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Feb 13, 2017

Washington Healthcare Update

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

1. Congress



2. Administration

3. Courts

4. State Activities

5. Regulations Open for Comment

6. Reports

1. Congress


House Energy and Commerce Approves Minor Changes to Medicaid

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

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

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


Senate Confirms Rep. Price as Secretary of HHS

Early Friday morning, the Senate confirmed Rep. Tom Price (R-GA) as secretary of HHS, putting him in charge of Republicans’ effort to repeal and 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 throughout the process. No Democrats voted for him.

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

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

At HHS, Price is expected to start immediately reforming the health care system, using administrative powers to ease Obamacare’s regulations and create a path for congressional Republicans to repeal and ultimately replace the law.

Senate Finance Committee Announces Confirmation Hearing on Seema Varma

Seema Varma, the Trump administration’s nominee to head the Centers for Medicare and Medicaid Services (CMS), will be appearing before the Senate Finance 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’s federal hiring freeze could leave Medicare and Medicaid more vulnerable to fraud if HHS can’t hire staff focused on program integrity. However, newly confirmed HHS Secretary Tom Price (R-GA) says he will take into account the role of fraud fighters as he works with the White House to implement the freeze.

A Trump administration memo dated Jan. 22 froze the hiring of employees across the executive branch except in limited circumstances. The memo says the head of an agency may exempt positions necessary to meet national security or public safety, and the Office of Management and Budget director can grant exemptions from the freeze where necessary. Guidance on the memo released Jan. 31 clarifies that for the director of the Office of Personnel Management to sign off on an exemption, an agency would need to explain why it has a critical need for the position with relation to mission requirements, why reallocation isn’t possible and the consequences of not filling the position within a three-to-six-month timeline.

Sen. Carper asked whether Rep. Price will recommend the hiring freeze be lifted for federal workers fighting criminal activity, waste and fraud in Medicare and Medicaid. Price has told lawmakers he would take these concerns 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 Patrick Leahy (VT) are asking Kaléo Pharmaceuticals to justify the price hike of its opioid reversal product, a naloxone auto injector called Evzio. The price went from $690 in 2014 to a current wholesale acquisition cost (WAC) of over $4,000. This is not the first time that Kaléo has come under scrutiny by Congress for the price of its naloxone product. Previously, members of the Senate Aging Committee wrote to five companies, including Kaléo, in June 2016 requesting an explanation of price changes for various naloxone products.

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

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

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

The senators also want to know what portion of Evzio profits are coming from government payers. They ask Williamson to provide the total amount Evzio received in reimbursements from the federal government in the past 12 months, and the percentage of customers that rely on federally funded dollars 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 by the general public (Evzio, Narcan Nasal) are rapidly increasing,” FDA wrote in 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 naloxone product on the market, Adapt Pharma’s Narcan nasal spray, which represented 9.1 percent of the market. However, both branded products were dwarfed by generic product utilization.

Price increases for naloxone products have come under fire previously from both lawmakers and stakeholders, and FDA has tried to nudge companies toward making their products available over the counter. The FDA took steps in August 2016 to encourage an Rx-to-OTC switch by drafting a sample Drug Facts Label, sample pictogram and arranging label comprehension testing. FDA also told lawmakers in November it was willing to meet with sponsors to discuss 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 move that generated fears that the manufacturer will dramatically increase the drug’s price. The approval is also raising red flags among health policy experts who say this looks like another case of a drug company abusing incentives designed to encourage new innovations for patients.

The FDA approved Marathon Pharmaceutical’s Emflaza (deflazacort) to treat patients age five and older with Duchenne muscular dystrophy, a rare genetic 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 the world to treat the disease. Patients in the U.S. are regularly able to gain access to the drug by ordering it from E

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

According to a report from the Chicago Tribune, Emflaza could now come with a list price of $89,000 for a year’s supply, thousands of dollars more than the cost of purchasing the drug overseas. Marathon has come under congressional scrutiny in the past for raising the prices of old medicines by nearly 400 percent.

In addition, drugs used to treat rare diseases are typically able to command large prices with less pushback from payers. For example, Sarepta’s recently 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 comes with seven years of marketing exclusivity, compared to the traditional three to five years granted to most new drugs. It also received a rare pediatric disease priority review voucher, meant to encourage companies to develop treatments that might not otherwise be economically attractive. Drug manufacturers that have acquired this fast-track voucher have reaped millions by selling them to other pharmaceutical companies.

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

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

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

The petition states the rule would considerably expand the government’s ability to seek criminal penalties for misbranding drugs. Drugmakers say they could be penalized for having knowledge that their products are being used 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 were not included in a proposed rule, offering no opportunity for public feedback. They claim it was a last-ditch attempt by the Obama administration to settle a long-running debate over one of the FDA’s most important issues without any notice or comment.

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

HHS Memo Points Out Positions That Are Exempt From Hiring Freeze

An internal HHS memo dated Feb. 6 reveals that a number of positions at the Office of Medicare Hearings and Appeals (OMHA) and Departmental Appeals Board (DAB) are exempted from President Donald Trump’s federal hiring freeze. Those exemptions are intended to cut down on the backlog of Medicare appeals and to meet court mandates.

On Jan. 22, President Donald Trump froze hiring across the executive branch, but the White House told agencies that they may exempt positions necessary to national security or public safety, and that the Office of Management and Budget director separately may grant exemptions. White House guidance released Jan. 31 lays out criteria for exempting personnel from the freeze.

In the memo, HHS Acting Deputy Secretary Colleen Barros used that criteria to apply an exemption to those positions, which handle appeals at the third and 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 can handle only about 92,000 appeals annually. Administrative law judges are supposed to decide appeals within 90 days, but in fiscal 2016, the average processing time for an appeal was more than 877 days.

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

3. Courts

Judge Blocks Anthem-Cigna Merger

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

U.S. District Judge Amy Berman Jackson concluded that Anthem and Cigna’s deal, which would create the country’s largest insurance company, would stifle competition for large employers in a market dominated by just four insurers. Jackson also did not accept Anthem’s argument that more insurer market power would indirectly benefit consumers because a combined Anthem-Cigna could depress the rates they paid to hospitals and doctors.

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

A representative of Anthem said the company was reviewing the decision but declined to comment further. A representative of Cigna did not immediately respond to a request for comment. Anthem can appeal the ruling, but it faces a tight timeline. At the end of April, either of the merging companies can pull the plug on the deal, and Cigna is expected to do so immediately. That would trigger a $1.85 billion breakup fee that Anthem would owe to Cigna.

Groups File Suit to Block Trump Executive Order

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

The Natural Resources Defense Council, the Communications Workers of America and Public Citizen are seeking to have the order, as well as an interim guidance document issued on Feb. 2, declared unconstitutional and block enforcement.

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

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

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

The case was assigned to Judge Gladys Kessler of the U.S. District Court for 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 new enrollment, even though the numbers slipped compared to 2016. More than 412,000 new enrollees signed up through Feb. 4, including those people who later backed out, according to figures released Feb. 6. That exceeded the agency’s projection of 400,000 new enrollees, but is still 6 percent less than the 439,000 Californians who enrolled for the first time for 2016 coverage. Once the number of new consumers who signed up but then changed their minds is factored in, 2017 new enrollment stands at 368,000—a 16 percent drop. Exchange officials say that, adding in all the renewals, total Covered California enrollment will reach 1.5 million, which is slightly 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’s Obamacare exchange, with the state Senate Finance Committee approving legislation early last week. The legislation’s sponsor argues that the exchange has not brought down insurance costs or provided more choice to consumers, but those against repeal say those problems would not be solved by scrapping the marketplace. The bill faces an uphill battle in the Democratic-controlled state House. Colorado’s exchange recently reported roughly 176,000 individuals chose plans during the most recent open enrollment 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’s mandate that all Medicaid beneficiaries be placed in a managed care plan to exclude long-term nursing home residents. The Florida Health Care Association told members of a Senate health care spending panel this week that HMOs are not value-added for long-term nursing home residents and that the mandate shouldn’t apply to individuals who have been in a facility for 60 days or more. By eliminating the HMO requirement and returning to a fee-for-service system, the state could save $68 million in administrative and case management fees, the nursing home group said.

However, the Florida Association of Health Plans argued that HMOs have transitioned back to the community residents who have lived in nursing homes for as many as two years. The debate occurs as the state prepares for its second round of bids with Medicaid managed care plans this summer. As of January, there were more than more than 94,000 elderly and disabled people enrolled in one of six HMOs that contract with Florida to provide long-term care.

Hawaii: State Legislature Considers Bills Combating Chronic Homelessness

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

Kansas: Health Committee to Vote on Medicaid Expansion

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

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

Minnesota Gov. Mark Dayton is advocating a plan that essentially creates a public option in Minnesota—letting anyone who has a plan on the individual market buy into the state’s ACA Basic Health Program, known as MinnesotaCare. Under the proposal, individuals who opt to buy MinnesotaCare coverage would have to pay the full premium for a plan rather than receiving any subsidies. On average, that monthly premium is $469 per person this year, according to state officials. MinnesotaCare existed before Obamacare, but the program was refurbished to comply with federal parameters for the Basic Health Program, which takes individuals between 138 and 200 percent of the federal poverty level and enrolls them in 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 statutory requirements and specify: the qualifications needed for practitioners to furnish and fabricate prosthetics and custom-fabricated orthotics, and for qualified suppliers to fabricate prosthetics and custom-fabricated orthotics; accreditation requirements that qualified suppliers must meet in order to bill for prosthetics and custom‑fabricated orthotics; requirements that an organization must meet in order to accredit qualified suppliers to bill for prosthetics and custom-fabricated orthotics; and a timeframe by which qualified practitioners and qualified suppliers must meet the applicable licensure, certification and accreditation requirements. This rule would also remove the exemption from quality standards and accreditation that is currently in place in accordance with Section 1834(a)(20) of the Act for certain practitioners and suppliers who furnish or fabricate prosthetics and custom‑fabricated orthotics. In addition, this rule also includes authority for the Centers for Medicare & Medicaid Services (CMS) to revoke the Medicare enrollment of Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) suppliers that submit claims for items that do not meet the requirements of the statute and this proposed rule.

Only qualified practitioners who furnish or fabricate prosthetics and custom‑fabricated orthotics and qualified suppliers that fabricate or bill for prosthetics and custom‑fabricated orthotics would be subject to these requirements.

CMS will accept comments on the proposed rule until March 13, 2017, and will 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 copycat biologic deemed interchangeable with its branded counterpart, a certification that paves the way for the cheaper products to be automatically substituted at the pharmacy level under state laws.

To get this designation, a biosimilar sponsor must show that its product can be expected to produce the same clinical result as the branded biologic in any given patient, for all of the drug’s approved uses, and that there are no risks if a patient is switched back and forth between the interchangeable biosimilar and the branded biologic, per draft guidance released by FDA.

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

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

FDA is requesting comments on the draft guidance as well as a number of questions outlined in a Federal Register notice. FDA wants to know how it should regulate manufacturing changes of interchangeable products that occur after approval. The agency also wants to know how it should handle interchangeable designations if a branded biologic gets another use approved for the drug, after the interchangeable biosimilar is cleared by FDA.

FDA Releases Draft Guidance on Off-Label Drug Communication

On Jan. 17, FDA issued draft guidance that gives drug and device companies more flexibility to communicate off-label information about their products and avoid charges of misbranding. The new policy allows companies to promote a drug or device with information not on the agency-approved label as long as that information is truthful and non-misleading and is consistent with FDA-approved labeling.

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

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

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

The guidance also outlines the type of scientific data companies need to support 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 administration issued guidance that proposes updates to the methodologies used to pay Medicare Advantage plans and Part D sponsors. The guidance calls for raising Medicare Advantage payments an average of 0.25 percent.

Health plans take in roughly $200 billion a year from the government to provide care for seniors enrolled in private Medicare plans. There are currently more than 18 million people enrolled in Medicare Advantage, accounting for roughly a third of all of the program's beneficiaries. More than 1 million seniors have been added to private Medicare plans in the past year, continuing a trend of robust growth that goes back a decade.

"These proposals will continue to keep Medicare Advantage strong and stable and provide high quality, affordable care to seniors and people living with disabilities," said Patrick Conway, acting administrator of the Centers for Medicare and Medicaid Services.

Obamacare included major cuts to Medicare Advantage—America's Health Insurance Plans puts the total figure at $200 billion—that were designed to bring payments more in line with traditional government-run Medicare. Last year, the federal government paid private plans an average of 102 percent of traditional fee-for-service costs per member.

UnitedHealth Group and Humana are the biggest national players, accounting for roughly 40 percent of the Medicare Advantage market in 2015.

CMS will accept comments until March 3 and the final notice will be posted on April 3.

To read a fact sheet on the rate proposal, click here.

6. Reports

Brookings Center for Health Policy Releases Report on ACA Marketplace Competition

In a new Brookings report, researchers with the ACA Implementation Research Network present analyses of competition in five states: California, Florida, Michigan, North Carolina and Texas.

According to the findings, pent-up demand for care and higher-than-expected coverage costs shook the five state marketplaces for the ACA. Though Obamacare compensated health plans for covering people with pre-existing conditions, some major insurers still withdrew from the exchanges. Researchers question if the unforeseen high demand was due to enrollees’ receiving coverage for the first time or if the problem would be an ongoing concern.

They found that the easiest way to keep costs down is competition—although that is particularly difficult in rural areas where plans have a limited number of doctors and hospitals to negotiate with.

Findings for the report are based on telephone or face-to-face interviews with people involved with health law exchanges in the five states. Some results and findings from those interactions were then applied nationwide.

GAO Recommends Ways to Ensure Quality of New Medicaid Data

On Feb. 6, GAO released recommendations on ways to assess and ensure the quality of new Medicaid data. Federal Medicaid administrators rely on state-reported data to inform oversight activities, but GAO found continuing concerns regarding such data’s completeness, accuracy and timeliness. Those administrators have not developed plans to ensure the quality of this new data, or how to use it for better oversight.

GAO recommended that the administrator of CMS take immediate steps to assess and improve the data available for Medicaid program oversight, including the Transformed Medicaid Statistical Information System (T-MSIS). Such steps could include refining the overall data priority areas in T-MSIS to reduce improper payments and expediting efforts to ensure the quality of the T-MSIS data.

Medicaid made an estimated $36 billion in payment errors in 2016.

GAO Recommends Better Federal Oversight of Data Used to Set Managed Care Payment Rates

In a new report, GAO recommended better federal oversight of the data used to set payment rates, as well as the rates’ effects on care and other outcomes. Medicaid provides long-term care to states’ most vulnerable populations, such as the elderly or disabled. States are increasingly paying for long-term care through managed care programs, paying based on set, monthly rates. How states structure these rates—aligning incentives to minimize cost and maximize service—is critical to enhancing community-based care.

To see the full report, click here.

GAO Reviews Actions Taken by FDA in Response to Cancer Risk From Medical Devices

In a new report, GAO reviewed actions taken by FDA in response to adverse event reports about the spread of unsuspected cancer following the use of a laparoscopic power morcellator to treat uterine fibroids.

In 1991, FDA allowed the first laparoscopic power morcellator—a device that cuts tissue into small pieces, which can be removed during minimally invasive surgeries—on the U.S. market. In late 2013, the agency began receiving reports that these devices might spread a type of cancer when used to treat uterine fibroids. FDA began to warn against the use of these power morcellators to treat fibroids, and recommended new labeling.

To see the actions FDA has taken on this matter since 2013, click here.

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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