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Jan 9, 2017

Washington Healthcare Update

This Week: Congress returned and started the Affordable Care Act repeal process…HRSA finalized 340B regulations.

Health Care Reform Takeaway From the Week of January 3

  • Budget Resolution Debate Begins: The Senate began consideration of a budget resolution that would pave the way to repeal the Affordable Care Act by instructing the committees of jurisdiction (the House Ways and Means Committee; House Energy and Commerce Committee; the Senate Health, Education, Labor, and Pensions Committee; and Senate Finance Committee) to cut at least $1 billion over ten years from the deficit—i.e., repeal those portions of the ACA that can be repealed through the budget process. Those committees would have until Jan. 27 to produce legislation repealing major provisions of the Affordable Care Act. Using the reconciliation mechanism means that only 51 votes are needed to pass it in the Senate.
  • Looking Ahead: President-elect Trump plans to announce executive actions on health care within days of taking office. Stay tuned.

1. Congress



2. Administration

3. State Activities

4. Regulations Open for Comment

5. Reports

1. Congress


Rep. Price to Have HELP Confirmation Hearing

The Senate HELP Committee has unofficially set Jan. 18 as its tentative date to hold a confirmation hearing on Rep. Tom Price (R-GA), the nominee for HHS secretary.

Although both the Finance and HELP committees are working together closely to vet the Atlanta orthopedic surgeon, the official confirmation vote will come from the Finance Committee, which will process Price’s paperwork. The HELP hearing is a courtesy. The official announcement should come this week.

In the meantime, Public Citizen asked both the congressional ethics office and the Securities and Exchange Commission to investigate Price’s stock-buying activity for potential violations.

The Senate Finance Committee has not yet scheduled a confirmation hearing for Price because Finance cannot move forward until Price has submitted all required disclosures. The Democrats say two ethics-related documents have not been filed. One is Form SF278, the Executive Branch Personnel Public Financial Disclosure Report, which can be made public, and the second is a letter from the Office of Government Ethics certifying that Price has taken steps to avoid conflicts of interest. That letter cannot be made public. The Trump transition team has responded that Price submitted all the required information on Dec. 21, 2016, and that Price submitted a request to the Office of Government Ethics several weeks ago and its investigation is proceeding. Minority Leader Chuck Schumer (D-NY) has vowed to slow down the process until the ethics questions are answered.


Sen. Grassley Asks CMS If It Fixed Rebate Misclassifications of Dilaudid, Prilosec

Drugmakers’ misclassifications of Dilaudid and Prilosec as noninnovator drugs—making them subject to lower Medicaid rebates—could have cost CMS hundreds of millions of dollars, Sen. Chuck Grassley (R-IA) said Jan. 4 in a letter to CMS Acting Administrator Andy Slavitt. Grassley, chairman of the Senate Judiciary Committee, has continued to press CMS for details on its communications with makers of drugs that the HHS Office of Inspector General in 2009 flagged as wrongly classified as noninnovators. CMS has not confirmed whether Dilaudid and Prilosec have been reclassified.

In his letter, Grassley asked CMS for records of CMS’s correspondence with Purdue Pharmaceuticals (maker of Dilaudid) and AstraZeneca (maker of Prilosec). He asked Slavitt whether the agency took steps to remedy the misclassifications after OIG flagged them, and also whether—and if so, when and how—CMS told the companies they had wrongly categorized the drugs. Grassley asked for a response by Jan. 18.

Grassley’s letter comes on the heels of the same issue involving Mylan’s EpiPen. In December, Senate Finance Chair Orrin Hatch (R-UT) and House Energy & Commerce Republicans Fred Upton (MI), Tim Murphy (PA) and Joseph Pitts (PA) also wrote to Slavitt asking whether Mylan applied for a narrow exemption in a new CMS rule under which drugmakers may ask CMS to treat innovator drugs as generics for rebate purposes.

Senate Takes First Budget Procedural Vote

On Jan. 4, the Senate took its first procedural vote on the long road to repeal Obamacare. The chamber voted 51-48 on a budget resolution that will allow Republicans to use reconciliation to repeal the health care law. A vote on the actual budget—which allows for 50 hours of debate and an unlimited number of amendments—is expected sometime this week.

The vote was split along party lines, except for Sen. Rand Paul (R-KY), who said he would not support a budget resolution that does not balance the budget. Sen. Dianne Feinstein (D-CA) did not vote.

The resolution instructs four authorizing committees—Ways and Means and Energy and Commerce in the House, and Finance and HELP in the Senate—to find at least $1 billion each in deficit reduction over 10 years and to report to the Budget Committee by Jan. 27.

Find the Senate resolution here.

Sen. Cassidy to Join Senate Finance Committee

Sen. Bill Cassidy (R-LA) will replace retired Sen. Dan Coats (R-IN) on the Senate Finance Committee. Cassidy, a one-time Democrat who defeated former Sen. Mary Landrieu (D-LA) in 2014, served six years in the House, where he was on the Energy and Commerce Committee and supported earmark reform and the push for a balanced budget amendment.

Cassidy is a physician who has said he was inspired to run for office—he served two years in the state senate—after witnessing the breakdown in health care in the aftermath of Hurricane Katrina.

Sens. Kaine and Young to Join Senate Health, Education, Labor, and Pension Committee

Former Democratic vice presidential candidate Sen. Tim Kaine (VA) will join the Senate HELP Committee. Senator Todd Young (R-IN) will also join the committee.

In health care, the HELP Committee jurisdiction encompasses most of the agencies, institutes and programs of the Department of Health and Human Services, including the Food and Drug Administration, the Centers for Disease Control and Prevention, the National Institutes of Health, the Administration on Aging, the Substance Abuse and Mental Health Services Administration and the Agency for Healthcare Research and Quality.

2. Administration

Expensive Cholesterol Medication To Be Forced From Market, Creating Monopoly

Sanofi and Regeneron will need to cease marketing their new cholesterol-lowering drug Praluent following a jury ruling that the company infringed on the patents of competitor Amgen’s drug Repatha, a U.S. district court judge said Jan. 5.

The unusual move could make it harder for payers and patients to negotiate lower costs for Repatha, the only other drug in that class on the market. Both drugs have been shown to reduce cholesterol levels more than the widely used and relatively inexpensive statins, but have come at a steep price of more than $14,000 a year.

Given the number of U.S. patients with cardiovascular disease, the pricing of the drugs when first approved in the summer of 2015 sparked fears that these medicines known as PCSK9s could be the costliest medicine for the country.

This summer, JAMA published a paper concluding the drugs are not cost-effective, saying the price would need to be reduced by more than two-thirds to meet acceptable cost-effectiveness thresholds.

The permanent injunction against Sanofi and Regeneron’s drug will take effect in 30 days to give the companies an opportunity to appeal or to reach a settlement with Amgen.

Third CMS Innovation Center Report to Congress Posted

On Jan. 5, the CMS Innovation Center released its third Report to Congress. It focuses on activities between Oct. 1, 2014, and Sept. 30, 2016, but also highlights a number of important activities started during that time period that were announced between Sept. 30, 2016, and Dec. 31, 2016. The CMS Innovation Center’s portfolio of models and initiatives has attracted participation from health care providers, states, payers and other stakeholders in all 50 states, the District of Columbia and Puerto Rico. During this period, the CMS Innovation Center has tested or announced 39 payment and service delivery models and initiatives authorized under Section 1115A authority. To improve care and value, these model tests focus on reducing program expenditures while improving the quality of care.

For additional information on the portfolio of models being tested through the CMS Innovation Center, visit the CMS Innovation website.

HRSA Finalizes “Penny Pricing” Policy, 340B Drug Pricing Issues

On Jan. 4, the Health Resources and Services Administration (HRSA) completed a 340B rule that deals with setting prices under the drug discount program, finalizing the so-called “penny pricing policy.” The rule prescribes a formula for drug manufacturers to use when estimating the 340B price of a new drug. The agency also said it will defer to the HHS Office of Inspector General to determine when manufacturers “knowingly and intentionally” charge 340B providers more than the ceiling price, and therefore are subject to penalties.

In 2015, HHS proposed the rule on setting prices for 340B drugs and penalties for manufacturers that overcharge 340B providers, but reopened the rule last year to get more information on whether to continue using the “penny pricing” policy where manufacturers charge a penny for drugs when the ceiling price comes out below $0.01 per unit. HRSA also asked for feedback on how to estimate the ceiling price of a new drug or determine when manufacturers knowingly and intentionally charge 340B providers more than the ceiling price.

HRSA says it received numerous comments supporting and opposing the alternatives to penny pricing. Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization commented the policy is punitive and could lead to providers’ hoarding drugs when they cost only a penny. Those opposed to penny pricing—which critics said leads to manufacturers’ not being repaid the cost of the drugs—suggested instead using the Federal Ceiling Price, the most recent positive 340B ceiling price from previous quarters, and the nominal price, HRSA says. Others said that manufacturers should be able to use any reasonable pricing method they choose.

HRSA finalized the penny pricing policy as proposed, and said that the “long-standing policy reflects a balance between the equities of different stakeholders and establishes a standard pricing method in the market.”

HRSA said there is no requirement in statute that the price paid must cover the cost of the drugs—or for manufacturers to participate in 340B—and drugmakers can control whether a drug falls under penny pricing by controlling a drug’s price.

“If a manufacturer does not wish to offer a zero 340B ceiling price, the manufacturer may choose not to participate in the 340B Program or may alter its drug pricing practices so as not to cause a zero 340B ceiling price,” the rule says. “For example, when AMP increases more quickly than the rate of inflation, the manufacturer must pay a greater Medicaid rebate, which can also cause a zero 340B price. A manufacturer can control AMP by adjusting the prices that it charges for drugs.”

340B Health, which represents 340B hospitals, says the group is pleased with HRSA’s decision on penny pricing, as well as HRSA’s decision to have the OIG impose penalties on manufacturers that knowingly and intentionally overcharge 340B providers.

In the final rule, HRSA also says that manufacturers should estimate the price for new drugs by using the wholesale acquisition cost of the drug minus the rebate percentage until an actual 340B ceiling price can be determined using the average manufacturer price. Then if there is a difference, manufacturers have 120 days to give providers a refund. Enrollment Reaches 8.8 Million

Roughly 8.8 million people have enrolled in Obamacare coverage through for 2017, the Obama administration announced Jan 4.

The latest figures, which cover the 39 states using the federal enrollment website, include individuals who actively chose a plan as well as millions who were automatically renewed. Compared to the same time in the 2016 enrollment period, about 200,000 more people have signed up for coverage this year.

As of Dec. 31, 2.2 million new customers had selected plans and 6.6 million were renewals. The CMS enrollment update came after President Barack Obama and Vice President-elect Mike Pence had dueling Capitol Hill meetings about the GOP’s plans to repeal the health care law.

HHS has predicted that 13.8 million people nationwide will choose plans during the 2017 enrollment season, which ends Jan. 31. The enrollment snapshot released does not account for states with their own exchanges, including California and New York.

FDA Releases Guidance on Nutrition Facts Label and Serving Size Final Rules

The FDA has released two guidance documents on the nutrition facts label and the serving size final rules, documents aimed at helping food manufacturers prepare for the sweeping update to Nutrition Facts labels set for 2018.

The agency’s 22-page draft guidance on added sugars clarifies the FDA’s current thinking on a slew of questions, including whether fruit concentrates need to be declared as added sugars (in some cases, yes, but it depends), or whether sugars from fermentation count as added sugars (it depends). A separate draft guidance delves into serving size changes.

The agency notes that its final rules on the Nutrition Facts label and serving sizes, which were finalized in May, come into effect on July 26, 2018. However, smaller businesses with annual food sales less than $10 million have until July 26, 2019, to comply with the changes.

FDA will accept comments on the two documents for 60 days.

3. State Activities

Arizona: Hearing Date Set for Lawsuit Challenging Medicaid Expansion Funding Mechanism

Last week, the Arizona Court of Appeals scheduled a hearing date for the years-long lawsuit challenging the funding mechanism for the state’s Medicaid expansion program. On Feb. 14, judges will take the next step in Biggs v. Betlach, which challenges the legality of the hospital assessment that was passed in 2013 to cover the state’s expansion costs. Opponents of expansion, who are being represented by the libertarian Goldwater Institute, argue the assessment is illegal because it didn’t pass with a legislative supermajority required for tax increases in Arizona.

Maryland: CMS Approves Maryland’s Medicaid 1115 Waiver

CMS approved the Maryland’s proposed Medicaid 1115 waiver that allows payment for substance abuse treatment at large mental health and substance use disorder residential treatment facilities, which was previously restricted by federal law. The five-year waiver agreement also expands dental coverage to former foster children until age 26. The waiver also allows the state to begin enrolling eligible inmates leaving prison to sign up for Medicaid.

Minnesota: Gov. Dayton Proposes a 25 Percent Rebate for Certain Obamacare Customers

Democratic Gov. Mark Dayton has again proposed that Minnesota fund a 25 percent rebate to lower premiums for Obamacare customers who don’t qualify for federal subsidies, saying it would help 125,000 people as they shop for 2017 plans. But with Republicans now fully in control of the Minnesota legislature, it appears unlikely Dayton’s plan will get through. Dayton also indicated during a recent press conference that he’ll propose additional reforms to Minnesota’s insurance market later this month.

New Jersey: Gov. Christie to Discuss Opioid Policies at State of the State Address

Gov. Chris Christie is expected to discuss new policies to combat New Jersey’s opioid epidemic at his final State of the State address on Jan. 10. It is one of the few remaining areas where the embattled governor can conjure up bipartisan support. Christie has focused on rethinking approaches to dealing with substance use disorders and nonviolent drug offenders since taking office in 2010. At an event last month, Christie indicated the state’s attorney general will be “more aggressive” in 2017 about using the statewide prescription monitoring program to identify both doctors and patients who are abusing prescription opioids.

North Carolina: Gov. Cooper Pursuing Medicaid Expansion Despite Uncertain Future of Program

On Jan, 4, North Carolina’s new Democratic governor said he will pursue Obamacare’s Medicaid expansion, even as congressional Republicans begin dismantling major parts of the health care law.

Gov. Roy Cooper told a group of business executives he will file a Medicaid state plan amendment with federal officials to expand the program. Republicans who control the North Carolina legislature criticized the announcement, contending that a 2013 state law prevents the governor from expanding Medicaid without lawmakers’ permission.

Several other governors who previously voiced support for implementing Medicaid expansion have recently halted plans due to uncertainty about the Affordable Care Act’s future. If North Carolina enacts Medicaid expansion, it would become the 32nd state to implement the optional Obamacare program providing coverage to low-income adults.

The North Carolina Hospital Association, in response to Cooper’s comments, said that it supports expanding coverage through a plan that has bipartisan agreement.

4. Regulations Open for Comment

CMS Releases Proposed Notice With Changes to Medicaid National Drug Rebate Agreement

On Nov. 7, CMS issued a proposed notice announcing changes that would be made to the Medicaid National Drug Rebate Agreement (NDRA) for use by the Secretary of the Department of Health and Human Services and manufacturers under the Medicaid Drug Rebate Program. The NDRA is being updated to incorporate legislative and regulatory changes that have occurred since the agreement was published in February 1991, as well as to make editorial and structural revisions, such as references to the updated Office of Management and Budget (OMB)-approved data collection forms and electronic data reporting. There is a 90-day comment period for this proposed notice that will end on Feb. 7, 2017.

For more information, click here.

Comments Due on IMPACT Act Cross-Setting Quality Measure

On Nov. 4, CMS announced that public comments are due Nov. 17 on a cross-setting post-acute care measure under the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act) to further develop and refine the percentage of residents or patients with pressure ulcers that are new or worsened and language modifications being explored with the term “Pressure Injury.” CMS seeks feedback on potential updates to measure specifications and items used to calculate the quality measure. Visit the Public Comment webpage for more information.

CMS Issues Interim Final Rule to Delay Inclusion of U.S. Territories in Definitions of States and United States

CMS published the Covered Outpatient Drug Final Rule with Comment Period in the Federal Register on Feb. 1, 2016. As part of that final rule with comment, CMS amended the regulatory definitions of “States” and “United States” to include the U.S. territories (American Samoa, the Northern Mariana Islands, Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands) beginning April 1, 2017. However, the agency said those territories could not be ready to implement the program by this date.

Therefore, CMS issued an Interim Final Rule with comment period that delays the inclusion of the territories in the definitions of “States” and “United States” from April 1, 2017, until April 1, 2020, which is effective on Nov. 15, 2016. There is a 60-day comment period that will end on Jan. 17, 2017.

For more information visit the Covered Outpatient Drugs Policy page on

CMS Issues Proposed Rule for Medicaid Managed Care Plans

CMS has issued a new proposed rule detailing regulations for pass-through payments to providers from Medicaid managed care plans. The guidance builds on the Medicaid managed care rule finalized by the Obama administration in May.

Read the proposed rule here.

CMS Announces PACE Innovation Act Request for Information

On Jan. 4, CMS released a Request for Information (RFI) seeking public input on potential adaptations of the model of care employed by the Program of All-Inclusive Care for the Elderly (PACE) for new populations, including individuals with physical disabilities, under the authority provided by the PACE Innovation Act. The PACE Innovation Act of 2015 (PIA) provides authority to test application of PACE-like models for additional populations, including populations under the age of 55 and those who do not qualify for a nursing home level of care, under Section 1115A of the Social Security Act.

The RFI includes two parts:

  • In the first part, CMS seeks comment on potential elements of a five-year PACE-like model test for individuals dually eligible for Medicare and Medicaid, age 21 and older, with disabilities that impair their mobility and who are assessed as requiring a nursing home level of care, among other eligibility criteria. We have provisionally named this model “Person Centered Community Care” or P3C. This potential model is designed to meet the requirements of a model test under Section 1115A of the Social Security Act and to adapt the PACE model of care for one population of focus. In addition to feedback on the potential elements of the P3C model described in the RFI, CMS seeks comment on the types of technical assistance that potential P3C organizations and states would require to participate in the model test.
  • In the second part of the RFI, CMS seeks information on additional specific populations whose health outcomes could benefit from enrollment in PACE-like models, and how the PACE model of care could be adapted to better serve the needs of these populations and the currently eligible population.

CMS is accepting feedback on this RFI until 5 p.m. EST on Feb. 10, 2017. Comments should be submitted electronically in PDF form to with the organization or individual submitting comments on the title of the document.

5. Reports

Commonwealth Fund Report Shows Repealing the ACA Could Cost 2.6 Million Job

According to a new study by The Commonwealth Fund, repealing the Affordable Care Act could cost 2.6 million jobs nationwide, with California projected to take the biggest hit.

The report, which was conducted with researchers at George Washington University’s School of Public Health, found that California stands to lose nearly 334,000 jobs in 2019, assuming federal payments are pulled back under repeal for Medicaid expansion and premium tax credits. Gross state products, a key indicator of economic health, could drop by $207 million by 2023.

Researchers found that Florida would be second in the number of employment losses, with 181,000 jobs eliminated in 2019. Meanwhile, Wyoming is expected to lose 4,000 positions. In gross state product losses, Texas would be second to California at $107.4 million by 2021.

The report estimates the number of jobs lost in all 50 states and D.C. could rise to nearly 3 million by 2021, while gross state products could decrease by $1.5 trillion nationally between 2019 and 2023. Business output could drop by $2.6 trillion in that five-year period and, as a result, state and local tax revenues would drop by $48 billion.

The authors described their findings as “noteworthy in part because of the common (and debunked) concern that Obamacare has been a ‘job killer.’ Evidence shows that job growth has been robust since the ACA was implemented and the economy has thrived.”

The researchers also noted the results were consistent with a study released last month by UC Berkeley’s Center for Labor Research and Education, which showed that repealing the ACA would eliminate more than 209,000 jobs in California and cost the state economy $20.3 billion in GDP.

OIG Report Finds High-Priced Drugs Threatening Medicare Part D Sustainability

According to a new HHS Office of Inspector General report, high-cost drugs were largely responsible for a huge jump in Medicare Part D “catastrophic” spending over the past five years, putting the program’s future at risk.

Federal payments for catastrophic coverage exceeded $33 billion in 2015, more than triple what the government spent in 2010. Drugs costing more than $1,000 per month accounted for two-thirds of the spending, with just 10 drugs accounting for one-third of those payments.

Once Medicare Part D beneficiaries hit the catastrophic threshold, the government pays 80 percent of drug costs after accounting for rebates and other discounts. The high costs of these drugs pose a big burden on taxpayers, the report says.

Part D had $6.3 billion in catastrophic spending on Gilead’s hepatitis C drug Harvoni in 2015, more than any other medication that year. Catastrophic spending on the next costliest treatment, Celgene’s blood cancer drug Revlimid, was $1.8 billion that year.

Six of the ten drugs had been on the market since at least 2010 and had sharp price increases since that year, OIG said. The average monthly cost of those drugs rose by $600.

CMS will likely need additional tools to address these drug costs, OIG said.

Urban Institute Study Identifies Reasons for High Premiums

A new Urban Institute study identifies a few reasons for high premiums in some parts of the country. It finds areas with the largest premium increases “reflect needed corrections” to low prices in the ACA’s early years, sicker people may be more likely to enroll, premiums may be higher where there is less competition, and the risk adjustment program is inadequate for some areas.

The group’s recommended fixes include: boosting subsidies and the penalty for not having coverage (which will not happen in a GOP-controlled Washington) and letting the Obama administration’s tweaks to the risk adjustment program take effect.

If you have any questions, contact the following individuals at McGuireWoods Consulting:

Stephanie Kennan, Senior Vice President
Charlie Iovino, Vice President
Caroline Perrin, Research Assistant

Founded in 1998, McGuireWoods Consulting LLC (MWC) is a full-service public affairs firm offering infrastructure and economic development, strategic communications & grassroots, and government relations services. McGuireWoods Consulting is a subsidiary of the McGuireWoods LLP law firm and has been named in The National Law Journal's special annual report, "The Influence 50," for the past several years. In the most recent report, McGuireWoods Consulting was ranked 15th of the 1,900 government relations firms in Washington, D.C.

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