Washington Healthcare Update

February 13, 2017

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This Week: Rep. Price confirmed as secretary of HHS…Energy and Commerce works on twoMedicaid bills…Drug bill held up in Energy and Commerce for vetting…CMSnominee hearing on the 16th.

1. Congress

House

Senate

2. Administration

3. Courts

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress

House

House Energy and Commerce Approves Minor Changes to Medicaid

On Feb. 7, the House Energy and Commerce health subcommittee approved twobills making minor changes to Medicaid.H.R. 829would require states to consider lottery winnings and other lump-sumpayments above $80,000 when determining whether someone is eligible forMedicaid or CHIP. The second bill,H.R. 181, would revise the rules for counting income for married couples whendetermining whether one spouse qualifies for Medicaid long-term carebenefits—that legislation would count half of the income that a spousereceives from an annuity as income.

Republicans said the two bills were the starting point for a discussion onmaking broader reforms to Medicaid, a program they argue needsbelt-tightening. But committee Democrats argued that the bills wereessentially a smoke screen to distract from the GOP’s broader goals to gutObamacare and sharply curtail spending on the country’s social safety net.

The bills were both approved largely along party lines. Republicanscriticized Democrats for making the tweaks a partisan issue.

Senate

Senate Confirms Rep. Price as Secretary of HHS

Early Friday morning, the Senate confirmed Rep. Tom Price (R-GA) assecretary of HHS, putting him in charge of Republicans’ effort to repealand replace the Affordable Care Act.

Price’s confirmation went through by a small 52-47 vote along party lines.The seven-term congressman maintained full Republican support throughoutthe process. No Democrats voted for him.

The opposition to Price’s confirmation—which was delayed nearly 30 hours byDemocrats—served as a preview of the partisan fights to come over thefuture of American health care.

The Georgia Republican, who has served as House Budget chairman, favors afar more conservative approach to health care. He authored a 2015replacement bill that would have eliminated many of Obamacare’s broadhealth benefits, and he supports drastically rolling back funding for bothMedicare and Medicaid.

At HHS, Price is expected to start immediately reforming the health caresystem, using administrative powers to ease Obamacare’s regulations andcreate a path for congressional Republicans to repeal and ultimatelyreplace the law.

Senate Finance Committee Announces Confirmation Hearing on Seema Varma

Seema Varma, the Trump administration’s nominee to head the Centers forMedicare and Medicaid Services (CMS), will be appearing before the SenateFinance Committee on Feb. 16.

Sen. Carper Raises Concerns Over Hiring Freeze and Medicare, Medicaid Fraud

Sen. Tom Carper (D-DE) is raising concerns that President Donald Trump’sfederal hiring freeze could leave Medicare and Medicaid more vulnerable tofraud if HHS can’t hire staff focused on program integrity. However, newlyconfirmed HHS Secretary Tom Price (R-GA) says he will take into account therole of fraud fighters as he works with the White House to implement thefreeze.

A Trump administration memo dated Jan. 22 froze the hiring of employeesacross the executive branch except in limited circumstances. The memo saysthe head of an agency may exempt positions necessary to meet nationalsecurity or public safety, and the Office of Management and Budget directorcan grant exemptions from the freeze where necessary. Guidance on the memoreleased Jan. 31 clarifies that for the director of the Office of PersonnelManagement to sign off on an exemption, an agency would need to explain whyit has a critical need for the position with relation to missionrequirements, why reallocation isn’t possible and the consequences of notfilling the position within a three-to-six-month timeline.

Sen. Carper asked whether Rep. Price will recommend the hiring freeze belifted for federal workers fighting criminal activity, waste and fraud inMedicare and Medicaid. Price has told lawmakers he would take theseconcerns into account.

Senators Probe Price Hike of Kaléo’s Naloxone, Company Says WAC Not A Fair Price Gauge

Thirty-one senators led by Judiciary Committee ranking Democrat PatrickLeahy (VT) are asking Kaléo Pharmaceuticals tojustify the price hike of its opioid reversal product, a naloxone autoinjector called Evzio. The price went from $690 in 2014 to a currentwholesale acquisition cost (WAC) of over $4,000. This is not the first timethat Kaléo has come under scrutiny by Congress for the price of itsnaloxone product. Previously, members of the Senate Aging Committee wroteto five companies, including Kaléo, in June 2016 requesting an explanationof price changes for various naloxone products.

Kaléo argues that the WAC is not an accurate representation of the amountconsumers pay, because many users receive discounts, thus lowering the costor eliminating it entirely. However, the senators still worry about theimpact the price would have on those who do not qualify for discounts, andbulk buyers of the product, such as health departments.

While the senators acknowledge the company’s claims that their product ischeaper for many consumers, they argue the WAC still impacts thoseineligible for discount programs, and bulk buyers of the product.

The senators are also scrutinizing Kaléo’s Evzio donation program. FDAreported Kaléo donated 120,466 Evzio products between April 1, 2015, andApril 3, 2016. The Feb. 8 letter asks Williamson to detail the proportionof Evzio devices that have been donated, and the outreach being used topublicize the program.

The senators also want to know what portion of Evzio profits are comingfrom government payers. They ask Williamson to provide the total amountEvzio received in reimbursements from the federal government in the past 12months, and the percentage of customers that rely on federally fundeddollars to purchase the product.

Retail sales of naloxone are increasing, with Evzio leading brand sales,according to FDA. “Retail sales of naloxone products intended for use bythe general public (Evzio, Narcan Nasal) are rapidly increasing,” FDA wrotein an October 2016 presentation.

Evzio represented 17.9 percent of retail sales from July 2015 to June 2016,which was nearly double the market share for the other branded naloxoneproduct on the market, Adapt Pharma’s Narcan nasal spray, which represented9.1 percent of the market. However, both branded products were dwarfed bygeneric product utilization.

Price increases for naloxone products have come under fire previously fromboth lawmakers and stakeholders, and FDA has tried to nudge companiestoward making their products available over the counter. The FDA took stepsin August 2016 to encourage an Rx-to-OTC switch by drafting a sample DrugFacts Label, sample pictogram and arranging label comprehension testing.FDA also told lawmakers in November it was willing to meet with sponsors todiscuss an Rx-to-OTC switch for the product.

2. Administration

FDA Approves Old Drug to Treat Rare Disease, Raises Concerns About Pricing

On Feb. 9, the FDA approved an old drug to treat a rare disease, a movethat generated fears that the manufacturer will dramatically increase thedrug’s price. The approval is also raising red flags among health policyexperts who say this looks like another case of a drug company abusingincentives designed to encourage new innovations for patients.

The FDA approved Marathon Pharmaceutical’s Emflaza (deflazacort) to treatpatients age five and older with Duchenne muscular dystrophy, a raregenetic disorder that typically kills patients in early adulthood.

This is the first time the drug has been approved for any use in the U.S.,however FDA notes that steroids like Emflaza are commonly used around theworld to treat the disease. Patients in the U.S. are regularly able to gainaccess to the drug by ordering it from E

urope. Online pharmacies sell it for prices that range from less than adollar per pill to a few dollars, depending on the dosage.

According to areportfrom the Chicago Tribune, Emflaza could now come with a list priceof $89,000 for a year’s supply, thousands of dollars more than the cost ofpurchasing the drug overseas. Marathon has come undercongressional scrutinyin the past for raising the prices of old medicines by nearly 400 percent.

In addition, drugs used to treat rare diseases are typically able tocommand large prices with less pushback from payers. For example, Sarepta’srecently approved drug to treat Duchenne comes with a list price of$300,000 per year.

Marathon could also benefit because it pursued a rare disease indication.This allowed the company to get an orphan drug designation, which comeswith seven years of marketing exclusivity, compared to the traditionalthree to five years granted to most new drugs. It also received a rarepediatric disease priority review voucher, meant to encourage companies todevelop treatments that might not otherwise be economically attractive.Drug manufacturers that have acquired this fast-track voucher have reapedmillions by selling them to other pharmaceutical companies.

Drugmakers Ask FDA to Halt Final Rule on Off-Label Use

In acitizen petition posted online Feb. 9, PhRMA,BIO and the Medical Information Working Group, which represents a number oflarge drug companies, asked the FDA to halt a final rule they argueimproperly expands the agency’s power to sanction companies when theirmedicines are used for unapproved or off-label purposes.

The industry argues that the final rule—issued in earlyJanuary—significantly changed the definition of “intended use.” Thatdesignation determines when a drug or device is subject to FDA regulationand also whether a drug is marketed for off-label uses.

The petition states the rule would considerably expand the government’sability to seek criminal penalties for misbranding drugs. Drugmakers saythey could be penalized for having knowledge that their products are beingused for off-label purposes, even though such uses are common and legal.CMS also reimburses for some off-label use.

Drug companies also say the final rule included extensive changes that werenot included in a proposed rule, offering no opportunity for publicfeedback. They claim it was a last-ditch attempt by the Obamaadministration to settle a long-running debate over one of the FDA’s mostimportant issues without any notice or comment.

Early last week, FDA delayed implementation of the finalrule until March 21 due to the White House’s regulatory freeze. It waspreviously set to take effect Feb. 8.

HHS Memo Points Out Positions That Are Exempt From Hiring Freeze

Aninternal HHS memo dated Feb. 6reveals that a number of positions at the Office of Medicare Hearings andAppeals (OMHA) and Departmental Appeals Board (DAB) are exempted fromPresident Donald Trump’s federal hiring freeze. Those exemptions areintended to cut down on the backlog of Medicare appeals and to meet courtmandates.

On Jan. 22, President Donald Trump froze hiring across the executivebranch, but the White House told agencies that they may exempt positionsnecessary to national security or public safety, and that the Office ofManagement and Budget director separately may grant exemptions. White Houseguidance released Jan. 31 lays out criteria for exempting personnel fromthe freeze.

In the memo, HHS Acting Deputy Secretary Colleen Barros used that criteriato apply an exemption to those positions, which handle appeals at the thirdand fourth levels of appeals where there is an appeals backlog.

As of Sept. 30, OMHA had a backlog of 650,000 appeals, and the agency canhandle only about 92,000 appeals annually. Administrative law judges aresupposed to decide appeals within 90 days, but in fiscal 2016, the averageprocessing time for an appeal was more than 877 days.

The criteria laid out in the memo states that “positions under programswhere limiting the hiring of personnel would conflict with applicable law”are exempt from the hiring freeze, and at HHS that includes positionswithin the OMHA and DAB.

3. Courts

Judge Blocks Anthem-Cigna Merger

A District of Columbia federal judge on Feb. 8 prohibited health insurersAnthem and Cigna from proceeding with a proposed $54 billion merger,agreeing with the government that the industry’s largest-ever merger wouldcreate an unlawful concentration of market power.

U.S. District Judge Amy Berman Jacksonconcludedthat Anthem and Cigna’s deal, which would create the country’s largestinsurance company, would stifle competition for large employers in a marketdominated by just four insurers. Jackson also did not accept Anthem’sargument that more insurer market power would indirectly benefit consumersbecause a combined Anthem-Cigna could depress the rates they paid tohospitals and doctors.

The judge was not persuaded by Anthem’s argument that any anticompetitiveeffects would be offset by some $2 billion in savings for customersgenerated by the merger. The companies’ claimed efficiencies were notnecessarily dependent on the merger and were unverifiable, she said.

A representative of Anthem said the company was reviewing the decision butdeclined to comment further. A representative of Cigna did not immediatelyrespond to a request for comment. Anthem can appeal the ruling, but itfaces a tight timeline. At the end of April, either of the mergingcompanies can pull the plug on the deal, and Cigna is expected to do soimmediately. That would trigger a $1.85 billion breakup fee that Anthemwould owe to Cigna.

Groups File Suit to Block Trump Executive Order

On Feb. 8, three organizations sued the Trumpadministration over the president’s Jan. 30 executive order directingagencies to identify two regulations for repeal for every rule written.

The Natural Resources Defense Council, the Communications Workers ofAmerica and Public Citizen are seeking to have the order, as well as aninterim guidance document issued on Feb. 2, declared unconstitutional andblock enforcement.

Trump’s order “will block or force the repeal of regulations needed toprotect health, safety, and the environment, across a broad range oftopics—from automobile safety, to occupational health, to air pollution, toendangered species,” the groups write in their joint lawsuit.

“To repeal two regulations for the purpose of adopting one new one, basedsolely on a directive to impose zero net costs and without anyconsideration of benefits, is arbitrary, capricious, an abuse ofdiscretion, and not in accordance with law,” the suit continues.

The suit describes potential problems with implementing the order when itcomes to regulations on vehicle safety, labor laws, chemical reviews, minesafety, energy efficiency, endangered species and air quality.

The case was assigned to Judge Gladys Kessler of the U.S. District Courtfor D.C. Kessler was named to the bench by Bill Clinton.

4. State Activities

California: Exchange Enrollment Numbers for 2017 Fall Short

California exchange officials say they met their 2017 projections for newenrollment, even though the numbers slipped compared to 2016. More than412,000 new enrollees signed up through Feb. 4, including those people wholater backed out, according to figures released Feb. 6. That exceeded theagency’s projection of 400,000 new enrollees, but is still 6 percent lessthan the 439,000 Californians who enrolled for the first time for 2016coverage. Once the number of new consumers who signed up but then changedtheir minds is factored in, 2017 new enrollment stands at 368,000—a 16percent drop. Exchange officials say that, adding in all the renewals,total Covered California enrollment will reach 1.5 million, which isslightly more than the current 1.4 million.

Colorado: Republicans Aim to Repeal Colorado’s Obamacare Exchange

Republicans in the Colorado Legislature are trying to repeal the state’sObamacare exchange, with the state Senate Finance Committee approvinglegislation early last week. The legislation’s sponsor argues that theexchange has not brought down insurance costs or provided more choice toconsumers, but those against repeal say those problems would not be solvedby scrapping the marketplace. The bill faces an uphill battle in theDemocratic-controlled state House. Colorado’s exchange recentlyreportedroughly 176,000 individuals chose plans during the most recent openenrollment period, a boost of 12 percent compared to last year.

Florida: Health Groups in Florida Debate Over HMOs

The Florida Senate is considering the possibility of modifying the state’smandate that all Medicaid beneficiaries be placed in a managed care plan toexclude long-term nursing home residents. The Florida Health CareAssociation told members of a Senate health care spending panel this weekthat HMOs are not value-added for long-term nursing home residents and thatthe mandate shouldn’t apply to individuals who have been in a facility for60 days or more. By eliminating the HMO requirement and returning to afee-for-service system, the state could save $68 million in administrativeand case management fees, the nursing home group said.

However, the Florida Association of Health Plans argued that HMOs havetransitioned back to the community residents who have lived in nursinghomes for as many as two years. The debate occurs as the state prepares forits second round of bids with Medicaid managed care plans this summer. Asof January, there were more than more than 94,000 elderly and disabledpeople enrolled in one of six HMOs that contract with Florida to providelong-term care.

Hawaii: State Legislature Considers Bills Combating Chronic Homelessness

Two bills aimed at combating chronic homelessness are gaining traction inthe Hawaii legislature as lawmakers look to reduce the state’s high rate ofhomelessness—the highest in the country. One bill, which requires certainplans to cover treatment for people who are homeless, advanced through aSenate committee this week. The other measure would classify homelessnessas a medical condition for Medicaid reimbursement purposes. It’s still incommittee but has attracted attention from both Democratic and Republicanlawmakers who believe it could effectively treat people who are chronicallyhomeless and often use emergency rooms while reducing uncompensated carecosts.

Kansas: Health Committee to Vote on Medicaid Expansion

The Kansas House Health and Human Services Committee is preparing to votenext week on a Medicaid expansion—an idea that previously fell flat withthe state’s conservative lawmakers. Expansion proponents estimate it wouldprovide coverage to nearly 150,000 Kansans who earn too much to qualify forthe state’s traditional Medicaid program but not enough to qualify forsubsidies on the exchange. Gov. Sam Brownback, a staunch opponent of theACA, is against expansion.

Minnesota: Gov. Dayton Pushing Plan to Create Public Option in Minnesota

Minnesota Gov. Mark Dayton isadvocating a planthat essentially creates a public option in Minnesota—letting anyone whohas a plan on the individual market buy into the state’s ACA Basic HealthProgram, known as MinnesotaCare. Under the proposal, individuals who opt tobuy MinnesotaCare coverage would have to pay the full premium for a planrather than receiving any subsidies. On average, that monthly premium is$469 per person this year, according to state officials. MinnesotaCareexisted before Obamacare, but the program was refurbished to comply withfederal parameters for the Basic Health Program, which takes individualsbetween 138 and 200 percent of the federal poverty level and enrolls themin a state-sponsored plan rather than in Obamacare exchange coverage.

5. Regulations Open for Comment

CMS Proposes Rule for Prosthetics and Orthotics Suppliers

On Jan. 11, CMS issued a proposed rule that would implement statutoryrequirements and specify: the qualifications needed for practitioners tofurnish and fabricate prosthetics and custom-fabricated orthotics, and forqualified suppliers to fabricate prosthetics and custom-fabricatedorthotics; accreditation requirements that qualified suppliers must meet inorder to bill for prosthetics and custom‑fabricated orthotics; requirementsthat an organization must meet in order to accredit qualified suppliers tobill for prosthetics and custom-fabricated orthotics; and a timeframe bywhich qualified practitioners and qualified suppliers must meet theapplicable licensure, certification and accreditation requirements. Thisrule would also remove the exemption from quality standards andaccreditation that is currently in place in accordance with Section1834(a)(20) of the Act for certain practitioners and suppliers who furnishor fabricate prosthetics and custom‑fabricated orthotics. In addition, thisrule also includes authority for the Centers for Medicare & MedicaidServices (CMS) to revoke the Medicare enrollment of Durable MedicalEquipment, Prosthetics, Orthotics and Supplies (DMEPOS) suppliers that submit claims for items that donot meet the requirements of the statute and this proposed rule.

Only qualified practitioners who furnish or fabricate prosthetics andcustom‑fabricated orthotics and qualified suppliers that fabricate or billfor prosthetics and custom‑fabricated orthotics would be subject to theserequirements.

CMS will accept comments on the proposed rule until March 13, 2017, andwill respond to comments in a final rule.

To see the proposed rule,click here.

FDA Releases Draft Guidance for Interchangeable Biosimilars

On Jan. 17, FDA outlined the criteria companies must meet to get a copycatbiologic deemed interchangeable with its branded counterpart, acertification that paves the way for the cheaper products to beautomatically substituted at the pharmacy level under state laws.

To get this designation, a biosimilar sponsor must show that its productcan be expected to produce the same clinical result as the branded biologicin any given patient, for all of the drug’s approved uses, and that thereare no risks if a patient is switched back and forth between theinterchangeable biosimilar and the branded biologic,per draft guidancereleased by FDA.

Interchangeable biosimilars are expected to offer greater savings to thehealth system than biosimilars that lack this designation. Without theinterchangeability designation a doctor must proactively write aprescription for the biosimilar.

The guidance outlines the types of studies and scientific data thatcompanies will need to submit to FDA to get an interchangeable designation.When companies seek that designation, FDA recommends they seek approval forall of the branded biologic approved uses.

FDA is requesting comments on the draft guidance as well as a number ofquestions outlined in aFederal Register notice. FDA wants to know how it should regulate manufacturing changes ofinterchangeable products that occur after approval. The agency also wantsto know how it should handle interchangeable designations if a brandedbiologic gets another use approved for the drug, after the interchangeablebiosimilar is cleared by FDA.

FDA Releases Draft Guidance on Off-Label Drug Communication

On Jan. 17, FDAissued draft guidancethat gives drug and device companies more flexibility to communicateoff-label information about their products and avoid charges ofmisbranding. The new policy allows companies to promote a drug or devicewith information not on the agency-approved label as long as thatinformation is truthful and non-misleading and is consistent withFDA-approved labeling.

Companies have asked FDA for clarity on marketing policies after a 2012U.S. Court of Appeals decision ruled that under the First Amendment thegovernment could not prohibit and criminalize the truthful off-labelpromotion of FDA-approved drugs.

The guidance outlines how FDA will determine whether a company’scommunication is consistent with FDA’s required labeling. For example,companies will not be permitted to communicate information about the drugor device related to a use that has not yet been approved by FDA. They alsocan’t promote a patient population for the drug or device that has not beencleared by the agency.

The agency offers some examples of information companies could communicatethat could be consistent with its FDA-required labels. For example, FDAsaid companies can promote testimony of patients who used the drug for itsFDA-approved uses, such as the product’s effect on patients’ dailyactivities. Companies could also communicate long-term safety and efficacyinformation about products that were approved for chronic use based on asix-month trial, if the company now has data on the drug lasting a coupleof years, FDA added.

The guidance also outlines the type of scientific data companies need tosupport their off-label claims. Comments on the draft are due in 60 days.

CMS Proposes Average 0.25 Percent Hike for Medicare Advantage Plans

On Feb. 1, the Trump admini