Health Policy Report

June 17, 2019

The Week in Review

The House kicked off a multi-day process to approve the first fiscal year (FY) 2020 "minibus” last week. While House Democrats were hopeful to wrap up consideration of the four-bill spending package last Thursday, House conservatives stymied progress on the bill by requesting a recorded vote on every amendment that was offered — forcing lawmakers to take votes on more than two-dozen amendments. The bill is expected to pass on party lines this week after the White House issued a veto threat, foreshadowing tough negotiations between the House and Senate over President Donald Trump’s spending priorities. 

Aside from marathon work on appropriations, House lawmakers cleared 11 bills under suspension of the rules. This includes a measure (H.R. 3151) out of the Ways and Means Committee that seeks to modernize and improve the Internal Revenue Service (IRS), as well as a Homeland Security bill (H.R. 2539) that would prioritize the assignment of certain officers and intelligence officers in state, local, and regional jurisdictions with a high-risk surface transportation asset.

In the upper chamber, a timeline for FY 2020 appropriations remains unclear as Senators currently lack a bipartisan agreement on funding levels to start markups. Senate Majority Leader Mitch McConnell (R-KY) and Appropriations Committee Chairman Richard Shelby (R-AL) met with acting White House Chief of Staff Mick Mulvaney, Treasury Secretary Steven Mnuchin, and Office of Management and Budget (OMB) acting director Russ Vought last week discuss the FY 2020 appropriations process. Negotiations between the Senate Republicans, House Democrats, and the White House on FY 2020 spending priorities are expected to continue this week.

The Week Ahead

Congress will gear up for another hectic work session this week as both chambers have teed up high-profile legislative items. When the House returns Tuesday, lawmakers will finish roll call votes on dozens of amendments to the first “minibus” package consisting of the Labor-Health and Human Services-EducationEnergy and Water DevelopmentDefense, and State-Foreign Operations spending bills. Once the four-bill measure clears the lower chamber, the House will take up a second minibus (text; amendments) which includes the Agriculture, Commerce-Justice-Science (CJS), Interior-Environment, Military Construction-Veterans’ Affairs (VA) and Transportation-Housing and Urban Development (HUD) spending bills.

Meanwhile, the upper chamber will return this afternoon to resume consideration of five pending presidential nominations. Prior to adjourning last week, Majority Leader Mitch McConnell (R-KY) filed cloture on a key legislative agenda item for 2019, teeing up the Senate’s version of the National Defense Authorization Act (NDAA). A vote on the motion to proceed for the $741 billion measure is expected once the Senate clears its nominations queue.

House Completes Consideration of Labor-HHS Amendments

The House completed consideration of amendments to the Labor, Health and Human Services, Education, and Related Agencies (L-HHS) title of the first appropriations “minibus” last Thursday. Procedural delays have greatly slowed down the process, with some GOP members requesting roll call votes on every amendment offered — 221 amendments to the legislation were made in order. As such, the spending package will not pass until the House completes consideration of the amendments of the three remaining titles of the minibus (State and Foreign Operations, Defense, and Energy & Water) sometime this week.

Barring unexpected action, consideration of amendments to the L-HHS title is completed, and the bill is expected to pass on what will likely be a near party-line vote next week. Meanwhile, the White House issued a veto threat on the minibus earlier in last week, further reinforcing the difficulty of the negotiations ahead between the House and Senate over President Donald Trump’s spending priorities. Notably, the House agreed to an amendment to prohibit the use of bill funding to implement the Administration’s restriction of the use of fetal tissue in research, as well as an amendment providing $10 million for the implementation of a demonstration program to develop, implement, enhance, or study alternatives to opioids for pain management in an emergency setting. House lawmakers also passed an amendment to allow the government to develop and promulgate a universal patient identifier, and an amendment that would prevent the Administration from implementing or enforcing its rule expanding short-term, limited-duration insurance.

Trump Administration Finalizes Rule Promoting HRAs

Last Thursday, the Trump Administration finalized a rule allowing employers to count subsidies for purchasing health insurance as employer coverage for the purposes of the Affordable Care Act’s (ACA) employer mandate. Such subsidies, or health reimbursement arrangements (HRAs), would be a defined contribution by employers to assist their employees in purchasing coverage on or off of the exchanges set up by the ACA. While the Administration requested comment on whether HRAs should be able to be used to purchase short-term, limited-duration insurance (STLDI), it is excluding STLDI from counting as individual coverage under the rule. As finalized, the rule defines no minimums or maximums for employer contributions, however, large employers may owe a penalty if the amount offered is not considered “affordable.” Employees within a given class must be offered HRAs or group health coverage on equal terms.

The Administration estimates that 800,000 employers will offer HRAs for individual coverage, covering over 11 million employees. While offerings must be consistent to each class of employee (for example, full-time employees, part-time employees, or those who are part of a given bargaining unit), they may be scaled based on an employee’s age or number of dependents. In the rule, the Administration says that its expects an expansion of HRAs to “substantially increase the size” of the individual market risk pool and to not affect the average health risk in that risk pool. The Administration will not require that a minimum number of individual market plans be available for employers to offer an HRA in lieu of group health insurance, citing a lack of availability of group health plans in certain areas. The final rule is expected to go into effect on August 19, 2019, and employers may start providing HRAs for individual coverage on January 1, 2020.

HHS Sends ‘Rebate Rule’ to OMB

The Administration has sent a final rule to remove the safe harbor protections for drug rebates in the Medicare Part D and Medicaid programs to the Office of Management and Budget (OMB). The development signals the Administration is focusing significant resources on advancing the new rebate rule policy, solidifying it as a cornerstone of the President’s initiative to lower drug costs for patients and the federal government. OMB officially has 60 days to complete its review, but extensions of the regulatory review period are common. This latest development is fueling speculation that the rule could be included in negotiations between congressional leaders and the White House.

The proposed rule calls for eliminating the Anti-Kickback Statute safe harbor protection for rebates paid by drug companies to pharmacy benefit managers (PBMs), Medicare Part D plans, and Medicaid Managed Care Plans. Over the past several months, the rumored timing of the final rule has fluctuated significantly. In its Spring 2019 Unified Agenda, released late last month, the administration projected that the drug rebate overhaul would not be released until November, although the final rule had initially been anticipated to be released this spring. In April, the Centers for Medicare & Medicaid Services (CMS) alerted plans that the rule would not be finalized before the June 3 deadline to submit Medicare Part D bids for 2020, and further clarified the agency still had the authority to implement the new system in 2020 through an optional demonstration if the rule went into effect for any part of the calendar year.

Notably, the Administration originally projected federal spending could increase as much as $196 billion over ten years and raise premiums for seniors eight to 22 percent if the rule was finalized as proposed. Subsequent analysis from the Congressional Budget Office (CBO) found that government spending would rise $177 billion, that list prices would be largely unaffected, and upfront negotiations between drug manufacturers and PBMs could be 15 percent less than current rebates if the rule is implemented as planned. If the rule is finalized with an effective date sometime in 2020, CMS has already stated it intends to move quickly to issue guidance on a voluntary demonstration to mitigate possible financial impact on patients. This quick turnaround could present significant and immediate operational challenges for industry stakeholders.

Drug Pricing Activity Accelerates in Congress

Over the past several weeks, congressional committees have been pushing out bipartisan draft legislation to address drug prices, teeing up hearings and markups, and starting to advance legislation through regular order. The release of draft legislation in both chambers marks an accelerating pace in the development of prescription drug pricing legislation, as credible proposals are now in writing and potential avenues to implementing them begin to take shape. While additional legislation is expected to be introduced in the coming weeks, the measures that have been introduced so far present a picture of the sort of bipartisan drug pricing package that could ultimately be signed into law this year.

While bills on drug pricing have been introduced in both chambers, the House is taking a notably more piecemeal approach, with legislation introduced by individual members being consolidated into larger legislative packages. Over a dozen individual bills have already been considered by the key committees of jurisdiction (Ways & Means, Energy & Commerce, and Judiciary), several of which have been passed by the full chamber. Most of those measures — including bills addressing transparency and generic competition — represent incremental changes intended to increase competition in the marketplace. Meanwhile, other ideas that would more directly impact drug reimbursement and patient costs are still under development, such as: (1) a bipartisan proposal from Ways & Means and Energy & Commerce Committee leaders to cap out-of-pocket costs for Medicare Part D beneficiaries; and (2) a proposal from Speaker Nancy Pelosi (D-CA) that is expected to allow Medicare to negotiate prices for certain drugs.

In the Senate, on the other hand, committee chairs and ranking members are negotiating entire packages of bills before releasing them to the public. Recently, the Senate Health, Education, Labor, and Pensions (HELP) Committee leaders released their first bipartisan drug pricing package, which adopts new restrictions on pharmacy benefit managers (PBMs) along with a slate of House-passed transparency measures. The HELP Committee is also reportedly working on additional legislation — including potential reforms to the 340B program — which may be included in a late-June markup. Meanwhile, in the Finance Committee, bipartisan staff members have reportedly agreed on several of the major elements of their forthcoming legislation — although a number of provisions, including potential changes to Medicare and Medicaid policy, are still being hashed out.