Health Policy Report

July 23, 2018

The Week in Review

Buzz in Washington focused last week focused on President Trump’s performance in a press conference with Russian President Vladimir Putin during a bilateral summit in Helsinki, Finland. Political commentators and a number of politicians on both sides of the aisle criticized President Trump for appearing too conciliatory to his Russian counterpart, particularly on the issue of Russian interference in the 2016 election. Given Special Counsel Robert Mueller’s ongoing probe of the Trump campaign’s connection to Russia and a reported invitation from the White House for Putin to visit this fall, it appears that American-Russian relations will continue to stay in the headlines for weeks to come.

In Congress, the House continued its appropriations work by narrowly passing a ‘minibus’ that included the Interior-Environment and Financial Services-General Government appropriations bill (H.R. 6147). Fifteen Republicans joined all voting Democrats in opposing the measure, which included a series of policy riders opposed by the minority party, such as subjecting the Consumer Financial Protection Bureau (CFPB) to the congressional appropriations process. Many of those controversial provisions are expected to be stripped in the Senate’s version, which is set to hit the upper chamber’s floor this week.

Last week, the Senate focused again on nominations by confirming two executive branch appointees, namely Scott Stump to be an Assistant Secretary at the Department of Education and Randal Quarles to join the Federal Reserve Board of Governors. The chamber saw some drama on Thursday after the last judicial nomination on its docket — Ryan Bounds for the Ninth Circuit Court of Appeals — was withdrawn by Majority Leader Mitch McConnell (R-KY) just before a final vote on the Senate floor. Republican Sens. Marco Rubio (R-FL) and Tim Scott (R-SC) had said they would oppose the nomination — despite approving it in a cloture vote on Wednesday — over racially charged remarks that Bounds had made in his writings as a student. The Republican opposition effectively killed the nomination given that every Democrat also opposed Bounds’ confirmation.

The Week Ahead

This week, the House aims to consider three health care bills in its last scheduled week of floor action before the August recess. One (H.R. 6199) would focus on boosting the use of health savings accounts (HSAs) by allowing funds from those accounts to be used for more over-the-counter medications and other medical and lifestyle supplies. Another (H.R. 6311) would attempt to increase access to lower premium plans by adjusting the definition of qualified health plans to allow tax credits to be used to purchase a copper plan in the individual market. The third bill (H.R. 184) would repeal the Affordable Care Act’s medical device tax permanently, after its collection was delayed to 2020 as part of the health care deal included in a continuing resolution passed by Congress earlier this year.

The Senate is expected to have a mixed week of nominations and legislative work, starting today with a vote on the confirmation of Robert Wilkie to be Secretary of Veterans Affairs. The President’s original nominee for the position — White House physician Rear Adm. Ronny Jackson — was forced to withdraw earlier this year and Wilkie is expected to enjoy bipartisan support. Following disposition of the nomination, the Senate will proceed to consideration of an appropriations minibus that will differ slightly from the version passed by the House last week by including two more appropriations bills. The total package as considered by the upper chamber is set to include the Interior, Financial Services, Transportation, and Agriculture appropriations bills.

As opposed to the House, Senate Majority Leader Mitch McConnell (R-KY) has promised that the Senate will be in action for a significant period in August.

HHS Readies Proposal to Limit Drug Rebates

The Department of Health and Human Services (HHS) appears to be moving forward with an initiative to regulate drug rebating practices, with the HHS Office of the Inspector General (OIG) submitting a proposal for White House review entitled “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.” The proposed rule, which is now under review by the White House Office of Management and Budget, is marked as “economically significant,” meaning it is estimated to have an annual effect on the economy of $100 million or more.

While safe harbor provisions created by the HHS OIG make it possible for PBMs to currently negotiate rebates from drug manufacturers, HHS said in their recent drug pricing blueprint that they would consider “restrict[ing] the use of rebates, including revisiting the safe harbor under the Anti-Kickback statute for drug rebates.” HHS Secretary Alex Azar has stated he believes rebating practices have contributed to rising list prices. The Secretary has instead pushed towards a system of “fixed-price discounts,” which he has said is well within the administration’s powers.

The title of the proposal indicates that the proposal will create a “new safe harbor protection,” leading some to speculate that HHS might limit rebates that are calculated as a percentage of list prices while allowing rebates used in value-based purchasing arrangements — something that the pharmaceutical lobby has broadly supported. 

HHS Creates Working Group on Drug Importation

The Department of Health and Human Services (HHS) announced Thursday the establishment of an FDA working group to consider drug importation in cases where there is a dramatic price increase for a drug produced by one manufacturer that is not protected by patents or exclusivities. Among other issues, the working group will examine processes to evaluate the safety of foreign produced drugs and what steps must be taken to encourage the production of U.S.-manufactured alternatives.

In a statement, FDA Commissioner Scott Gottlieb, M.D. emphasized the limited scope of the proposal: imported drugs can not be under any patent or exclusivity and would have to be produced by only a single U.S. manufacturer. Additionally, importation would only continue until domestically manufactured competition emerged. Secretary Azar, in his statement, contrasted this approach with proposals to import a broader range of drugs and claimed that because importation would only apply to off-patent drugs, it would not disincentivize innovation. Commissioner Gottlieb stated that FDA’s ultimate goal is to achieve “FDA-approved and marketed versions of each medically important drug.”

The Trump Administration has prioritized prescription drug prices amid the release of its Blueprint to Lower Drug Prices in May; notably, the Blueprint does not mention drug importation. However, some GOP interest in drug importation exists on Capitol Hill. In May, Sen. Bill Cassidy (R-LA) circulated a white paper calling the importation of generic drugs approved in other countries, and HELP Committee Chairman Lamar Alexander (R-TN) expressed the belief that the working group makes sense given that the United States already allows the manufacture of drugs in foreign facilities. Meanwhile, critics of drug importation have questioned the safety of importing generic drugs from foreign markets, as well as adverse effects on pharmaceutical innovation in the United States. 

FDA Releases Draft Guidance on Over-the-Counter Drugs

Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced new draft guidance entitled “Innovative Approaches for Nonprescription Drug Products” that aims to simplify the process by which prescription drugs are made available over the counter and without physician consent. In his statement on the guidance, Commissioner Gottlieb described the new guidance as a means for the FDA to help reduce drug costs under certain categories, particularly prescriptions for chronic conditions such as high cholesterol. The guidance aims to provide an easier pathway to demonstrate safety and effectiveness without relying solely on drug facts labeling (DFL) by: (1) developing labeling in addition to the DFL, and (2) implementing additional conditions that will allow consumers to self-select and use the product safely.

The FDA’s announcement describes the guidance as a “first step” in an ongoing effort to study products that might be considered for marketing without a prescription. Future efforts are likely to include a rulemaking targeted towards increasing access to nonprescription drug products that was alluded to in the agency’s Spring 2018 Unified Agenda of Regulatory and Deregulatory Actions. A 60-day comment period will accompany the draft guidance once it is published in the Federal Register.

The guidance marks a very early step in an ongoing effort that will likely remain a priority for the FDA in the coming months, and it is loosely connected to the Trump Administration’s campaign to lower prescription drug prices. Conceding that the FDA “doesn’t have a direct role in the cost of medicines,” the Commissioner said that the guidance’s “new, more modern framework will contribute to lower costs for our health care system overall and provide greater efficiency and empowerment for consumers by increasing the availability of certain products that would otherwise be available only by prescription.” That goal is coupled with the FDA’s broader approach to create a more competitive environment for medicines that can take advantage of free market principles to lower drug costs. However, the regulator has also made clear that the nonprescription guidance — and eventual rulemaking — are not intended to change the “evidentiary standard” needed for a product to be approved by the FDA as nonprescription.

FDA Releases Biosimilar Action Plan, Finalizes Labeling Guidance

The Food and Drug Administration (FDA) has released their Biosimilar Action Plan (BAP) aimed at increasing the availability of biosimilars through increased competition and innovation. The plan was announced during a speech by FDA Commissioner Scott Gottlieb at the Brookings Institute last week, in which he called out drug manufacturers and payers for slowing the development of competition for biologic drugs and costing the U.S. billions each year. In conjunction with the release of the plan, the FDA also finalized guidance on the labeling of biosimilars.

In releasing the plan, Commissioner Gottlieb reported that the administration’s analysis revealed that the U.S. health system could have saved more than $4.5 billion in 2017 alone if given full access to every lower-cost version of biologic medicines the FDA has approved, and blamed “rebating schemes or patent thickets designed to deter the entry of biosimilars” for the loss in savings. The FDA Commissioner also expressed concern that some payors are requiring step-therapy or prior authorization on the reference biologic before patients can access a biosimilar. Additionally, Commissioner Gottlieb called out patent infringement lawsuits from delaying biosimilar introduction into the U.S. market, even when they are available in other countries. He likened the difficulty of biosimilars to reach the market to how small-molecule generics initially struggled to create competition after the passage of the Hatch Waxman Act in 1984.

The FDA’s Biosimilar Action Plan broadly directs the agency to focus in four key areas: (1) improving the efficiency of the biosimilar and interchangeable product development and approval process; (2) maximizing scientific and regulatory clarity for the biosimilar product development community; (3) developing effective communication to improve understanding of biosimilars among patients, providers, and payors; and (4) supporting market competition by reducing gaming of FDA requirements or other attempts to unfairly delay market competition to follow-on products. Commissioner Gottlieb said FDA would look to strengthen its partnerships with international regulatory authorities in Europe, Japan, and Canada to enable greater efficiency through data-sharing and the increased use of non-U.S.-licensed comparator products in biosimilar development. Additionally, he said FDA would update the Purple Book to give product developers more transparency, and would be collaborating with the Federal Trade Commission (FTC) to address anti-competitive behavior in the near future.

House Passes Sweeping Over-The-Counter Drug Review Legislation

Last week, the House passed a sweeping over-the-counter (OTC) drug regulation reform bill (H.R. 5333; summary), bringing the first changes to the system in over four decades. The Over-the-Counter Monograph Safety, Innovation, and Reform Act of 2018 would amend the Food and Drug Administration’s (FDA) OTC drug review process by expanding the $8 million budget, adding roughly 100 employees to oversee it, and setting in place a five year, $134 million user fee system known as OMUFA. Additionally, the bill requires that manufacturers provide data on unsafe ingredients within 180 days of introduction to the market, or risk having their product approval reversed.

The Senate is working on their own version of OTC drug reform (S. 2315), which passed the Health, Education, Labor, and Pensions (HELP) Committee in April. While there have reportedly been objections raised by some Members who are working through unrelated issues with FDA, those members do not have objections to the substance of the bill. Once the issues are resolved, the bill is not expected to need floor time to pass in the upper chamber. While differences between the House and Senate legislation are minor, it remains unclear how they might ultimately be reconciled.

Among the more hotly-contested provisions, the bill would grant just 18 months of exclusivity to manufacturers of innovative OTC drugs — six months shorter than under current law. The Senate’s version of the bill would allow for the current 24 months of exclusivity. The bill that passed out of the House includes a provision that requires the Government Accountability Office to conduct a study no later than four years after the bill is enacted to assess the “overall impact of exclusivity … including its impact on consumer access.” Supporters celebrated the bill for bringing much-needed change to a “cumbersome, slow, and inefficient” OTC review process, as well as promoting the approval of safer, more affordable drugs. The legislations has also been championed by consumer and public health organizations, as well as the Pew Charitable Trusts.