Health Policy Report

The Week in Review

With the House in recess and the work-week shortened by both Martin Luther King, Jr. Day and a severe snowstorm that sent lawmakers home on Thursday, legislative business was light last week. However, on Tuesday, Senate Democrats successfully blocked a House-passed measure (H.R. 4038) that would restrict refugees from Iraq and Syria from settling in the United States. While the measure was initially slated to be subject to floor debate, Senate Majority Leader Mitch McConnell (R-KY) and Minority Leader Harry Reid (D-NV) were unable to strike a deal on politically charged amendments. Republicans were hoping to include a provision that would give governors the ability to reject refugees from their states, while Democrats wanted to force a vote on presidential candidate Donald Trump’s proposal to ban Muslims from entering the United States. Leader McConnell’s reversal on allowing floor debate is likely to save fellow Republican senators from being on the record over the controversial ‘Muslim-ban’ in an election year. 

Other action in the Senate included a vote to override President Obama’s veto of a resolution (S.J. Res. 22) that would halt the Administration’s so-called ‘Waters of the U.S.’ rule. The resolution, which was passed by the House and vetoed by the President earlier this month, would nullify the water rule that broadens the protections of the Clean Water Act to include small bodies of water, such as streams or wetlands. The vote ultimately failed, but the regulation still will not go into effect until a federal court rules on whether it complies with the Clean Water Act and the Constitution.

The Week Ahead

Washington is still digging out from a severe snowstorm over the weekend that brought two feet of snow to the area. As a result, the week’s schedule is still in flux, with the House already calling off all votes for the week. As of this moment, Senate Republicans plan to begin floor debate on energy legislation this week – if the streets are clear of snow and Washington is back to business. The measure (S. 2012), which had bipartisan support in the Senate Energy and Natural Resources Committee, includes provisions designed to boost efficiency, speed construction of electric transmission lines, and streamline permitting for natural gas exports.

Senate HELP Announces Piecemeal Approach to ‘Innovation’ Bill  

Senate Health, Education, Labor & Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) announced last week that the Senate will not advance a comprehensive companion measure to the House-passed 21^st Century Cures Act (H.R. 6), and will instead hold a series of hearings on several smaller bills – many of which were included in the House package. The first in a planned series of hearings to consider biomedical innovation bills will be held on Feb. 9, followed by additional hearings in March and April. In announcing the hearings, the Chairman stressed the importance of moving forward on a biomedical innovations package in light of the White House’s support through the Precision Medicine Initiative (PMI) and cancer ‘moonshot’ initiative.

While House Energy & Commerce (E&C) Committee leadership welcomed the Senate action, the announcement was not issued jointly with HELP Committee ranking member Sen. Patty Murray (D-WA), who has been engaged in bipartisan discussions with Chairman Alexander on the Senate’s ‘Innovation Initiative.’ Following the release of the hearing schedule, Democratic staff noted that the agenda does not include input from the minority party, who have been pushing for provisions related to drug pricing and mandatory funding for the National Institutes of Health (NIH) as part of a package of Food and Drug Administration (FDA) reforms. Republican priorities in the package have included issues such as off-label use and the regulation of laboratory-developed tests (LDTs).

Questions continue to loom about the political viability of an FDA reform bill advancing during an election year. Senate Majority Leader Mitch McConnell (R-KY) has made no indication that he plans to introduce such a bill on the full Senate floor, as it could force Republicans facing difficult election battles to vote on contentious issues. Meanwhile, the HELP Committee’s plans to introduce a wide-ranging package of reforms—similar to the effort passed in the House last year—have been scuttled amid swelling concerns around drug pricing. And the announcement from Chairman Alexander may indicate that Republicans will move forward in a more partisan way – an argument furthered by the fact that Democratic provisions are not included in the schedule past a markup scheduled for Feb. 9. Nonetheless, bipartisanship is not a totally lost cause in this regard, and it remains possible that that a more comprehensive health care bill could be introduced later this year. 

Alexander, Murray Introduce Bipartisan ‘Interoperability’ Bill

Despite looming questions over the bipartisanship of their legislation to spur biomedical cures, the leaders of the Senate HELP Committee jointly announced the introduction of new legislation to advance the interoperability of electronic health records (EHRs). The legislation would ease the documentation required of providers that participate in federal EHRs by allowing non-physician members of health care teams, such as nurses, to document information instead. Furthermore, it would establish a rating system for health information technology to help doctors and hospitals choose the best product. The bill would also allow the Department of Health and Human Services (HHS) inspector general to investigate health care providers and any health information technology developers who appear to be hindering the sharing of information.

Chairman Alexander and Sen. Murray have stated that the draft will likely be revised and are requesting feedback from officials and interest groups by Friday, Jan. 29.

Medicaid Outpatient Drug Rule Addresses Rising Rx Costs

The Centers for Medicare and Medicaid Services (CMS) released a long-awaited final rule on Medicaid reimbursement for covered outpatient drugs (CODs) last Thursday, including key dimensions of the Medicaid drug rebate program intended to improve beneficiaries’ access to therapies. According to the federal agency, the rule creates a long-term framework for implementing the program and puts in place a fairer reimbursement system for Medicaid programs and pharmacies. The rule implements Affordable Care Act (ACA) changes to Medicaid rebates and is intended to close loopholes, provide pharmacies incentives to use generics, and give officials more tools to manage Medicaid drug costs.

Other provisions in the final rule include: (1) creating a definition for Average Manufacturer Price (AMP) to help determine manufacturer rebates and pharmacy reimbursement, (2) establishing a definition of AMP for inhalation, infusion, instilled, implanted, or injectable drugs in order to allow states to collect rebates on more expensive infused and injected drugs, (3) clarifying the definition of what counts as a manufacturer's best price and aligns that, where possible, with the AMP definition, (4) clarifying the definitions of a retail community pharmacy and wholesaler and establishing definitions for drugs with a pediatric indication and clotting factor, (5) creating an exception to the Federal Upper Limits (FUL) calculation, allowing for a higher multiplier to calculate the FUL based on acquisition costs for certain multiple source drugs, (6) requiring that actual acquisition cost (AAC) be the basis for states determining their ingredient cost reimbursement, (7) setting up a professional dispensing fee to make sure the fee paid to pharmacies reflects the cost of pharmacists' professional services and the costs to dispense the drug to a Medicaid beneficiary, (8) clarifying that states are required to evaluate whether the reimbursement for ingredient costs and for professional dispensing fees are sufficient, and (9) requiring states to specify in a Medicaid state plan the reimbursement methods to pharmacies that buy drugs through the Federal Supply Schedule.

The agency, however, has not yet finalized the definition of line extension drugs, saying that manufacturers should rely on the statutory definition of the drugs while the agency continues to consider comments on that portion of the rule. CMS did finalize the rebate calculation requirements for line extension drugs and the alternative rebate calculations for when there is a corporate relationship between the manufacturer of the line extension drug and the manufacturer of the original brand-name drug. 

In sum, the rule is estimated to save taxpayers $2.7 billion over five years after taking effect April 1. State Medicaid agencies are expected to comply with the rule and submit a state plan that accounts for its effects starting in April 2017, with a final rule on AMP-based FULs and guidance on how to implement ACA FULs expected around the same time. 

Grassley, Wyden Request Provider and Patient Input to Curb Drug Spending

On Thursday, two leading members of the Senate Finance Committee, Chairman. Chuck Grassley (R-IA) and Ranking Democrat Ron Wyden (D-OR) requested advice from a range of providers and patients on ways to control drug spending following their recent investigation of Gilead Sciences’ practices in pricing its hepatitis C medication. In their request, Sens. Grassley and Wyden called for more information on price transparency measures and policies that could ease access restrictions for Medicaid beneficiaries and the poor. The lawmakers are also asking how much of a drug’s value manufacturers should recoup in their pricing, how much breakthrough, single-source drugs affect the market, and whether payers have enough information to assess the cost, patient volume and increase in efficacy of new treatments. 

This request for advice follows a recent spike in attention towards drug pricing in Congress, the Administration, and on the presidential campaign trail. While rising drug prices have received heightened public attention as of late, significant legislative action to curb prices has yet to take shape.

Shkreli to Remain Silent at House Drug Pricing Hearing 

Former Turing Pharmaceutical CEO Martin Shkreli plans to invoke his right against self-incrimination and remain silent during a House Oversight and Government Reform Committee hearing scheduled for tomorrow. Mr. Shkreli was recently arrested and is currently facing criminal charges for his prior management of hedge fund MSMB Capital Management and biopharmaceutical company Retrophin. Prosecutors said Shkreli engaged in a Ponzi-like scheme, defrauding hedge fund investors and then misappropriating $11 million in assets from Retrophin to repay them. 

Lawmakers of the Oversight Committee have subpoenaed Mr. Shkreli to appear to discuss his decision as chief executive of Turing Pharmaceuticals to raise the price of a life-saving medicine, Daraprim, by more than 5,000 percent. They warned that the controversial CEO would be prosecuted for contempt if he chose not to appear at Tuesday’s hearing. However, some are skeptical whether Mr. Shkreli will show up at all. Currently, he is required to ask a judge for a waiver to travel as his release on bond restricts him to certain areas of New York State – so far there is no indication that he has sought one to travel to Washington. 

CMS Works to Aid Waning Insurance Co-ops

Federal officials are intending to make it easier for private firms to invest in the surviving insurance cooperatives (co-ops) created through the ACA; however, some have argued that it would be better to change the rules of a federal program that would shift funds among insurers. The parties are sharply split on why many co-ops have failed, with Republicans suggesting that Congress should never have authorized CMS to spend $2.4 billion on bringing competition to the insurance industry and Democrats blaming federal rules – such as limits on marketing – for putting the start-ups at a disadvantage.

In a Senate Finance Committee hearing Thursday, Acting CMS Administrator Andy Slavitt responded to complaints on the funding of the co-ops by saying that the agency plans to issue guidance soon, but he did not provide specifics of what that guidance would entail. Slavitt also stressed that the co-ops’ success depends on whether their managers can quickly adapt to the competitive market. However, many believe that the co-ops require changes in the risk adjustment program, one of three programs designed to aid both established insurers and the co-ops in the new federal and state health marketplaces.

Last year, the industry asked CMS to consider exempting certain fast-growing insurance plans from paying into the risk adjustment program for three to five years. Others have said that CMS could aid the co-ops by capping payments into the risk-adjustment program at 2 percent of premium revenues. Currently, co-ops may have to pay 15 percent or more of their premiums into the risk adjustment program, with the money often flowing to larger competitors. Critics say these rules favor more established insurers and that newly founded co-ops may not be getting full credit yet for covering people with serious diseases – leading to the proposal for a “circuit breaker,” or a pause or limit to the co-ops’ participation in risk adjustment.