Health Policy Report (9/23)

The Week in Review

Lawmakers completed a busy week of legislative business that saw significant action on fiscal year (FY) 2020 appropriations priorities. In the House, lawmakers passed a continuing resolution (CR) (text; summary) that would punt the deadline to fund the federal government for fiscal year (FY 2020) until Nov. 21. The bill includes a host of policy riders designed to address pressing deadlines for the National Flood Insurance Program (NFIP), Temporary Assistance for Needy Families (TANF), and numerous expiring health programs. Meanwhile, the Senate Appropriations Committee continued its work on FY 2020 spending bills, passing measures for Financial Services and General Government (FSGG), Transportation-Housing and Urban Development (T-HUD), and Agriculture.

In addition to the CR, House lawmakers also passed a bill out of the Judiciary Committee that seeks to reform the Federal Arbitration Act. The Forced Arbitration Injustice Repeal (FAIR) Act would: (1) prohibit pre-dispute arbitration agreements that force arbitration of future disputes; and (2) prohibit agreements and practices that interfere with the right of individuals, workers, and small businesses to participate in a joint, class, or collective action related to an employment, consumer, antitrust, or civil rights dispute. The FAIR Act is not expected to be taken up in the GOP-controlled Senate after the White House issued a veto threat last week.

The Week Ahead

Congress is set to close out the September legislative work session this week wen Senators look to clinch a deal on a stopgap funding resolution. When the upper chamber returns to action today, the Senate is expected to take action on a stopgap funding resolution that would punt the government funding deadline beyond Sept. 30. However, it remains to be seen if Majority Leader Mitch McConnell (R-KY) will call up the House-passed CR or if the Senate offers its own version — leaving the fate of the dozens of policy riders that have been tacked on to the lower chamber’s bill up in the air. 

On the House floor, Democrats are expected to call up groundbreaking legislation that would open up banking to cannabis companies. In a move aimed at appeasing Senate Majority Leader Mitch McConnell (R-KY) and Banking Committee Chairman Mike Crapo (R-ID), House Democrats tacked on provisions to the Secure And Fair Enforcement (SAFE) Banking Act that would prevent a revival of the Obama-era program known as "Operation Choke Point" and exempt banks that do business with hemp companies from punishment under federal law in hopes of getting the bill through the upper chamber. Additionally, House lawmakers are also expected to consider a pair of Homeland Security measures aimed at reforming policies pertaining to U.S.-Mexico border security.

Speaker Pelosi Releases Sweeping Drug Pricing Plan

Last Thursday, House Speaker Nancy Pelosi (D-CA) released a long-awaited plan to reform drug price negotiations in the U.S. The centerpiece of the legislation is the granting of authority to the Department of Health and Human Services (HHS) to negotiate the prices of drugs covered under Medicare Parts B and D and extend negotiated prices to the commercial market, as well. The plan is similar to a version that leaked two weeks ago but contains a number of critical updates, including specifying that HHS must negotiate prices for at least 25 but not more than 250 drugs. While Speaker Pelosi’s bill will garner the support of many of her Democratic colleagues, the proposal was met with immediate opposition from House Republicans and is likely dead on arrival in the Senate. Bill text may be expected ahead of a hearing in the Energy & Commerce (E&C) Health Subcommittee scheduled for September 25.

Speaker Pelosi said that there is not yet a Congressional Budget Office (CBO) score on the legislation, though she predicted “enormous savings” from the bill. She also predicted “strong, bipartisan support” for the legislation. Meanwhile, E&C Republicans released a statement deriding the plan as “socialist.”

In a press conference Thursday morning, E&C Chairman Frank Pallone (D-NJ) said that under the bill, insulin would be treated separately from other drugs, indicating that all insulin would be subject to negotiation and that it would not count towards the floor of 25 drug negotiations annually.

The E&C Health Subcommittee will hold a hearing this Wednesday to discuss the legislation. Democratic leaders appear poised to run the proposal through regular order, with subcommittee and full committee markups likely to occur in October. To that end, we expect that the Ways and Means Committee will also hold a drug pricing markup in October, although it’s unclear whether that panel will adopt bipartisan policies that were not included in Speaker Pelosi’s plan. Separate from the Speaker’s bill, House members are continuing work on a second wave of drug pricing-related bills, which are expected to include several bipartisan proposals.

Senate Unveils L-HHS-Ed Bill, House Passes CR

As negotiations over appropriations for fiscal year (FY) 2020 heat up, House Democrats released and passed a continuing resolution (CR) that would fund the federal government through November 21, 2019 in hopes of a quick passage that would delay a longer-term funding battle to late October or early November. The bill also contains a number of health care provisions. Meanwhile, Senators released a draft Labor-HHS-Education funding bill for FY 2020, though it suffered a quick setback as a motion to proceed failed on the floor.

On Wednesday, the Senate Appropriations Committee unveiled a draft FY 2020 spending measure for the Departments of Labor, Education, and Health and Human Services (HHS). The draft $187.7 funding bill would provide a roughly $3 billion increase for HHS, allocating $93.4 billion in discretionary funding for the Department’s 2020 operations. The draft measure has yet to be considered by the Senate Appropriations Committee amid tensions over policy riders, thus leaving the numbers released subject to change.

House Democrats also passed a continuing resolution (CR) last week that would keep the government open through November 21, 2019. Senate passage of the CR could lead to a showdown before the Thanksgiving holiday as lawmakers try to reach an agreement to fund the government for the whole fiscal year. Included in the CR is a provision that would exclude “authorized generics” from the calculation of the average manufacturer price (AMP) cap for rebates in the Medicaid Drug Rebate Program (MDRP). Rebates in the MDRP are capped at the AMP for a given drug, and this provision stops lower-priced authorized generics from being included in that average, effectively raising the AMP for brand-name drugs with authorized generics on the market and allowing for larger rebates. CBO estimates that this provision would save the federal government nearly $3.2 billion over ten years. The bill would also delay the reductions of disproportionate share hospital (DSH) allotments in Medicaid, which are due to go into effect on October 1, 2019.

Tennessee Releases Medicaid Block Grant Proposal

Last Tuesday, the state of Tennessee released a much-anticipated proposal seeking to use a block grant financing structure for the federal share of the costs of the state’s Medicaid program. Tennessee’s proposal coincides with the Trump Administration’s ongoing review of a federal policy document, “Medicaid Value and Accountability Demonstration Opportunity,” which is expected to describe new pathways states may pursue to receive flexibilities that lower or contain Medicaid costs. The proposal lays out a marker for the protections and flexibilities that would make a Medicaid block grant viable for states. According to Tennessee Governor Bill Lee, his state is “…pursuing what we believe the Trump administration wants us to pursue. Their goal is to give block-grant programs that deliver efficiency and innovation of services.”

According to the state, the proposal will (1) allow both the state and the federal government to predict the budget for the TennCare program with improved certainty; (2) allow a portion of the federal dollars saved by the state to be reinvested in the state’s needy populations; and (3) provide an opportunity for the federal government to test a potential national solution for incentivizing states’ performance in maximizing the value of taxpayer dollars. Tennessee’s proposal is subject to a series of review and comment processes at the state and federal levels that are likely to take several months to work through. CMS Administrator Seema Verma and other key officials within the Administration have consistently advocated for rethinking the Medicaid financial arrangement with states and have sought to carefully balance three major issues: (1) cost containment goals for the Medicaid program; (2) additional flexibility for states to administer the Medicaid program; and (3) strong accountability policies. Tennessee’s proposal includes several new concepts that likely require extensive federal analysis, for example the new concept of “shared savings,” while concepts like the adjustment for enrollment increases are vital to the feasibility for states. If and when the Trump Administration approves a block grant proposal, it could be subject to litigation, much like work requirement proposals.

FDA Issues Draft Guidance on New Medical Device Pathway to Increase Product Safety

The Food and Drug Administration (FDA) last Wednesday issued draft guidance to further promote innovation and safety in medical devices. The guidance describes a new voluntary pathway for certain medical devices and device-led combination products that do not otherwise meet the criteria for the Breakthrough Devices Program, but have the potential to be significantly safer than currently available treatments or medical diagnostics. Jeff Shuren, Director of the FDA’s Center for Devices and Radiological Health, noted that the new pathway, dubbed the Safer Technologies Program (STeP) for Medical Devices, “will help ensure that we’re giving patients timely access to safe, effective and high-quality medical devices by expediting their development, assessment and review, and by facilitating the generation of the robust evidence required to support product marketing authorizations.”

The Safer Technologies Program will aim to incentivize innovation for safer medical devices, and will include tools for developers such as interactive and timely communications with the FDA, review team support, senior management engagement, and prioritized review. The FDA reported that the interactive and expedited feedback may reduce the time necessary to develop a device and gain marketing authorization without impacting the “the agency’s gold standard” for safety and effectiveness. Medical devices and device-led combination products undergoing premarket approval, de novo, or 510(k) clearance reviews will be eligible for the new pathway. Devices must demonstrate “substantial safety innovations” to reduce known risks — including serious adverse events, device failures, use-related hazards, or user errors — to gain acceptance under the program. Although the FDA intends to apply many of the tools used in the Breakthrough Program to products expedited under the new pathway, the agency clarified it will prioritize the Breakthrough Devices Program if resources become strained. Stakeholders will have until November 18, 2019 to submit feedback on the proposed pathway.