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The Medliminal Washington Report 3.19.18

March 19, 2018

The Washington Monument and buildings along the waterfront at night in Washington, DC.

Congress begins this week with only five days to finalize a $1.3 trillion spending bill, or risk the third government shutdown since January or a sixth stopgap spending bill in this fiscal year alone. Standing in the way is a number of contentious issues, most notably health insurance market stabilization. Looming over the budget debates are November’s mid-term elections, as well as a special House election in Pennsylvania that a Democrat is poised to flip in a district President Trump won by 20 points. We cover this and more in our weekly health care review.



Market Stabilization Bills Face Uncertain Future in Last Minute Spending Debate

As Congress hurtles towards Friday’s deadline to avert another federal government shutdown, discussions continue about whether and how to help stabilize Affordable Care Act (ACA) insurance markets. Although there appears to be bipartisan support to include some kind of health care market stabilization funding in the upcoming omnibus, there are a number of issues still left to be resolved.

Senators Lamar Alexander (R-TN) and Susan Collins (R-ME) have developed a new market stabilization package, which combines elements of two bipartisan proposals developed last fall by Senators Alexander and Patty Murray (D-WA) and Senators Collins and Bill Nelson (D-FL). This revised package would include funding for cost-sharing reduction (CSR) payments for three years, $10 billion in annual reinsurance funding for three years, additional Section 1332 waiver flexibility, and expanded eligibility for catastrophic plans. The bill also includes an additional requirement that federal funds could not be used for plans that cover abortion services.

A preliminary analysis by the Congressional Budget Office (CBO) estimates that the Alexander/Collins proposal would reduce premiums by 10 percent in 2019 and by 20 percent in 2020 and 2021 for states that receive reinsurance funding. A recently published report by the consulting firm Oliver Wyman found that passing the stabilization bills would lower monthly premiums by 20 to 40 percent and prompt an additional 3.2 million people to get covered.

Despite support for the underlying reinsurance and cost-sharing reduction payments, the restrictions for abortion funding, an effort to shore up Republican votes in the House, is a sticking point for Democrats. Given this debate, and a split within the GOP on reinsurance itself, there is growing skepticism that they will be included in omnibus bill. Legislative text is expected to be released Monday night, and the House is aiming to vote on the bill Wednesday, leaving the Senate just two days to pass the bill and avoid a government shutdown at midnight on Friday.

Ranking E&C Committee Democrat Calls for a Hearing on Cigna, Express Scripts Merger

In a March 14 letter to House Energy and Commerce Committee chair Greg Walden (R-OR), the committee’s ranking member, Representative Frank Pallone (D-NJ) requested that he schedule a hearing on Cigna’s recently proposed plan to acquire Express Scripts for $67 billion and CVS’s proposed $69 billion merger with Aetna.

In the letter, Pallone notes that the combination would combine the nation’s largest PBM with one of the nation’s largest health insurers, and that the deal would be “just one of many recent mergers and acquisitions in American health care delivery.” The proposed Cigna/Express Scripts transaction is only the latest in a recent string of significant proposed “vertical mergers” that would combine a health insurer with a PBM; other recently announced transactions include the pending CVS/Aetna and Centene/RxAdvance deals.

“The Committee has an ongoing responsibility to evaluate and consider these changes to our health care system, so as to better understand the impact of these changes on consumers, patients, and providers,” Pallone wrote.  “Due to the scale of the proposed Cigna-Express Scripts and CVS-Aetna deals, these changes should be thoroughly scrutinized and understood by the members of this Committee. To best understand the matter, it would be in this Committee’s best interest to hear directly from representatives of the companies involved, in addition to other perspectives.”

Pallone’s request for a hearing on the Cigna/Express Scripts merger comes only a month after the February 14 House Energy and Commerce Subcommittee on Oversight and Investigations held a hearing on the impact of health care consolidation generally, and a House Judiciary subcommittee hearing specifically on the CVS/Aetna deal on February 27th. While congressional hearings on proposed mergers can be informative, ultimately Congress has no formal role in the process. Regulators in the Justice Department’s Antitrust Division and/or Federal Trade Commission will ultimately decide if the mergers violate antitrust laws.

Senators Introduce Legislation to Remove ‘Gag Clauses’ Prohibiting Pharmacists from Revealing Lower Prescription Drug Prices

A group of bipartisan senators introduced two pieces of prescription drug legislation, including a ban on “gag clauses” that can lead to consumers paying higher prices at the pharmacy.

The group — led by Susan Collins (R-ME), Claire McCaskil (D-MO), and Debbie Stabenow (D-MI) — introduced the Patient Right to Know Drug Prices Act and the Know the Lowest Price Act on March 15. Under the two bills, health insurers and pharmacy benefit managers (PBMs) would not be able to use gag clauses that prohibit pharmacists from telling consumers if they would pay less out of pocket for prescription drugs than they would going through insurance.

“Insurance is intended to save consumers money.  Gag clauses in contracts that prohibit pharmacists from telling patients about the best prescription drug prices do the opposite,” said Senator Collins in a press statement.  “Multiple reports have exposed how this egregious practice has harmed consumers, such as one customer who used his insurance to pay $129 for a drug when he could have paid $18 out of pocket.  Americans have the right to know which payment method – insurance or cash – would provide the most savings when purchasing prescription drugs. By prohibiting gag clauses, our legislation would take concrete action to lower the cost of prescription drugs, saving consumers money.”  

The Patient Right to Know Drug Prices Act applies to plans offered through exchanges and private employers. Sponsors include Senators Collins (R-ME), McCaskill (D-MO), Stabenow (D-MI), John Barrasso (R-WY) and Bill Cassidy (R-LA).

The Know the Lowest Price Act applies to Medicare Advantage and Medicare Part D. Senator Ron Wyden (D-OR) joined with Collins, McCaskill, Stabenow, Barrasso and Cassidy to sponsor this bill.

In 2016, Americans spent nearly $330 billion on retail prescription drugs, including $45 billion out-of-pocket. A recent study published in the Journal of the American Medical Association that reviewed 9.5 million insurance claims found that 23 percent of prescriptions filled through insurance ended up costing more for customers than if they would have paid out of pocket. The overpayments totaled $135 million for 2013, or $10.51 per covered member on average.

Democrat Leads in Pennsylvania House Election, Recount Possible

Pennsylvania’s contentious House special election still doesn’t have an official winner nearly a week later  Democrat Conor Lamb has a lead of roughly 600 votes over Republican state Representative Rick Saccone in the March 13 special election in Pennsylvania’s 18th Congressional District. Lamb’s margin exceeds the number of outstanding provisional and military votes. However, the result has not yet been certified and some Republicans have floated the possibility of a recount or lawsuit challenging the outcome.

This is all political posturing. After the Pennsylvania Supreme Court struck down state Republicans’ redistricting map in February, the 18th district in its current form will cease to exist. Per the Court’s ruling, the 18th and 14th districts will swap names and have their boundaries adjusted for the 2018 elections and thereafter. However, it is a district that President Trump won in 2016 by 20 points, and where Democrats failed to even field a candidate to face Tim Murphy (who resigned last fall following a personal scandal) in 2014 and 2016.

The significance of the race is not that it will impact governing in 2018 as Republicans will still enjoy a significant House majority for the remainder of the year. Instead, it is being seen as a wakeup call for congressional Republicans and a potential harbinger of a Democratic wave in November. Democrats need to flip only 24 seats to re-take the House, and there have already been 33 Republicans that have announced their retirements (many still in likely safe Republican districts).

Even with the outcome of the election still unresolved, both candidates appear to be looking ahead. Lamb is expected to run in the new 17th Congressional District, while Saccone is expected to run in the new 14th district.

House Expected to Vote Again on ‘Right to Try’ Bill for Terminally Ill Patients

On March 13, the House failed to pass a so-called ‘Right to Try’ bill that would give terminally ill patients the right to seek drugs in clinical trials, but not approved by the Food and Drug Administration (FDA). The House voted 259-140, which fell seven votes short of the two-thirds majority needed for passage under suspension of the rules. House Majority Leader Kevin McCarthy (R-CA), promised to bring the bill back to the floor under regular order, which would require a simple majority to pass.  The House Rules committee will take up the bill on Monday, and it could be voted on this week. The Senate passed a similar bill by unanimous consent in 2017, though it differs enough from the bill under consideration that the House and Senate would have to reconcile the two bills if the House passes its bill.

Both bills would allow terminally patients to access drugs that have completed a Phase 1 clinical trial, and remove FDA from the process of signing off on certain patients accessing experimental treatments and instead allow institutional review boards to essentially make such decisions. However, neither bill would mandate or encourage companies to provide such treatments to those with terminal illnesses, which is usually the rate-limiting step as FDA typically signs off on 99 percent of all expanded access requests.

Health Policy

New Research Finds that US Health Spending Twice that of Other Developed Nations, Largely Because of Administrative Costs

A new Harvard School of Public Health and the London School of Economics study published in the Journal of the American Medical Association found that the U.S. spends about twice as much on medical care despite similar utilization rates compared to other nations without markedly better health outcomes.

The study compared potential spending drivers, including structural capacity and utilization, in the U.S. and 10 high-income countries (the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark). The findings confirm that the U.S. has substantially higher spending, worse population health outcomes, and worse access to care than the other countries studied. For example, in 2016, the U.S. spent 17.8 percent of its gross domestic product on health care, while other countries ranged from 9.6 percent (Australia) to 12.4 percent (Switzerland). Life expectancy in the U.S. was the lowest of all 11 countries in the study, at 78.8 years; the range for other countries was 80.7 to 83.9 years. The proportion of the U.S. population with health insurance was 90 percent, lower than all the other countries, which ranged from 99 to 100 percent coverage. However, the U.S. also had the highest percentage of private health insurance (55.3 percent).

Overall, quality of care in the U.S. isn’t markedly different from that of other countries, and in fact excels in many areas. For example, the U.S. appears to have the best outcomes for those who have heart attacks or strokes, but is below average for avoidable hospitalizations for patients with diabetes and asthma.

What explains the substantially higher spending in the U.S. is administrative complexity and high prices across a wide range of health care services. For example, the findings showed that:

  • Administrative costs of care accounted for 8 percent of total health care costs, compared with a range of 1 to 3 percent for other countries.
  • Per capita spending for pharmaceuticals was $1,443 in the U.S., compared with a range of $466 to $939 in other nations. For several commonly used brand-name pharmaceuticals, the U.S. had substantially higher prices than other countries, often double the next-highest price.
  • The average salary for a general practice physician in the U.S. was $218,173, while in other countries the salary range was $86,607 to $154,126.

Given the similarities in overall patterns of healthcare use between the U.S. and other countries, the authors conclude that targeting healthcare use likely won’t be enough to control spending and that the answer is more likely to come from reducing process and administrative costs.

Industry News

CVS Health, Aetna Shareholders Vote to Approve Merger

Shareholders for both CVS Health and Aetna voted on March 13 to approve the $69 billion merger between the pharmacy chain and the insurer. According to press statements from the two companies, more than 98 percent of CVS Health shares voted in favor of the merger, while about 97 percent of Aetna shareholders voted to approve the plan. Both CVS and Aetna stated that they still expect the merger to be completed in the second half of this year, subject to the required regulatory approvals.

The combined company, if approved by federal regulators, would create a firm with annual revenues of about $245 billion. In early February, the Justice Department requested additional information from CVS, but the company did not specify what information the Department is seeking. It is a routine request, and not unexpected considering the deal is valued at about $70 billion. In a filing with the Securities and Exchange Commission, CVS said it is cooperating and still expects the deal to close by the end of this year.

In The States

Oregon Governor Signs Bill Increasing Drug Price Transparency

On March 13, Oregon Governor Kate Brown (D) signed a bill to provide more transparency around drug pricing. HB 4005 requires drug manufacturers to compile a report on a prescription drug if the price was $100 or more for a 1-month supply (or course of treatment lasting less than 1 month) and if the net price increased by 10 percent or more.

For drugs that fit into these criteria, manufacturers would need to provide information to explain the factors that contributed to the price increase, such as:

  • Research and development costs
  • Direct costs incurred to the manufacturer, marketer, and distributor of the drug
  • The 10 highest prices paid for the drug in the previous calendar year in any country outside of the United States

Under the law, pharmaceutical companies must provide these reports by July 2019. The bill also requires that insurers report the 25 most frequently prescribed drugs, the 25 most costly drugs as a portion of total annual spending, the 25 drugs that have caused the greatest increase in total plan spending from one year to the next, and the impact of the costs of prescription drugs on premium rates

According to the National Academy for State Health Policy, state legislatures are currently considering 48 bills to increase drug pricing transparency. Many of new state laws are facing legal challenges questioning their constitutionality. Due to the amount of information that manufacturers are required to report under the new Oregon law, and the fact that this information will be made available to the public, it’s likely that similar legal challenges may be raised before the new Oregon law goes into effect.

Bill to Ban Sale of Short-Term Health Insurance Plans Advances in California State Senate

On March 14, California’s Senate Health Committee approved a bill (SB-910) that would prohibit the sale of short term limited duration health insurance in California. Authored by Senator Ed Hernandez, (D) and approved by a vote of 7-0, SB 910 was introduced in response to the Trump Administration’s recent proposed regulations to expand short term limited duration coverage up to 12 months. The bill now heads to the Senate Appropriations Committee

The Week Ahead

The U.S. House of Representatives and Senate will be in session the week of March 19-26.

March 20: The House Education and Workforce Committee’s Subcommittee on Health, Employment, Labor, and Pensions will hold a hearing titled “Expanding Affordable Health Care Options: Examining the Department of Labor’s Proposed Rule on Association Health Plans.

March 21-22: The House Energy and Commerce Committee’s Subcommittee on Health will hold a two-day hearing titled “Combating the Opioid Crisis: Prevention and Public Health Solutions.”

March 23: Expiration of temporary funding for the federal government.