Health Policy Report

January 22, 2019

The Week in Review

House Democrats continued their push to reopen the government last week as the partial government shutdown entered its fourth week. The House took up a pair of continuing resolutions (CR) (H.J.Res.27; H.J.Res.28) last week that would temporarily reopen federal agencies without funding President Trump's border wall priority. The lower chamber also cleared a $12 billion supplemental spending bill (H.R. 268) for relief and recovery aid to states impacted by recent hurricanes, typhoons, wildfires & other natural disasters.

Despite warnings from ratings agencies and economic forecasters about the funding lapse’s impact on the economy, these spending measures were dead on arrival in the Senate as Majority Leader Mitch McConnell (R-KY) will not call up spending bills that lack the president’s support. In response, Senate Democrats are blocking consideration of GOP-sponsored legislation in protest of the partial government shutdown, including a Middle East policy bill (S.1) and a bill (S. 109) that would ban taxpayer funded abortions.

Meanwhile, tensions between the White House and Congressional Democrats have only further soured after President Trump denied Speaker Pelosi the use of a military aircraft for a Congressional Delegation (CODEL) trip to the Middle East, calling the visit "totally inappropriate" amid the nearly 4-week funding lapse. President Trump delivered the news in a letter to the Speaker a day after she penned a note effectively rescinding his invitation to give the State of Union address later this month due to security concerns caused by the funding lapse.

The Week Ahead

Congress will resume legislative business today after both chambers canceled their previously scheduled recess due to the ongoing government shutdown. Over the weekend, President Trump disclosed his latest offer to Democrats over in hopes of striking a deal that ends the 32-day shutdown while also funding his border wall priority. In exchange for $5.7 billion in funding for the border wall, as well as funding for closed parts of the federal government, the president’s deal would provide a three-year extension of protections for young immigrants enrolled in the Deferred Action for Childhood Arrivals (DACA) program and an extension of Temporary Protected Status for refugees currently covered.

Shortly after President Trump’s announcement, Leader McConnell announced plans to put President Trump’s proposal up for a vote this week in the Senate. The bill would reopen the shuttered federal departments and agencies through Oct. 1 and will include the full $5.7 billion border wall allocation. In addition to the extensions of protections for young immigrants enrolled in the DACA and Temporary Protected Status for refugees, Senate Republicans also plan to add $12.7 billion in additional disaster relief aid ­­– similar to the House-passed disaster relief spending package (H.R. 268) that cleared the lower chamber last week.

While the White House and GOP lawmakers have championed this deal as a fair compromise, Democrats have thus far rejected the proposal, insisting that the shuttered parts of the federal government must be reopened prior to talks on a broader deal. Speaker Nancy Pelosi (D-CA) said the House will take up another spending measure (H.R. 648) similar to the one that was cleared in the Senate by unanimous consent last month, downplaying the likelihood of a vote in the House on the latest GOP offer.

Chairman Cummings Sends Oversight Inquiries to Drug Companies on Pricing Practices

Last Monday, House Committee on Oversight and Reform Chairman Elijah Cummings (D-MD) sent letters to 12 leading drug manufacturers seeking information about the companies’ pricing practices. As detailed in a release, Chairman Cummings requested information on research and development investments, strategies to preserve market share, and price increases from companies that the Committee identified as selling the drugs that are costliest to Medicare Part D, the costliest per Medicare beneficiary, and the drugs that have seen the largest price increases over the past five years.

Drug makers Abbvie, Amgen, AstraZeneca, Celgene, Eli Lilly, Johnson & Johnson, Mallinckrodt, Novartis, Novo Nordisk, Pfizer, Sanofi, and Teva all received letters from Chairman Cummings as part of the Committee’s investigation into drug pricing practices. “The goals of this investigation are to determine why drug companies are increasing prices so dramatically, how drug companies are using the proceeds, and what steps can be taken to reduce prescription drug prices,” the Chairman said in a statement.

HHS Secretary Azar Promotes Initiatives to Lower Drug Costs

In remarks to the Price of Good Health Summit last Tuesday, Department of Health and Human Services (HHS) Secretary Alex Azar touted the strategies the Administration is developing to bring down drug costs in Medicare. Pointing to the International Pricing Index (IPI) model and the Centers for Medicare and Medicaid Services’ (CMS) proposed exceptions to the “protected classes” of prescription drugs under Medicare Part D, Secretary Azar said that HHS is implementing President Trump’s drug pricing blueprint by increasing competition and giving the federal government more negotiation tools. Secretary Azar said that the Administration has already seen successes in its drug pricing agenda, characterizing a lower rate of drug price increases in 2018 than in 2017 as a victory for President Trump.

Secretary Azar took issue with what he described as industry “denial” that bringing down list prices should be a priority. He pointed to mechanisms that determine out-of-pocket costs that rely on list prices as opposed to negotiated prices or post-rebate prices agreed upon by insurers and drug companies, saying that the benefits of such arrangements “aren’t accruing to the patients who need them the most.” Additionally, Azar floated HHS's willingness to explore importing drugs from Canada when single-source drugs undergo "dramatic price hikes." The HHS Secretary has the authority to permit imports from Canada if they can guarantee that the imports pose no additional public safety risk.

Competition is a particular area of focus for HHS to bring down drug prices. Secretary Azar noted that the that the Food and Drug Administration (FDA) had approved a record number of generic drug approvals in fiscal year 2018, adding that the competition generated by generic drugs and biosimilars, versions of biologic pharmaceuticals with no clinically meaningful differences, will continue to be a priority of HHS and the FDA. Biosimilar competition is a powerful factor in lower drug prices in Europe, said Secretary Azar, and he called not only for more biosimilar approvals but also for pharmacy-level interchangeability and reforms to the rebate system that would help to promote insurers and providers prescribing lower-cost biosimilars rather than name brands that offer big rebates. Secretary Azar closed his speech by saying that no policy that preserves drug safety and maintains patient-centeredness is off the table.

Part D Drug Pricing Demo Incentivizes Plans to Reduce Spending for High-Cost Patients

The Centers for Medicare and Medicaid Services (CMS) will allow Medicare Part D plans to share in savings generated by reducing costs in the program’s catastrophic phase under a Center for Medicare and Medicaid Innovation (CMMI, or Innovation Center) model announced Friday. The goal of the voluntary Part D Payment Modernization model is to reduce government spending once patients have spent $5,100 in out-of-pocket drug costs and they enter the phase where taxpayers are responsible for 80 percent of costs and plans pay 15 percent. CMS said it believes the model could save taxpayers $2 billion a year. Both stand-alone Part D plans and Medicare Advantage (MA) plans can participate in the model, with applications for the 2020 plan year are due by March 1 — although the formal Request for Applications (RFA), which will contain crucial details, has yet to be released.

Participants in the five-year model will take on two-sided risk. CMS will calculate a benchmark for what government spending would have been without plans taking on the additional risk, and Part D plans will share an unspecified percentage of savings if they stay below the target. Plans that exceed the target will be accountable for 10 percent of the federal government’s losses. The framework for this two-sided risk model is only vaguely outlined in the materials released today, the details of which will play a significant factor in model participation.

The Innovation Center model would also provide participants with additional tools to increase engagement between plans and beneficiaries and to promote better understanding of the Part D benefit, out-of-pocket costs, and clinically equivalent therapeutic options. Under the Part D Rewards and Incentives program, CMS says that plans will be granted additional “flexibility… to strengthen the clinical relationship between the enrollee, their provider, and his or her chosen Part D plan.” While details on this aspect are limited, CMS notes that “additional programmatic flexibilities available will be outlined to model participants” in the RFA.

CMMI Expands Medicare Advantage Demo to Allow New Benefits

The Center for Medicare and Medicaid’s (CMS’s) Innovation Center (or CMMI) announced plans last week to expand their Medicare Advantage model, allowing health plans more flexibility to include hospice care and increase access to telehealth. Starting in 2020, the Value-Based Insurance Design (VBID) model will test more ways of delivering care to its consumers, such as reducing cost-sharing, relying on telehealth, and providing more supplemental benefits to enrollees — including "non-primarily health-related" services such as transportation — based on a patient’s chronic condition or socioeconomic status. Also, in the 2021 plan year, plans in the model will be allowed to cover Medicare's hospice benefit. Additionally, CMS is extending the performance period of the VBID model by an additional three years, through 2024.

The first iteration of VBID was launched in January 2017 to see whether giving Medicare Advantage plans flexibility to offer certain supplemental benefits or reduce cost sharing would improve health outcomes and lower costs. The model is currently being deployed in 25 states, and under Friday’s announcement, will be available to plans in all 50 states beginning in 2020 (a provision in the 2018 Bipartisan Budget Act authorized the nationwide expansion). MA plans have been supportive of expanding the VBID model and are likely to champion the updated demonstration. Meanwhile, agency officials said they estimate "hundreds of millions of dollars" in savings for the federal government from the demonstration.

As Finance Chairman, Grassley Looks to Set GOP Agenda for Drug Pricing Policy

As Democrats seek to lay markers with a range of solutions to address rising prescription drug pricing — largely setting their agenda for the 2020 Presidential elections — the road for any game-changing drug pricing bill this year likely goes through Senate Finance Committee Chairman Chuck Grassley (R-IA). The independent-minded Republican Senator has been steadfast in his commitment to drug pricing transparency: from advancing the Physician Payment Sunshine Act, to his recent partnership across the aisle with Sen. Dick Durbin (D-IL) on direct-to-consumer advertising, Chairman Grassley has often riled the pharmaceutical industry. But true to his oft-stated commitment to free market capitalism, the Iowan has dampened industry criticisms by eschewing Medicare price negotiation and throwing shade at the Trump administration’s international reference pricing proposal.

In the early weeks of the 116th Congress, Chairman Grassley has already aggressively sought to lay out the Finance Committee’s 2019 drug pricing agenda, starting with a Senate floor speech he gave last November. In that speech, he noted that he doesn’t believe the government should be “intruding unnecessarily” in the marketplace, but that it has a responsibility to keep checks on unfair business practices and rein in “anti-competitive behaviors.” Sen. Grassley promised then to continue to fight against drug misclassification in the Medicaid Drug Rebate Program, close regulatory loopholes, fight extended monopolies, and praised HHS for moving forward with prescription drug price transparency in direct-to-consumer advertising. Already this year, Grassley has specified plans to take on the growing number of mergers in the pharmaceutical industry, address “pay-for-delay” agreements, revisit Medicare Part D risk corridors, advance drug importation, and examine the need for transparency in manufacturer negotiations with pharmacy benefit managers (PBMs) — a pet issue for Grassley’s Democratic counterpart, Ranking Member Ron Wyden (D-OR).

While many of Sen. Grassley’s priorities align with those of President Trump, he’s promised to “keep a check on the Trump Administration” as they implement drug pricing policies, including changes to the drug rebate system. For example, on the administration’s most controversial drug pricing proposal — a notice of future rulemaking to launch an International Pricing Index demonstration — Sen. Grassley said he would wait to see what the Centers for Medicare & Medicaid Services (CMS) formally proposed before issuing final judgement but cautioned that he does not support the underlying idea of tying U.S. drug prices to those set by foreign countries.