Life Science Compliance Update

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July 12, 2017

Prices Testifies On Proposed Budget Cuts

Tom-price-2_custom-2c664edb75a9799e117003e741ae03c9eec35dcc-s900-c85

We continue to follow the President’s budgets with potential cuts to the NIH and possible legislation to address drug prices. With that in mind, HHS Secretary Tom Price’s testimony in front of a House appropriations subcommittee is particularly relevant. The head of HHS reiterated his support for the President’s cuts to NIH and noted that he is working on a plan to lower the cost of drugs in the United States. Chairman Tom Cole’s (R-Okla.) remarks before Price’s testimony can be found here.

Price’s testimony

The Secretary faced a number of questions regarding the promotion of Obamacare plans along with drug prices and NIH funding. On the funding of the NIH, Price argued the agency could be trimmed by cutting “inefficiencies,” such as overhead payments. As has been reported, “About 30% of the grant money that goes out is used for indirect expenses, which as you know means that money goes for something other than the research that's being done,” Price said. The Trump budget, he explained, is “trying to … be the first step in this process” of getting “a bigger bang for our buck.”

In 2016, NIH paid $6.4 billion in overhead costs on top of the $16.9 billion in extramural funds to support the direct costs of research projects and other awards. Price’s comments were echoed by Representative Andy Harris (R–MD), who noted that many private foundations limit overhead payments to grantees to 10%, whereas others, such as the American Lung Association, pay nothing. “It’s very interesting that the private sector doesn’t hold these indirect costs to be so valuable as to pay them,” Harris said.

Rep. Tom Cole, who chairs the appropriations subcommittee that oversees HHS, told Price that current levels of proposed cuts to the NIH and CDC are highly unlikely to be supported by Congress. He said NIH and the Centers for Disease Control and Prevention are every bit as important as national defense. "Frankly, you're much more likely to die in a pandemic than you are in a terrorist attack," said Cole, adding: "I'd rather fight Ebola (the deadly virus) in West Africa than in West Dallas."

Regarding drug prices, Regulatory Focus described Price’s reference to President Trump’s planned “bidding” system, although he did not elaborate on Trump’s call to double user feeds in an effort to offset budget cuts to the FDA.

Price also critiqued the structure of the current Medicaid program during the hearing, calling the system "broken" because it focuses too much on funding and not enough on ensuring beneficiaries achieve better health outcomes. It has been previously noted that Price has expressed support in the past for requiring Medicaid beneficiaries to pay premiums in exchange for program participation and lowering those premiums depending on beneficiaries meeting healthy behavior requirements, such as getting physicals.

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