Health Policy Report (2/3)

February 3, 2020

The Week in Review

The Senate — sitting as a court of impeachment — resumed its trial of President Donald Trump last week. Following two marathon days of questioning, Senators took a vote to consider additional evidence and witness testimony beyond the scope of the House’s investigation. The motion was defeated on a close 49-51 vote, with Sens. Susan Collins (R-ME) and Mitt Romney (R-UT) joining all Senate Democrats in support of further witness testimony.

In notable House floor activity, lawmakers cleared a bipartisan suspension bill that would address an expiring ban on synthetic opioids. Passed unanimously by the Senate, the measure would provide a 15-month extension of the Drug Enforcement Agency’s (DEA) temporary Schedule I designation of fentanyl analogues. The bill is expected to be swiftly signed into law by President Trump ahead of the Feb. 6 expiration date.

Also on the House floor last week, lawmakers passed a slew of bills on a party-line basis. The lower chamber cleared a package of credit-related bills out of the Financial Services Committee aimed at modernizing the Fair Credit Reporting Act (FCRA). The House also passed two bills that would repeal the 2002 Authorization for Use of Military Force (AUMF) against Iraq, as well as limit President Trump’s ability to engage in military offensives against Iran absent Congressional approval. Each of these measures are considered dead-on-arrival in the GOP-controlled Senate after the White House issued veto threats earlier last week.

The Week Ahead

The impeachment trial of President Trump is nearing an endgame after the Senate chose not to pursue additional evidence and witness testimony last week. Senate Majority Leader Mitch McConnell (R-KY) outlined the next steps in the upper chamber’s impeachment process prior to the end of last week. Leader McConnell’s resolution provides two days of closing arguments and Senate speeches today and tomorrow, followed by votes to acquit the President on the two articles of impeachment next Wednesday.

Meanwhile, the House will reconvene tomorrow as President Trump is set to deliver his third State of the Union address. On the floor for the balance of the week, lawmakers will consider a Congressional Review Act (CRA) resolution that seeks to overturn the Trump administration’s recently announced Medicaid block grant demonstration. The lower chamber will also take up a $4.7 billion emergency aid package that seeks to provide disaster relief for Puerto Rico, as well as a bill out of the Education and Labor Committee that would amend the National Labor Relations Act and related labor laws to extend protections for union workers. 

CMS Announces Limited Medicaid Block Grant-Style Opportunities

Last Thursday, the Centers for Medicare and Medicaid Services (CMS) announced a demonstration opportunity for states to cover certain optional Medicaid populations through a capped funding mechanism at an event that brought together senior administration officials including Health and Human Services (HHS) Secretary Alex Azar, CMS Administrator Seema Verma, and Domestic Policy Council Director Joe Grogan. A State Medicaid Director Letter (SMDL) outlines the parameters for the 1115 demonstration opportunities, termed Healthy Adult Opportunities (HAO), in which participating states would need to operate within a defined budget but would have access to significant flexibilities including limited formularies, pared-down benefits, beneficiary premiums and cost-sharing, waiving retroactive coverage and presumptive eligibility, and instituting work requirements. Alongside those flexibilities, CMS would require a quality strategy from participating states, including reporting 25 quality and access to care measures from CMS’ adult core set and reporting a set of continuous performance indicators on the demonstrations. The SMDL maintains a focus on HIV care, substance use disorder (SUD) care, and mental health, asserting robust protections and coverage for beneficiaries in requiring such care. CMS officials frame the opportunity as a way to contain costs for the expansion population while reinvesting savings in Medicaid’s core beneficiary populations, and indeed, CMS will release a portion of shared savings back to states.

CMS Administrator Seema Verma emphasized Medicaid’s role as a safety net program and criticized the Affordable Care Act’s (ACA) Medicaid expansion for putting an emphasis on beneficiaries who were not the original target population of the program. Citing concerns with lax state eligibility process, the Administrator stated CMS will permit states participating in an HAO demonstration to institute new conditions of eligibility, including asset tests, income limits, and community engagement requirements. However, limiting coverage to exclude segments of the expansion population — for instance by capping enrollees — would not be permitted if a state receives an enhanced federal matching rate for that population. At the regular federal medical assistance percentage (FMAP), states would have more leeway. Additionally, states could introduce a closed formulary for prescription drug coverage for beneficiaries covered by an HAO demonstration, though significant protections would be in place for drugs to treat behavioral health disorders, substance use disorders, and HIV. The formulary restrictions may not address some state concerns about the costs of novel treatments such as gene therapies.

Patient groups were immediately critical of the plan. Twenty-seven groups, including the American Lung Association, the Epilepsy Foundation, the Cystic Fibrosis Foundation, and the National Alliance on Mental Illness, issued a statement saying that “block grants and per capita caps will reduce access to quality and affordable health care for patients with serious and chronic health conditions and are therefore unacceptable to our organizations.” The House Energy & Commerce Committee’s majority called the plan “illegal” and that it “blatantly violates the Medicaid statute and defies clear congressional intent.” The House will hold a symbolic vote this Thursday to block the demonstration.

FDA Releases Seven Guidances on Gene Therapy

The Food and Drug Administration (FDA) released six final guidances and one draft guidance to inform the development and manufacture of gene therapies last week. Following approval of four gene therapies, FDA anticipates much more activity in the coming years, noting that there are over 900 investigational new drug applications for gene therapy clinical studies. The final guidances provide recommendations on manufacturing issues and for disease-specific product development. FDA notes that the clinical reviews of gene therapies is more difficult than those for conventional drugs and that the agency may accept some uncertainty regarding response duration.

The draft guidance addresses FDA’s comparison of different gene therapy products that treat the same disease for the purpose of orphan drug designation. The agency says that it is seeking to not discourage the development of multiple gene therapies to treat the same disease. FDA Commissioner Stephen Hahn said that the administration “understands and appreciates the tremendous impact that gene therapies can have on patients by potentially reversing the debilitating trajectory of diseases. These therapies, once only conceptual, are rapidly becoming a therapeutic reality for an increasing number of patients with a wide range of diseases, including rare genetic disorders and autoimmune diseases.”

GAO Finds Faults in 340B Duplicate Discount Avoidance

The Government Accountability Office (GAO) released a report finding fault with HHS’ oversight of state processes for avoiding “duplicate discounts” in the 340B Drug Pricing Program and Medicaid Drug Rebate Program (MDRP) last Monday. States are prohibited from seeking rebates under the MDRP program for drugs obtained through the 340B program, and GAO found that the Department of Health and Human Services (HHS) “does not have reasonable assurance that states and covered entities are complying with the prohibition on duplicate discounts.” States must keep track of when 340B drugs are dispensed to Medicaid beneficiaries in order to prevent duplicate discounts, and GAO found multiple shortcomings in HHS’s oversight that allow duplicate discounts to occur.

GAO found a number of shortcomings in HHS’s oversight of 340B and MDRP as it relates to duplicate discounts, and offered three recommendations. First, the report recommended that “CMS ensure that state Medicaid programs have written policies and procedures that are designed to prevent duplicate discounts and forgone rebates.” The GAO also recommended that HRSA “incorporate covered entities’ compliance with state policies into its audits.” Lastly, the report recommended that HRSA “require covered entities to work with manufacturers regarding repayment of identified duplicate discounts in managed care.” GAO noted in its report that HHS agrees with the CMS recommendation, but it disagrees with those for HRSA.

House Democratic Leadership Aims for Surprise Billing Fix ‘Sooner Rather than Later’

House Majority Leader Steny Hoyer (D-MD) noted last week that he plans to pass legislation banning balance billing through the House as soon as mid-February. He explained that he was working with the Energy & Commerce and Ways & Means Committees to reach an agreement so that the House can “move a bill sooner rather than later.” The House Ways and Means Committee announced later last week that they would release a surprise billing proposal this week, and mark up the legislation February 12. Although few details have yet been released about the potential proposal, an outline put forth by the Committee in December was at odds with the bipartisan, bicameral compromise hammered out by the House Energy & Commerce and Senate health committees. Meanwhile, House Education & Labor Committee Chair Bobby Scott (D-VA) recently said his committee will also soon release surprise billing legislation, but the committee has yet to unveil its approach.

CMS Proposes to Exclude Manufacturer Coupons from Cost Sharing

Last Friday, the Centers for Medicare and Medicaid Services (CMS) released its 2021 Notice of Benefit and Payment Parameters for health plans sold on the exchanges. In the annual rule setting parameters for Exchange plans, the agency proposed a number of policy changes, including changing the definition of cost-sharing to exclude pharmaceutical manufacturer coupons and updating periodic data matching procedures to try to cut down on improper payments. CMS is also seeking comment on a process in which consumers with $0 plans would be required to return to the Exchange during open enrollment to receive a new eligibility determination for the premium tax credit. The proposed rule is open for comment, and stakeholders may weigh in until March 2, 2020.

CMS is proposing to interpret the definition of cost sharing to exclude manufacturer coupons. This may have the effect of increasing patients’ out-of-pocket (OOP) costs, as they may achieve cost sharing limits more slowly. The proposed rule also offers issuers options for implementing value-based insurance design, and they would be permitted to adopt some, all, or none of the designs. In response to the high number of individuals eligible for zero-dollar plans after premium tax credits, CMS is seeking to restrict automatic re-enrollment in such plans without eligibility redeterminations. Additionally, the agency seeks to have Exchanges not re-determine eligibility for premium tax credits or cost-sharing reductions when individuals voluntarily terminate their coverage following periodic data matching finding that they are enrolled in other minimum essential coverage. It would also retroactively terminate coverage for deceased individuals at the date of death. Lastly, the rule also seeks to amend medical loss ratio (MLR) rules to deduct prescription drug rebates that are retained by pharmacy benefit managers (PBM), and also require issuers to report expenses for outsourced services in the same manner as non-outsourced services.

GAO Calls for Greater CMS Oversight of State Medicaid MAT Coverage

Recently, the Government Accountability Office (GAO) released a report highlighting state policy barriers to Medicaid beneficiary access to opioid use disorder (OUD) treatment medication. GAO reported that Medicaid is one of the largest sources of coverage for individuals undergoing medication-assisted treatment (MAT), and analyzed existing policies, examined studies, and conducted interviews with relevant stakeholders to determine the barriers to MAT. The report includes recommendations that HHS ensure that states comply with federal requirements to cover MAT medications. HHS concurred with this recommendation. The GAO examined policies surrounding buprenorphine, buprenorphine-naloxone, and naltrexone, and three selected states’ and the District of Columbia’s efforts to address potential access barriers.