Health Policy Report (9/13)

September 13, 2021

Capitol Hill Update

The House will gear up for another week of budget reconciliation markups this week as Democrats look to clear each of their respective bills by Wednesday’s deadline. Members on the House Ways and Means Committee are slated to mark up the tax portion of the reconciliation package — which includes revenue boosting measures pertaining to the child tax credit, earned income tax credit, drug price negotiation, and clean energy tax incentives — on Tuesday and Wednesday. Additionally, the House Financial Services Committee is slated to consider $327 billion worth of housing-related policies in its reconciliation instructions at a markup today. 

Meanwhile, the Senate will return from its August state work period today to kick off a busy September legislative session. Majority Leader Chuck Schumer (D-NY) has a lengthy to-do list for the balance of this year, with the Democratic reconciliation package, fiscal year (FY) 2022 appropriations, and the federal debt ceiling standing out as some of the most pressing action items on the Senate’s agenda. Senators will also look to clear the queue of Biden administration nominees, beginning with James Kvaal to be Under Secretary of Education.

Both bodies adjourn for the week Wednesday in honor of the Yom Kippur holiday.

HHS Issues Plan to Address High Drug Prices

On Thursday, the U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra released a comprehensive plan to lower drug prices (text; fact sheet; TRP summary) as required by President Biden’s July 2021 Executive Order (EO) Promoting Competition in the American Economy (text; fact sheet). The report calls on Congress to implement policies that would: (1) allow for drug price negotiations in Medicare parts B and D; (2) implement Part D reforms; (3) slow drug price increases; (4) expedite the entry of generic and biosimilar competition into the market; (5) prohibit “pay-for-delay” agreements; and (6) invest in research and innovation. HHS also outlined key tools that it can leverage administratively to reduce drug pricing, including: (1) value-based payment (VBP) models in Part B; (2) Part D Low-Income Subsidy beneficiary cost-sharing models; (3) general cost of care models; (4) Pharmacy Benefit Manager (PBM) and insurer data collection; (5) implementation of the U.S. Food and Drug Administration’s (FDA’s) Biosimilars Action Plan and Drug Competition Action Plan; and (6) drug importation programs.

The extensive policy options outlined in HHS’s report signal the administration’s prioritization of drug pricing reforms amidst negotiations for the Democrats’ $3.5 trillion reconciliation package. While many Democrats are expected to favor policy options that provide the most substantial funding avenues for the reconciliation package, centrist caucus members who want to constrain the price tag of a reconciliation package are likely to prefer measures with more moderate savings. The report identifies three principles to guide its policy options and administrative actions: (1) make drug prices more affordable and equitable for all consumers and throughout the health care system; (2) improve and promote competition throughout the prescription drug industry; and (3) foster scientific innovation to promote better health care and improve health.

HHS, Treasury Dole out $452M for State Reinsurance Programs

This past Tuesday, the Department of Health and Human Services (HHS) issued an additional $452 million through the Centers for Medicare and Medicaid Services (CMS) via the American Rescue Plan Act (ARPA). Back in April, HHS and the Department of the Treasury announced $1.29 billion in pass-through payments for 2021, adding that more funding was in the pipeline. Pass-through payments are provided directly to insurance companies for their most expensive claims to drive down premiums. The new tranche of funding will target 13 states to boost their reinsurance programs. New Jersey will also receive funding at a later date. These additional payments are aligned with HHS’s goal to lower insurance costs to encourage enrollment.

States implement section 1332 waivers to redesign their reinsurance programs with the goal of enhanced access and affordably, qualifying states for the funding boost. According to 2018 to 2021 plan data from CMS, states that implement section 1332 waivers experience decreases in premiums between four and 41 percent compared to states without section 1332 reinsurance programs. Evidence also indicates that reinsurance programs boost plan retention and increase overall plan participation.

House Democrats Unveil Health Provisions for Reconciliation

On Friday, Democrats on the House Energy and Commerce Committee unveiled legislative text (summary) for their portion of the fiscal year (FY) 2022 reconciliation package ahead of this week’s markup. Health care policies are a key plank of the committee’s instructions, as the draft legislation contains several provisions related to: (1) prescription drug price negotiation; (2) Medicare expansion of dental, hearing, and vision benefits; (3) funding for home and community-based services (HBCS); (4) expanding Medicaid eligibility to those who fell in the Affordable Care Act’s (ACA) coverage gap; and (5) permanently extending the Children’s Health Insurance Program (CHIP). The drug price negotiation measure originated in House Democrats’ H.R. 3, which reflected the caucus’s “wish list” for drug pricing policies. The legislation also contains a host of Democratic policy priorities on clean energy and climate change, supply chains and manufacturing, consumer privacy and data protection, as well as broadband connectivity, among others. The committee will meet today at 11:00 AM ET to consider the legislation.

The Senate’s legislative mechanisms to lower drug prices in its reconciliation package are expected to be less far-reaching to secure moderate Democrats’ approval. House and Senate negotiations will ensue to reconcile differences in the chambers’ health care legislation, though a final reconciliation bill is expected to align more closely with moderate Democrats’ priorities. Notably, the bill out of Energy and Commerce would set a cap on drug prices by implementing foreign reference pricing. However, moderate Senate Democrats object to the idea and are instead reportedly looking to implement some form of domestic reference pricing. While Energy and Commerce bill is more expansive than the Senate’s anticipated health care legislation, the House bill still fell short of the White House’s request. In an effort to squeeze a range of priorities into a reconciliation package, the House bill cut down the White House’s $400 billion request to $190 billion. Additionally, the administration requested $30 billion towards preparations for future pandemics, which would include investments in the strategic national stockpile (SNS) and vaccine manufacturing. The Energy and Commerce bill only puts $15 billion toward this request.

Centrist Democrats Offer Alternative Drug Pricing Legislation

A key group of moderate House Democrats — Reps. Scott Peters (D-CA), Kurt Schrader (D-OR), Kathleen Rice (D-NY), Stephanie Murphy (D-FL), and Lou Correa (D-CA) — are offering an alternative approach to the drug pricing legislation endorsed by party leaders. The centrist Democrats’ proposal would allow Medicare to negotiate drug prices, albeit under more limited circumstances. Specifically, the plan would enable price concessions ranging from 25 to 35 percent but would be limited to drugs that lack competition and are not protected by exclusivity. Rep. Peters said that the plan would strike a balance between lowering drug costs for consumers and protecting drug industry jobs and innovation. The plan is likely to rankle House Democratic leadership as they look to shepherd their $3.5 trillion spending bill through the lower chamber amidst very narrow voting margins. Just three Democrats could vote against final passage of the bill while still advancing the measure through the House.