Health Policy Report

June 19, 2017

The Week in Review

The week in Washington was marred by tragedy after a gunman opened fire at a baseball practice for Republican Members of Congress ahead of the annual Congressional Baseball Game, injuring four, including House Majority Whip Steve Scalise (R-LA). Members of Congress were shaken by the event, particularly after it was apparent that the gunman was targeting lawmakers, and legislative schedules were altered as Congress grappled with their response to the attack. That response took the shape of a remarkable show of unity at the Congressional Baseball Game, and an emotional floor speech from House Speaker Paul Ryan (R-WI), speaking for lawmakers of all partisan stripes, saying, “For all the noise and all the fury, we are one family.” All of the victims of the shooting are expected to recover.

In floor action, the Senate reached an agreement to pass an Iran sanctions bill that includes codifying sanctions against Russia for its meddling in the 2016 presidential election. The bill, which passed on a nearly unanimous 98-2 vote, also gives Congress authority to review any efforts to lighten the sanctions initiated by the White House. While all but two Republicans voted for the measure, it is unclear whether it enjoys similar support in the House or the White House.

The House passed a trio of healthcare-related measures, primarily clarifications on the availability of tax credits for purchasing insurance. The bills would require that social security numbers be provided as a condition to receiving a health insurance tax credit (H.R. 2581); codify existing regulations that allow veterans who are eligible for, but do not elect to be covered by, certain Veterans Affairs (VA) health programs to qualify for premium assistance tax credits (H.R. 2372); and allow tax credits to be used on unsubsidized COBRA coverage (H.R. 2579). All three bills would apply to either the Affordable Care Act (ACA) or the Republican-backed replacement bill.   

The Week Ahead

The Senate starts its legislative business today with consideration of three executive nominations: Brock Long to be Administrator of the Federal Emergency Management Agency (FEMA), Sigel Mandelker to be Under Secretary of Treasury for Terrorism and Financial Crimes, and Marshall Billingslea to be Assistant Secretary of Treasury for Terrorist Financing. Meanwhile, House floor action this week will focus on two measures advanced by the Natural Resources Committee. One measure (H.R. 1654) – introduced by California Rep. Tom McClintock (R-CA) – would aim to streamline the permitting process for new water reservoirs and encourage federal agencies to improve coordination on water projects. The other bill (H.R. 1873) to hit the House floor aims to streamline the processes for the removal of overgrowth near power lines on federal lands, ostensibly to improve grid reliability. Specifically, the bill would allow electric utilities to submit to the Forest Service and the Bureau of Land Management (BLM) long-term plans that would guide vegetation management and maintenance activities on or adjacent to rights-of-way containing electrical infrastructure on federal lands.

In healthcare action, Senate Majority Leader Mitch McConnell (R-KY) is still aiming to hold a floor vote on the Republican health care overhaul before the July 4 recess, although some intraparty disagreements on the bill remain. A discussion on one of those disagreements, Medicaid funding, is in our roundup below. The health of the Affordable Care Act will also become more clear this week as the deadline for insurers to decide whether they will participate in 39 states’ insurance markets next year is set for June 21.

Finally, political observers will be paying close attention to the special election in Georgia’s 6th congressional district tomorrow. Democrat Jon Ossoff is challenging Republican Karen Handel to replace current Health and Human Services Secretary Tom Price in the suburban seat, which President Trump carried by only a single point in last November’s election. Many analysts are describing the election as an early indicator for Democrats’ chances of taking the House in next year’s midterm elections, which conventional political wisdom suggests will be determined by the minority party’s performance in well-educated, suburban areas.

Trump Administration Preparing a Drug Pricing Executive Order

President Donald Trump’s administration is preparing an executive order aimed at lowering U.S. drug costs, according to people familiar with the matter. Trump administration officials huddled Friday, but few are expecting its punch to match the president's often blistering rhetoric about the pharmaceutical industry. The industry isn't thrilled about the contemplated administration action – but it's no longer in a state of panic. A primary reason: Expectations are that the White House won't endorse tactics pharma fears most, such as major changes to drug payments in Medicare parts B or D, or allowing broad importation of medicines from countries where they typically sell for less. Sources within the administration said the players along the health supply chain that could be hit hardest could be the pharmacy benefits managers.

There's a sense among some that the White House may decide to do a "check-the-box" type of exercise, issuing an order that calls for various parts of the government like FDA, CMS and HRSA to work on drug pricing measures. That would demonstrate a commitment to the issue while more nuanced policies are being crafted. If the order goes into more specifics, most expect it will include a directive for the government to allow more value-based drug pricing arrangements — agreements between insurers and manufacturers that tie payment for a drug to how well it works. It's an idea long promoted by the drug industry itself. Also expected are reforms to the 340B drug pricing program, but given its considerable expansion under the Affordable Care Act, policy experts say there are few things Trump could do to further expand the program. Another possibility is that the administration will address the oft-voiced criticism that hospitals and clinics that benefit from low 340B prices don't pass the discounts on to patients. This could resonate with consumers but wouldn't upset the pharmaceutical industry. Trump is close to Rep. Chris Collins (R-N.Y.), who has drafted legislation on the issue that could be adapted.

Additionally, the pharma trade policies the administration is looking at are reportedly expected to be relatively industry-friendly, including taking steps to reward U.S. manufacturing or making a stronger effort to go after countries that violate U.S. drugmakers’ intellectual property protections. The administration is also said to be looking at changes to fees that pharmacy benefits managers impose on pharmacies.

A draft of the executive order has been circulating around the White House and HHS, but it is a work in progress and there's disagreement among White House officials over how to proceed. The meeting Friday was attended by HHS Sec. Price, CMS Administrator Seema Verma, FDA Commissioner Scott Gottlieb, Chief economic advisor Gary Cohn, assistant to the president Reed Cordish, representatives from the Health Resources and Services Administration, and the Office of the U.S. Trade Representative.

GOP Health Bill Focus of Senate Drug Price Hearing

The Senate Committee on Health, Education Labor & Pensions (HELP) held a hearing on the costs of prescription drugs on Tuesday. At the outset, Chairman Lamar Alexander (R-TN) said that the hearing was the first of three planned on topic of drug costs. The hearing, he said, was intended to be focused on “fact finding” to establish basics. The second hearing, scheduled for next month, will be based on “process,” that is, the different steps drugs take when they travel through the system and how they are paid for at each step along the way. Finally, he stated, this fall the Committee intends to host a third hearing dedicated to the results of a forthcoming report “Ensuring Patient Access to Affordable Therapies.”

During the hearing, Senators looked at various pricing issues differently along party lines. For Republicans, much of the focus was on prescription drug costs borne by the patient. To this end, they questioned insurance design that imposed high cost sharing on beneficiaries through coinsurance, especially when that coinsurance was based on a drugs’ list price as opposed to its negotiated “net” price. Democrats, on the other hand focused more on the high list price of drugs, price increases, costs to the system and manufacturer pricing decisions.

Despite its importance, many Democrats chose to spend their time during the hearing off the topic of drug pricing. Instead, they focused to a more immediate priority, lambasting Senate Republicans for the lack of transparency in the process currently underway to craft health reform legislation based on the House-passed American Health Care Act (AHCA). Every Democratic lawmaker brought up the “secret” negotiations underway and highlighted the differences in this process as compared to the Affordable Care Act’s (ACA) negotiations. Using words and phrases like “completely unacceptable,” “repeal and decimate,” an “abusive process,” “shameful,” and “secret bill to kick people off of health insurance,” some members spent their entire allotted time discussing AHCA, refusing to ask witnesses any questions.

CMS Actuary: 13M Individuals to Lose Coverage under GOP ACA Repeal Bill

The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT) issued a report last week estimating the financial and coverage effects of select provisions of the House-passed American Health Care Act (AHCA) (H.R. 1628) – projections that differ significantly from those of the Congressional Budget Office (CBO). Senate Republicans, who are likely to view OACT’s AHCA estimates more favorably when compared to the CBO’s, may leverage these numbers in a full-court press to build support for their Affordable Care Act (ACA) repeal measure prior to the July 4 recess.

CMS’ actuary found that the GOP’s ACA repeal bill would leave 13 million more individuals uninsured by 2026 – but that’s 10 million fewer uninsured than what the CBO estimated last month. Additionally, CMS’ analysis concluded that the AHCA would reduce federal spending by $328 billion over 10 years – the bulk of these savings are attributed to decreased Medicaid spending ($383b in Medicaid cuts/10 years vs. the $834b/10 yrs. estimated by CBO). OACT’s overall financial estimate also stands in stark contrast to the CBO’s projection that the AHCA would save $119 b/10 yrs. OACT also finds that average gross premiums for the individual insurance market would be roughly 13 percent lower in 2026 under the AHCA than under current law, though average net premiums (once federal and state subsidies are accounted for) would be roughly 5 percent higher than under current law.

OACT notes that its analysis does not take into account “the impacts of [other AHCA] provisions that would affect other parts of the federal budget – such as those associated with repealing taxes or fees that do not have a direct effect on the Medicare or Medicaid program – and federal administrative costs.”