Health Policy Report

July 24, 2017

The Week in Review

It was an immensely tumultuous week for the Republican plan to repeal and replace the Affordable Care Act (ACA). The bill was seemingly dead after Sens. Mike Lee (R-UT) and Jerry Moran (R-KS) announced that they would oppose a motion to proceed early in the week, but further negotiations have resurrected the package and it may yet be considered on the Senate floor. A full breakdown on the developments is included below.

House lawmakers meanwhile advanced two significant administrative measures, namely a reauthorization of the Department of Homeland Security (H.R. 2825) and a bill (H.R. 806) to limit the implementation of ozone standards. The former would make technical changes to the Department’s organization and passed on a bipartisan 386-41 vote. Meanwhile, the latter would delay ozone regulations promulgated under the Obama Administration for a ten-year period and provide legal cover for new EPA Administrator Scott Pruitt to give states more permanent flexibility in setting up their own ozone enforcement programs.

With the health bill stalled, the Senate worked through the backlog of presidential nominees, confirming conservative judge John Bush to the Sixth Circuit and Patrick Shanahan as Deputy Secretary of Defense.

The Week Ahead

Another busy week is expected in Washington, as lawmakers are looking to advance major legislation before the August recess. In the Senate, that entails Senate Republicans trying to resurrect their bill to repeal and replace the Affordable Care Act (ACA), although the process has been shrouded in confusion and uncertainty as it remains unclear what bill Senate leaders ultimately hope to move forward. Politically, the path forward for the bill is also murky, with Republican leadership needing to navigate complications including Sen. Susan Collins (R-ME) apparent firmness on voting in opposition and Sen. John McCain’s (R-AZ) recent brain cancer diagnosis.

The House has its own significant initiative this week in considering the first fiscal 2018 appropriations bill to make it to the floor of either chamber. House leadership has teed up a four-bill “minibus” (H.R. 3219) that would include the Defense, Legislative Branch, Military Construction-Veterans Affairs, and Energy and Water Development appropriations bills. House leadership is hoping that the more narrow minibus will provide rank-and-file Republicans with key victories on issues such as funding for a border wall and a significant increase in defense spending.

Additionally, the House will consider a disapproval resolution (H.J. Res. 111) for a recently finalized rule from the Consumer Financial Protection Bureau (CFPB) governing the use of mandatory arbitration clauses in contracts with consumers. Sen. Tom Cotton (R-AR) has led the charge in both chambers of Congress to disapprove of the rule through the Congressional Review Act (CRA) before lawmakers leave for the August recess.

GOP Attempts to Revive Health Care Effort

The top story this week will be whether Senate Republicans can resurrect their bill to repeal and replace the ACA, which has been on life support after an announcement from Sens. Lee and Moran that they would oppose a previous version of the legislation. The Senate Budget Committee posted the latest version Thursday, which would add additional opioid and market stabilization funding, but notably excludes the Cruz amendment. A Congressional Budget Office (CBO) score on the bill also released last Thursday suggests that by 2026, 22 million fewer people would have insurance as compared to current law and premiums would increase by about 30 percent. Compared to CBO’s previous score of the bill, Thursday’s version would save $99 billion more over 10 years.  A procedural vote for the updated bill is currently scheduled for Tuesday, although many Senators had expressed confusion over which bill they would be voting on.

Politically, the path forward for the bill remains unclear. In a boon to the legislation’s proponents, Sen. Rand Paul (R-KY) — a key holdout — said he would support a motion to proceed to debate on the bill as long as a floor vote was held on a clean repeal bill on the Senate floor. Moderates are still highly skeptical though, and Sen. John McCain’s (R-AZ) absence due to his recent surgery to remove a brain tumor also complicates the math for Republicans. Additionally, the Trump administration’s Medicaid chief, Seema Verma, is pitching moderates on a Medicaid “wraparound” idea, which would allow states to use Medicaid dollars to help people afford private coverage.

White the prospects for the bill are dim, there may still be a narrow path forward to passage.  A vote on “repeal and delay” appears inevitable to prevent Sens. Paul and Lee from blocking the motion to proceed. This vote would be expected to fail. Leaders would also have to assure moderates that they would subsequently vote on the BCRA as a substitute amendment while dispelling concerns about the scope of Medicaid cuts and coverage losses estimated by the CBO. Moderates have also avoided, so far, going on record regarding the Cruz amendment. It remains to be seen whether senators are satisfied with the Trump administration’s analysis. Further, Sens. Paul, Lee, and Jerry Moran (R-KS) have offered concerns of their own — albeit from a conservative perspective — on aspects of the BCRA.

The likely absence of Sen. McCain this week along with Sen.  Susan Collins (R-ME) refusal to participate in eleventh-hour negotiations will make threading the legislative needle a difficult — almost impossible — task for GOP leaders. But the BCRA could make one last gasp for revival as hundreds-of-billions of dollars are used to corral additional votes.

FY 18 House Budget Resolution Calls for $200B in Additional Mandatory Savings

The House Budget Committee on Wednesday approved the fiscal 2018 budget resolution that would include hundreds of billions in Medicaid cuts from the ACA repeal bill, plus an additional $114 billion in cuts over 10 years. The draft plan — which sets topline discretionary (defense and non-defense) spending for FY 2018 at $1.132 trillion ($621.5 billion defense; $511 billion non-defense) — sets the foundation for deficit-neutral tax reform via embedded reconciliation instructions. The budget resolution also assumes enactment of the House-passed American Health Care Act (AHCA), calling for an additional $200 billion in mandatory savings and reforms, particularly from Medicare and Medicaid.

Similar to previous GOP health care proposals, the budget outlines a plan to move to an optional Medicare premium support system beginning in 2024. The plan also calls for the use of “readily available digital advance care plans” and additional means-testing of Medicare Parts B and D premiums for high-income seniors, “including full responsibility of premium costs for individuals with an annual income exceeding $1 million.” Finally, the budget touts medical liability reform, including solutions embodied in the Protecting Access to Care Act of 2017 (H.R. 1215).

The budget delineates a number of reforms to Medicaid — beyond the savings gleaned from the aforementioned AHCA — including: (1) the application of work requirements for able-bodied, non-pregnant, working age adults in Medicaid; and (2) enhanced flexibility through structural reforms, such as allowing states to “set reasonable cost-sharing standards for able-bodied adults, address inappropriate use of emergency facilities, or strengthen eligibility processing to reduce wait times.” The budget also calls for enhanced state reporting on annual Medicaid data to reduce improper payments in the program, drawing from Government Accountability Office (GAO) recommendations.

The policies outlined in the draft aim to balance the budget within 10 years, yielding a projected $9 billion surplus in 2027. To accomplish this, the budget resolution looks to entitlement reform, noting that “[a] full two-thirds of the nation’s annual budget funds government programs such as Medicare, Medicaid, and Social Security, among others… While these programs are vital to the people they serve, their spending rates are unsustainable and the key drivers of our nation’s fiscal challenge.” Meanwhile, House appropriators continue to forge ahead to advance individual spending bills for federal agencies. Senate GOP leaders have not yet released their respective budget resolution, and both chambers ultimately need to reach agreement on a year-end federal spending measure prior to the end of the current fiscal year (Sept. 30, 2017).

Senate Appropriations Committee Adds $1 Million in FDA Funding 

The Senate Appropriations Committee unanimously advanced the FY 2018 FDA funding bill out of committee last Thursday that adds $1 million in discretionary funding for FDA over the fiscal 2017 enacted level, defying a call from President Trump to cut the agency’s discretionary spending. The bill provides a total of $2.8 billion in discretionary spending for the agency, and adds $60 million in additional funding to implement the 21st Century Cures Act. Senate Appropriations Committee Vice Chair Patrick Leahy (D-VT) declared that the $1 million bump was still a “woefully” inadequate, but still committed his support for the bill. In total, the bill calls for $5.2 billion in funding for FDA, $491 million over the FY 2017 level, with most of the increase coming from higher user fee revenues.

The Committee added an amendment offered by Sen. Lisa Murkowski (R-AK) by voice vote requiring labeling of genetically engineered salmon and banning its import until FDA publishes final labeling guidelines. The committee also approved a bipartisan manager’s amendment by voice vote containing FDA-related additions to the Committee’s report language, including language asking the FDA provide further clarity on the Nutrition Facts final rule, increase support for Food Safety Modernization Act activities, pursue additional stakeholder comments on New Dietary Ingredient Notifications guidance, hold a public meeting on medical gases regulations, and more.  Additionally, the FDA funding bill ignores President Donald Trump’s request that industry fully pay for the cost of premarket reviews. The White House recently raised concerns with the user fee package negotiated by FDA and industry, reasserting its request to double user fees.

E&C Oversight Panel Examines 340B Drug Discount Program

Last week, the House Energy and Commerce Oversight and Investigations Subcommittee held a hearing on the oversight of the 340B Drug Discount Program. Members engaged witnesses from the Health Resources and Services Administration (HRSA), Government Accountability Office (GAO), and Department of Health and Human Services Office of Inspector General (HHS OIG) on the 340B Program’s growth trajectory, HRSA’s audits of providers and manufacturers, and prospect of legislation to clarify program parameters and give HRSA fuller authority to issue regulations.

Members voiced concern about duplicate discounts and drug diversion while expressing bipartisan support for the importance of the program, and members on both sides of the aisle recently said transparency could help the Health Resources and Services Administration oversee the 340B program. Numerous Members probed how hospitals employ program savings, with HRSA repeatedly saying the “statute is silent” on the issue. Members also asked about whether access to 340B discounts plays a role in hospital consolidation, particularly acquisition of oncology practices.

Several Democrats said the Centers for Medicare and Medicaid Services (CMS) proposal — included in the calendar year 2018 hospital outpatient prospective payment system rule — reducing Medicare Part B payments to hospitals for 340B drugs is ill advised and should be abandoned. CMS' hospital outpatient pay rule, released two weeks ago, would cut hospitals' pay for Part B drugs purchased through 340B from Average Sales Price (ASP) plus 6 percent to ASP minus 22.5 percent. The White House touted the proposal as a step to fulfilling President Donald Trump’s promise to go after high drug prices, even though critics have said the proposal does little to address the underlying cost of prescription drugs — and in particular, high list prices.

FDA To Develop Generic Review and Submission Guidance By Year's End

The FDA held a public hearing entitled “The Hatch-Waxman Amendments: Ensuring a Balance Between Innovation and Access,” to address agency’s plan to increase competition on the drug market while fostering innovation last Tuesday. FDA Commissioner Scott Gottlieb announced that the FDA will develop a new internal policy guide for generic reviewers by the end of the year, in hopes of focusing FDA reviews on validating industry studies rather than redoing those studies. The agency will also issue guidance for industry on best practices for submitting Abbreviated New Drug Applications (ANDAs). Both documents are part of the agency’s “Drug Competition Action Plan,” which aims to address high drug prices by encouraging generic competition. Agency leaders also foreshadowed possible further steps in the agency's generic action plan, including publicly releasing certain communications with generic companies over Risk Evaluation and Mitigation Strategies (REMS).

FDA will first issue a “Good ANDA Assessment Practices” Manual of Policies and Procedures (MAPP) to outline how the agency will streamline the ANDA review process, Commissioner Gottlieb told stakeholders. The agency hopes its MAPP will eliminate “unnecessary, duplicative procedures” and increase review efficiency. Commissioner Gottlieb appeared to indicate the MAPP will direct reviewers to focus on validation of bioequivalence studies, instead of redoing industry's work. Drug center Chief Janet Woodcock told stakeholders that the FDA is still weighing how it evaluates bioequivalence for complex generics and combination products. Additionally, Commissioner Gottlieb noted that the FDA will address “gaming” of the system that keeps generics out of the market, and said that the FDA is taking steps to “improve our own regulatory framework,” including a highly efficient review cycle. Commissioner Gottlieb also announced the FDA’s plan to issue a “Good ANDA Assessment Practices Manual of Policies and Procedures” and a “Good ANDA Submission Practices” guidance, both aimed at streamlining the ANDA review process.