandate

The House Ways and Means Committee held a markup of eleven health care bills this past week, advancing several measures that would expand access to HSAs, a bill to delay the Affordable Care Act’s (ACA) ‘Cadillac tax’ and place a moratorium on the employer mandate, and another bill to apply the ACA tax credits to low-cost catastrophic or “copper” plans. Several of these measures are expected to reach the House floor later this month, as GOP leaders prepare for a week-long blitz of health care legislation. Republican leaders are expected to roll out several bills for consideration during the week of July 23rd, including a measure by Rep. Erik Paulsen (R-MN) to permanently repeal the medical device tax.

While all of the bills were approved, votes typically fell close to party lines. Several Democrats, including Reps. Lloyd Doggett (D-TX), Ron Kind (D-WI), and Judy Chu (D-CA), raised issue with the cost of the $92 billion package. Chairman Kevin Brady (R-TX) dismissed calls from Democrats to guarantee that the package would be offset, as the minority party championed bipartisan offsets to pay for the legislation. Even Democrats that voiced support for some of the bills in the markup expressed concern about Republican’s willingness to spend federal resources without seeking pay-fors. Rep. Doggett went as far as to propose postponing the markup until Monday so that offsets could be considered, a motion which Chairman Brady swiftly denied.  

While bipartisan agreement emerged on a few pieces of legislation — including bills that would allow the use of tax-preferred accounts to cover fitness and sports activities and another for over-the-counter drugs — measures regarding the ACA’s Cadillac tax and employer mandate delay were met with Democratic resistance. While Republicans argued that repealing the Cadillac tax would provide “much needed relief” to smaller employers and ‘mom and pop’ shops, Democrats fought to defend the necessity of the ACA era provision.

DOJ Finalizes Proposal to Allow Federal Government to Limit Opioid Production

Last Wednesday, the Department of Justice unveiled a proposal giving the federal government more power to control the annual production levels of opioids in the U.S. The Drug Enforcement Administration (DEA) will be allowed to issue stricter limits on specific opioids if federal authorities have reason to believe they are being misused if the proposal is finalized. The DOJ stated that the proposal will encourage opioid manufacturers to remain “vigilant” in the fight against opioid addiction, and assist the agency in responding to the changing drug environment.

At 340B Conference, Azar Promises Reforms to the Drug Discount Program

Department of Health and Human Services (HHS) Secretary Alex Azar delivered a speech last week promising “comprehensive changes” to the 340B drug discount program. Addressing the 340B Coalition’s Summer Meeting, Sec. Azar explained that HHS will pursue changes to the program to bring greater transparency surrounding how the discounts are being used, and reforms to reduce the gap between discounted prices and the reimbursement provided by government programs. Under the program, hospitals are currently reimbursed at higher rates for using 340B drugs, and the savings are intended to be used to help cover costs for low-income patients. It is not yet clear whether Sec. Azar would be able to demand additional transparency in the program with congressional action, although Krista Pedley, the program’s top administrator at HRSA, recently told lawmakers they would need to alter the 340B statute to give the agency authority to write regulations to define how the savings can be used.

Sec. Azar largely sided with the reforms proposed by the pharmaceutical industry, claiming that the program had the unintended consequence of allowing for the benefits to be diverted for unintended purposes. The Secretary clarified that the administration decision to delay the 340B drug ceiling price regulation was not a show of favoritism for the pharmaceutical industry, and promised to address it in the future as part of the changes to come for the program. Hospital and clinic representatives present were surprised at the “frankness” of the speech, and likened the Secretary’s comments to “marching orders” in their fight to maintain the program for participating hospitals. The federal drug discount program has been criticized by the pharmaceutical industry, who claims overuse and misuse of the program allows hospitals and clinics to benefit unfairly.

In a notable diversion from the topic of 340B, Sec. Azar took a moment in his speech to respond to a recent tweet from President Trump calling out drug manufacturer Pfizer and “others” for rising drug prices “for no reason.” Sec. Azar criticized drug manufacturers and pharmacy benefit managers (PBMs) for their part in driving up drug costs through high list prices and the lack of incentives to lower them. He also reiterated the administration’s interest in abolishing the Medicare rebate system in an attempt to remove incentives for rising list prices. Pfizer announced later in the week it would hold off on planned price increases, to give the president “an opportunity to work on his blueprint to strengthen to strengthen the health care system and provide access for patients.”