Health Policy Report

November 9, 2015

The Week in Review 

Speaker Paul Ryan’s first full week on the job was a successful one as the House successfully advanced a highway funding measure (H.R. 22) that would renew highway and surface transportation programs for six years – paying for three years and leaving Congress to find funding for the second three years at a later juncture. Conferees from both chambers will attempt to hammer out differences between the two versions this week, with the lower chamber expected to take issue with some of the pay-fors included in the Senate version. The bill, which the House passed on Thursday, includes language to revive the Export-Import Bank, despite opposition from some conservative members. Lawmakers are hopeful that a long-term deal will be agreed to before the most recent short-term highway authorization expires on November 20, but another extension may be necessary if negotiations are drawn out.  

With the budget deal passed, Congress is starting to move on individual appropriations bills that have been stalled for months. The new budget deal increases fiscal 2016 spending caps for defense and non-defense activities by $25 billion each, leaving the door open for a possible omnibus package that would address various appropriations concerns in a single deal. However, last week, the Senate passed a stand-alone defense appropriations bill (H.R. 2685) that will now wait upon an authorization after President Obama vetoed the first authorization bill (H.R. 1735) last month. The defense policy bill would continue the prohibition on closing the military prison at Guantanamo Bay and on transferring detainees; even though Obama opposes those provisions, he’s likely to sign the measure into law.

Finally, in non-legislative action, Rep. Kevin Brady (R-TX) was elected by his Republican colleagues to replace Speaker Ryan as Chairman of the powerful House Ways and Means Committee. Rep. Brady prevailed over Rep. Pat Tiberi (R-OH) in a closed election held by the House Steering Committee on Wednesday in what was reportedly a very tight contest. Chairman Brady will be thrown into a busy time for the Committee as Congressional leaders attempt to seal an appropriations agreement before December 12 – when the continuing resolution currently funding the government expires.

The Week Ahead 

This week’s legislative activity will feature House-Senate negotiations on an omnibus appropriations package—even though the House isn’t in session—and the chambers’ leaders may move to discussions on the long-term highway funding measure. Veterans Day, meanwhile, has prompted Senate leaders to tee up several military-related bills.

Senators are due to consider defense spending authorization Tuesday in a new package (S. 1356) that the House passed last Thursday by a vote of 370-58. To comply with the budget agreement, the bill includes about $5 billion in cuts from the original defense policy bill (H.R. 1735), which the President vetoed because it sidestepped budget caps. The Senate is also considering the Military Construction-Veterans Affairs (VA) spending bill for fiscal 2016. That bill (H.R. 2029) is likely to become the vehicle for the broader measure that would fund all federal agencies. A substitute amendment to the MilCon-VA bill would provide about $79.8 billion for the next fiscal year, which is about $2.3 billion more in spending to comply with the new budget agreement. It also includes several initiatives to reduce the backlog for processing veterans’ benefits claims. 

Off the floor, the Senate will likely name its conferees to iron out differences in the first multi-year highway authorization law since 2012. The House has expressed concerns over some of the pay-fors used to finance the Senate version of the bill. And further complicating matters is the recent passage of the Budget Agreement, effectively taking some of those offsets off the table. This will be the key area of negotiation in the conference committee and the result could be a much narrower bill that extends funding into 2017, but would require Congress to revisit funding under a new President. If that happens, Congress will return its focus to repatriation and other tax measures to then fund a longer transportation measure.

Drug Pricing Comes Under Scrutiny from Congress, Administration

After a post-Affordable Care Act détente that limited policy discussions around the issue of drug pricing, a slew of critical headlines among drug manufacturers has thrust pharmaceutical costs back to the forefront of emerging health policy issues.  Following recent stories around controversial drug makers including Turing and Valeant, policymakers in Congress and the Obama Administration are coming under increased pressure to address rising prescription drug costs – and both lawmakers and regulators took steps last week to increase their investigation of the issue.  Last Wednesday, for example, the Senate Special Committee on Aging launched a bipartisan probe into recent price spikes of off-patent drugs, tentatively scheduling a December 9 hearing on the matter. The Committee will focus on FDA's “role in the drug approval process for generic drugs, the agency’s distribution protocols, and, if necessary, its off-label regulatory regime.”  Likewise, Democrats on the House Oversight and Government Reform and Energy & Commerce Committees are pressing Republican leadership for hearings in the lower chamber. 

Meanwhile, the Obama Administration is opening an inquiry of their own—seeking a balanced approach to the issue—as the Centers for Medicare and Medicaid Services (CMS) sent letters on Thursday to both sides in the drug pricing debate. On one hand, it sent letters to drug companies asking about pricing arrangements that they have with state Medicaid programs and ways to assist states with making high-price drugs affordable. On the other hand, CMS also sent letters to state Medicaid programs expressing concern that they are restricting access to high-price drugs too much as a way to keep down costs. The letters came just days after the administration announced an invitation-only forum on drug prices slated for November 20.  According to the agency, the forum will bring together a broad range of health care stakeholders—including consumers, providers, employers, manufacturers, insurers, and state and federal government officials—to explore ways to stem rising specialty drug costs and ensure patient access to medications. 

Energy and Commerce Health Panel Advances Mental Health Legislation

Wednesday, culminating years of effort, the House Energy and Commerce (E&C) Committee health subcommittee voted to pass a mental health reform bill after a long and heated debate during which Democrats protested that they had been cut out of the process. The subcommittee’s vote served both as a testament to the perseverance of its sponsor, Congressman Tim Murphy (R-PA), as well as the difficulty of finding bipartisan consensus on such a delicate issue. 

Rep. Murphy first introduced the bill in 2013 as a response to the 2012 Sandy Hook Elementary school shooting. Among other things, the bill aims to overhaul the mental health system by dismantling SAMHSA and shifting the agency’s responsibilities to a newly created office of the assistant secretary for mental health within HHS, expanding exemptions to HIPAA privacy laws regarding when providers can share health information with caregivers and family members of patients with serious mental illness, and providing financial incentives to states with assisted outpatient treatment (AOT) laws, which allow judges to order a patient with a serious mental illness to follow an intensive treatment plan.

While the subcommittee’s members have been meeting for months negotiating the bill, Wednesday’s mark-up showed that partisan disagreements remain, as highlighted by numerous amendments unsuccessfully offered by Democrats throughout the evening. Among other concerns, Democrats argued that the bill’s language jeopardizes patient privacy, which could deter patients from seeking care and that the AOT provision violates patients’ civil liberties. Finally, Democrats took issue with cuts in funding for the treatment of abuse of substances in SAMHSA’s budget. Energy and Commerce Chairman Fred Upton (R-MI) noted that both Republicans and Democrats had raised valid concerns with the bill and offered to work with all members to identify solutions before a full committee markup. He also stated several times that the full committee markup has not yet been noticed and that a date has not been set.  

Among other challenges with the bill were its funding. The Congressional Budget Office (CBO) on Tuesday estimated that the Medicaid provisions could cost roughly $40 to $60 billion over ten years. Rep. Upton suggested that he would have to speak to new Speaker Paul Ryan (R-WI) about the new Medicaid spending. Ultimately, H.R. 2646 was adopted 18-12, mostly along party lines, with Rep. Kurt Schrader (D-OR) casting the only Democrat vote in support of the bill’s passage. 

CMS Rebuffs Pricing Complaints for Biosimilars 

Last Friday, the Centers for Medicare and Medicaid Services (CMS) finalized a self-deemed “competitive pricing plan” for biosimilars, much to the dismay of pharmaceutical firms and lawmakers who sought separate coding and reimbursements for each copycat version of a biotech drug. The new payment rule would instead place biosimilars that reference the same brand biologic in a single billing code, and would base reimbursement on average sale price of all products within that code, similar to its treatment of generic drugs.  

Both drugmakers and many members of Congress have warned that this approach could make tracking side effects from new entrants to the market more difficult and remove some of the incentive for biosimilars by essentially compressing reimbursement rates. A bipartisan group of lawmakers including more than 30 House members and 20 senators wrote letters to CMS urging them to reconsider their proposal. CMS responded, however, by stating it would develop an approach for monitoring the makers of different versions of biotech drugs for potential side effects in its final rule.

Democratic Leaders Pushing for ‘Cadillac’ Tax Repeal in Tax Extenders Package

Senate Minority Leader Harry Reid (D-NV) and House Minority Leader Nancy Pelosi (D-CA) are rumored to be negotiating the repeal of a controversial tax on high-cost health plans included in the Affordable Care Act (ACA). The two Democratic leaders have reportedly discussed a repeal with President Obama since last spring and have targeted an upcoming package on tax extenders as the most attractive vehicle for getting rid of the tax. Including the ‘Cadillac’ tax repeal in a tax extenders package would allow for the measure to avoid budget offsets that are required of most bills, but are typically not considered for tax extenders.

 While the tax isn’t set to go into effect until 2018, it has already drawn the ire of lawmakers on both sides of the aisle. Labor groups have been particularly vehement in convincing Democrats to oppose the tax, but the repeal’s $87 billion price tag has proven to be a significant obstacle. One solution that has emerged would be to use an offset package that was originally intended to be included in the “doc-fix” legislation enacted into law earlier this year, but was rejected by House lawmakers. Even with the offset, the Obama Administration remains firmly in favor of the tax, with an official describing it last month as “perhaps the single biggest leverage we have on health costs in the private sector.” However, with a bipartisan consensus in favor of getting rid of the tax—and notably all Democratic presidential candidates favoring repeal—the President may be forced to reluctantly sign a measure repealing the tax into law if it reaches his desk.

Democrats Offer Lukewarm Defense of Health Co-ops

The nonprofit health insurance cooperatives established and heavily subsidized by the Affordable Care Act (ACA) are struggling, but Congressional Democrats have offered little support. ACA drafters intended for co-ops to lower prices in the health insurance market by challenging the dominance of a few large insurance companies, however at least 13 of the two-dozen health co-ops have failed. This includes a Vermont project, which was never allowed by state regulators to begin selling insurance.

Last month, CMS announced a $2.5 billion shortfall in the program and a subsequent 87 percent reduction in expected payments. The cause for the failure remains an area of dispute, but a House Energy and Commerce panel will examine them on Thursday.

The co-ops were incorporated into the law as part of an intraparty settlement among Democrats after it became clear that supporters of a government-run health insurer option would not get their wish. Some Democrats today blame Republicans for the co-ops’ collapse, arguing that Republicans have been sabotaging them in order to demonstrate the flaws in the ACA. Funding for the co-op program has dramatically diminished from the $6 billion initially provided for the program, and Democrats say marketing restrictions put in place have also led to the shortfall in so-called risk corridor payments. Both the House and Senate versions of the fiscal 2016 spending bills (H.R. 3020, S. 1695) would revoke $18 million from the co-op account, likely stripping much or all of what remains. Instead of fighting for the funds, Democratic appropriators have mainly focused on eliminating other spending cuts in the program such as the Title X family planning funds, which have caused the rescission of health co-op funding to go largely unnoticed.

Medicare Advisers Put Spotlight on Part D Policies

On Thursday, the Medicare Payment Advisory Commission (MedPAC), considered a package of proposed policy options for Congress surrounding shared risk in Medicare Part D. Within the options included a recommendation to “remove two drug classes from protected classes.” While the staff was not explicit about which classes they were considering removing, they did reference CMS’ January 2014 proposed rule to remove antidepressants and immunosuppressants.  The staff suggested that the policy limits the ability of prescription drug plans (PDPs) to negotiate lower prices with manufacturers, while also pointing out that it’s worth “thinking through whether beneficiaries can get relatively quick access” to medications when in need. Not all staff members agreed to the proposal, however, as some were concerned that the change could have unintended consequences for beneficiaries and others questioned whether the change is even necessary. This ruling would jeopardize hundreds of thousands of Americans who need access to a full range of effective medications to manage their health conditions such as those with mental illness and cancer.

The policy recommendations discussed included: reducing Medicare’s reinsurance to twenty percent; easing mid-year formulary changes and allowing plans to provide shorter days’ supply for higher priced drugs; and updating the previous copy recommendation, including new tier structure and preferred pharmacy networks. The staff was mostly in agreement with reducing Medicare’s reinsurance rate, while most resistance was evident in the option to create preferred pharmacy networks. Some staff members stressed that preferred pharmacies could be too difficult for low-income beneficiaries to access because of travel limitations. The Commission plans to revisit Part D during their March public meeting, at which time MedPAC staff will return with a revised package of recommendations.  This will allow an opportunity to provide additional feedback before the staff returns in April for a planned vote on a package of recommendations around Part D.