Life Science Compliance Update

February 20, 2018

The Congressional Budget Deal's Effect on Health Care


In early February, Congress passed a massive bipartisan budget deal to fund the government through March 23, 2018, suspend the debt ceiling until 2019, raise budget caps by nearly $300 billion over two years, and fund various parts of the government.

Naturally, passage of the budget agreement means that quite a few health care priorities made their way into the law. For example, several health care “extenders” were reauthorized, community health centers (CHCs) were funded, cuts to safety net hospitals were delayed, as were cuts to the CHRONIC Care Act and the Part B Improvement Act, while revisions to the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) were made.

Then, the deal reached in the Senate added $6 billion in funding to address opioid and mental health treatment, $4 billion for VA hospitals, and $2 billion in new funding for research at the National Institutes of Health (NIH). The Senate deal also extend funding for the Children’s Health Insurance Plan (CHIP) by an additional four years — a ten-year extension when combined with the six-year reauthorization secured last month.

Interestingly, the agreement also permanently repeals Medicare’s moribund Independent Payment Advisory Board (IPAB), while also making adjustments to the prescription drug “donut hole” that will require pharmaceutical companies to provide steeper discounts for seniors in the coverage gap.

IPAB Repealed

Before it could go into effect, Congress included the repeal of the unpopular Affordable Care Act (ACA) Independent Payment Advisory Board (IPAB), which would have been responsible for identifying potential Medicare savings to Congress. Congressional representatives of both parties had disdain for IPAB because it had the ability to limit Congress’ power over its recommendations. While Medicare spending has yet to hit the designated threshold that would have triggered the creation of the panel, the most recent Medicare trustees report estimated that it may have been enacted as soon as 2021.

The repeal of IPAB is likely to benefit drug makers and private Medicare plans as without the repeal, the Board would have been precluded from rationing care, increasing beneficiary spending, or cutting payments to hospitals and hospices.

The Donut Hole is Closed

The bill increased the discounts that drug companies pay to beneficiaries whose drug costs fall into the coverage gap of Part D, from the current 50 percent level to 70 percent. This change is estimated to save the federal government $10 billion over the course of a decade but is expected to cost drug companies close to $40 billion over that same decade.

Part D plan sponsors, on the other hand, had a decrease in their liability from the 25 percent they were expected to pay to begin in 2020 all the way down to 5 percent. The hole will remain the same for patients – 25 percent.

Changes to MACRA

The Medicare Access and CHIP Reauthorization Act (MACRA) had several changes made to it by way of the budget deal, including excluding the cost of Part B drugs from the calculation of doctor pay, delaying the use of cost measures in doctor performance scores, giving CMS three more years to transition to the performance threshold, and allowing the Physician-Focused Payment Model Technical Advisory Committee (PTAC) weigh in earlier on the payment models that providers design.

Physician advocate groups had been lobbying for the ability to exclude the cost of drugs they administer from the calculation of their Merit-Based Incentive Payment System (MIPS) scores because they were concerned that specialty therapies do not always have consistent coverage in reimbursement. In addition to listening to the concerns on that front, lawmakers also allowed CMS the flexibility to determine the weight of the cost performance category between 10 percent to 30 percent for three years.

February 01, 2018

State of the Union De-Briefing


President Donald Trump gave his second State of the Union address this week, and while reactions to his speech were mixed, he mentioned several items of importance to the healthcare space.

Affordable Care Act

First, he noted the repeal of the individual mandate found in the Affordable Care Act, by noting, “We eliminated an especially cruel tax that fell mostly on Americans making less than $50,000 a year -- forcing them to pay tremendous penalties simply because they could not afford government-ordered health plans. We repealed the core of disastrous Obamacare -- the individual mandate is now gone.”

Interestingly to some of his most ardent fans, however, the President did not call for the repeal of the Affordable Care Act in its entirety. Therefore, it seems as though his focus on the ACA will be muted with respect to the rest of the ACA that is still in place, including the Medicaid expansion and other reforms.

Right to Try

President Trump also noted his belief in right to try laws, stating, “We also believe that patients with terminal conditions should have access to experimental treatments that could potentially save their lives. People who are terminally ill should not have to go from country to country to seek a cure -- I want to give them a chance right here at home. It is time for the Congress to give these wonderful Americans the ‘right to try.’”

Vice President Mike Pence has long held Right to Try as a priority of his, and Trump’s call on Congress to pass legislation comes amid stalled House legislation, which easily passed the Senate in August.

More than half of the states have laws that already exist to allow some patients access to experimental treatments and the Food and Drug Administration also hash a pathway that grants expedited access to treatment to patients with terminal illnesses; however, FDA Commissioner Scott Gottlieb has been reluctant to expand much past that.

Opioid Abuse

Many Senators and Congresspeople wore purple ribbons in an attempt to highlight the opioid crisis. President Trump addressed this hot-button issue as well, saying, “In 2016, we lost 64,000 Americans to drug overdoses: 174 deaths per day. Seven per hour. We must get much tougher on drug dealers and pushers if we are going to succeed in stopping this scourge. My Administration is committed to fighting the drug epidemic and helping get treatment for those in need.”

As we have previously written, President Trump has always placed a priority on resolving opioid abuse, including creating a Task Force to review the situation and craft a plan of action. However, he has yet to propose new funding to help states respond (one of the suggestions we often hear from Democrats).

Newly appointed Health and Human Services Alex Azar recently highlighted the administration’s five-point strategy, including (1) encompassing better treatment, prevention, and recovery services; (2) better targeting of overdose-reversing drugs; (3) better data on the epidemic; (4) better research on pain and addiction, and (5) better pain management. Funding for treatment will continue to be central to the debate, and it remains to be seen whether Congress will provide the boost that many public health advocates have been calling for.  

Drug Pricing

Prescription drug prices were a hot topic in the 2016 Presidential election and were, naturally, mentioned during the State of the Union as well. President Trump stated, “To speed access to breakthrough cures and affordable generic drugs, last year the FDA approved more new and generic drugs and medical devices than ever before in our history... One of my greatest priorities is to reduce the price of prescription drugs. In many other countries, these drugs cost far less than what we pay in the United States. That is why I have directed my Administration to make fixing the injustice of high drug prices one of our top priorities. Prices will come down.”

Given the political climate, little action has been seen on this front while excessive rhetoric continues to be the modus operandi of the political class.


Overall, there were statements by the President that earned cheers and some jeers from both sides of the political aisle. While lip service can be effective in providing a motivating speech, we will have to wait to see what changes are actually effectuated in the future.


September 15, 2017

HELP Committee Holds Hearing on Individual Health Insurance Market


The Senate Health, Education, Labor and Pensions (HELP) Committee recently held the first hearing of several about ways to stabilize premiums and help individuals in the individual insurance market. The Committee heard from five different state insurance commissioners regarding their experiences with the individual insurance marketplaces under the Affordable Care Act (ACA). Most of the testimony focused on the need to fund cost-sharing reduction (CSR) payments, increase flexibility under the ACA’s section 1332 waiver program and establish a federal reinsurance program. There was bipartisan interest in stabilizing the individual market.

Chairman Lamar Alexander reported that there are eighteen million people with coverage through the individual market. He noted that thirty-one Senators not on the HELP Committee attended a morning coffee with today’s witnesses and applauded the wide interest in stabilizing the individual market. He said there has been a “partisan stalemate for seven years” and that action needs to be taken sooner rather than later, with final rate determinations due September 20th and Qualified Health Plan contracts for 2018 due September 27th. He also warned that insurer exits could occur prior to the contract finalization deadline and that half of counties nationwide have only one insurer participating on the Exchange.

Ranking Member Patty Murray was slightly more political, stating the Administration is “trying to create Trumpcare by sabotage,” cutting ACA outreach, and creating uncertainty about cost-sharing subsidies. She said it is important to reach a “multi-year solution” because plans develop rates over many months. She said, however, note that she believes that “agreement is possible,” while also noting the importance of preserving guardrails present in the ACA.

Julie Mix McPeak, the Commissioner of the Tennessee Department of Commerce and Insurance, noted that while the individual insurance market in Tennessee has not collapsed, the market should not be considered stable and that insurers have been “fleeing the market” because of uncertainty about rising costs. Most individuals in the state only have one plan to choose from, compared to last year, when at least two carriers offered policies in all counties. She stated that premiums have skyrocketed while choices have diminished and that the current situation is not sustainable.

McPeak stated that funding of CSRs is the single most critical issue and that such funding is not an insurer bailout, while also noting the importance of reinsurance and the cost of care, stating that there is no transparency in the pharmaceutical industry. She highlighted the fact that insurer rates are directly related to underlying health care costs.

Mike Kreidler, the Washington State Insurance Commissioner, stated that roughly 330,000 individuals purchase coverage through the individual state-based marketplace. He also noted that Washington embraced the ACA from the beginning and the uninsurance rate has dropped from fifteen percent to less than six percent. He stated that insurers in the state need certainty and that “progress forward is threatened by uncertainty around the fate of the ACA.” Mr. Kreidler asked Congress to address the market uncertainties by permanently funding CSR payments and enacting a federal reinsurance program for a minimum of three years. He also asked for federal investments in outreach and enrollment marketing to maximize the number of people enrolled in the market, especially the young and healthy, and to continue the “guardrails” in the section 1332 waiver process.

Lori Wing-Heier, Director of the Alaska Division of Insurance, testified to the health care challenges in Alaska, including its large size, rural population and insufficient provider competition. She stated that while the individual mandate reduced the number of uninsured residents in the state, it also had the unintended consequence of raising insurance premiums, resulting in a volatile market. She believes that congressional action is necessary in the individual market. Wing-Heier gave the example of the Section 1332 waiver that they did in Alaska and asked Congress to focus on stabilization of the health insurance markets. She asked for funding of CSR payments through at least 2019. Ste also stated that programs that allow states to address the unique needs of their residents are crucial to long-term stability of the health insurance markets.

Theresa Miller, the Insurance Commissioner of Pennsylvania, noted that while the ACA is not perfect, the narrative that it is failing and imploding is false. She stated that the ACA has worked well in Pennsylvania, where the uninsured rate has dropped to 6.4 percent. Commissioner Miller stated that for 2018, the insurers in the individual market filed for an average increase of 8.8 percent, assuming no changes come from the federal government. She noted that if CSR payments are not made, insurers estimate an average increase of 20.4 percent and if the individual mandate is not enforced, insurers would seek an estimated 23.3 percent increase. She stated that CSR uncertainty has a significant impact on rates and drives up costs for all consumers. Commissioner Miller asked Congress to allocate CSR funding through at least 2019.

John Doak, Commissioner of the Oklahoma Department of Insurance stated that small business owners and self-employed individuals are suffering with the insurance premium spikes. In addition, carriers are narrowing their networks. Doak stated that he is encouraged by the Trump Administration’s priorities for state flexibility and that Oklahoma has submitted a section 1332 waiver. He asserted his belief, however, that waivers are not the solution to the problems from the ACA and that powers must be returned back to states.


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