Insights

Health Policy Report (9/20)

September 20, 2021

Capitol Hill Update

The House will convene for legislative business this week as lawmakers look to address a series of key policy issues, including keeping the government funded past the September 30 deadline. Lawmakers are scheduled to consider a continuing resolution (CR) that is widely expected to fund the government into December, providing Congress with more time to iron out a broader funding agreement for fiscal year (FY) 2022. Also, on the House floor this week, Members will take up the chamber’s version of the FY 2022 National Defense Authorization Act (NDAA), as well as a measure that seeks to create new federal protections on abortion rights. Meanwhile, the Senate is expected to primarily focus on confirming President Joe Biden’s pending judicial nominees.

Democrats could choose to use the forthcoming CR as a legislative vehicle to raise the federal debt ceiling — something that has been adamantly opposed by congressional Republicans. Senate Minority Leader Mitch McConnell (R-KY) emphasized last week that Republicans will vote in unison to defeat any government funding bill that raises the debt ceiling, thus raising the possibility of a government shutdown if both parties continue to engage in brinksmanship on this issue. In a recent letter to congressional leadership, Treasury Secretary Janet Yellen urged Congress to act on the debt limit in the coming weeks, explaining that cash and “extraordinary measures” will be exhausted “during the month of October.” But as of now, a path forward remains uncertain given these political dynamics.

Looking ahead to the balance of the month, House Majority Leader Steny Hoyer (D-MD) announced that lawmakers will take up the Senate’s bipartisan infrastructure deal on September 27. However, intel from Capitol Hill suggests that Democratic leadership could move to consider the Biden-endorsed legislation under suspension of the rules, which requires a two-thirds majority vote to clear under this expedited procedure. While the measure may have some GOP support, it is unlikely to have enough to overcome some progressive Democrats’ concerns about voting for it prior to taking up the reconciliation package. A failed suspension vote would not be the end of the roughly $1 trillion infrastructure package, but it could further delay action on the measure, and would put pressure on the need to extend the surface transportation programs that expire at the end of the month.  

House Energy and Commerce Marks Up Reconciliation Legislation

Last week, the House Energy and Commerce Committee convened a markup of the Democrats’ reconciliation text, the Build Back Better Act. Throughout the duration of the markup, Republicans expressed frustration that Democrats on the committee did not hold hearings on the legislation to allow for GOP input. Democrats discussed the merits of the myriad policies in each subtitle and voted against an extensive number of Republican amendments. However, Rep. Kurt Schrader (D-OR) broke with his party and voted in support of several amendments.

Reps. Schrader and Scott Peters (D-CA) also introduced his Reduced Costs and Continued Cures Act (RCCCA) (text; press release; one-pager) as an amendment in the nature of a substitute (ANS), but quickly withdrew this amendment as negotiations over drug pricing proposals continue behind-the-scenes. Despite withdrawing this proposal, the two lawmakers, along with Rep. Kathleen Rice (D-NY), voted against the drug pricing subtitle. Notably, the centrist members’ dissent from their party resulted in a 29-29 tie vote which withheld the provision from advancing. Aside from this, each section of the E&C reconciliation legislation was approved by the committee along party lines. The approved portions will now be reported to the House Budget Committee to be scored and compiled, along with the tax and drug pricing provisions from the Ways and Means markup.

Health titles discussed during the markup include:

House Ways and Means Marks Up Reconciliation Text

Last week, the House Ways and Means Committee concluded a marathon four-day markup of its (FY) 2022 reconciliation legislation. At the center of the committee’s activities were provisions related to: (1) universal paid family and medical leave (text); (2) the health care workforce (text); (3) elder justice (text); (4) skilled nursing facilities (text); (5) Medicare expansion (text); (6) and prescription drug pricing (text).

Democratic lawmakers claimed that, while the outlay for these provisions may be high, the investments set forth by this package would promote savings in the long term. Additionally, Democrats stressed that the measures discussed would tackle social and health-related inequities that, if left unaddressed, would only grow. While Democrats emphasized their support for the subtitles within the Build Back Better Act, Republicans voiced opposition to the large increases in spending within each of the subtitles considered. Further, GOP Members lamented that the legislation was “rushed,” claiming that proper procedure for reviewing and discussing these proposals was not afforded. All of the amendments that were considered by the committee were offered by Republicans; however, each failed along party lines. Notably, clear partisan disagreements emerged throughout the discussion on drug pricing provisions as Democrats looked to lower prices on existing drugs. However, GOP lawmakers protested that these efforts would severely hamper incentives for innovation, which would be far more harmful in the long term.

Following the conclusion of the House reconciliation markups, the Budget Committee will likely meet as soon as this week to compile each committee’s bills into a legislative package. However, timing on floor consideration of the $3.5 trillion proposal is unclear, as House and Senate leadership — as well as the White House — have been heavily engaged in negotiations on provisions involving tax reform, drug pricing, and clean energy… as well as the total size of the package. Speaker Nancy Pelosi (D-CA), Majority Leader Chuck Schumer (D-NY), and President Joe Biden will need to carefully navigate differences between the centrist and progressive wings of the Democratic party before a concrete timeline and strategy emerge.

CMS Proposes Repeal of Rule Allowing Expedited Coverage of New Technologies 

Last Monday, the Centers for Medicare and Medicaid Services (CMS) issued a rule proposing to repeal the Trump-era rule, “Medicare Coverage of Innovative Technology and Definition of ‘Reasonable and Necessary,” finalized on January 14, 2021. The January 2021 final rule instituted Medicare coverage for all medical devices designated by the Food and Drug Administration (FDA) as “breakthrough” technology. Under this policy, qualifying devices were to be covered by Medicare for four years after which manufacturers would need to seek local or national coverage determinations. The January 2021 final rule also clarified the definition of “reasonable and necessary” with respect to coverage determinations for all items and services covered under Medicare Parts A and B, including drugs, devices, and biologics. 

While CMS is proposing to repeal the January 2021 final rule, the agency is considering future policies and potential rulemaking to provide improved access to innovative technologies. CMS believes that there may be more flexible pathways to providing faster coverage of such technologies for Medicare beneficiaries and it is soliciting public comments on this proposal. In addition, the agency is also seeking public comments on its proposal to repeal the “reasonable and necessary” components of the January 2021 final rule. Specifically, CMS is seeking feedback on: (1) whether CMS should only repeal the commercial insurance aspects of the January 2021 final rule rather than repealing all of the “reasonable and necessary” provisions that were previously finalized; and (2) criteria that CMS might consider as part of the “reasonable and necessary” definition should the agency undertake a rulemaking in the future. 

Peters, Schrader Introduce Moderate Drug Pricing Proposal

On Tuesday, Reps. Peters and Schrader introduced their drug pricing plan entitled the “Reduced Costs and Continued Cures Act” (RCCCA) (text; press release; one-pager). Rep. Peters also offered the legislation as an amendment during the Energy and Commerce reconciliation markup. He said that the plan would strike a balance between lowering drug costs for consumers and protecting drug industry jobs and innovation. Some centrist Democrats have suggested that they would like a final reconciliation package to be offset by revenue and savings, though a narrower plan will likely generate fewer offsets, placing some broader progressive priorities in jeopardy. 

The moderates’ proposal would permit Medicare to negotiate drug prices in Part B for products that no longer have exclusivity and for which there is no competition on the market. This negotiation authorization would be much narrower in scope that would be permitted under H.R. 3, which would require the Secretary of the Department of Health and Human Services (HHS) to negotiate the price of a least 50 brand-name drugs without generic competitors. Under the more moderate approach, the Secretary of HHS will be authorized to enter into negotiations with manufacturers to secure price concessions between 25 percent and 35 percent for a more limited group of products.

Like H.R. 3, this proposal includes provisions that would require manufacturers to pay a rebate to HHS if the price of applicable drugs rises faster than CPI-U. The rebate owed would be based on the difference between the price plus CPI-U for Part B and Part D drugs. For Part B drugs, the calculation of the inflation rebate would be based on average sales price (ASP), while Part D rebates would be based on average manufacturer price (AMP).

Though there are subtle differences in out-of-pocket cap amounts, reinsurance payment amounts, and manufacturer discounts, this proposal is similar in nature to redesign efforts seen in prior drug pricing proposals. Under the bill, annual out-of-pocket costs for Part D Medicare beneficiaries will be capped at $1200, $2000, and $3100, with higher out-of-pocket caps applying to beneficiaries who are higher earners. The proposal will also amend the existing coverage gap discount program and would require manufacturers to provide part D beneficiaries who have met their deductible with a 10 percent discount off the drug’s negotiated price at the point-of-sale. Finally, the provision would reduce the federal government’s share of reinsurance for costs incurred by enrollees in the catastrophic phase. The federal government’s share is currently set at 80 percent and would be reduced to 20 percent in some cases, significantly shifting these costs to plans and manufacturers.

The RCCCA includes provisions to incentivize the utilization of biosimilar products as a way to generate more savings, specifically for Medicare Part B. Such provisions would create a temporary increase in Medicare Part B payment for biosimilars to ASP plus 8 percent, not to exceed the total payment for the reference product. So as not to stifle innovation, this proposal also includes provisions to ensure that biosimilars are not reimbursed at a higher price than their reference product in the initial period. In addition, this proposal would require the Secretary to establish a set of quality measures in the Medicare Advantage (MA) program in which star ratings would be favorably impacted by access to biosimilars.

To promote transparency in drug pricing, this proposal would require drug manufacturers to report to the Secretary of HHS justifications for price increases of certain drugs from prior years as well as justifications for high launch prices of certain drugs. Separately, the RCCCA would also create reporting requirements for pharmacy benefit managers (PBM) as a means of ensuring that price concessions from manufacturers are passed on to beneficiaries.

The proposal contains numerous provisions that are aimed at promoting competition in the prescription drug market. Notably, several of these provisions—including provisions to (1) prohibit “pay-for-delay;” (2) prevent “product hopping; and (3) limit “patent thickets” — appear to align with proposals supported by HHS as outlined in its recently released drug pricing plan (text; TRP analysis). In addition, this proposal would task the Secretary of HHS with requiring that each direct-to-consumer advertisement (DTCA) for prescription drugs or biologics paid for under Medicare or Medicaid include appropriate, truthful, and non-misleading pricing information for the product. This provision is likely in response to a study conducted by the U.S. Government Accountability Office published earlier this summer which found that some of the drugs with the highest Medicare spending between 2016 and 2018 also had the highest DTCA spending.

Unlike H.R. 3, the RCCCA includes several Medicaid policies that have been included in previous drug pricing proposals including the Lower Cost, More Cures Act (H.R. 19) introduced by House Republicans in April. Specifically, the RCCA includes Medicaid proposals to (1) improve oversight of and limit conflicts of interest in state pharmacy and therapeutics committees and drug utilization review boards; (2) require ongoing audits of drug price and product information reported to HHS under the Medicaid Drug Rebate Program (MDRP) with penalties for noncooperation or making false statements; and (3) create a state option to allow states to pay for covered outpatient drugs through risk-sharing value-based agreements.

The RCCCA includes several other provisions to reduce the costs of drugs or to provide additional protections for beneficiaries, including provisions to (1) institute a cap on monthly out-of-pocket costs for Part D beneficiaries to spread out out-of-pocket spending for high-cost drugs over time; (2) include the value of manufacturer coupons to reduce patients’ out of pocket costs in calculations for the average sales price (ASP) of a given drug; and (3) establish a monthly post-deductible cap for insulin and insulin supplies in Part D.