Life Science Compliance Update

March 23, 2017

Will Trump Repeal Medical Device Taxes?

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Part of President Obama’s landmark health care bill, the Affordable Care Act, imposed a federal tax on medical devices. That tax was temporarily suspended in January 2016, which allowed some medical device companies (i.e., OrthoPediatrics Corp. based in Northern Indiana) to hire more workers. The CEO of OrthoPediatrics is hoping that President Donald Trump, together with Congress, will turn the temporary suspension into a permanent repeal. 

OrthoPediatrics Instituted a Headcount Freeze

OrthoPediatrics, founded in 2006, develops and markets implantable orthopedic devices, such as metal plates that can be attached to bones, to treat deformities and traumatic injuries in children. It has 60 employees in its Warsaw, Indiana headquarters, and 94 sales representatives around the United States.

When the tax was in full effect, CEO Mark Throdahl said, OrthoPediatrics "had almost a headcount freeze during 2015" because of the revenue that was siphoned away by the tax. Since the tax's temporary suspension, he said, "We've resumed an aggressive pace of hiring and investment."

AdvaMed Quickly Started Lobbying

The medical device industry is seeking to frame the fight as a jobs issue. Immediately following Trump's election victory, industry lobbying group AdvaMed wrote to him and Vice President-elect Mike Pence asking for permanent repeal of the tax.

In the letter, AdvaMed President Scott Whitaker wrote, "The medical device tax has been a significant drag on medical innovation, and resulted in the loss or deferred creation of jobs, reduced research spending, and slowed capital expansion."

Industry complaints like these led Congress last year to temporarily suspend the 2.3 percent excise tax on the sale of non-retail medical devices, such as pacemakers, heart valves and artificial hips. It had been in effect for only three years.

J.C. Scott, head of government affairs at AdvaMed, said companies "feel a great sense of urgency in trying to get complete repeal done early next year, rather than later in the year, because companies need certainty."

There are about 9,000 U.S.-based medical device manufacturers. The industry accounts for about 520,000 U.S. jobs and has $150 billion in direct sales, AdvaMed spokesman Mark Brager said.

Indiana (Vice President Pence’s home state) is home to several device companies. So are Minnesota, California and Massachusetts. Lawmakers from these states helped push through the temporary suspension of the device tax.

Trump Executive Order

One of President Trump’s first orders of business was signing an Executive Order that allowed government agencies, "to the maximum extent permitted by law... to waive, defer, grant exemption from, or delay the implementation of any provision or requirement of the Act [Affordable Care Act] that would impose a fiscal burden on any State or a cast, fee, tax penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications."

Congressional “Repeal and Replace” Attempt

In early March 2017, House Republicans unveiled their plan to repeal and replace Obamacare, and the released legislation includes ending the medical device tax for good.

While that is a significant victory for medical device makers, there are still open questions as to how the rest of the Republican plan will affect the industry. Those questions could be just the tip of the iceberg, as an industry that is deeply affected by federal policy tries to game out what the new regime, headed by Donald Trump and his GOP allies, will mean for their businesses.

We look forward to continuing to provide updates as we continue working in what seem to be uncharted political waters.

February 27, 2017

Senate Finance Committee Hearing on Seema Verma Confirmation

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On February 16, 2017, the Senate Finance Committee held a hearing to discuss the nomination of Seema Verma to be the Administrator of the Centers for Medicare and Medicaid Services (CMS). The hearing provided a little bit of insight into her plans for Medicare and Medicaid reform, should she be approved by the full Senate.

Ms. Verma did not offer many specifics on what types of reforms she will pursue, and she did not react to the recently-proposed CMS rule on market stabilization. She was particularly non-committal about the prospect of a Medicare premium support model and expressed enthusiasm for changing Medicaid, expressing a desire to attain better outcomes while noting multiple policy options available. Verma also discussed drug prices and praised the current negotiating abilities of pharmacy benefit managers and plan sponsors in Part D.

Chairman Orrin Hatch opened the hearing by complimenting Ms. Verma and her work on the Healthy Indiana Medicaid waiver plan, while Ranking Member Ron Wyden expressed concerns about Ms. Verma’s conflicts of interest and ability to lead CMS in a direction that benefits all Americans.

Ms. Verma stood up for herself and her past, noting that she has devoted her career working on policy for the most vulnerable Americans, and that she started her career by working on healthcare solutions for those affected by HIV/AIDS. She further noted that she wants to put the power to make healthcare decisions in the hands of the patients, along with pledging to modernize CMS and combat fraud.

Medicare

A topic that has received much discussion, whether Medicare and other government plans should be able to negotiate their own drug prices, was touched upon by Senator Debbie Stabenow. Verma did not really answer the question directly, instead noting that under her direction, CMS would do everything in its power to get affordable prices for seniors. She further noted her appreciation for PBMs and the Part D program that are already performing that function to the best of their ability.

Senator Bill Nelson asked Ms. Verma whether she would turn Medicare into a voucher program. She explained that it is not her intention, and that she is more interested in giving beneficiaries the choices and options they deserve.

Medicaid

Several of the senators were concerned about various aspects of Medicaid. Senator Robert Menendez expressed concerns that, if the Affordable Care Act were repealed, many children with autism would lose access to vital treatment and therapy. He asked Ms. Verma what she would do to protect their care, and she stated she had actually been advised by the Office of Government Ethics to refrain from engaging in matters related to mental disorders and care, due to a conflict of interest with her husband’s child psychiatry practice.

Senator Maria Cantwell shared “grave” concerns about block granting Medicaid and wondered how Ms. Verma would handle such a proposal. Ms. Verma noted that Medicaid does not currently encourage innovation due to its rigidity, and that the system needs to be rebalanced to allow more state leadership and flexibility for creativity. She stated that any reform would focus on ensuring better outcomes for patients.

Senator Sherrod Brown asked Ms. Verma to work with state Medicaid directors and encouraged her to have open communications with them. Ms. Verma seemed receptive to the idea, further agreeing with Senator Brown that CHIP funding should be extended for at least eight more years, in line with what HHS Secretary Price recently threw his support behind.

Senator Tim Scott asked for policy ideas that would work best to strengthen Medicaid on a state level. Ms. Verma noted that what works in one state may not work in another, that there is no one-size-fits-all solution to Medicaid that would be applicable to all fifty states.

January 30, 2017

Senate Finance Committee Holds Hearing on Dr. Price to Lead Department of Health and Human Services

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On Tuesday, January 24, 2017, the Senate Committee on Finance held a hearing to consider the nomination of Representative Thomas Price, M.D., to be Secretary of the Department of Health and Human Services (HHS). The hearing was the last for Dr. Price before the entire Committee holds its formal vote on confirmation and provided key insights to Representative Price’s views on healthcare reform, from the Affordable Care Act (ACA) repeal and replace to Medicare and Medicaid reform.

The hearing somewhat highlighted the division between the political parties, with Democrats focusing on concerns surrounding Representative Price’s healthcare investments, his previous statements on health policy, and his legislative record combating the ACA. On the other hand, Republican support for Representative Price remained strong, and he seems to be on track for confirmation some time over the next couple of weeks.

Opening Remarks

In his opening remarks, Senate Finance Committee Chairman Orrin Hatch offered glowing remarks on Representative Price’s qualifications to lead HHS, noting that he has the “experience and qualifications necessary to effectively lead this large and diverse set of agencies.” Chairman Hatch noted numerous stakeholder organizations that have “enthusiastically” supported Price’s nomination, including the American Medical Association, the American Hospital Association, and the Healthcare Leadership Council.

Senator Hatch also criticized Senate Democrats for their “grossly exaggerated attacks” on Representative Price’s record, attempting to derail his nomination. “I have never seen a party in the Senate – from its leaders on down – publicly commit to not only opposing virtually every nomination, but to attacking and maligning virtually every single nominee,” noted Chairman Hatch.

Senate Finance Committee Ranking Member Ron Wyden voiced concerns surrounding Representative Price’s nomination for HHS Secretary. Senator Wyden pointed to the Trump Administration’s promises not to cut Medicare and Medicaid, noting that the President’s positions are in contrast with Representative Price’s policy positions.

Senator Wyden labeled Representative Price’s ACA replacement plan as “repeal and run,” stating that if it became law, “18 million Americans would lose their health care plans in less than two years.” Senator Wyden expressed concern the future of women’s health and coverage for individuals with pre-existing conditions if Representative Price’s replacement bill were enacted.

In his opening remarks, Representative Price spoke fondly about his time as a physician and legislator in the Georgia State Assembly, highlighting his experience in strengthening children’s healthcare throughout his tenure. Representative Price also complimented HHS’ “incredible work” in the areas of drug treatment research, as well as food safety. Representative Price commented on his frustrations with the current healthcare system, noting that the system has lost focus on its top priority: the patient. He emphasized a “bipartisan, team-driven” policy when it comes to reforming healthcare, calling for a “patient first” system that strengthens medical innovation, accessibility, and choice.

Discussion and Commentary

Affordable Care Act

Senate Democrats harped on several different issues related to repeal and replace of the ACA, especially focused on the ACA’s individual mandate and the ban on denying coverage based on pre-existing conditions. Representative Price strongly stated that Republicans will not “abandon” people with pre-existing conditions as the Republican-led Congress makes plans to repeal and replace the law. Additionally, Representative Price voiced support for extending funding for the Children’s Health Insurance Program (CHIP).

Representative Price noted that he would not commit to utilizing the executive order issued by President Trump to eliminate the ACA individual mandate, nor did he promise that no one would lose coverage because of the executive order. “I’m humble enough to appreciate and understand that I don’t have all the answers,” Representative Price said, stating that “the people in the department have incredible knowledge and expertise.” Additionally, Representative Price did not comment on whether HHS would wait for Congress to prepare a replacement plan before taking steps to dismantle the ACA, noting that he would promise to put “patients at the center of healthcare.”

Sunshine Act

During the hearing, Senator Chuck Grassley went into detail about the Sunshine Act that he worked hard to implement. Senator Grassley noted that several years back, he worked hard to get the Patient Physician Sunshine Act passed in Congress, and that it took the prior Administration several years to get the Act in full swing, working the way it was intended. Senator Grassley questioned Dr. Price as to whether he would help support an expansion of the Sunshine Act, to include nurse practitioners and others, because he feels that the increased transparency is truly a good thing for patients and the healthcare industry as a whole.

When Dr. Price responded, he did not give a yes or no answer, instead opting to note that he does believe transparency is vital in so many different ways in health care, including drug pricing and industry interactions, so that patients can understand what is going on in the health care system.

Medicare and Medicaid Reform

Throughout Representative Price’s confirmation process, Democrats have emphasized that his position on Medicare and Medicaid is at odds with President Trump’s promise not to cut either program.  In the Senate hearing, Representative Price stated that Medicare must be reformed if the government wishes to keep its promise to seniors, while avoiding questions surrounding his support of reforming Medicaid into a block grant program, only commenting that he is in favor of turning Medicaid into a system “that responds to patients, not government.”

Representative Price indicated some support for the Center for Medicare and Medicaid Innovation (CMMI), calling it “vehicle that might help” incentivize innovation. At the same time, however, he also argued that the directives and programs from CMMI should not be mandatory, and that the center’s work had “gotten a bit off track” during the previous Administration.

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