Health Policy Report (3/22)

March 22, 2021

House lawmakers have completed their voting sessions for the month of March after passing a measure to ensure that the increase in deficit spending as a result of the American Rescue Plan (ARP) does not trigger statutorily-required across-the-board spending cuts. The bill would avert billions of dollars in automatic spending cuts — known as sequestration — to Social Security, Medicare, Medicaid, and other programs required under the 2010 pay-as-you-go (PAYGO) law. If the Senate does not act on the PAYGO sequester prior to the end of this year’s session, the Congressional Budget Office (CBO) estimates that the increase in spending would trigger roughly $381 billion in funding cuts annually over five years, beginning in fiscal year (FY) 2022. The House will convene for a Committee Work Week next week, and its next scheduled voting day is Tuesday, April 13.

When the Senate convenes for legislative business this week, Senators will consider a bipartisan deal that would move the Paycheck Protection Program (PPP) loan application date to May 31, while also allowing the Small Business Administration (SBA) to continue processing pending applications for up to 30 days after the new expiration date. The bill is likely to pass prior to the March 31 expiration date and be signed into law swiftly by President Joe Biden. In addition to the PPP Extension Act, the Senate will take up the nominations of: (1) Marty Walsh to be Labor Secretary; (2) Vivek Murthy to be U.S. Surgeon General; (3) Rachel Levine to be Assistant Secretary at the Department of Health and Human Services (HHS); (4) Adewale Adeyemo to be Deputy Treasury Secretary; (5) Shalanda Young to be Deputy Director of the Office of Management and Budget (OMB); and (6) David Turk to be Deputy Energy Secretary.

CMS Abandons Model Weakening ‘Protected Classes’

Last Tuesday, the Centers for Medicare and Medicaid Services (CMS) announced that it would roll back changes to a Part D demonstration that would have weakened Medicare’s prescription drug coverage patient protections. The agency released an updated Request for Applications (RFA) for the Part D Payment Modernization (PDM) Model for CY 2022 (RFA, Fact Sheet) eliminating the changes, which were proposed in the final days of the Trump administration. In the initial RFA for the calendar year (CY) 2022 performance period, the Trump administration announced that it would allow model participants to treat Medicare’s six protected classes as they would any other drug class and cover only one drug per therapeutic class. CMS noted in last week’s announcement that stakeholder feedback was a major consideration in the decision to not move forward with the changes. 

Under current statute and regulation, Medicare Part D plans are required to cover two drugs in each therapeutic class, with the exception of six protected classes, of which plans must cover substantially all drugs. The six protected classes are antipsychotics, anticonvulsants, antidepressants, antiretrovirals, antineoplastics, and immunosuppressants for organ transplant. The Trump administration’s last-minute changes to the model for CY 2022 would have allowed participants to waive the requirement that substantially all protected class drugs be covered, with the exception of antiretrovirals. Antiretrovirals would have joined the other classes in being waived beginning CY 2023. Additionally, CMS had announced that it would allow participating plans to cover just one drug in each therapeutic class rather than the current requirement of two. This lessened coverage requirement would have applied to protected class drugs in participating plans, as well. Both opportunities for plans to waive patient protections were jettisoned in last week’s announcement.

In addition to the rollback of the proposed formulary flexibilities, CMS announced that it would not follow through with a change to a demonstration that would have removed downside risk for plans for 2022. When the Trump administration announced model changes in January 2021, it cited a change to the anti-kickback regulation that disallows rebates to PBMs. However, the rule was delayed by court order until 2023, obviating the reasoning for removing downside risk. 

Although letters of intent for participation in the PDM Model for CY 2022 were due March 1, CMS announced last week that all plan types that were eligible to participate in the model in 2021 may apply to participate in 2022. With the changes to the 2022 performance year negated, CMS says that it will simply continue to allow participants to adopt the same flexibilities it allowed in 2021, which included: (1) Part D rewards and incentives programs; (2) Medication Therapy Management+ programs; (3) cost-sharing smoothing; (4) limiting initial days’ supply; (5) reducing or eliminating cost-sharing on generics and biosimilars for Low-Income Subsidy beneficiaries; and (6) plan timeliness for standard initial coverage determinations. Plans interested in participating in the PDM Model in 2022 may apply starting March 23, 2021 with a deadline of April 16, 2021. It seems likely that without the additional flexibilities, plan interest in the Model will not climb significantly.

Becerra Confirmed as HHS Secretary

The Senate voted to confirm Xavier Becerra as Secretary of Health and Human Services (HHS) in a narrow vote of 50-49 last Thursday. Sen. Susan Collins (R-ME) was the lone Republican to vote in favor of Sec. Becerra’s confirmation, citing his commitment to rural health care and lower drug prices as her reason for support. Sen. Mazie Hirono (D-HI) did not vote. The Senate is expected to take up the nominations of Vivek Murthy to be U.S. Surgeon General and Rachel Levine to be Assistant HHS Secretary this week.

HHS Report Finds Work Requirements, 1115 Demonstrations Linked to Coverage Loss

A new report by the Office of the Department of Health and Human Services (HHS) Assistant Secretary for Planning and Evaluation found that several state Medicaid waivers were tied to coverage losses and negative health impacts due to beneficiary confusion surrounding work requirements, health savings accounts, healthy behavior incentives, premiums, and more. The analysis was mandated by President Biden’s executive order directing the immediate review of all Medicaid demonstrations that could reduce coverage, and examined work requirement waivers in Arkansas, New Hampshire, and Michigan. While the stated intent of these demonstrations is the desire to improve beneficiary health, the report notes, the loss of coverage carries a “significant risk” of having the opposite effect. HHS explained that policies that lead to the loss of Medicaid coverage, increased rates of un-insurance, and increased barriers to health care can have significant negative public health consequences — particularly during public health emergencies such as the COVID-19 pandemic. The report’s findings serve as additional evidence that the Biden administration is unlikely to allow the work requirement demonstrations to continue.

HHS’s report also found that limited awareness and confusion surrounding healthy behavior incentive programs result in low program completion rates, but that states offering the programs under expanded Medicaid still experienced substantial coverage gains and improved access to care. The five states with health savings account demonstrations suffered from beneficiary confusion and lack of awareness and led to disenrollment — particularly among those with chronic conditions. The analysis was unable to determine how capped funding programs impacted beneficiary access to care as no such demonstration have gone into place. Additionally, 1115 waiver demonstrations implementing premiums, eliminating or reducing retroactive eligibility, and increasing verification and periodic data matching to identify potential changes in beneficiaries’ circumstances resulted in reduced coverage rates.

FTC Announces New Approach to Pharmaceutical Mergers

The Federal Trade Commission (FTC) announced last Tuesday that it was launching a working group with counterpart competition enforcement agencies in the U.S. and abroad to develop a new approach to analyzing the impact of pharmaceutical company mergers. The working group is will tap into the expertise of stakeholders the FTC frequently coordinates with, and will include: the Canadian Competition Bureau, the European Commission Directorate General for Competition, the U.K.’s Competition and Markets Authority, the U.S. Department of Justice Antitrust Division, and Offices of State Attorneys General. The FTC noted that the group will work to identify “concrete and actionable steps” to review and update the analysis of pharmaceutical mergers, taking into account fresh approaches that fully address the “varied competitive concerns” these mergers create.

FTC Acting Chair Rebecca Kelly Slaughter cited the high volume of pharmaceutical mergers in recent years, rising drug prices, and ongoing complaints of anticompetitive behavior in the industry as reasons it was critical the members of the FTC rethink their approach to pharmaceutical mergers. She stated the organizations would take an “aggressive” approach to tackling anticompetitive pharmaceutical mergers. The working group will strive to answer the following questions: 

  • How can current theories of harm be expanded and refreshed?
  • What is the full range of a pharmaceutical merger’s effects on innovation?
  • In a merger review, how should we consider pharmaceutical conduct such as price fixing, reverse payment, and other regulatory abuses?
  • What evidence would be needed to challenge a transaction based on any new or expanded theories of harm?
  • What types of remedies would work in the cases to which those theories are applied?
  • What have we learned about the scope of assets and characteristics of firms that make successful divestiture buyers?

340B Administrative Dispute Resolution Process on Hold

A federal judge in Indiana last Tuesday temporarily blocked the administration from implementing a rule establishing an administrative dispute resolution process for the 340B drug program. The preliminary injunction was sought by Eli Lilly, who filed a lawsuit against the Department of Health and Human Services (HHS) last December arguing that the former administration improperly implemented the rule. Sanofi and AstraZeneca also filed lawsuits against the rule, stating that HHS should have followed normal notice and comment procedure.

U.S. District Court Judge Sarah Evans Baker ruled that the 340B administrative dispute resolution rule be put on hold while Eli Lilly’s lawsuit on it proceeds. She sided with drug manufacturers that the health administration violated the notice and comment rulemaking requirements under the Administrative Procedure Act, considering that there were years between the proposed and final rules and that the Unified Agenda listed the proposal as withdrawn. The federal judge explained that HHS violated Eli Lilly’s “rights and interests,” and pointed to past statements from Trump administration officials that they would not move forward with the rule without additional authority from Congress to enforce the guidance. Furthermore, she noted the preliminary injunction would have no immediate impact as the administrative dispute resolution process, board, and panels had not yet been finalized or implemented.