Feb 5, 2018

Washington Healthcare Update

This Week: State of the Union mentions drug prices….CDC director resigns over tobacco stock trading….Next government funding deadline is Feb. 8

1. Congress


2. Administration

3. CMS

1. Congress


Chairman Frelinghuysen and Chairman Gowdy Announce Retirements

The chairman of the House Appropriations Committee, Rodney Frelinghuysen, announced he will retire at the end of his term. The 12-term New Jersey congressman is the eighth committee chairman to announce retirement plans this year and brings to a record 33 Republicans who have announced they will leave Congress in 2018.   

Rep. Trey Gowdy (R-SC), chairman of the House Oversight Committee, also announced that he was opting to retire at the end of 2018, becoming the ninth committee chairman to retire.

Energy and Commerce Committee Holds Hearing on Compounding

On Jan. 30, the House Energy and Commerce Committee held a hearing to review the effect of the Compounding Quality Act passed five years ago. Witnesses included:

Mr. Scott Gottlieb, commissioner, Food and Drug Administration

Ms. Jenn Adams, senior vice president and president, Clinical Product Solutions, PharMEDium Services

Dr. Bruce Brod, chair, Congressional Policy Committee, American Academy of Dermatology Association

Ms. Nancy Dargen

Mr. Shawn Hodges, vice president, International Academy of Compounding Pharmacists

Ms. Elizabeth Jungman, director, Public Health, The Pew Charitable Trusts

Mr. Jacob Olson, president and CEO, Skywalk Pharmacy, on behalf of the National Community Pharmacists Association

Ms. Molly Ventrilli, vice president, Regulatory Affairs, Fresenius Kabi 

Dr. George Williams, president elect, American Academy of Ophthalmology

To view the hearing or read the statements, click here.

2. Administration

State of the Union and Health Care

President Donald Trump in his first State of the Union Address touched upon health care issues including the repeal of Obamacare’s individual mandate. He vowed to cut prescription drug prices; held up FDA’s increased approval of new and generic drugs and medical devices; asked Congress to pass “Right to Try” legislation giving patients immediate access to experimental drugs; and pledged to fight the opioid epidemic. The president provided no details about how he plans to lower drug prices.  

In remarks on the Senate floor prior to the State of the Union, Senate Minority Leader Chuck Schumer (D-NY) called on the president to turn his focus to negotiating a health care stabilization package—something both the GOP and Democrats have been focused on since the tax bill repealed the individual mandate. Sens. Lamar Alexander (R-TN), Susan Collins (R-ME) and Patty Murray (D-WA) have been negotiating a market stabilization package that would fund cost-sharing reductions and provide funding for reinsurance.

It’s not clear whether Trump plans to rely on Congress to help lower drug prices. Trump said this week at the swearing-in of HHS Secretary Alex Azar that the new secretary will work on drug prices. One of Azar’s suggestions for curbing drug-price growth is allowing pharmacy benefit managers to negotiate prices in Medicare Part B as they do in Part D.

HHS Sued Over Basic Health Program Funding

Minnesota and New York sued HHS on Friday for reducing Basic Health Program (BHP) funding, alleging the department violated the Affordable Care Act and the Administrative Procedure Act by informing the two states that the Trump administration’s decision to end the cost-sharing reductions payments would result in a 25 percent funding cut for BHP. The states seek $1 billion that HHS has or will withhold for 2018 and allege HHS ignored state proposals to create funding work-arounds.

The ACA’s Basic Health Program allows states to cover residents earning from 133 percent to 200 percent of the federal poverty level using 95 percent of money that would have otherwise been allocated to the same individuals via advanced premium tax credits (APTCs) or cost-sharing reductions (CSR). Only two states, Minnesota and New York, have taken up the program and their programs combined cover 800,000 residents.

The suit was filed in the federal district court in New York and notes that prior to the Trump administration’s decision to stop paying the CSRs due to lack of a congressional appropriation, HHS sent the BHP funding to states on a quarterly basis, separating the APTCs from the CSRs.

As recently as September, the suit notes, HHS provided both states with the full BHP funding. However, in a November call CMS officials told the states that HHS would no longer pay the CSR component.

The newly filed BHP suit alleges the decision to withhold the funding violates the Administrative Procedure Act both because it is “arbitrary and capricious” and because HHS failed to conduct any notice and comment period for the change. The BHP methodology lets states know in advance how much funding they will receive by publishing proposed and final rules in the Federal Register. “On December 21, 2017, however, HHS radically deviated from this final payment methodology by merely sending an email advising of a drastic change in the federal funding amount, without even acknowledging the States’ proposed alternatives,” the suit says. The states also charge that the failure to provide notice and comment also circumvented the Unfunded Mandates Reform Act. Finally, the suit points out that under the APA, the court can compel an agency to take an action that it had illegally delayed.

As a remedy, the suit asks HHS to recalculate the BHP payments based on the states’ alternative proposals, or to grant a preliminary injunction blocking the Dec. 21 payment determination and require HHS to propose a methodology that follows a notice and comment period.

The agency had proposed a methodology, which the White House began to review Dec. 6, but that rule was withdrawn Jan. 17. HHS said it withdrew the rule because it is not revising the methodology from 2017 and 2018. The states also propose a second alternative: declare HHS has authority and obligation to pay the CSR component and ask the department to do so immediately and on a quarterly basis going forward.

CDC Director Traded Tobacco Stocks, Resigns

Amid mounting questions about financial conflicts, Dr. Brenda Fitzgerald resigned her position as director of the Centers for Disease Control and Prevention (CDC). Dr. Fitzgerald’s resignation comes one day after news organizations reported she bought shares in a tobacco company one month into her tenure as CDC director.

Fitzgerald, a doctor and former Georgia Department of Public Health commissioner, assumed her role as CDC director in July and was close to former HHS Secretary Tom Price, who resigned in September.

Fitzgerald had already come under congressional scrutiny for slow walking divestment from older holdings that government officials said posed potential conflicts of interest and prevented her from testifying before Congress.

Besides Japan Tobacco, she also purchased tens of thousands of dollars in new stock in at least a dozen companies, including between $1,001 and $15,000 each in Merck & Co., Bayer and health insurance company Humana, as well as between $15,001 and $50,000 in US Food Holding Co., according to financial disclosure documents.

FDA Calls on Marketers of Drugs to Take Steps to Address Public Health Issues

On Jan. 30 FDA Commissioner Scott Gottlieb called on marketers of drugs with a potential for abuse and misuse to voluntarily take steps to address public health issues, and specifically asked Imodium A-D makers to change their packaging. Gottlieb said online marketers are “no longer in the business of selling widgets or books” and “have a social contract to take voluntary steps to help address public health challenges” associated with abuse-potential drugs.

Gottlieb highlighted manufacturers of over-the-counter (OTC) anti-diarrhea drug loperamide—sold by Johnson & Johnson under the brand name Imodium A-D, and as store brands and generics—by asking them to change the way they package loperamide. Package changes should help limit the number of pills in each container and cut back on opportunities for abuse of the product, he said. He asked online retailers who sell health care products to “voluntarily” help address public health crises.

3. CMS

Hospital Groups Want More Information on Bundled Pay Model

Hospital groups say providers don’t know enough about CMS’s new voluntary bundled pay model to decide whether to participate, and ask CMS to provide more information to those interested in the model by Feb. 15 and to push back the application deadline from March 12 to March 31.

The hospitals noted that CMS indicates it may make changes to the model in later years, and say that participants need detailed information about the model prior to the application deadline. The level of information should be comparable to what was provided in proposed and final rules for the Comprehensive Care for Joint Replacement mandatory demonstration, they say.

AEH, AAMC and Premier also ask CMS to detail its methodology for determining the benchmark and target prices for the bundles, saying it is unclear how national and regional trends, as well as comparison among providers, will be incorporated into the benchmarks. They also want to know how CMS wi+ll adjust for patient characteristics, like the number of dually eligible beneficiaries served by providers.

Plus, they say it is unclear which years will constitute the baseline data that providers receive from CMS, and whether that data will also be used to calculate the benchmark price. The baseline data and episode specifications need to be released no later than May for participants to assess how they would perform in the model, according to the hospital groups.

They say providers need more information on the quality score adjustment, as well, and CMS should adopt an approach “where good and exceptional quality performance is rewarded with a lowered discount on the target price as in the CJR model.”

The new bundles model also mandates providers participate in CMS learning systems or attest to Merit-Based Incentive Payment System improvement activities, which the associations say gives an unfair advantage to physician groups that act as conveners for participants, as they are already attesting to MIPS improvement activities and hospitals have no equivalent. AEH, AAMC and Premier say CMS should let participants attest to participating in non-CMS learning systems or improvement activities that aren’t tied to MIPS.

The hospital groups also note that CMS has indicated an option for doctors to get credit for participating in an advanced alternative pay model that is only available for physician group conveners and not hospitals. In addition, they also ask CMS to give providers another opportunity to enter the model prior to 2020 and to let providers have the option to begin the model with no or lower downside risk.

CMS Extends Indiana Current Waiver While Working on Application to Add Work Requirements

CMS has extended Indiana’s 1115 Medicaid waiver provisions for one month while the agency considers the state’s application to add a work requirement to its Healthy Indiana 2.0 program.

The Indiana waiver provisions, known collectively as HIP 2.0, apply mainly to the state’s Medicaid expansion population and had been set to expire Jan. 31 unless CMS acted on the state’s pending renewal request. The provisions include cuts to nonemergency medical transportation and a requirement that some beneficiaries pay monthly premiums.

Indiana has asked CMS to renew those provisions and to allow the state to add a work requirement for some beneficiaries.

Industry insiders had expected CMS to make a decision on Indiana’s application by the end of the month. Instead, CMS granted a temporary extension of nearly all of the existing waiver provisions until Feb. 28, according to a Jan. 22 letter to the state’s Medicaid director from Judith Cash, the acting director of the State Demonstrations Group at the Center for Medicaid and CHIP Services.

One waiver provision—the ability of the state to require a copay up to $25 for nonemergency use of emergency rooms—was not extended, according to the letter. 

CMS Begins to Process Therapy Claims

CMS will begin to process some therapy claims affected by the cap that went into place Jan. 1, according to a recently posted announcement on the agency’s website, and others will be subject to a “rolling hold” so that CMS can try to minimize the claims that need to be reprocessed if legislation to address the therapy caps is eventually passed.

Earlier this month, CMS said it was planning to hold, “for a short time period,” claims affected by the expiration of the therapy cap exceptions process on Jan. 1. For 2018, the cap for physical therapy and speech therapy is $2,010 and the occupational therapy cap is $2,010.

A new post on CMS’s website says that starting on Jan. 25, the agency immediately released for processing therapy claims from Jan. 1 through Jan. 10 with the modifier signifying that the beneficiary had received therapy beyond the cap, but that the claim met the criteria for an exception. Starting Jan. 31, CMS says it will release claims for processing one day at a time, and at the same time the agency says it plans to institute a “rolling hold” on new claims.

It is unclear if a solution to the therapy cap issue will be part of the next resolution to fund the government. 

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

Stephanie Kennan, Senior Vice President
Anne Starke, Research Associate

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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