Health Policy Report

The Week in Review
 
­­­­The White House set the tone in Washington last week by releasing its proposed budget for fiscal year (FY) 2017 on Tuesday. While the $4 trillion proposal adheres to the topline spending deal struck by President Obama and Republican leadership last year, current Speaker Paul Ryan (R-WI) and other Republicans are unlikely to give it any real consideration in Congress. Nevertheless, a number of top Administration officials testified in both chambers last week to discuss the proposed budget and defend various executive agency practices. The budget projects revenue to increase by $308 billion next year and spending to rise by $196 billion, while requesting more funds to research cancer, combat heroin addiction, and bolster the military’s fleets of aircraft and naval vessels. The budget will also call for a $10 per barrel oil tax to pay for an infrastructure build-out across the country aimed at reducing carbon emissions.

In a busy week in the lower chamber, the House passed bills on veterans’ affairs, adjusting Food and Drug Administration (FDA) disclosure requirements on nutritional information, and placing additional sanctions on North Korea in response to its recent testing of a long range rocket. Among the veterans-related bills passed last week were measures to adjust the standards for the Department of Veterans Affairs (VA) to enter into new construction projects (H.R. 3106), broaden the definition of physicians within the VA to include podiatrists (H.R. 3016), and link increases in Social Security benefit amounts payable to an equal increase in veterans’ disability compensation (H.R. 677). The FDA bill (H.R. 2017), approved on a 266-144 vote, would require the agency to reissue rules requiring restaurants to display nutritional information on menus. The new rules would allow businesses as long as 90 days to fix a violation before they would face penalties. While the White House stopped short of a veto threat in its position statement, it said the legislation would undercut the goal of giving consumers clear, consistent information.

 
In the Senate, lawmakers failed to come to a compromise on comprehensive energy legislation (S. 2012) after the bill became entangled in the ongoing controversy over tainted water in Flint, Michigan. While that bill’s consideration was delayed two weeks, the Senate did approve the conference report to a customs enforcement measure (H.R. 644) that includes a provision that would permanently ban states and municipalities from taxing Internet access. The measure, which was passed by an overwhelming 75-20 margin, would expand trade enforcement programs and reauthorize the U.S. Customs and Border Protection Agency for the first time since it was created in 2002. President Obama is expected to sign the bill into law this week. 
 
Finally, over the weekend, Supreme Court Justice Antonin Scalia, one of the most conservative judges on the nation’s highest court, passed away at the age of 79. The consideration of a successor to Scalia has already produced a partisan divide as Democrats will hope President Obama can force a nominee through the Senate before he leaves office in January 2017. However, Senate Majority Leader Mitch McConnell (R-KY) is unlikely to be cooperative and has insisted that the post "should not be filled until we have a new president."
 
The Week Ahead
 
The House and Senate will both be in recess this week for the Presidents’ Day holiday. The Senate aims to return on Monday, Feb. 22, with the House set to reconvene a day later.
 
White House Budget: Drug-Pricing, MA Bids, Cancer ‘Moonshot,’ Opioid Crisis
 
The White House unveiled its fiscal 2017 budget request Tuesday – a roughly $4 trillion budget request – that echoes a number of prior healthcare budgetary proposals, and altogether amounts to roughly $492 billion in cuts over the next 10 years. Furthermore, an additional $56.4 billion in ten-year savings are delineated via proposed Medicare structural reforms for the Department of Health and Human Services (HHS). The budget conforms to the federal budget levels established last fall, and proposes to lift sequestration in FY 2018 and beyond.
 
The budget proposes a handful of anticipated new policies for the Centers for Medicare and Medicaid Services (CMS), including several aimed at reducing drug prices. Among the provisions in the budget are: (1) letting CMS partner with states to negotiate drug prices; (2) making drug makers disclose discounts and research-and-development costs; (3) requiring drug wholesales to report wholesale acquisition costs; (4) requiring evidence development for Medicare Part D drugs; (5) eliminating surprise out-of-network charges in commercial plans; and (6) giving Puerto Rico and other territories $30 billion more in Medicaid funding. The drug pricing measures in particular are expected to draw controversy, as many lawmakers, especially Republicans, fear that it could hinder innovation.
 
The budget also creates a Medicare Advantage (MA) bidding program, which is estimated to save $77.2 billion over a ten years. Specifically, the program would calculate an adjusted benchmark, against which plans are paid, as the lesser of the current law's fee‐for‐service benchmark or the average Medicare Advantage plan bid plus a 5 percent “buffer” to protect beneficiary rebates. However, the program is expected to see pushback, as MA plans are popular with seniors, and health plans have successfully partnered with beneficiaries in the past to oppose unpopular CMS proposals.
 
Finally, the President’s budget calls for $1.1 billion in new mandatory funding to address the opioid abuse and heroin epidemic, $500 million in new mandatory funding over two years for individuals with serious mental illness, and $1 billion to support the newly-announced National Cancer Moonshot initiative. While Democrat appropriators applauded the proposal, some research advocates were disappointed because as a consequence, it could reduce research funding in other areas, such as diabetes, multiple sclerosis, or rare diseases. Despite this criticism, funding for cancer research, opioid abuse, and mental health programs enjoy bipartisan support and may gain traction in the Republican-led Congress.
 
Burwell, Hatch Spar Over Medicare Drug Negotiations
 
At a Senate Finance Committee hearing on the budget for the Department of Health and Human Services (HHS) for Fiscal Year 2017, HHS Secretary Sylvia Mathews Burwell was pressed by committee chairman Sen. Orrin Hatch (R-UT) on whether President Obama is considering utilizing executive action to negotiate drug prices in Medicare Part D. Burwell said that the executive branch was “looking at opportunities for what we can do in terms of drug prices,” pointing to the fact that prescription drugs are an “increasing percentage of [the nation’s] overall health costs.” In their exchange, Chairman Hatch reminded Burwell that the 2003 measure (H.R. 1)  that created the Medicare Part D program deliberately assigned the task of negotiating drug prices to insurance companies, and warned that an executive order “would be in violation of the law.” 
 
Secretary Burwell went on to explain the steps the Administration has already taken to reduce prescription drug costs for beneficiaries – such as installing additional transparency measures and closing the coverage gap known as the ‘donut hole’ – but avoided any specifics on a possible executive order. Chairman Hatch continued to express concern with these proposals, noting his support for the biopharmaceutical industry and criticizing a provision in the Trans-Pacific Partnership (TPP) trade deal regarding drug exclusivity.
 
Senate Eyes Path Forward on ‘Innovation’ Initiative
 
On Tuesday, the Senate Health, Education, Labor, and Pensions (HELP) Committee approved a series of seven bills in the first of three planned meetings to mark up medical innovation legislation that will eventually become the panel’s response to the House-passed 21^st Century Cures Act (H.R. 6). However, the Senate’s version will not be an exact match to the House effort and will instead focus on priorities identified by the Senate panel’s members, such as improving federal electronic health record programs. During the hearing, Chairman Alexander provided a glimpse into his expectations for the process of moving the group of twenty bills to the Senate floor, emphasizing bipartisanship and suggesting that consideration of each would include an opportunity for debate and open amendment. He aims to create a consensus on the measures in the Senate panel, while saving more contentious debates – such as that over mandatory National Institutes of Health (NIH) and Food and Drug Administration (FDA) funding – for the Senate floor.
 
The partisan differences over funding forced the committee to break up the innovation package into separate bills rather than approach the issue through a single bill as was done in the House. Nonetheless, Chairman Alexander and other moderate Republicans on the panel have expressed optimism the bills can be re-combined into a single bill after their panel consideration. Others have been much less enthusiastic, as Democrats have refused to support any bill that does not include mandatory funding for both the NIH and FDA. Additionally, many in the minority party, including Sen. Elizabeth Warren (D-MA) are worried that the bills might “neuter” the FDA’s oversight of drugs and medical devices.
 
Opioid Abuse Bills Advance Despite Dem. Funding Concerns
 
The Senate Judiciary Committee advanced a pair of bills Thursday designed to address the prescription drug abuse problem, but notably declined to include funding despite the urging of the panel’s Democrats. Among the bills that passed were: (1) the Comprehensive Addiction and Recovery Act (S. 524), (CARA), which would provide financial assistance to state efforts on prescription drug monitoring, increase access to drugs that can counteract the effect of opioids and prevent overdoses, and expand prevention and treatment efforts; and (2) Sen. Orrin Hatch’s Ensuring Patient Access and Effective Drug Enforcement Act (S. 483), which would instruct the Drug Enforcement Agency (DEA) and HHS to collaborate on strategies to prevent prescription drug abuse while ensuring that patients who legitimately need the drugs can still access them.
 
Despite an abundance of Democratic support for CARA, some expressed frustration that the bill only authorizes new funding and does not actually locate the funds. Democrats are expected to make a push to include a measure, backed by Sen. Jeanne Shaheen (D-NH), that would provide $600 million in emergency supplemental funding to address heroin and opioid abuse when the CARA bill reaches the full Senate floor. It remains unclear whether Democrats are planning on filibustering the bill if it does not include the additional funding.
 
McConnell Sets Up Confirmation Vote on FDA Chief
 
Last week, Senate Majority Leader Mitch McConnell (R-KY) filed cloture on Robert Califf’s nomination to be Food and Drug Administration (FDA) Commissioner, setting up a Senate floor vote on confirmation despite opposition from lawmakers in both parties. Democratic presidential candidate Sen. Bernie Sanders (I-VT) and Sens. Joe Manchin (D-WV), Ed Markey (D-MA) and Kelly Ayotte (R-NH), have all pledged to block the confirmation over concerns on Califf’s ties to the pharmaceutical industry and the FDA’s response to the opioid epidemic. Both Sens. Markey and Manchin plan to filibuster the confirmation over opioid concerns, despite Califf’s announcement earlier this month of a sweeping plan aimed at tackling substance abuse. The vote is scheduled for the evening of Monday, February 22, after the Senate’s week-long recess for Presidents’ Day.