Life Science Compliance Update

April 13, 2017

President Trump Meets with Democrats on Drug Prices

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President Donald Trump recently met with several Democratic lawmakers regarding rising drug prices, including Representative Elijah Cummings and Peter Welch. Representative Cummings, Ranking Member of the House Committee on Oversight and Government Reform, has been an outspoken critic of the pharmaceutical industry and drug pricing.

During the meeting, which was also attended by HHS Secretary Tom Price and Dr. Redonda Miller, president of Johns Hopkins Hospital, President Trump allegedly told the lawmakers that he is interested in taking action with respect to U.S. drug prices and believes it may be an area of potential bipartisan agreement as both parties continue to resolve healthcare issues and concerns in America.

Cummings and Welch presented President Trump with a bill to allow Medicare to directly negotiate drug prices with manufacturers. The proposed legislation would allow Secretary Tom Price to negotiate lower prices with drug manufacturers under Medicare Part D, which provides coverage for prescription drugs purchased at pharmacies. An estimated 41 million Americans are covered under Part D, which is provided through private insurers who each have their own list of permitted drugs, and typically use pharmacy benefit managers for drug purchasing.

Representative Cummings left the meeting feeling optimistic, saying, “He made it clear to us that he wanted to do something,” and that Trump was “aware of the problem” and “enthusiastic.”

"He was clearly aware of the problem and he made clear to us he wanted to do something about it," Cummings said, adding "it boiled down to, again, saving people’s lives and saving money, and he was clear when you have situations where these companies are jacking up these prices it puts a lot of families in jeopardy."

While allowing the federal government flexibility in negotiating drug prices is not a new idea, Cummings and Welch both painted a picture on Wednesday of a political climate ripe for change with a president who “gets it.”

President Trump has always been a critic of the pharmaceutical industry, even throughout his campaign. He has threatened to use the government’s buying power to force prices down, but has yet to offer specifics as to how. In early March 2017, President Trump tweeted a promise to lower medicine costs and said he is working on a “new system where there will be competition in the drug industry,” a tweet that sent pharmaceutical stocks tumbling.

Reaction from Former Director of the Congressional Budget Office

Douglas Holtz-Eakin, a former director of the Congressional Budget Office and now president of the American Action Forum, said the idea of lowering prices through Medicare Part D negotiations is "completely unrealistic."

Holtz-Eakin points out that insurers are already used to managing health care for beneficiaries and there are formularies in those plans. Adding into the law that the HHS Secretary should be part of the negotiations merely adds a "bully pulpit," he said.

"The problem with the negotiation in Part D is not a political, partisan problem — it's that it won't work," said Holtz-Eakin, adding that the Medicare Part D program is already holding prescription drug costs down because of the negotiating ability of the drug plans.

April 12, 2017

AHCA Failed…Now What?

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Moments before a scheduled vote on the bill, Republican House leaders announced that they were pulling the American Health Care Act (AHCA) from consideration. Such a move, made because of a shortage of votes needed to pass the bill, has thrown the political arena into disarray and uncertainty. As of right now, it looks like President Donald Trump is going to leave the Affordable Care Act (ACA) in place and move onto other priorities of his, such as tax reform. Even still, there are other options out there with respect to health care and what may happen next.

The Administration’s authority to make changes in the health arena is extremely broad. It includes: executive orders, rules, or other executive guidance based on the extensive body of statutes governing federal health care programs; pre-ACA demonstration and waiver authority; and demonstration authority given to the Center for Medicare & Medicaid Innovation (CMMI) under the ACA. The Trump Administration also has broad opportunities to aggressively interpret these authorities with minimal chance that its actions will be overridden by Congress.

Further, courts review executive actions with deference, thereby limiting actions subject to judicial modification.

Congress

For example, with respect to legislative possibilities, it is possible that key Senate leaders, such as Senator Lamar Alexander of Tennessee, could take a role in brokering an agreement that could pass the Senate with 60 votes. Under such a scenario, major changes would be likely to the House approach on Medicaid expansion, tax credits, and insurance reforms. Moreover, per-capita caps would be unlikely to pass bipartisan muster. Such efforts could be characterized as an attempt to “fix” the ACA, or could end up being a rebranding exercise altogether – even something to the tune of “Trumpcare,” perhaps. But significant challenges would exist in reconciling such a package with Republican promises to “repeal and replace” the ACA. It is also possible that Republicans could seek to pass a “clean” repeal of the ACA – something they have done before, which was vetoed by President Obama in Jan. 2016 – without any agreement on how to replace it.

Administrative Agencies

While the ACA remains in place, it is likely that Health and Human Services (HHS) Secretary Tom Price will look to his regulatory toolbox to provide “relief” from ACA regulations and reverse Obama administration regulations in general.

Additionally, the Trump administration has indicated they will seek to facilitate expedited approval of Medicaid waiver applications to reshape the program for the poor and disabled. Specifically, Secretary Price and CMS Administrator Seema Verma have suggested that states may consider policies imposing work requirements for able-bodies adults, “Health Savings Account-like features,” and various cost-sharing policies common in commercial insurance, like premium payments and emergency room copayments.

Executive Branch

Within hours of his inauguration, President Trump signed an Executive Order (EO) signaling his Administration’s policy of seeking “prompt repeal” of the ACA through wide-ranging executive action. The EO lays the groundwork for federal agencies’ efforts to take intermediate regulatory steps to unravel parts of the ACA, although no specific policies are implemented via the order itself.

The order says HHS and other ACA implementing agencies, such as the Internal Revenue Service (IRS) and Department of Labor (DOL), shall “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement” of the ACA to the maximum extent permitted by law.”

The order identifies burdens on states and taxes and penalties on individuals, insurers, providers, or drug and device manufacturers and encourages flexibility for states as well as action to promote a “free and open market in interstate commerce,” including for health insurance.

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.

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