TRP Health Policy Report
March 9, 2015
Last Wednesday, the U.S. Supreme Court heard oral arguments in the King v. Burwell case, which challenges the legality of tax subsidies in the 37 states that have opted to use the federal government’s marketplace instead of creating their own. A divide among the justices was clear, with the liberal wing largely backing the Obama Administration and conservatives speaking out in favor of the challengers. A ruling on the case is expected in June, with the outcome likely to hinge on the votes of Chief Justice John Roberts and Justice Anthony Kennedy. The White House has said it does not have a contingency plan for an adverse ruling in King v. Burwell. Republicans leaders have begun reviewing ways to create a stopgap legislative fix, should the Supreme Court rule to immediately strike down the subsidies. But Justice Samuel Alito said that if that occurred, the court could give states a few extra months to comply before taking away the subsidies, perhaps until the end of tax season. "Going forward, there would be no harm done," he said.
In legislative activity, the House voted 257-167 to approve legislation (H.R. 240) funding the Department of Homeland Security without provisions to undo President Obama's executive actions on immigration. Seventy-five Republicans voted with all 182 Democrats in the 257-167 vote, averting a weekend shutdown at the agency. Last Wednesday, House members passed legislation (H.R. 749) authorizing nearly $8 billion in funding for Amtrak in a 316-101 vote. In the Senate, lawmakers failed to override President Obama’s veto of legislation (S. 1) approving the Keystone XL oil sands pipeline, falling five votes short of the two-thirds majority needed in a 62-37 vote. Keystone proponents vowed to continue the fight for the pipeline by attaching the legislation to a six-year highway reauthorization or an energy bill. Senators also voted 53-26 to strike down a controversial National Labor Relations Board rule meant to speed up union elections.
The Week Ahead
The House is in recess this week. In the Senate, members will consider a range of issues, from war authorization to human trafficking. The anti-human trafficking bill (S. 178) would establish a new fund for domestic trafficking victims. Republican leaders decided to take up that measure after postponing consideration of legislation (S. 625) that would require Congressional approval of any Iran nuclear deal. The Senate floor may also see debate on President Obama’s request for authorization to use force against Islamic State terrorist groups in Syria and Iraq. Also up for potential consideration is a confirmation vote on Attorney General nominee Loretta Lynch. Off the floor, House and Senate staff will be putting the finishing touches on their fiscal 2016 budget resolutions. House Budget Committee Chairman Tom Price (R-GA) intends to release his budget on March 17, and Senate Budget Committee Chairman Mike Enzi (R-WY) plans a two-day markup starting the following day. In notable healthcare-related hearings, the Senate HELP Committee convenes tomorrow for a discussion featuring testimony from outgoing FDA Commissioner Margaret Hamburg and NIH Director Francis Collins. The hearing comes as the HELP panel launches drug and device innovation discussions parallel to the House’s 21st Century Cures initiative.
Justices Appear Split on Health Law Subsidies Challenge
Last Wednesday, the Supreme Court took up the Affordable Care Act in one of the most anticipated arguments of the term, and it seemed closely divided over the fate of the 2010 healthcare law. The King v. Burwell case turns on a single word in the 2,000-plus-page statute, in a clause authorizing the tax credits for policies purchased on an exchange established “by” the state. Only 13 states fully operate their own online healthcare marketplaces. The other 37 rely on the HealthCare.gov site operated by the federal government. The challengers contend the provision reflects a miscalculation by Congress, which assumed states would establish exchanges in light of the benefits residents would receive. Meanwhile, the Justice Department argues that the law, when read as a whole, makes clear that the subsidies were intended to be available nationwide, not just in certain states. The court’s liberal justices, as expected, appeared to align behind the Obama Administration, while court’s three most conservative justices appeared to be just as firmly behind the challengers.
Chief Justice John Roberts, who cast the pivotal vote to save the ACA in 2012, said almost nothing on Wednesday, and did not indicate his position. And in a surprise for the White House, Justice Anthony Kennedy, who was in dissent in 2012, made several comments indicating that his vote was in play. Last Wednesday’s arguments suggested that the coming months will be tense for the Administration as it waits to hear whether about seven million low- and middle-income people will continue to receive subsidies to help them buy health insurance. Should the court rule that subsidies were not authorized by the health law, most of those people would be unable to afford coverage and insurance markets in those states could collapse. The high court is expected to decide the King v. Burwell case by June, and it seems certain that the Administration will have to win the support of either Justice Kennedy or Chief Justice Roberts to prevail. For months, the issue has divided ACA supporters and detractors. Congressional Republicans see the lawsuit as their gateway to repealing and replacing the 2010 health law, while Democrats have expressed confidence that the Court won’t strike down subsidies to millions of Americans.
Republicans Make Backup Plans for ACA Subsidies
In related news, Sen. Ben Sasse (R-Neb.) released a plan that would provide subsidies to help U.S. residents purchase coverage through the federal exchange for 18 months if the Supreme Court rules they are illegal. Introduced last Thursday, the Nebraska Senator's bill is the latest in a string of GOP-backed contingency plans that have been unveiled in the past week. Last Sunday, Republican Senate leaders announced a plan that would protect people affected by a ruling striking down the subsidies by providing temporary financial assistance for those who would lose the subsidies, among other provisions. In addition, House Republican leaders on Monday outlined a backup plan that would allow affected individuals to continue receiving subsidies in the form of tax credits. Comments from Supreme Court Justice Antonin Scalia during oral arguments on Wednesday encouraged Republicans that they should act if the subsidies are ruled illegal. During the arguments, Justices Samuel Alito and Scalia both argued that Congress could act to remedy the issue if the subsidies are invalidated. Further, Scalia said he believes Congress would take action in such an instance.
Sen. John Barrasso (R-WY), one of the Senate leaders who proposed a backup plan, said the remarks were encouraging "because we are committed to" implementing a contingency plan. Still, Democrats expressed concern that Congressional Republicans would not work to address the potential subsidies issue. The plans also come at a time when GOP lawmakers are considering whether to move forward with efforts to repeal the ACA. Senior House Republican aides said Thursday that committee chairs were meeting to decide whether to create a budget plan that would include parliamentary language to repeal the law through a process known as budget reconciliation. House Budget Committee Chair Tom Price (R-GA) noted that such language would be broad enough to allow Republicans to use the process for either an ACA repeal or another policy initiative.
FDA Approves First 'Biosimilar' Drug
Last Friday, the FDA approved the first biosimilar drug in the U.S. in a move that is expected to increase competition and lower prices in the pharmaceutical marketplace. The agency approved Zarxio – made by Sandoz, a subsidiary of Novartis – a biosimilar to Amgen's Neupogen. The drug is used to increase white blood cells in people undergoing chemotherapy. The pathway for approving biosimilars was eased by the Affordable Care Act, which included a measure easing the licensing process. The move was intended to increase competition and reduce costs of the effective, but often expensive, drugs.
Outside the United States, biosimilars have typically sold at a 20% to 30% discount to the original biologic, while generic drugs often sell at up to 90% discounts to the branded version. Analysts expect roughly the same discounts in the United States. The price competition could shave billions of dollars a year from the cost of U.S. healthcare. A RAND study estimated that biosimilars will generate $44 billion of savings in 10 years.
As part of its approval process, the FDA reviews evidence to ensure that the biosimilar has the same effects as the reference product. In a statement, FDA Commissioner Margaret Hamburg said “patients and the health care community can be confident that biosimilar products approved by the FDA meet the agency’s rigorous safety, efficacy and quality standards.”
MedPAC Focuses on Discount Drug Program
Last week’s snowstorm in Washington delayed a House hearing on the government’s 340B discount drug program, but Congress’ advisers on Medicare braved the bad weather, holding a separate discussion about the issue. Meeting last Thursday, the Medicare Payment Advisory Commission (MedPAC) said it plans to include a section on the 340B program in its June report to Congress, even though the drug discount program falls somewhat outside of its jurisdiction. “We are not yet close to the point of making recommendations,” said Glenn Hackbarth, MedPAC’s chairman, beginning a discussion about the program and Medicare’s drug purchase through its Part B benefit. “If we as a group elect to pursue recommendations, that would happen next cycle,” meaning that publication would not occur prior to 2016.
There has been significant interest from members of Congress in the 340B program, which allows some hospitals and clinics to obtain pharmaceuticals at a steep discount. Eligible hospitals and other entities saved about $3.8 billion in fiscal 2013, according to the Health Resources and Services Administration (HRSA), which administers the 340B program. The agency has struggled in recent years to develop a comprehensive framework for the 340B program, which was created by Congress in the 1990s. At the same time, HRSA has faced complaints from both hospitals about having to pay more than they should for medicines, as well as from pharmaceutical makers about a lack of accountability on the part of hospitals with regard to how they have accessed discounted products under 340b.
The House Energy and Commerce Committee’s health panel had to reschedule a planned Thursday hearing on the program due to weather. But in a memo prepared for the hearing, the Health subcommittee staff said that the GAO and the HHS Inspector General are both looking at the 340B program. GAO’s review includes a look at how hospitals that qualify for the 340B discount program compare with those that don’t. The HHS’s IG office is examining how much Medicare might save if it were able to share in the discounts offered through the 340B program, according to the memo. According senior committee staff, the Health subcommittee hearing is likely to be rescheduled in the coming weeks.
House Budget Chair Rules Out Permanent 'Doc Fix' Before Deadline
Last Monday, House Ways and Means Chairman Paul Ryan (R-WI) told a hospital group that there isn't consensus on how to pay for a permanent repeal of Medicare’s physician payment formula and that Congress “will have to buy time” and pass another short-term bill to avert cuts of about 21 percent due to take effect April 1. Physician groups and other stakeholder organizations have been pushing Congress to permanently replace the sustainable growth rate (SGR) before a temporary payment patch expires at the end of the month. Chairman Ryan said that he supports a bipartisan, bicameral replacement policy reached last year, but that the $174.5 billion price tag remains a problem. While Republicans are “trying to engage” with Democrats, Ryan said the parties have opposing views on what a Medicare overhaul should look like.
The Wisconsin lawmaker characterized Democrats’ general position as continuing implementation of the health law, including the IPAB cost-cutting board he criticized for taking money away from providers. “There are other issues, like Medicare reform-based issues, we’d like to enter into this to try and help pay for this,” he said. Ryan also said that other fiscal issues crowding the agenda, including the budget sequester, could lead to a broader fiscal policy discussion or another budget agreement that could serve as an opportunity to move forward on the SGR. Beyond Medicare payments, Ryan said that House Republicans will pass a contingency plan by June, should the Supreme Court strike down the health law's system for distributing insurance subsidies. “Our goal is to have legislation ready to go come June … so that we have a bridge out of this problem,” Ryan said. In addition, Ryan said the House will move legislation this year to repeal the ACA’s tax on medical devices and that he thinks the Senate will take it up. But he said he’s uncertain whether President Obama would veto it.
The Week Ahead
The House is in recess this week. In the Senate, members will consider a range of issues, from war authorization to human trafficking. The anti-human trafficking bill (S. 178) would establish a new fund for domestic trafficking victims. Republican leaders decided to take up that measure after postponing consideration of legislation (S. 625) that would require Congressional approval of any Iran nuclear deal. The Senate floor may also see debate on President Obama’s request for authorization to use force against Islamic State terrorist groups in Syria and Iraq. Also up for potential consideration is a confirmation vote on Attorney General nominee Loretta Lynch. Off the floor, House and Senate staff will be putting the finishing touches on their fiscal 2016 budget resolutions. House Budget Committee Chairman Tom Price (R-GA) intends to release his budget on March 17, and Senate Budget Committee Chairman Mike Enzi (R-WY) plans a two-day markup starting the following day. In notable healthcare-related hearings, the Senate HELP Committee convenes tomorrow for a discussion featuring testimony from outgoing FDA Commissioner Margaret Hamburg and NIH Director Francis Collins. The hearing comes as the HELP panel launches drug and device innovation discussions parallel to the House’s 21st Century Cures initiative.
Justices Appear Split on Health Law Subsidies Challenge
Last Wednesday, the Supreme Court took up the Affordable Care Act in one of the most anticipated arguments of the term, and it seemed closely divided over the fate of the 2010 healthcare law. The King v. Burwell case turns on a single word in the 2,000-plus-page statute, in a clause authorizing the tax credits for policies purchased on an exchange established “by” the state. Only 13 states fully operate their own online healthcare marketplaces. The other 37 rely on the HealthCare.gov site operated by the federal government. The challengers contend the provision reflects a miscalculation by Congress, which assumed states would establish exchanges in light of the benefits residents would receive. Meanwhile, the Justice Department argues that the law, when read as a whole, makes clear that the subsidies were intended to be available nationwide, not just in certain states. The court’s liberal justices, as expected, appeared to align behind the Obama Administration, while court’s three most conservative justices appeared to be just as firmly behind the challengers.
Chief Justice John Roberts, who cast the pivotal vote to save the ACA in 2012, said almost nothing on Wednesday, and did not indicate his position. And in a surprise for the White House, Justice Anthony Kennedy, who was in dissent in 2012, made several comments indicating that his vote was in play. Last Wednesday’s arguments suggested that the coming months will be tense for the Administration as it waits to hear whether about seven million low- and middle-income people will continue to receive subsidies to help them buy health insurance. Should the court rule that subsidies were not authorized by the health law, most of those people would be unable to afford coverage and insurance markets in those states could collapse. The high court is expected to decide the King v. Burwell case by June, and it seems certain that the Administration will have to win the support of either Justice Kennedy or Chief Justice Roberts to prevail. For months, the issue has divided ACA supporters and detractors. Congressional Republicans see the lawsuit as their gateway to repealing and replacing the 2010 health law, while Democrats have expressed confidence that the Court won’t strike down subsidies to millions of Americans.
Republicans Make Backup Plans for ACA Subsidies
In related news, Sen. Ben Sasse (R-Neb.) released a plan that would provide subsidies to help U.S. residents purchase coverage through the federal exchange for 18 months if the Supreme Court rules they are illegal. Introduced last Thursday, the Nebraska Senator's bill is the latest in a string of GOP-backed contingency plans that have been unveiled in the past week. Last Sunday, Republican Senate leaders announced a plan that would protect people affected by a ruling striking down the subsidies by providing temporary financial assistance for those who would lose the subsidies, among other provisions. In addition, House Republican leaders on Monday outlined a backup plan that would allow affected individuals to continue receiving subsidies in the form of tax credits. Comments from Supreme Court Justice Antonin Scalia during oral arguments on Wednesday encouraged Republicans that they should act if the subsidies are ruled illegal. During the arguments, Justices Samuel Alito and Scalia both argued that Congress could act to remedy the issue if the subsidies are invalidated. Further, Scalia said he believes Congress would take action in such an instance.
Sen. John Barrasso (R-WY), one of the Senate leaders who proposed a backup plan, said the remarks were encouraging "because we are committed to" implementing a contingency plan. Still, Democrats expressed concern that Congressional Republicans would not work to address the potential subsidies issue. The plans also come at a time when GOP lawmakers are considering whether to move forward with efforts to repeal the ACA. Senior House Republican aides said Thursday that committee chairs were meeting to decide whether to create a budget plan that would include parliamentary language to repeal the law through a process known as budget reconciliation. House Budget Committee Chair Tom Price (R-GA) noted that such language would be broad enough to allow Republicans to use the process for either an ACA repeal or another policy initiative.
FDA Approves First 'Biosimilar' Drug
Last Friday, the FDA approved the first biosimilar drug in the U.S. in a move that is expected to increase competition and lower prices in the pharmaceutical marketplace. The agency approved Zarxio – made by Sandoz, a subsidiary of Novartis – a biosimilar to Amgen's Neupogen. The drug is used to increase white blood cells in people undergoing chemotherapy. The pathway for approving biosimilars was eased by the Affordable Care Act, which included a measure easing the licensing process. The move was intended to increase competition and reduce costs of the effective, but often expensive, drugs.
Outside the United States, biosimilars have typically sold at a 20% to 30% discount to the original biologic, while generic drugs often sell at up to 90% discounts to the branded version. Analysts expect roughly the same discounts in the United States. The price competition could shave billions of dollars a year from the cost of U.S. healthcare. A RAND study estimated that biosimilars will generate $44 billion of savings in 10 years.
As part of its approval process, the FDA reviews evidence to ensure that the biosimilar has the same effects as the reference product. In a statement, FDA Commissioner Margaret Hamburg said “patients and the health care community can be confident that biosimilar products approved by the FDA meet the agency’s rigorous safety, efficacy and quality standards.”
MedPAC Focuses on Discount Drug Program
Last week’s snowstorm in Washington delayed a House hearing on the government’s 340B discount drug program, but Congress’ advisers on Medicare braved the bad weather, holding a separate discussion about the issue. Meeting last Thursday, the Medicare Payment Advisory Commission (MedPAC) said it plans to include a section on the 340B program in its June report to Congress, even though the drug discount program falls somewhat outside of its jurisdiction. “We are not yet close to the point of making recommendations,” said Glenn Hackbarth, MedPAC’s chairman, beginning a discussion about the program and Medicare’s drug purchase through its Part B benefit. “If we as a group elect to pursue recommendations, that would happen next cycle,” meaning that publication would not occur prior to 2016.
There has been significant interest from members of Congress in the 340B program, which allows some hospitals and clinics to obtain pharmaceuticals at a steep discount. Eligible hospitals and other entities saved about $3.8 billion in fiscal 2013, according to the Health Resources and Services Administration (HRSA), which administers the 340B program. The agency has struggled in recent years to develop a comprehensive framework for the 340B program, which was created by Congress in the 1990s. At the same time, HRSA has faced complaints from both hospitals about having to pay more than they should for medicines, as well as from pharmaceutical makers about a lack of accountability on the part of hospitals with regard to how they have accessed discounted products under 340b.
The House Energy and Commerce Committee’s health panel had to reschedule a planned Thursday hearing on the program due to weather. But in a memo prepared for the hearing, the Health subcommittee staff said that the GAO and the HHS Inspector General are both looking at the 340B program. GAO’s review includes a look at how hospitals that qualify for the 340B discount program compare with those that don’t. The HHS’s IG office is examining how much Medicare might save if it were able to share in the discounts offered through the 340B program, according to the memo. According senior committee staff, the Health subcommittee hearing is likely to be rescheduled in the coming weeks.
House Budget Chair Rules Out Permanent 'Doc Fix' Before Deadline
Last Monday, House Ways and Means Chairman Paul Ryan (R-WI) told a hospital group that there isn't consensus on how to pay for a permanent repeal of Medicare’s physician payment formula and that Congress “will have to buy time” and pass another short-term bill to avert cuts of about 21 percent due to take effect April 1. Physician groups and other stakeholder organizations have been pushing Congress to permanently replace the sustainable growth rate (SGR) before a temporary payment patch expires at the end of the month. Chairman Ryan said that he supports a bipartisan, bicameral replacement policy reached last year, but that the $174.5 billion price tag remains a problem. While Republicans are “trying to engage” with Democrats, Ryan said the parties have opposing views on what a Medicare overhaul should look like.
The Wisconsin lawmaker characterized Democrats’ general position as continuing implementation of the health law, including the IPAB cost-cutting board he criticized for taking money away from providers. “There are other issues, like Medicare reform-based issues, we’d like to enter into this to try and help pay for this,” he said. Ryan also said that other fiscal issues crowding the agenda, including the budget sequester, could lead to a broader fiscal policy discussion or another budget agreement that could serve as an opportunity to move forward on the SGR. Beyond Medicare payments, Ryan said that House Republicans will pass a contingency plan by June, should the Supreme Court strike down the health law's system for distributing insurance subsidies. “Our goal is to have legislation ready to go come June … so that we have a bridge out of this problem,” Ryan said. In addition, Ryan said the House will move legislation this year to repeal the ACA’s tax on medical devices and that he thinks the Senate will take it up. But he said he’s uncertain whether President Obama would veto it.