3.11.19 – 3.15.19 Health Wrap Up – Prepared by Van Scoyoc Assoiciates

3.11.19 – 3.15.19 Health Wrap Up – Prepared by Van Scoyoc Assoiciates

3.11.19 – 3.15.19 Health Wrap Up

Please find below a summary of the latest major health policy developments in Washington this week. Please let us know if you have any questions.

Scheduling note: both chambers are on recess next week.  Unless activity warrants, we will send the next wrap up on March 29.


FY20 President’s Budget

Portions of the president’s FY20 budget request were released on Monday and can be found on the OMB website (HHS section on pages 43-52). The president’s plan calls for a 5 percent cut to current caps for non-military spending, coupled with a boost to $750 billion for national defense programs. It also includes $8.6 billion for a border wall with Mexico, raising the threat of a funding showdown that may trigger another government shutdown this fall. Around Washington, many insiders consider the budget to be dead on arrival.

While the budget appendix and congressional justifications are not expected until next week, HHS has released its Budget in Brief document, which includes some additional details regarding HHS programs. Fact sheets on several topics were also released, including one on Combatting the Opioid Epidemic and another on Lowering Drug Pricing and Payment.

Overall, the Department of Health and Human Service’s Total Discretionary Budget Authority would be reduced by $11.981 billion, from $99.496 billion in FY2019 to $87.515 billion in FY2020, for a 12.04% reduction. The proposal calls for nearly $1.25 trillion in mandatory savings from various health programs, including cutting more than $456 billion from Medicare over the next decade, but offers $25 million in new funds to address the opioids crisis and $2.1 billion in new funding for health center programs and public health research. The budget also provides $291 million to fund Trump’s new initiative to end the HIV epidemic by 2030, including roughly $140 million in new funding for the CDC to improve diagnosis and testing for HIV, a $70 million boost to the Ryan White HIV/AIDS Program and an additional $50 million to expand community health center services.

The budget also assumes changes to Medicaid, including partially converting it into a grant program, that would add up to $143 billion in savings over the decade. The White House also touted a series of initiatives aimed at lowering drug prices that it says will cut about $19 billion alone in Medicare spending through 2029. The request additionally assumes that Congress will succeed in repealing and replacing Obamacare.

The administration is also requesting $480 million in fiscal 2020 for an “Unaccompanied Alien Children Contingency Fund.” In fiscal 2018 and 2019, the administration transferred $446 million and $385 million respectively from other areas in HHS to address the increase in children in the department’s care due to the administration’s practice of separating immigrant families.

While details on many specific programs are not yet available, the following are highlights of interest:

National Institutes of Health

  • The National Institutes of Health Total Program Level would be reduced by $4.938 billion, from $39.306 billion in FY2019 to $34.368 billion in FY2020, for a 12.56% reduction. An NIH funding chart can be found on page 56 of the HHS Budget in Brief.
  • $1.3 billion for opioids and pain research across NIH as part of the government-wide effort to combat the opioid epidemic, including $500 million to continue the Helping to End Addiction Long-term (HEAL) Initiative and nearly $800 million to support ongoing research.
  • National Cancer Institute:  $5.247 billion, $897 million less than FY19
  • National Institute on Drug Abuse: $1.296 billion, $123 million less than FY19

Centers for Disease Control and Prevention

  • For CDC, the budget proposes a $1.27 billion reduction in CDC’s Total Discretionary Budget Authority, from $6.553 billion in FY2019 to $5.277 billion in FY2020, for a 19.47% reduction.
  • $476 million for CDC to continue current activities in support of all 50 States and Territories, as well as local jurisdictions, to track and prevent overdose deaths. CDC would prioritize expanding support to States and Territories to collect and report real time overdose and robust overdose mortality data.
  • $58 million for CDC to address the infectious disease consequences of the opioid epidemic. CDC would focus on areas most at risk for outbreaks of HIV and hepatitis due to injection drug use.
  • $2 million to support CDC’s continued work to advance our understanding of neonatal abstinence syndrome and translate these findings to improve the care of mothers and babies.

Substance Abuse and Mental Health Services Administration (SAMHSA)

  • $5.5 billion for SAMHSA, $62 million less than FY19
  • $3.9 billion for SUD prevention and treatment activities, including:
    • Substance Abuse Prevention and Treatment Block Grant: $1.858 billion, equal to FY19
    • $1.9 billion for programs that specifically address opioid misuse, abuse, and overdose. The budget narrative indicates that it will continue all existing opioid related programs and allocate this money as follows:
      • $1.5 billion for the State Opioid Response grants, equal to FY19 funding levels.
      • $89 million to expand the availability of MAT, “the most effective evidence-based treatment for opioid use disorder.”
      • $48 million for training and equipping first responders on the use of opioid-overdose reversing drugs.
      • $4 million for a new program authorized in The SUPPORT Act to provide grants to medical schools and teaching hospitals to develop curricula that satisfy the requirements to prescribe MAT.
  • Programs of Regional and National Significance: $430 million, $31 million less than FY19
  • $244 million substance abuse prevention, such as a demonstration program to fight underage drinking and expanding tribal behavioral health services. This includes $100 million for the Drug Free Communities Program.

Office of National Drug Control Policy

For the third year in a row, the Budget proposes to cut the Office of National Drug Control Policy’s (ONDCP) budget by more than 95% by moving the office’s two major grant programs (Drug Free Communities and High Intensity Drug Trafficking Areas (HIDTA)) to other federal agencies.  Congress has previously rejected similar proposals.

Drug Pricing

  • Changes to the Medicare Part D Prescription Drug Benefit
    • The Administration’s proposal is intended to:
      • Enhance Part D plans’ negotiating power with manufacturers
      • Encourage utilization of higher value drugs
      • Discourage drug manufacturers’ price and rebate strategies that increase spending for both beneficiaries and the government
      • Provide beneficiaries with more predictable annual expenses through the creation of a new out-of-pocket spending cap
  • Reduce Costs for Part B Drugs
    • The Budget includes proposals targeted at: removing the three-year payment protection of average sales price (ASP) plus six percent for certain new drugs provided in outpatient hospitals; deterring anti-competitive behavior from drug manufacturers that exploit aspects of the patent system to keep out competition; and moving coverage of some Part B drugs to Part D to reduce spending while protecting beneficiaries from increased out of pocket costs.
    • Limits growth in Part B drug payment to an inflation benchmark and mandates manufacturers report ASP data for all Part B drugs to improve payment accuracy.
  • Increase Access to More Affordable Generics Through Greater Competition
    • Reform the current 180-day exclusivity forfeiture provision for first generics so that first generics do not block subsequent generics from U.S. Food and Drug Administration (FDA) approval.
    • Clarify FDA’s approach in determining whether a new drug is a new chemical entity to ensure that only truly innovative new drugs receive an additional five years of exclusivity.
    • Enhance FDA authority to address abuse of petition process so FDA has greater flexibility to summarily deny petitions when circumstances indicate that the primary purpose of the petition is to delay FDA approval.
    • Enable FDA to tentatively approve a subsequent generic application, which would start the 180-day exclusivity clock, when a first to file generic application cannot be approved due to deficiencies.
  • Lower Costs and Increases Flexibility for Medicaid Prescription Drugs
    • Proposes removing the cap on Medicaid manufacturer drug rebates, to ensure rebates reflect all price increases for a drug.
    • The Budget includes new demonstration authority allowing States to test innovative approaches for Medicaid prescription drug coverage. Under the demonstration, participating States would test a closed formulary and negotiate prices directly with manufacturers.
    • The Budget also prevents manufacturers from using authorized generics to lower their rebate obligations, and includes payment changes so State Medicaid programs do not overpay for generic drugs, saving money for States and taxpayers.
  • 340B Reforms
    • The Budget seeks to improve the integrity of the 340B program and ensure that benefits are used to help low-income and uninsured patients.
    • The proposal includes broad regulatory authority for the 340B Drug Pricing Program to set enforceable standards of program participation and requires all covered entities to report on use of program savings.
    • The Budget also modifies hospitals’ payment for drugs acquired through the 340B drug discount program by rewarding hospitals that provide charity care and reducing payments to hospitals that provide little to no charity care.
      • Hospitals providing at least 1 percent of patient care costs in uncompensated care will receive redistributed savings based on the percentage of all uncompensated care they provide compared with other outpatient hospitals. Hospitals not meeting that threshold are not eligible for the redistribution, and the savings from their payment reduction will be returned to the Medicare Trust Fund.


  • The Budget proposes adding additional transparency to several Medicare payments to hospitals, by financing payments not directly related to Medicare’s health insurance role outside the Medicare Trust Fund and tying future growth to inflation growth.
  • The Budget also reduces Medicare’s spending on beneficiaries’ unpaid cost sharing obligations, consistent with private sector business practices.
  • The Budget proposes to expand seniors’ personal control and introduce more consumer power into the healthcare market by allowing Medicare beneficiaries to make tax deductible contributions to HSAs associated with high deductible health plans offered by their employers or Medicare Advantage plan.
  • Expand the Medicare program’s authority to conduct prior authorization on items or services at high risk of fraud and abuse. The proposal helps ensure that the right payment goes to the right provider for appropriate services and saves taxpayer dollars from paying for Medicare services that are not medically necessary.
  • Expands CMS’s work in notifying providers that prescribe drugs or perform procedures in excess of their peers.
  • Strengthens  Medicare Advantage program integrity by ensuring initial risk-adjustment payments are paid correctly and expands risk-adjustment data validation audits.
  • Strengthens CMS’s ability to partner with States to address improper payments and ensures Federal recovery of incorrect eligibility determinations, an area of concern identified by the HHS Office of Inspector General.
  • Allows States flexibility to more frequently assess beneficiary eligibility, ensuring resources are available for the millions of Americans who depend on Medicaid’s safety net.
  • The budget proposes saving $48 billion over ten years through the consolidation of graduate medical education into block grant to states.
  • Effective Calendar Year (CY) 2021, the Department, in consultation with the HHS Office of Inspector General, will establish a new exception to the physician self-referral law for arrangements that arise due to participation in advanced Alternative Payment Models and identify the types of arrangements and the minimum risk levels and level of participation in the model required for such exceptions
  • Effective FY 2020, proposes to raise ICU stay threshold for long term care hospitals (LTCHs) from three days to eight days to more accurately identify the chronically ill patients who typically receive the
  • specialized care LTCHs provide
  • Effective CY 2020, proposes to make payments between on-campus hospital outpatient departments and physician offices for certain services such as clinic visits “site neutral”
  • Effective FY 2020, proposes to reduce Medicare reimbursement of bad debt from 25% to 25% over 3 years


  • Supports enactment of legislation modeled after the Graham-Cassidy-Heller-Johnson bill proposed in September 2017, followed by enactment of additional reforms to help set government healthcare spending on a sustainable fiscal path that leads to higher value spending.
  • Beginning in 2021, the Market-Based Health Care Grant Program, the Medicaid block grant, and the per capita cap program are set to grow at the Consumer Price Index. These programs would support States as they transition to more sustainable healthcare programs

and encourage States to pursue innovative ideas that aim to curb costs moving forward.

  • The Budget would give States additional flexibility around benefits and cost-sharing, such as increasing copayments for non-emergency use of the emergency department to encourage appropriate use of healthcare resources.
  • States can consider savings and other assets when determining Medicaid eligibility.
  • Allow States to streamline appeals processes and delegate authority to another entity, to help eliminate duplicative appeals and reduce beneficiary confusion.
  • Proposes eliminating loopholes that some States use to shift and increase costs to Federal taxpayers, and for the Centers for Medicare and Medicaid Services (CMS) to issue guidance ensuring that State Medicaid supplemental payments to hospitals and other providers are supported by robust and timely data.
  • Realign the Federal matching payments for State Medicaid eligibility workers with other administrative costs, providing a fair balance between Federal and State resources for these activities.
  • Extends current law reductions in Medicaid disproportionate share hospital payments, and proposes to limit reimbursement to Government providers to no more than the cost of providing services to Medicaid beneficiaries.
  • Money Follows the Person Demonstration – states that are awarded competitive grants receive an enhanced Medicaid matching rate to help eligible individuals transition from a qualified institutional setting to a qualified home or community-based setting.
  • The Administration intends to issue a regulation requiring more complete and timely provider-level data on supplemental payments, including the financing of such payments.

As you know, the budget is only a request to Congress and Congressional action is required to actualize the proposals in the budget.  We will continue to keep you posted as more analysis and details become available.

FY20 HHS Budget

On Wednesday, the House Labor HHS Appropriations Subcommittee held a hearing examining the President’s FY20 HHS budget. The only witness was HHS secretary Alex Azar. Azar’s testimony and a webcast of the hearing can be found here and a summary of the hearing is attached.  Secretary Azar also testified before the House Energy and Commerce Committee Health Subcommittee and Senate Finance Committee.  At all of the hearings, Democrats criticized the Administration’s proposed cuts to Medicare and Medicaid.  Additionally, particularly on the House side, Democrats pressed Azar for answers related to the Administration’s separation of children at the southern border and what Democrats consider to be the Administration’s “sabotage” of the Affordable Care Act.

During one of the House hearings, House Democrats said they will push for a significant increase in funding for the Health and Human Services, Labor and Education departments in FY20, indicating that they will likely move ahead with a generous appropriations bill even before Congress formally agrees to top-line spending figures. A boost to the Labor HHS allocation would contrast with the Trump administration’s approach given that the President’s budget this week called for an 11.9 percent cut to HHS spending, a 12 percent cut to Education spending and a 10 percent cut to Labor funds from fiscal 2019 estimated levels. Given that lawmakers don’t appear close to a formal agreement on top-line defense and nondefense spending figures, House and Senate appropriators will likely have to set their own separate numbers in order to start work on spending bills.

Ranking Member Tom Cole (R-OK) also indicated that he expects House appropriators to draft a Labor HHS bill that would increase the top line spending figure. In addition, he pushed back in a statement following the budget release on Trump’s proposed cuts to the National Institutes of Health and the Centers for Disease Control, calling them “short sighted and counterproductive.”

According to Cole, the House Appropriations Committee will likely report out a Labor HHS bill that most Republicans will oppose because it would provide too much money and include too many Democratic policy riders. In the Senate, appropriators may decide to stake out a middle ground between the White House’s suggested cuts and House Democrats’ increases. This week Senate Appropriations Chairman Richard Shelby (R-AL) said it would be “draconian” to cut non-defense discretionary spending by 9 percent, as the White House budget proposal called for, also indicating that he supports an increase in defense spending, but declining to say exactly what he wants for nondefense discretionary spending, other than that he doesn’t support cuts as steep as those in Trump’s budget.


Energy and Commerce Prescription Drug Legislation

On Wednesday, the House Energy and Commerce Committee Subcommittee on Health held a legislative hearing on a series of bills designed to reduce prescription drug prices by addressing tactics proponents feel are anticompetitive and by improving FDA-published patent books.  These bills include:

  • HR 938 (the Blocking Generics Act) amends the 180-exclusivity period under Hatch-Waxman to prevent so-called “patent parking” by the first generic applicant.
  • HR 965 (the CREATES Act) would better facilitate the sharing of branded samples for generics to conducting testing.
  • HR 985 (the FAST Generics Act) establishes an authorization process for generic manufacturers to gain samples to approved drugs they intent to genericize.
  • HR 1499 (the Protecting Consumer Access to Generic Drugs Act) prohibits branded drugs and generic manufacturers from entering into patent settlements which result in the branded drug paying the generic maker to stay out of the market.
  • HR 1503 (the Orange Book Transparency Act) improves the accuracy of the FDA’s Orange Book on patented drugs.
  • HR 1506 (the FAIR Generics Act) allows additional generic manufacturers to share the 180-exclusivity period in certain circumstances.
  • HR 1520 (the Purple Book Continuity Act) improves the FDA’s Purple Book.

At the hearing, a panel of witnesses discussed the merits of each bill.  Witnesses in support of the legislation described how current the current patent system allows branded drugs to use a variety of tactics to extend their monopoly beyond that provided by the patent.  By modifying some of these tactics, proponents contend generic drugs will be more quickly brought to market, thereby reducing out of pocket costs. Committee Chairman Frank Pallone (D-NJ) called these bills “pro-competition, market-driven capitalism.”

Committee Republicans expressed frustration that these bipartisan bills had been finalized without full cooperation of Republican staff.  Furthermore, they expressed concerns the bills will actually increase patent litigation which would necessarily slow the entry of generics into the market even further.  They also expressed concerns that innovation and access could be affected.

No date has been set for markup of these bills, but most likely it will happen in the coming weeks.


Congressional Hearings

The following upcoming health care hearings of note have been announced as of press time:

March 26

  • Senate Judiciary Committee hearing on gun violence

April 3

  • Senate Finance Committee hearing with pharmaceutical benefit managers (PBMs)


FDA Commissioner

This week, HHS Secretary Azar announced that Ned Sharpless will be serving as Acting Food and Drug Administration (FDA) Commissioner upon the departure of Scott Gottlieb.  Dr. Sharpless is an oncologist by training who only recently stopped seeing patients; he currently serves as director of the National Cancer Institute.  Anti-tobacco groups such as the Campaign for Tobacco Free Kids, the American Heart Association and the American Cancer Society Cancer Action Network applauded the announcement of his appointment. Reports indicate that Sharpless is likely to become the permanent FDA Commissioner with the blessing and support of Scott Gottlieb.

FDA E-Cigarette Plan

In one of FDA Administrator Scott Gottlieb’s last actions, the FDA unveiled a new policy aimed at reducing the use of e-cigarettes among the nation’s minors.  In 2017, the FDA put forward a plan to reduce tobacco smoking.  Since that time, the FDA claims, the surge of e-cigarettes among the nation’s youth “is threatening the progress…in reducing youth tobacco use.”  FDA believes in particular that flavors of e-cigarettes have targeted appeal to children.  To combat this problem, the FDA will increase enforcement of tobacco related establishments.  Among the actions they plan to take, FDA will require manufacturers to submit premarket applications for certain e-cigarette products by August 2021. Further, it will restrict the use of flavored e-cigarette products to tobacco, menthol, and mint flavors only.  Further, it will target commercial establishments which sell e-cigarette products and allow access to their facilities for people 17 years or younger.  The plan can be found here.

CMS Dashboard Update

This week, CMS updated its Drug Spending Dashboard to reflect prescription drugs cost of 2017.  The Dashboard examines thousands of drugs under Medicare Part B and Part D, as well as Medicaid.  The Dashboard allows stakeholders in the health care industry to identify drugs with the highest increases.  In 2017, total gross spending on prescription drugs was $154.9 billion in Medicare Part D, $30.4 billion in Part B, and $67.6 billion in Medicaid.  The dashboard can be found here.

3-13-19 House Labor-HHS PDF


Katie Weyforth Vanlandingham

Van Scoyoc Associates

800 Maine Ave SW

Suite 800

Washington, DC  20024