Health Policy Report

The Week in Review

The Senate finished up work for the week — and the month — after reaching a deal to break the presidential nominee logjam. Under an agreement announced on the Senate floor by Majority Leader Mitch McConnell (R-KY), seven judicial nominations were confirmed Tuesday, including Lynn Johnson to be Assistant Secretary for Family Support at the Department of Health and Human Services (HHS), and Richard Clarida to be Vice Chairman of the Board of Governors of the Federal Reserve Systee. The agreement allowed senators to depart for events in their home states during the week, as well as to make the trip to Phoenix, AZ for services in remembrance of the late Sen. John McCain (R-AZ).

In notable political news, progressive Tallahassee Mayor Andrew Gillum scored a major upset last week in the race for the Democratic nomination for Governor of Florida. He will square off against Rep. Ron DeSantis (R-FL) in hopes of becoming Florida’s first African-American governor. Elsewhere, Rep. Martha McSally (R-AZ) secured the Republican nomination to represent Arizona in the Senate, fending off conservative challengers Kelli Ward and Joe Arpaio. Rep. McSally will face fellow congresswoman Rep. Kyrsten Sinema (D-AZ) in the race to replace outgoing Sen. Jeff Flake (R-AZ).

The House remained out of session for its August recess.

The Week Ahead

Congress will return to legislative business today as both chambers seek to clear a host of funding priorities prior to the September 30 deadline. As of now, the House and Senate have not yet agreed upon final top-line numbers for each of the 12 spending bills — a necessary step before sending any of them to President Trump's desk. While the Senate-passed bills have largely remained void of partisan “poison pill” amendments, lawmakers will have to navigate a series of partisan provisions —including policies targeting the Affordable Care Act (ACA) and Planned Parenthood — in the House-passed bills. Another contentious wrinkle in the process is expected to be funding for a wall along the U.S.-Mexico border, as President Trump has repeatedly threatened to veto a spending package for the Department of Homeland Security (DHS) that does not include border wall funding. 

When the House returns this afternoon, the chamber is slated to take its first step in reconciling the spending bills with a vote to go to conference with Senate on federal spending package funding Defense, Labor, HHS & Education Departments for 2019. House members may also vote next week on a final version of the FY 2019 federal spending package funding energy & water projects, legislative branch, military construction & the VA. In addition to its appropriations work, The House will also consider three pieces of legislation, including: (1) a bill (H.R. 1635) that would amend the loan counseling requirements under the Higher Education Act; (2) a bill (H.R. 4606) to provide that applications under the Natural Gas Act for the importation or exportation of small volumes of natural gas be granted without modification or delay; and (3) a bill (H.R. 6691) that clarifies the definition of "crime of violence."

Under Majority Leader Mitch McConnell’s (R-KY) nominations agreement, the Senate is set to clear eight additional presidential nominations next week. The upper chamber will resume consideration of Elad Roisman to be a member of the Securities and Exchange Commission (SEC) when it resumes legislative business next Tuesday. While the rest of the Senate’s schedule for the balance of the week has yet to be announced, legislation to combat the opioid epidemic — as well as reauthorization of the Federal Aviation Administration (FAA) (H.R. 4) and Water Resources Development Act (WRDA) (H.R. 8) — is in the Senate’s legislative queue.

In notable committee activity, the Supreme Court confirmation hearing for Brett Kavanaugh will begin today, kicking off a high-profile debate over President Trump's newest pick for the high court. The hearing is expected to last three to four days as the GOP looks to fend off Democratic opposition and approve Kavanaugh's nomination prior to the next Supreme Court term. Despite Democratic resistance over Kavanaugh’s views on Roe v. Wade, the legality of a special counsel to investigate the president for criminal liability, and the White House’s decision to withhold over 100,000 documents related to his time as lawyer during the George W. Bush administration, Kavanaugh’s nomination is expected to clear the upper chamber.

Tentative Trade Agreement With Mexico Includes 10 Years of Biologic Exclusivity

Early last week, the White House announced an “agreement in principle” between Mexico and the U.S. on a renegotiated version of the North American Free Trade Agreement (NAFTA) that includes a provision on exclusivity for biologic drugs. While scarce on details, the agreement calls for 10 years of data protection for biologic drugs, as well as an “expanded scope” of products that are eligible for protection. After negotiations with Canada fell apart Friday, President Trump announced to Congress that he would advance the trade deal with Mexico.

Biologic drug exclusivity has been a hot-button issue for both sides of the trade debate, as there are no data exclusivity protections under the current NAFTA. The branded biologic industry has pushed for 12 years of exclusivity for the drugs, which is in line with current U.S. law. Mexico’s framework is more complex, as it provides five years of data exclusivity for pharmaceuticals but does not explicitly state eligibility for biologic drugs.

While the reaction from brand drug makers was reticent, biosimilar makers and advocates for lower drug prices lambasted the agreement by saying that it will impede patient access to affordable medicines. Senate Finance Committee Chairman Orrin Hatch (R-UT), who co-authored the law which formally established pharmaceutical exclusivity, was also unimpressed with the proposed exclusivity period, noting that he’s “not real happy” with the 10 year protections. Sen. Hatch did, however, compliment the deal as a “step in the right direction.”

House Committee Leaders Send Letter to MedPAC on Medicare Cost Drivers 

Leaders of the House Energy and Commerce Committee and its subcommittees on oversight and investigations sent a letter to the Medicare Payment Advisory Commission (MedPAC) requesting that it examine the impact consolidation has had on patients, including whether Medicare’s current policies encourage hospital consolidation and lead to higher drug costs for patients and the program. The letter cites conflicting information the committee has received on this topic and poses a series of questions to guide MedPAC’s further analysis of the issues. The letter was signed by Committee Chairman Greg Walden (R-OR), Oversight Subcommittee Chairman Gregg Harper (R-MS), and Health Subcommittee Chairman Michael Burgess (R-TX). The five areas the leaders specifically ask MedPAC to study are:

• Recent trends in hospital consolidation and whether federal policies contribute to those trends.
• Effects of consolidation on costs for hospitals and patients.
• Whether markets with higher levels of hospital consolidation tend to have higher commercial prices or higher costs for Medicare beneficiaries.
• Effects of mergers between physicians and hospitals on Medicare payments for doctors' services.
• How the 340B drug discount program might drive hospitals to acquire physician practices, designate them as 340B sites, and then prescribe more expensive drugs for Medicare beneficiaries.

CMS Unveils Plans for Indication-Based Formulary Design for Part D Plan Sponsors

The Centers for Medicare & Medicaid Services (CMS) announced (letter to plan sponsors, fact sheet) that Part D plan sponsors will soon be able to tweak their formularies to limit Medicare Part D coverage of drugs to specific conditions. The health agency argued that allowing Part D sponsors greater flexibilities and tools to design their plans would help them negotiate lower prices for seniors and government programs, and noted the indication-based formulary design reform will begin in CY 2020. By allowing plan sponsors to determine formularies for a defined set of indications, CMS suggested beneficiaries will be “able to access more drugs at lower prices” and “receive individualized drug treatment that is targeted to meet their needs.” The announcement comes on the heels of CMS’ July guidance noting that Medicare Advantage plans may utilize step therapy-like requirements within their PA to promote to promote cost-effective drug therapy by requiring the use of one formulary drug for a certain indication prior to authorizing coverage of a second drug for that indication.

Existing policy stipulates that if a Part D plan includes a particular drug on its formulary, the plan must cover that drug for every indication approved by the FDA unless statutorily excluded from Part D coverage. The new policy expands existing tools to allow plans to tailor their formularies by specific indications and “provide additional negotiating leverage with manufacturers.” CMS notes that If a Medicare Part D plan sponsor chooses to tailor on-formulary coverage of drugs to certain indications, the plan must ensure that there is another therapeutically similar drug on the formulary for the non-covered indication in order to meet the anti-discrimination requirements. CMS did not specify how they will implement the change, as reform could allow for “black and white” formulary decisions or tiered indication-based decisions.

While the health agency has touted this change as beneficial to expanding consumer options and cost-reducing, some patient advocates warn that indication-specific formularies will only act as barriers and make it more difficult for beneficiaries looking to gain access to certain medications. Step therapy and utilization management have also been pegged by patient advocates as disingenuous pro-consumer choice reform. According to reports, the top three Part D plan sponsors — United HealthCare, CVS, and Humana — all told the administration they supported the reform when it was included in the President’s drug pricing blueprint. Some health experts have argued that indication based formularies could lead to higher prices as manufacturers chose to set different prices depending on effectiveness for certain indications. 

FDA Commissioner Previews Forthcoming Opioid Guidance 

U.S. Food & Drug Administration (FDA) Commissioner Scott Gottlieb last week released a statement highlighting the administration’s ongoing efforts to address the opioid crisis. The progress report on the plan released by the Department of Health and Human Services (HHS) last year touched on three key areas of advancement: (1) addressing opioid prescribing, (2) the marketing of illicit opioids, and (3) supporting novel product innovation. The statement highlights more than a dozen steps the agency has taken in these domains, including developing new guidance, collaborating with other agencies, expanding oversight, and more.

In the statement, Commissioner Gottlieb indicated that FDA plans to withdraw their existing 2014 analgesic guidance document on developing new pain drugs due to issues in implementation. Gottlieb clarified that the call for a large number of studies to develop a general chronic pain indication may have been too broad for its own good, and the health agency has instead determined a more focused approach would streamline drug development in specific areas. Commissioner Gottlieb also indicated that the agency is exploring the use of blister packs for opioid drugs as a method of better controlling prescription dispensing and reduce exposure. The FDA is actively considering other policy options, according to the Commissioner, including novel steps to better manage the use of high-dose opioid formulations. At least four new guidance documents will be published to replace the retracted 2014 analgesic guidance, which will be released in a series over the next six to twelve months.

The first guidance will address drugs that can be used in place of opioids in the treatment of acute pain and establish the FDA’s current thinking on reducing the use of opioids for acute pain in a clinical meaningful way. Commissioner Gottlieb also outlined forthcoming guidance for drug developers of new opioid treatments, noting that the FDA will ask sponsors to provide specific information to help assess the potential benefits and risks of potential new drugs. This will include an updated framework for evaluating the risks associated with intentional or illicit misuse or abuse of drugs. Another guidance will profile a path for developing extended-release local anesthetics as an alternative to the systematic use of oral opioid drugs, and address the clinical pharmacology, the proper evaluation of safety and efficacy, and the types of studies that may support approval of these products. The final document to be released from the FDA will look to assist sponsors with development of new non-opioid medication for chronic pain that can provide therapeutic alternatives to the use of opioids.

Bipartisan, Bicameral Leaders Seek Action on 340B Program

A letter from the bipartisan, bicameral leaders of the House Energy and Commerce and Senate Health, Education, Labor and Pensions (HELP) committees called for the administration to expeditiously issue clarifying rules for the 340B Drug Pricing program in three specific areas (statement; letter). In the letter addressed to Captain Krista Pedley, Director of the Office of Pharmacy Affairs for the Health Resources and Services Administration (HRSA), lawmakers acknowledged a recent court ruling which limited HRSA’s regulatory authority, but they went on to identify three areas where that the agency does have authority to act.

The letter cites Captain Pedley’s testimony before the HELP committee in June and Energy & Commerce in July, during which she reiterated the administration’s request to provide HRSA additional regulatory authority to oversee and manage the program. In the letter, lawmakers appeared to balk at HRSA’s request, saying, “we remain concerned that the agency is not using its exiting authorities.” Additionally, HRSA’s efforts to issue new regulations has been further complicated by the administration’s work on drug pricing, which Secretary Azar has stated would include the 340B program.

Congressional committee leaders are essentially putting HRSA on notice that they intend to continue to closely monitor the agency’s activities in the months ahead. While the legislative calendar makes it unlikely that Congress will take up a major 340B reform bill this year, there appears to be bipartisan interest in continuing the discussion in 2019. The Secretary has indicated that the administration does intend to issue rulemaking concerning the 340B drug ceiling price, and that this could be incorporated in the department’s broader drug pricing initiative. The three areas where Congress urged HRSA to take action include:

• Establishing and implementing a binding Administrative Dispute Resolution (ADR) process for the resolution of certain disputes relating to compliance with 340B Program requirements;
• Authorizing the imposition of civil monetary penalties (CMPs) against manufacturers that “knowingly and intentionally overcharge a covered entity for a 340B drug”; and
• Issuing “precisely defined” standards of methodology for calculation of 340B ceiling prices.