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Vol. 17, No. 47 - November 20, 2014
Sebelius: Loss Of
Individual Mandate
Would Kill Private
Insurance Industry
Former HHS Secretary Kathleen
Sebelius said Thursday (Nov. 13) that
a move by either the Supreme Court
or incoming GOP-led Congress to
undermine or repeal the individual
mandate in the Affordable Care Act
would send the private insurance
industry into a “death spiral.” Speaking at the American Academy of
Actuaries’ annual meeting in Washington, Sebelius warned that doing away
with the individual mandate, while
leaving in place the ACA’s provision
protecting people with preexisting
conditions, would leave private
insurance companies with high-risk
pools they couldn’t afford to cover.
Sebelius urged Republicans,
following their expected symbolic
ACA-repeal vote, to tread carefully on
piecemeal repeal efforts that could
have major unintended consequences
to industry, as could the high court’s
upcoming ruling. But she predicted a
handful of ACA changes will gain
bipartisan support: repealing the
device tax, changing the 30-hour work
week and reducing paperwork
required of large employers.
Last week, the Supreme Court
decided to hear a case, King v.
Burwell, that challenges the
government’s payment of tax-credit
premium subsidies to those enrolled in
insurance through federally administered health care exchanges. Sebelius
said if the court decides against the
Obama administration, which would
continued on page 10
Stakeholders Look To Congress On 340B Fix As
HRSA Pulls ‘Mega-Rule’
The Health Resources and Services Administration’s decision to pull back
its anticipated “mega-reg” and instead release guidance in 2015 leaves some
stakeholders looking to Congress for major changes to the 340B program,
with the drug industry lobby already urging lawmakers to get involved.
“While we look forward to the guidance to be issued by HRSA, we
believe that the fundamental problems of the program still need to be addressed by Congress, and we agree with HRSA that Congress needs to engage
with oversight and reform of the program,” said Lori Reilly, executive vice
president for policy and research at Pharmaceutical Research and Manufacturers of America. “We will continue to encourage Congress to address many of
continued on page 14
CMS To Award 2 RAC Contracts; Might Extend
Limited Contracts Into 2015
CMS is moving ahead with awards for the two recovery audit contracts
not caught up in a Recovery Audit Contractor’s protest suit even though the
agency estimates it will not be able to move forward on the other contracts
until at least late next summer. The agency also told providers it will likely
extend into next year the limited contracts it used to re-start the program.
The agency recently posted on its website that it expects that CGI Federal
Inc.’s protest suit will not be resolved by the courts until late summer next
year. An American Hospital Association official, at a National RAC and MAC
Summit on Thursday (Nov. 13), said CMS also indicated it expects there will
be post-award protests over the RAC contracts, which would further drag out
continued on page 16
CBO’s Estimated Cost Of Freezing Medicare
Physician Pay Falls Slightly
The Congressional Budget Office lowered by $5 billion its 10-year
estimate of the cost of freezing Medicare payments to physicians, which is
good news for those pushing to replace the Sustainable Growth Rate formula.
However, physicians are lobbying to replace SGR without paying for it, and
some Republicans reportedly are warming to the idea.
When CBO last scored the cost of freezing Medicare physician pay, the
estimate had crept up after more than a year of falling. Some physician
lobbyists worried that meant the cost would continue to steadily rise, but the
new score allays those fears, physician lobbyists say. CBO on Friday estimated
the 10-year cost of freezing pay at just under $119 billion. The cost of a pay
continued on page 18
As Doctors Push For Unpaid SGR Bill, Budget Think Tank Suggests Offsets
As physicians lobby Congress to replace the Sustainable Growth Rate without paying for the fix, the think tank
Center for a Responsible Federal Budget published Wednesday (Nov. 19) a plan to pay for Medicare physician-pay
reform using policies that generate half of the savings from providers and half from beneficiaries — beneficiary policy
changes would reduce out-of-pocket costs, the report states. The plan combines a package of SGR replacement and socalled Medicare “extenders” with a tax-reform plan for dealing with a separate group of 55 tax breaks for businesses and
individuals, which also are called tax extenders.
Provider offsets for SGR reform include expanding bundled pay ($40 billion), changing Part B drug reimbursement
($10 billion), reducing readmissions ($10 billion) and paying equally for similar services regardless of where they’re
provided ($20 billion).
The beneficiary offsets include simplifying cost-sharing, reducing cost sharing for poor seniors, restricting firstdollar coverage in Medigap plans and encouraging retirees to cash out employer supplemental plans in exchange for
premium subsidies. The combined savings of beneficiary offsets also equal $80 billion, but CRFB doesn’t itemize them.
CRFB would glean $10 billion in Medicaid savings by restoring the provider tax threshold to 5.5 percent.
The center is pushing to combine SGR- and tax-reform recommendations because the two issues came up at the
same time and because combining the two creates more chance for a compromise, said Loren Adler, a research director at
the Center for a Responsible Federal Budget. Physicians and many lawmakers want to pass the bipartisan SGR bill before
the end of the year, and tax extenders must be dealt with by the end of the year. However, the current SGR patch doesn’t
expire until March 31, and Adler said the center’s plans for SGR and tax reform could be separated.
“If policymakers address these two issues irresponsibly, they could add up to $1 trillion to the debt over the next decade,”
CRFB says. “Yet policymakers could also use these moments to make a down payment toward tax and entitlement reforms
that slow health care cost growth, speed economic growth, and help put the debt on a sustainable long-term path.”
The center’s plan assumes that the bipartisan SGR bill, plus Medicare extenders, will cost $170 billion. Senate and
House lawmakers agreed earlier this year on a plan to replace the SGR, but they couldn’t agree on how to pay for it.
Although the SGR policy was identical in the bills drafted by the two chambers, the Senate included Medicare extenders,
and the House did not. House lawmakers planned on including extenders, but they didn’t decide on which ones, and it’s
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Pelosi Sends Letter To Boehner Calling For ‘Fair’ Committee Ratios
GAO Lists Factors For Low Initial SHOP Enrollment, FFM Figures Still Not Available
Kaiser Analysis Finds Silver Plans Rates Decreasing, Bronze Plans Up Slightly
Dozens Of Provider, Consumer Groups Send Letter To Congress Urging SGR Replacement
HealthPocket Finds 12 Percent Decrease In Bronze Premiums, Silver, Gold Flat, Platinums Increase
By 20 Percent
ASCO Calls For Major Medicaid Reforms Concerning Cancer Treatment, Includes Higher Reimbursement
Rates
CBO Scores Options For Replacing SGR
115 Organizations Ask NAIC To Address Network Adequacy Concerns In Forthcoming Regulation
Black, Blumenauer Send Letter To CMS On Socioeconomic Status And Risk-Adjustment In Medicare
Advantage
NASHP Brief Suggests Ways To Align State, Federal Policy On Behavioral, Physical Health
Medicare Rights Center Recommends Ways To Improve Part B Enrollment
AMA, Dozens Of Other Groups, Urge FDA To Put LDT Framework Through Formal Rulemaking
Van Hollen Unanimously Reelected Ranking Member Of House Budget Committee
ASCO Calls For Eligibility Reform, Increased Accountability In 340B Program
GAO Calls For Giving Consumers Better Data On Cost Of Health Care Services
GOP Senators Press Burwell On Recouping Taxpayer Dollars Spent On Failed State Exchanges
ONC Lays Out Vision For Health IT To Drive Quality Improvement
Ways & Means Health Chair Floats Draft Medicare Hospital Reform Bill
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INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
not clear which extenders would be included were Congress to pass SGR legislation during the lame duck session.
There is little time for lawmakers to move forward on SGR reform because they plan to leave town after Dec. 12.
Provider offsets:
The center says bundling pay would discourage hospitals and post-acute care providers from providing redundant
and low-value services. The center calls for bundling pay for hospital stays and 90 days of post-acute care for a number
of conditions. The plans also calls for using pay bundles to identify overpayments in post-acute care.
The Part B revamp would do away with incentives for administering the most expensive drugs. Medicare pays
physicians 6 percent of drugs’ average sales price to cover the cost of administering those drugs — sequestration lowered
that to 4 percent. That system encourages doctors to administer the most expensive drugs so the center suggests paying
doctors a flat fee that is equal to an average of 3 percent of ASP.
The Affordable Care Act included a hospital readmission program that penalizes hospitals for high rehospitalization
rates for certain medical conditions. The Center for a Responsible Federal Budget suggests increasing penalties and
applying them to more medical conditions and types of providers.
Site-neutral payments also make the list of recommended offsets, although the proposal is limited to services provided in hospital outpatient departments and physician offices. Medicare often pays different rates for similar services
based on the type of facilities that provide them. The center’s plans would set pay at the lowest cost level for certain
services, which the group says would save money and remove a key incentive that has led to hospitals buying freestanding physician practices.
Beneficiary offsets:
The center hopes to glean $80 billion by simplifying cost-sharing, reducing cost sharing for poor seniors, restricting
first-dollar coverage in Medigap plans and encouraging employees to cash out their retiree plans in exchange for premium subsidies.
The center also calls for changes to Medicare Part A and Part B, which currently have varying deductibles, coinsurance and copays. The center calls for creating a combined deductible of about $600 and combined coinsurance of 20
percent for most services. The proposal would limit out-of-pocket cost to about $6,000. The center states that the details
could be adjusted and the important thing is to simplify cost-sharing, encourage cost control and protect seniors against
catastrophic health costs.
The plan also would reduce deductibles and out-of-pocket maximums for poor seniors, while keeping the costsharing structure the same, and it would charge wealthy seniors 5 percent co-insurance up to an additional $2,000 of costs
above the standard out-of-pocket limit.
Catastrophic caps would make reforming supplemental insurance easier because seniors would no longer need
Medigap for catastrophic coverage. Many policymakers say supplemental insurance drives up spending by removing
disincentives to seek low-value services — but seniors’ advocates say there is no proof that supplemental insurance
encourages overuse of services and most people who buy it, need it. The center suggests prohibiting Medigap plans from
covering new deductibles and allowing them to cover only half of additional out-of-pocket costs.
Likewise, the plan would encourage retirees to drop supplemental insurance by letting employees cash out the value
of those plans in exchange for premium subsidies. It also would hike Medicare premiums for those who continue to use
wrap-around insurance with first-dollar coverage.
Medicaid savings:
The plan suggests $10 billion could be saved by restoring the provider tax threshold to 5.5 percent. To get more from
federal matching, many states inflate Medicaid costs by taxing health providers, then they redistribute that money right
back to providers. In 2011, the limit on this practice was raised from 5.5 percent of net patient revenue to 6 percent.
The center also would expand Medicaid waiver authority to allow states more flexibility to test new models of paying
providers and delivering care.—John Wilkerson
MACPAC: HHS Reports Show Need For CHIP Funding, Express Lanes
Congressional Medicaid advisers reiterate calls to extend Children’s Health Insurance Program funding for two more
years, and urges CMS to more closely monitor transfers between Medicaid, CHIP and exchange coverage in letters to
HHS, Senate Finance and House Energy & Commerce committees on three HHS reports that were released earlier this
year.
The Medicaid and CHIP Payment and Access Commission also says HHS’ evaluation of the CHIP program reinforced the notion that waiting periods for CHIP should be eliminated and more assistance with the renewal process is
required. MACPAC also supports a recommendation from HHS’ report on children’s health care quality to make express
lane eligibility permanent, though the commission was more cautious about recommendations to extend CHIPRA
[Children’s Health Insurance Program Reauthorization Act of 2009] performance bonus funding.
HHS this summer released two reports on the efforts to improve health quality for adults in Medicaid and efforts to
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
3
improve CHIP, and in September the agency released a report evaluating the CHIP program. In the children’s health care
quality report, HHS recommended a one-year extension of performance bonuses, as well as a permanent extension of
express lane eligibility. The CHIPRA bonus fund expired in fiscal 2013 and the express lane eligibility state plan option
expires at the end of fiscal 2015.
MACPAC notes that many of the eligibility simplifications that were incentivized under the bonuses are now
state requirements under the Affordable Care Act, and the formula for calculating performance bonuses relies on preACA eligibility standards, so the commission says changes will be necessary to update the program if it is continued.
The commission also says it is “encouraged by the progress that HHS has made in expanding its children and adult
quality improvement efforts since 2011,” but says CMS could reduce the state reporting burden and duplication if it starts
calculating some core quality measures for states using the data collected through the Transformed Medicaid Statistical
Information System.
MACPAC’s letter on the quality reports also says that since the core measures have been established, CMS should
look for opportunities to use those in state quality improvement initiatives, such as managed care external quality review
organization activities. The quality measures were initially meant to be used by managed care organizations and providers, MACPAC notes, but CMS only collects data at the state level and there’s limited evidence that the quality measures
are being widely used in state managed care oversight or provider incentive programs.
HHS also should devote more attention to quality measurement for Medicaid enrollees with disabilities, MACPAC
says. The adult core quality measures don’t include measures specific to those with disabilities, the commission says, and
“both reports to Congress are largely silent about efforts to measure and improve care provided to this population.”
MACPAC says it would support more funding for state and CMS quality measurement programs. Funding for
these measures hasn’t been approved for fiscal 2015 or later years, which MACPAC says is “raising concerns about how
continued measurement activities will be supported.”
The commission says in a separate letter that the CHIP report reinforces the need for Congress to quickly extend
CHIP funding for two years, as HHS’ report showed that many states hadn’t yet made contingency plans for CHIP
running out of funding as of early 2013. MACPAC reiterates its recommendation that extended funding for two years
gives Congress time to address issues around the affordability and adequacy of alternative options for children’s health
coverage.
Sen. Jay Rockefeller (D-WV), who is retiring in January, has said he plans to push to extend CHIP funding
during the lame duck session.
MACPAC says the CHIP report also reinforces the notion that waiting periods for CHIP coverage should be eliminated, as it found that only 4 percent of children voluntarily dropped employer-sponsored insurance before enrolling in
CHIP in the 10 states HHS looked at.
“[T]he potential pool of children who might be targeted by waiting periods is small and does not justify the added
administrative burden and complexity that waiting periods create,” the letter says.
The HHS report on CHIP found that in five states studied at least 40 percent of enrollees transitioning between
Medicaid and CHIP had a gap in coverage, and MACPAC says this is “instructive about the need for mechanisms to
smooth transitions when changing sources of coverage, whether between Medicaid and CHIP or between Medicaid/CHIP
and exchange coverage.”
Better data collection and monitoring of those moving among Medicaid, CHIP and the exchanges is needed to see
how well efforts to close such coverage gaps are working, MACPAC said. — Michelle M. Stein
ONC Lays Out 10-Year Vision For Health IT Improving Health Quality
Within a decade, the HHS Office of the National Coordinator for Health Information Technology (ONC) says it will
develop a health IT infrastructure for driving quality improvements in health care that will combine clinical decision
support (CDS) and clinical quality measurement (CQM) in a “continuous feedback loop” that allows patients, physicians,
public health officials and researchers to access information in real time. ONC envisions that patients and their doctors
will have secure access to the data, which will inform decisions about patient care. De-identified, privacy-protected
patient data also would be available in metadata sets for public health officials’ and researchers’ use.
“ONC envisions an electronically enabled (quality improvement) ecosystem that promotes better health and care,
improved communication and transparency, rapid translation of knowledge for all stakeholders and reduction in the
burden of data collection and reporting for providers,” ONC says in its paper “Health IT Enabled Quality Improvement:
A Vision to Achieve Batter Health and Health Care” released last week. “Data created during the normal course of care
can, when collected in standard formats (e.g., CDEs), be transformed real-time into knowledge to inform clinical decisions, report on notifiable conditions or events, measure quality of care and provide evidence for patient-centered
outcomes research.”
ONC says its vision depends on achieving true interoperability — the office plans to release its map for
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INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
interoperability early next year — that includes common data elements (CDE). The vision is also contingent on stakeholders investing in the needed technology.
“In order to be successful in these new payment environments, providers must invest in delivery system re-design
which includes more robust leveraging of health information technology and interoperability. Public and private payers
alike must commit to this transition in order for the incentives to be large enough for providers to make these substantive
system-wide changes,” ONC says.
In the paper, ONC notes that at this point all states have some form of health information exchange services and more
than half of the nation’s hospitals can electronically access patient information outside of their own systems. On top of
this, ONC says more than half of office-based professionals and more than 80 percent of hospitals are participating in the
electronic health records Meaningful Use (MU) program — with nearly 70 percent of providers in MU submitting CQM
information to CMS.
The MU program, however, has been fraught with complications, with some providers having trouble getting the
latest certified technology, and stakeholders asking for more flexibility and time to attest to MU. CMS and ONC extended
the time for first time MU users to apply for hardship exemptions earlier this month, and extended the time frame for
attesting to MU stage two earlier this year. CMS and ONC have yet to release guidelines for MU stage three, but those
regulations are expected in the near future.
ONC lays out its vision in three-year, six-year and 10-year time frames, and it details what it believes is possible
during those periods.
In three years, ONC expects to see alignment and standardization to support data capture within the sphere of quality
improvement. In this time frame, ONC envision that patients who need diagnostic tests could easily meet insurers’
preapproval requirements with data in the their EHR, which will include radiation exposure doses so patients and
providers can discuss the pros and cons of diagnostic imaging options.
In six years, ONC believes data sharing will be improved to a point at which “big data” can be transformed into
easily usable information and quality and safety metrics will move from provider-centric to patient-centric. In this
scenario patients monitored for mental health needs would periodically complete self-assessment that would be sent
electronically to their mental health providers.
In 10 years, ONC envisions that nationwide use of interoperable health IT will be pervasive and “individuals will
view themselves as the hub of their health care and will be considered an integral member of the care team.” ONC says at
that point the practice of health care will use preventive, predictive and precise models. In this scenario, were a measles
outbreak to emerge in a community of children who have been vaccinated, public-health officials could quickly figure out
the vaccine lot numbers of the affected children and establish a significant correlation. Officials then would determine
what other children have received the suspect vaccine to “identify at risk community members and intervene proactively.”
“Providers, patients and researchers will have the complete health and clinical picture and benefit from personalized
options informed by rich and malleable data that can provide numerous types of health IT enabled decision-making,
quality monitoring and real-time and predictive analytics,” ONC says. — Todd Allen Wilson
Pallone Takes Energy & Commerce Ranking Slot In Full Caucus Vote
New Jersey Rep. Frank Pallone eked out a surprise 100-90 victory in battle against Rep. Anna Eshoo (CA) for the
ranking Democratic slot on the influential Energy & Commerce Committee, in a blow to House Minority Leader Nancy
Pelosi (D-CA) who supported Eshoo but has also been the focus of Democratic grumbling following the party’s crushing
election defeats. Wednesday morning’s full caucus vote came a day after the House Democratic Steering and Policy
Committee chose the less-senior Eshoo for the job.
Also on Wednesday, Energy and Commerce Chair Fred Upton (R-MI) announced that Rep. Joe Pitts (R-PA) will
continue to chair the health subcommittee and Rep. Tim Murphy (R-PA) will lead the oversight panel. Reps. Brett Guthrie
(R-KY) and David McKinley (R-WV) will serve as vice-chairs on health and oversight, respectively.
Health care stakeholders had closely watched the months-long battle between Eshoo and Pallone to take over
the slot being vacated by retiring veteran Henry Waxman (D-CA). Pallone has been heavily involved in drug compounding and other pharmaceutical issues, among other key health care issues; while Eshoo’s health care experience has
included biosimilars, medical devices and pediatric drugs.
Pallone authored the Children’s Health Insurance Program, helped draft the Affordable Care Act, was heavily
involved in negotiations for the FDA Safety and Innovation Act, and co-sponsored the Family Smoking and Tobacco
Prevention Act. He also helped negotiate the recently enacted Drug Quality and Security Act.
“I am deeply honored to have been chosen by my colleagues to serve as Ranking Member of the House Energy and
Commerce Committee,” he said in a statement after the Wednesday caucus vote. “Over the last year, it has been a
privilege to speak with members of the caucus about our shared vision for the futures of both the committee and our
party. I am excited to work together to make this vision a reality. I want to extend my profound appreciation and deepest
gratitude to the entire Democratic Caucus, especially those who have encouraged me along the way. The outpouring of
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
5
support has been humbling.”
Pallone had played up his seniority in his months-long bid for the position. When he first announced he was
running for the slot on Feb. 3, he ticked off details of his 20-year tenure on the committee, during which he served as
chair or ranking member of three subcommittees, and also played up his ability to seek common ground in a divided
Congress. “As the person tasked with developing the Democratic Caucus’ message on the House Floor, I believe I would
be the most effective voice to lead the Committee toward a successful future.”
But Eshoo, whose policies have drawn support from the medical device and biotechnology trade groups, had chalked
up an initial win Tuesday, when the House Democratic Steering and Policy Committee recommended her for the position
in a 30-19 vote, but with less of a lead than was expected, according to CQ Roll Call. Pallone then called for a full caucus
vote, which occurred Wednesday morning. — Amy Lotven
Marketplace Implementation, Oversight Top HHS Challenge
Implementing, operating and overseeing the health insurance marketplaces ranks number one on the HHS Office of
Inspector General’s list of top management challenges for the department in 2015, according to a report released on
Tuesday (Nov. 17). OIG says that state and federal marketplaces will need to focus on four key areas: ensuring accurate
tax credit payment; ensuring eligibility is properly determined; improving management and administration of the law; and
ensuring the site is secure and any personally identifiable information is protected.
OIG notes that the marketplaces had also been listed as a key challenge for 2014, and “(in) 2015, CMS and the
Health Insurance Marketplaces face new and ongoing challenges including, for example, ensuring accurate eligibility
determinations; processing enrollments, re-enrollments, and qualifying life change events; and communicating timely and
accurate information to health insurance issuers and consumers.”
To carry out those functions, OIG says, HHS must ensure effective communication and coordination between and
among all internal and external parties. Effective coordination with, and timely provision of accurate data to, the Internal
Revenue Service (IRS) will be particularly important for sound administration of the premium tax credit program, OIG
says.
But OIG also says that some progress has been made in federal marketplace operations, including:
• Changes to CMS’ management of the federal Marketplace, including closer oversight by CMS leadership; designation of a systems integrator; use of cross-functional teams; and procurement of a new contractor for federal Marketplace
construction and maintenance.
• Establishment of an interim process for resolving data inconsistencies pending automated functionality, an interim
process for paying issuers that are owed financial assistance payments pending automated functionality and functionality
for reporting life change events;
• An improved application on a redesigned HealthCare.gov intended to streamline the eligibility process and improve
the consumer experience.
• Actions taken to address OIG recommendations to improve information technology (IT) security.
• Screening of call center representatives and focused training on protecting sensitive information.
OIG also notes that CMS has reported it is in regular contact with IRS to validate payment information and the
provision of technical and other support to the state exchanges.
In the coming year, OIG says, HHS must continue to improve both the consumer-facing and back-end administrative
and financial management functions for the site. It must also ensure that alternative pathways to enrollment are functioning and consumer data is secure. “The Department must operate a well-run second open enrollment period for individuals
and small businesses, employing lessons learned, taking all steps practicable to avoid problems that marred the first open
enrollment period, and rapidly and effectively addressing any problems that arise.,” OIG says. — Amy Lotven
Clinical Oncologists Want New Formula For Determining 340B Eligibility
The American Society of Clinical Oncologists (ASCO) says Congress and HHS’ Health Resources and Services
Administration (HRSA) should reform the 340B drug discount program by increasing transparency and accountability,
and develop a new formula for determining what qualifies as a 340B entity in order to ensure the program is used for its
original intent to incentivize care for the uninsured, underinsured and Medicaid patients regardless of care setting. ASCO,
as part of a broader set of Medicaid reform proposals released Monday (Nov. 17), reiterates 340B reforms that it had
outlined in a policy statement in the spring, including that 340B drug discounts should be extended to free-standing
cancer clinics.
ASCO’s renewed call for 340B reforms came days after HRSA revealed it won’t issue a long-anticipated 340B
“mega-rule” and instead will propose guidance next year addressing key policy concerns raised by various stakeholders.
The scope of the program is also tied up in the courts, with HRSA again embroiled in a lawsuit brought by the Pharma6
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
ceutical Research and Manufacturers of America (PhRMA) over the agency’s interpretive rule on the 340B orphan drug
exclusion.
Blase Polite, of the University of Chicago who coauthored ASCO’s Medicaid reform policy statement, told Inside
Health Policy Tuesday (Nov. 18) that the formula for determining an entity’s 340B eligibility based on Medicaid inpatient
days for disproportionate share hospitals (DSH) — hospitals that see a higher percentage of uninsured, underinsured and
Medicaid patients — doesn’t make sense for a program that exclusively focuses on discounts for outpatient prescription
drugs.
To qualify for 340B status, eligible hospitals — which include acute-care hospitals, critical-care hospitals, sole
community hospitals, children’s hospitals, rural referral centers and stand-alone cancer hospitals — must have a DSH
percentage greater than 11.75 percent, which is calculated using a formula based on Medicaid inpatient days and Medicare Supplemental Security Income inpatient days.
Under this formula stand-alone outpatient oncology clinics — many of which provide cancer treatments to the
populations the 340B program is designed to target — currently are ineligible for the program.
Polite said the Ralph Lauren Cancer Center in Harlem, NY, which primarily serves the 340B target populations, is a
perfect example of a non-hospital based oncology clinic excluded from the program.
“They are a non-hospital affiliated cancer center. They’re taking care of an underserved population. But they have no
way of qualifying for 340B, because they don’t have an inpatient DSH. But they’re exactly the type of place you would
want to given some relief for taking care of uninsured and underinsured patients,” Polite said.
Polite says ASCO’s 340B policy statement argues that in its current form 340B creates a false market incentive for 340B hospitals to buy oncology clinics. While the discount drug program is not the only factor driving the trend
of 340B hospitals buying up oncology practices — other factors include efforts to build hospital networks or accountable
care organizations — it does provide those hospitals an opportunity to increase the “spread” of their 340B savings.
“(I)n the case of oncology care, hospitals have an added incentive to purchase provider practices in an effort to
expand the patient base for cancer drugs that qualify for the 340B program. In this context, the acquisition of oncology
practices by 340B institutions may have the potential of unintended, market-distorting consequences by creating an
uneven practice reimbursement environment favoring the survival of a 340B practice over a non-340B practice; by
maintaining a practice that might otherwise have shuttered its doors; and by creating higher out-of-pocket costs for the
patient community,” ASCO says in its 340B policy statement published in the Journal of Oncology Practice.
Because the primary source of 340B funding is discounts from drug manufacturers, as the size of the program
increases ASCO argues that the drug industry could look to offset the large number of 340B discounts by “increasing
prices for consumers in other settings.”
In order to ensure the program achieves its original intent to provide high-quality care for uninsured,
underinsured and low-income patients, ASCO also recommends that HRSA and Congress require 340B entities to provide
comprehensive annual reports on how much they received in 340B savings and what percentage of those savings they
“reinvested into caring for the uninsured, underinsured and Medicaid patients.”
“Let’s make sure everyone’s transparent with it — if you’re getting this money, what are you doing with it,”
Polite said. “We need to make sure that people are plowing it back into their care for the underserved — that’s how we
approached it.” — Todd Allen Wilson
Lawmakers Want CMS To Risk-Adjust MA Plans For Low-Income Patients
A bipartisan group of House lawmakers is asking CMS to quickly risk-adjust Medicare Advantage programs for dual
eligible and poorer beneficiaries, arguing that the current system “perpetuates a downward funding and quality spiral for
the populations who may need the most help.”
The lawmakers’ Nov. 14 letter , led by Reps. Diane Black (R-TN) and Earl Blumenauer (D-OR) and signed by 32
others, came shortly after plans told CMS that low-income beneficiaries are causing lower-than-appropriate star ratings
for some MA plans. Plans asked CMS to include risk-adjustment for socio-economic status in the MA star ratings
program, responding to CMS’ request for stakeholder input on whether such risk-adjustment is necessary.
The lawmakers write that CMS’ Request for Information was a good first step toward examining this issue, and ask
that “CMS make the necessary adjustments in the short term to ensure that both the risk-adjustment system and the star
rating and quality bonus program accurately reflect the challenges in caring for vulnerable, dually-eligible individuals.”
Duals need the extra care management and care coordination that MA plans provide, the lawmakers say, so it’s
concerning that the current pay system doesn’t take into account socio-economic factors that may affect beneficiaries’
health.
CMS should take into account the National Quality Forum’s recommendations to adjust quality measures for socioeconomic factors on a trial basis when considering changes to the MA program, the letter says. CMS’ earlier comments
on the NQF’s draft report indicated that the agency was not in favor of risk-adjusting for socio-demographic factors.
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future changes to the program.
The lawmakers also say improvement models should take into account Medicare Payment Advisory Commission
recommendations to use two years of condition data in the risk adjustment formula, include the number of beneficiary
conditions as an adjustment factor, and include variables for partial and full dual status. Plans should also be adjusted to
reflect the “challenges plans and providers face in caring for the most vulnerable populations,” the letter adds.
“The current MA payment system — specifically the risk adjustment payment model and the star ratings and quality
bonus program — does not adequately recognize the types of high-cost interventions and care management required to
provide high-quality care to the unique and specific needs of dually- eligible beneficiaries,” the lawmakers say.
The lawmakers also say it is well established that social determinants of health like socio-economic status are
important drivers of health outcomes.
But the Medicare Rights Center told CMS that current data doesn’t show that beneficiaries’ low income or duals
status is the cause of lower quality care. — Michelle M. Stein
Rx Lobbyists: GOP Not Interested In Medicaid Directors’ Price-Control Idea
National Coalition on Health Care Director John Rother wrote Friday (Nov. 14) that the debate over government
price controls on drugs began when the National Association of Medicaid Directors included direct and indirect price
controls among a list of suggestions to Congress, but drug lobbyists countered that there is little threat of government
price controls now that Republicans are taking control of Congress. Rother said Gilead brought the discussion of drug
price controls to its entire industry by refusing to lower the price of its hepatitis C medicines.
“Our coalition has repeatedly warned that the debate is likely to move toward some form of price control unless
Gilead and its brethren start to act more responsibly and sincerely engage with health care stakeholders,” Rother wrote in
a blog post titled, “We Don’t Want To Say ‘I Told You So,’ But...”
Not all National Coalition for Health Care members are part of the group’s drug price campaign, and neither the
campaign nor Medicaid directors support drug price controls. Medicaid directors were careful to say in their recent letter
that they were merely listing options for smoothing out unexpected drug price spikes.
Despite the recent attention on drug prices, drug lobbyists said Republicans aren’t expected to show much interest in
major policy changes. Senate Finance Committee Republican Chuck Grassley (IA) and committee Chair Ron Wyden (DOR) are investigating how Gilead priced Sovaldi, but lobbyists say Grassley is the lone Republican involved in the probe.
Also, Sen. Orrin Hatch (R-UT), who is expected to be the Finance Committee chair when Republicans take control of the
Senate next year, is not part of that investigation
It remains to be seen whether the price of hepatitis medications will come down much once other brand drugs hit the
market. Express Scripts recently outlined its strategy for negotiating lower prices, but a company official said the strategy
might not work. Medicaid directors also said the mere presence of other drugs on the market doesn’t always lead to
reasonable prices.
The National Coalition on Health Care bills itself as a nonpartisan, nonprofit group representing more than 80
participating organizations, including medical societies, businesses, unions, health care providers, faith-based associations, pension and health funds, insurers, and groups representing consumers, patients, women, minorities, and persons
with disabilities.
The Pharmaceutical Research and Manufacturers of America did not immediately respond to a request for
comment. — John Wilkerson
In Debate Over Rx Prices, Tufts Estimates R&D Cost At $2.6 B Per Drug
In the midst of the drug-pricing debate, Tufts Center for the Study of Drug Development announced Tuesday (Nov.
18) that it costs on average $2.6 billion to develop a new drug, including the cost of drug-development failures. Many
view Tufts’ research on drug development costs as the most dependable because the organization has a unique relationship with industry that allows it to get data that others cannot obtain, but consumer groups are skeptical about the research.
In 2001, Tufts estimated that it cost $802 million to develop a drug. That previous estimate arrived in the middle of
the debate over pediatric research incentives, drug user fees and Medicare drug coverage.
At the time, when new brand drugs often worked only about as well as those they replaced, the drug industry’s
primary justification for rising drug prices was the cost of drug development, and drug makers said government price
controls would dry up research investment. Industry still makes that argument, but with the advent of specialty drugs that
significantly improve treatments or even cure diseases, such as hepatitis C drugs, industry now also emphasizes how
much it would have cost to treat chronic disease in the absence of a cure. Hepatitis C infects an estimated 3.2 million
people, and a 12-week course of Harvoni costs $94,500, although many with the infection could be cured with shorter,
less expensive regimens. Industry emphasizes that Harvoni, and its predecessor Sovaldi, cure nearly everyone, which
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eliminates the need to treat those patients for decades.
However, National Coalition on Health Care President and CEO John Rother said executives at Gilead Sciences,
which makes Sovaldi and Harvoni, didn’t base the price on research costs or the drug’s value to the health care system.
They merely took the price of previous hepatitis C drugs and bumped up the price a bit, he said, even though many more
people will now seek treatment than before. Gilead President and CEO John Milligan said as much last month. Rother
said research spending matters, but the value of drugs to the health care system matters more and drug makers should set
prices based on that value.
A Biotechnology Industry Organization release on the Tufts’ study stated that, of the more than 5,000 medicines in
development, about 70 percent would be first-in-class. BIO President James Greenwood said biopharmaceutical innovation contributed to a 22 percent decline in cancer deaths over the past 20 years and more cancer drugs are on the horizon.
Harvoni cures more than 90 percent of patients, with minimal side effects, he said, and HIV is now a manageable chronic
condition.
“These investments are only sustainable with a policy, regulatory, and reimbursement environment that recognizes
the value of medical innovation and spurs patient access to new medicines, including through insurance mechanisms that
ensure such products are available to patients at an out-of-pocket cost that makes them truly accessible,” the BIO release
states.
James Love, director of Knowledge Ecology International, wrote on the group’s website that Tufts is funded in large
part by drug makers and cannot be trusted. He said Tufts didn’t disclose how many patients were in the trials or how
much money drug makers told Tufts they spent per patient in those trials. Tufts based the estimate on trial costs and the
public doesn’t know what the sample looked like, Love wrote.
“The drug companies that fund the CSDD are hoping people will just take the number and quote it for several years
until a new one is needed,” Love wrote. “If Tufts or PhRMA thought it was needed, they would have provided more
transparency of the data in the sample. They don’t think they need to.”— John Wilkerson
Medicare Rights Center Pushes Lawmakers To Ease Part B Penalties
The Medicare Rights Center is asking Congress to make enrollment for Medicare Part B (outpatient) easier to
understand and less punishing for those who make a mistake, as the group says the rules are confusing and those working
when they turn 65 may end up paying lifetime penalties on their Part B premiums due to honestly misunderstanding the
program.
The center is asking Congress to look into whether a lifetime penalty for those who sign up for Part B care after their
first opportunity has passed is too punitive, and wants lawmakers to fund a National Medicare Transitions Resource
Center to help beneficiaries get the right information when transitioning to Medicare.
The center, in a report released Monday (Nov. 17), floats ways to smooth a “fragmented Medicare enrollment
system,” particularly around Part B. Beneficiaries collecting Social Security at age 65 are automatically enrolled into
Medicare Parts A and B, but others must actively choose whether or not to enroll in Part B.
“If this transition is mismanaged, individuals new to Medicare may face lifetime late enrollment penalties, higher
health care costs, gaps in coverage and disruptions in care continuity,” the report says.
Premium expenses for Part B lead some beneficiaries to turn down Part B when they first become eligible,
MRC says, especially if they are continuing to work or otherwise have another type of insurance. But beneficiaries that
don’t choose to enroll in Part B during the initial enrollment period surrounding their 65th birthday may end up with
lifetime enrollment penalties.
Beneficiaries who sign up late for Part B see a penalty that grows at 10 percent of the current premium for every year
a person should have been, but wasn’t, enrolled in Part B. The Part D penalty, on the other hand, grows at 1 percent of the
national base beneficiary premium for each month that person lacked creditable coverage — coverage of an equal or
greater value than Part D pharmacy benefits.
“These individuals face an array of complex rules and timelines, often leading to honest errors and enrollment
mistakes,” the report says.
Former Medicare chief Jon Blum, who sits on the board at MRC, said during a press call Monday that the lifetime
enrollment penalties were originally intended to make sure all beneficiaries signed up early, which would lead to a robust
risk pool. MRC President Joe Baker added that the penalties help avoid adverse selection. But Blum said that the big
policy challenge is for those who continue to work and have insurance through an employer or who have another source
of insurance. Since the rules are confusing, often people make the wrong choice about whether to sign up for Part B,
Blum said.
Beneficiaries can avoid penalties in Part B if they prove they were given bad information from a government
source, but there is no formal process to request that equitable relief, the report says. There are no channels to request
relief, no timelines for when the Social Security Administration should make a decision and no way to challenge those
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decisions, according to the report. Beneficiaries must simply send a letter providing evidence that a federal employee or
agent provided misinformation.
There is no recourse for beneficiaries who receive bad information from an employer, the MRC says, and roughly
740,000 Medicare beneficiaries paid Part B penalties in 2012.
MRC asks lawmakers to look at whether the lifetime late enrollment penalty is too punitive.
“It is important that a penalty appropriately deter individuals who might actively seek to avoid Medicare enrollment
but not punish those who make honest mistakes when first becoming eligible for Medicare,” the report says.
The MRC is asking for more education for those about to enter Medicare about whether they need to actively enroll
in Medicare, and says the Social Security Administration and CMS should collaborate to provide a standardized notice
and instructions to beneficiaries. This should be supplemented by a broad-based educational campaign including trainings
and resources to explain insurance coordination and enrollment rules, and the consequences of not following those rules.
Congress should also create a National Medicare Transitions Resource Center to provide technical assistance to employers, health plans, beneficiaries and others, MRC says. This should include Frequently Asked Questions documents, MRC
adds.
CMS should also be required to help employers pass along the right information to their employees, the report says.
Plus, Congress should make coverage timelines for Part B work similar to the process in the exchanges, where
coverage start dates are determined by when a person enrolls and coverage goes into effect either the first of the month or
the following month. The start of the general enrollment period should also be moved to match up with the annual open
enrollment periods for private Medicare plans, MRC suggests.
Congress also should expand equitable relief so that beneficiaries can take advantage of it if they receive misinformation from employers, other plans or insurance brokers. The process should also be standardized and formalized —
including the addition of an appeals system, according to MRC.
The center also wants the Government Accountability Office to find out more about which entities provide misinformation the most often, how often equitable relief is granted, and how long it takes for such requests to be processed. The
GAO should also look into how many beneficiaries are paying penalties, and which beneficiaries are most susceptible,
MRC says.
Baker says that while there is not anything currently in the pipeline to relieve these problems, there is a perfect storm
brewing with the number of people encountering problems with signing up for Part B. — Michelle M. Stein
Sebelius Doubts GOP Can Repeal Individual Mandate . . . begins on page one
effectively kill the individual mandate in the 34 states that rely on federally run exchanges, or if Republicans in Congress
are able to get enough Democrats on board to repeal the individual mandate with a veto-proof majority, the private
insurance industry would face serious problems.
“We need everybody in the system,” Sebelius said. “If indeed the individual mandate is repealed without the preexisting condition barrier that will be a rapid demise of the private insurance industry. That will really take plans down —
that’s an immediate death spiral.”
Sebelius said while she expects the GOP-led Congress will vote to repeal the ACA, it will be symbolic legislation
because Republicans will not have the numbers to override a presidential veto. Following that symbolic effort she said
she does expect Congress to work on changing certain aspects of the law that can be agreed upon — such as the 30-hour
work week, the medical device tax and reducing the amount of paperwork large employers are required to submit to the
federal government.
Under the ACA an employee who works 30 or more hours a week is considered a full-time employee requiring
insurance coverage. Sebelius said she expects Congress to try to increase that to 35 or 40 hours a week. Republican
leadership has said this is one of their priorities when they take control of Congress in January.
Sebelius said the irony is that the 30-hour work week provision in the ACA did not come out of thin-air, but was
based on the fact that laws in most states define a full-time employee as a person who works 30 or more hours per week.
She also noted there have been ongoing discussions from both sides of the aisle on repealing the medical device
tax. The tax on the device manufacturers industry, she said, while not a huge part of the ACA’s funding mechanism, was
put in place as the administration worked to ensure that the omnibus health reform law was fully paid for without relying
on deficit spending — as opposed to Medicare Part D, which she said was just “put on a credit card.”
“That funding stream was thought to be a trade-off for the medical device companies having more paying customers
who would then use their products,” Sebelius said.
Congress may also reduce the amount of paperwork large employers need to file with the federal government
to attest to compliance with the law, Sebelius said. At this point, she said, it is known that as many as 95 percent of
large employers are in compliance with the law, so there is a question of how much of an administrative burden should be
placed on them.
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Sebelius also said she is optimistic now that the elections are over that more governors will look to expanding
Medicaid in 2015 using private market options states like Arkansas, Michigan, Iowa and Pennsylvania have used. She
said it is not surprising that not all states have come on board with Medicaid expansion, noting that it took three years to
get most states to sign on to the Children’s Health Insurance Program after it became law in 1997.
She said the economic argument is strong for states to expand Medicaid because of the generous federal match, and
states that have not expanded are seeing an increase in the amount of money they are now spending on uncompensated
care, as provisions in the ACA cut back on federal funds for such care.
“I think that debate is very much underway still,” Sebelius said. “We have a number of other states with Republican
governors poised to come into the Medicaid strategy. At the end of year one with Medicaid expansion, 30 states have
declared their interest with moving ahead — 27 have actually joined the program, another two or three are in the process.”
Sebelius also gave high marks to her successor, HHS Secretary Sylvia Burwell, saying the “new secretary is doing a
great job.” — Todd Allen Wilson
Clinical Oncologists Call For Higher Medicaid Reimbursements
The American Society of Clinical Oncologists (ASCO) Monday (Nov. 17) called for major reforms to Medicaid that
include equalizing Medicaid and Medicare reimbursement rates for providers, doing away with cost sharing for cancer
screening and therapies for beneficiaries, allowing beneficiaries to participate in clinical trials, creating a medical home
model for oncology practices and tying states’ flexibility in running their individual programs to meeting predefined
cancer quality measures. ASCO also called on states that have not expanded their Medicaid programs under the Affordable Care Act to find ways to expand insurance coverage for individuals with incomes below the federal poverty level.
“ASCO believes that no individual diagnosed with cancer should be without health insurance that guarantees access
to high quality cancer care, which includes care delivered by a cancer specialist, as well as access to clinical trial participation,” the organization says in its policy statement published in the Journal of Clinical Oncology Monday.
ASCO called on states that have not expanded Medicaid eligibility to 138 percent of the federal poverty level to do
so in order to meet the generous federal match — 100 percent through 2016 then dropping to 90 percent for 2020 and
thereafter — for expanding the joint state/federal program. Barring, that the organization says states that have no intention of expanding their program under the ACA should at the very least develop an alternative strategy “to ensure subsidized health care for individuals with incomes below 100 (percent) of the FPL, so no group is left without subsidized
health care coverage options.”
Even with expanded Medicaid coverage, however, many beneficiaries will still have difficulty accessing quality
oncology care, ASCO says. That’s because, as the organization points out, on average Medicaid pays providers 66 cents
on the dollar compared to reimbursement rates for Medicare. This has led to a situation where only 71 percent of specialty physicians are accepting new Medicaid patients compared to 91 percent of specialists accepting new Medicare
patients.
ASCO recommends that Medicaid payment rates be the same as Medicare rates, but also tied to quality
measures. The organization believes the increased payment rates should be accompanied with incentives to meet meaningful quality metrics specific to cancer care and a leadership role for oncologists in developing cancer payment reforms.
“We are not calling for increased reimbursement as a sole policy,” Blase Polite, a co-author of the ASCO Medicaid
reform policy statement, said on a call with reporters. “We are calling for increased reimbursement resources in the
context of complete reform. And that complete reform should look at measures of quality and value. We think that once
you do that you can provide increased reimbursement with costs that are not much more significant than the current
reimbursement and provide better care.”
ASCO notes that the joint federal/state funding mechanism gives states a lot of flexibility in how they run their
individual programs. In conjunction with payment reform the organization says states should be required to meet “predefined cancer quality outcomes” in order to keep that flexibility.
“Failure to meet quality metrics should be cause for the federal government to intervene,” ASCO says.
CMS should develop cancer-related medical home models to help achieve reforms, ASCO says. Under the ACA
CMS is running medical home demos that focus on primary care. ASCO notes that the services that define medical homes
— care coordination, patient and family education and aggressive management of of chronic conditions — are very much
in line with services patients with cancer need and “in part define cancer care.”
“As such, the medical home model provides an excellent framework for the care of patients with cancer and, in
particular, populations that currently experience disparities in cancer prevention, screening, care, and outcome,” ASCO
says.
ASCO asks that Medicaid do away with cost sharing, or states’ abilities to require copays for beneficiaries, for
both oral and intravenous anticancer therapies, as well as preventative and hospice care services. The organization also
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asks that provisions of the ACA that prohibit cost-sharing or copays for cancer screening and genetic testing for beneficiaries who fall within the Medicaid expansion population be extended to include beneficiaries in the traditional Medicaid population.
The organization would also like Medicaid beneficiaries to be allowed to participate in approved clinical trials for
cancer treatments, and says states should allow Medicaid patients to cross state lines to participate in clinical trials.
ASCO notes the ACA requires that group health plans and health insurers provide coverage of approved clinical trials,
but it is unclear whether these provisions of the law also include beneficiaries under the Medicaid expansion. These
provisions, ASCO says, should be applied to both beneficiaries in the Medicaid expansion and the traditional Medicaid
population.
ASCO says this can also have the benefit of increasing the number of racial and ethnic minorities in clinical trials, as
the organization notes these populations are overrepresented in the Medicaid population while substantially
underrepresented in clinical trials.
“Given the particularly poor accrual of under-represented racial and ethnic minority patients in clinical trials, this
oversight places these patients, who are over-represented in the Medicaid program, at an even greater disadvantage for
clinical trial enrollment. This prevents access to clinical trials for low-income Medicaid enrollees and will impede our
ability to learn about potential important differences in response to, or tolerance of, treatment in this nation’s racially and
ethnically diverse patient population,” ASCO says. — Todd Allen Wilson
Open Enrollment Has Strong Start, Washington State Flops But Fights Back
HHS Secretary Sylvia Burwell said Sunday morning that more than 100,000 people had applied for coverage through
the federal health insurance exchange since open enrollment kicked in a day earlier, signaling a solid start despite reports
of some minor problems. Washington state’s exchange, however, had a rocky start, with officials taking the site offline for
a day as staff resolved an issue that resulted in tax credit miscalculations.
Burwell also said that 500,000 people had created accounts on healthcare.gov since it opened for business a little
after 1 a.m on Nov. 15. HHS also said that as of Saturday 1.2 million people had visited the site to review plans via the
window shopping feature that launched last week.
On Saturday, Burwell visited an enrollment event at the Greater Prince William Community Health Center. She
toured the center and announced that 23,000 people had submitted an application through healthcare.gov in the first eight
hours.
The secretary has plans to attend more enrollment events in Texas and Florida this week
The federal web site saw no major problems, but some consumer did have problems logging in, according to several
reports. The administration suggested many of the issues could have been due to user errors.
“Some people forget their user names,” Burwell said on Meet the Press Sunday. “Some people are renewing their
passwords and other things, if there were any other technical problems. Our customer service folks are ready and able to
help people,” she said, adding that “there were over 100,000 calls yesterday.”
In Washington, the problems were not related to user error. Officials with the state-based exchanged said that shortly
after opening on Saturday the quality assurance team alerted them that some of the 2015 tax credits were not calculating
properly. Officials took the site offline in order to prevent consumers from receiving inaccurate information, and fixed the
problem overnight. The system went back online at 8 a.m. Sunday.
Richard Onizuka, CEO for the Washington Health Benefit Exchange, said that officials had identified fewer than 800
consumers who had taxes calculated wrong and fewer than 150 who had scheduled a payment. The exchange will be
contacting each consumer to provide them with their accurate credit amount, he said. — Amy Lotven
Providers, Consumers Urge NAIC To Address Network Adequacy Concerns
The American Medical Association has joined forces with more than 115 health care groups to urge the National
Association of Insurance Commissioners (NAIC) to address several key issues as it puts together a final model regulation
on network adequacy that will affect exchange and other insurance plans. The AMA, Children’s Hospitals Association
and other national and state-level provider and consumer groups such as First Focus ask NAIC to ensure that regulators
use appropriate quantitative standards, patients have access to a full range of age-appropriate care, provider directories
are accurate and issuers are transparent in their provider selection standards.
The NAIC, which held its annual meeting in DC this month, has been working for months on a proposal to update the
1996 Managed Care Plan Network Adequacy Act. The works comes as stakeholders and lawmakers raise concerns about
a trend towards increasingly narrow networks, in exchange and other plans, and high-cost drug formulary tiers.
“We recognize that there is already broad regulator support for these concepts, and we appreciate that the NAIC has
been deliberative in hearing from all interested parties,” the groups write in a Nov. 16 letter to Sandy Praeger of Kansas
and Theodore Nickel of Wisconsin, the chair and vice chair of the NAIC task force that has been developing the new
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model regulations.
“By adopting provisions consistent with the priorities outlined in this letter, we believe lawmakers and regulators can
adapt the Model Act to establish reasonable, meaningful standards, while still allowing for market flexibility and choice,”
they add.
NAIC is taking comments on the draft model until Jan. 12, 2015, a source tracking the process says.
The letter comes shortly after AMA approved a policy that calls for network adequacy and transparency. Among
other policies, the doctors group says that issuers should terminate any providers without cause prior to open enrollment
in order to mitigate inaccurate directors. Providers could be added at any time, AMA’s policy says. The doctors group
also calls for insurers to ensure that consumers do not pay more for out-of-network providers if there is not an adequate
number of providers in-network, and says that issuers should be required to report quarterly on several network adequacy
measures.
“While plans with narrow networks may have lower patient premiums, some narrow provider networks on
the market today provide inadequate access to timely, convenient, quality care,” AMA President Robert Wah said of
the new policy. “Inadequate networks could prevent patients from being able to see the physicians that they know, trust
and depend upon throughout their lives which could lead to interruptions in care, delayed care and undue harm. They can
also prevent patients who are newly insured from being able to access the physicians that suit their needs in a timely
manner. As enrollment opens for health insurance exchanges, patients deserve to have an honest look at their coverage
options — including the physicians, hospitals and medications they will have access to as well as cost-sharing - so that
they can make an informed choice.”
In the Nov. 1 letter to NAIC, AMA and the other groups say that health plans must be able to demonstrate they offer
access to a full range of pediatric and adult providers for all covered services, from primary care to specialty and subspecialty providers for more complex needs. The groups also say that NAIC should incorporate several types of quantitative measures for regulators to determine adequacy, but allow regulators to adapt thresholds that are best for their own
state. The act should call for broad usage of the measures “as no individual measurement is likely to ensure access, and in
fact, if used alone, may provide a false assessment of adequacy.”
The groups also write that they are extremely concerned about a reliance on the appeals process as a remedy
for networks so narrow that patients must go out of network to get covered services. Such a reliance does not reduce
costs, but rather leaves “consumers at risk of delayed and fragmented care and providers with additional administrative
costs, all of which increase the overall costs of care,” the letter states.
NAIC should require that all networks meet or exceed adequacy requirements; that consumers only pay in-network
cost-sharing if forced to go out-of-network due to lack of providers; plans show that they have an adequate approval
process for out-of-network services; and use appropriate clinical standards in evaluating requests and have an appeals
process for any denied services, the groups say.
The groups also say that while they recognize the need for insurers to have flexibility to incentivize physicians and
other providers to contract in good faith, they worry that allowing issuers to pay non-contracted providers deeply discounted, non-negotiated rates to remedy inadequate networks will not protect consumers.
“In fact, this practice may have the unintended consequence of encouraging insurers to create inadequate networks in
the first place,” they write. “Therefore, when there is an inadequate network, we believe that payers should be required to
reimburse providers the reasonable and customary value for out-of-network services. This both protects the patient and
helps ensure a level playing field during contract negotiations.”
The letter also says that the use of tiered and narrow networks must include specific patient protections in
order to prevent discrimination based on health status. To do so, the stakeholders recommend several actions: ensure that
network adequacy standards apply to the lowest cost-sharing tier; require clear consumer information about the tiers and
the appeals processes; assure the use of a integrated delivery system — such as an accountable care organization — by a
tiered network does not relieve the carrier from providing access to all covered services; and protect against higher cost
sharing if the tiers change.
The letter also stresses that issuers must be transparent in their network design. “Some plans identify networks
as ‘high value’ or ‘high-performing’ thus implying that quality has been a factor in the provider selection process,” the
groups write. “In the event that quality is a factor that is used in the design of a network, consumers and providers should
have information regarding the quality measures that were used. By the same token, if quality measures have not been
used to create the network, it is critical that consumers, providers and regulators are made aware of the basic methods that
were used to create the network, which may be centered on lower-cost providers.”
Finally, the groups agreed with NAIC’s task force that consumers should have timely access to up-to-date information on provider directories. It is critically important that regulators monitor the accuracy of the provider directors on an
ongoing basis, and especially at open enrollment, since the impact of inaccurate provider directories can be “devastating”
to consumers, the letter says. —Amy Lotven
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Higher Drug Premiums, Lower Deductibles Could Mean Higher Overall Costs
Seniors who choose a Medicare Part D plan with a higher premium in order to have a lower deductible many times
will end up paying more in the long run, according to a study by the website HealthPocket, which compares and rates
health plans for consumers. The study — which compared all Part D plans on the market — found that the average
deductible savings between the least expensive plans and the most expensive plans was $209.77, while the average annual
premium increase between low-cost and the most expensive plans was $1,137.48 — meaning that while not having to
worry about the costs of a deductible in choosing a higher priced plan, seniors would pay $927.71 on average for the
most expensive plans.
“Selecting a Part D plan based on a lower deductible could result in a higher premium, the added annual expense of
which could be far in excess of the value of the deductible savings. A wise evaluation of Part D options will consider all
insurance costs together (premiums, deductible, co-payments for drugs) rather than considering one cost in isolation from
the others. This financial evaluation can then be weighed against other important considerations such as the plans’ quality
ratings, drug restrictions, and pharmacy networks,” the study concludes.
In comparing Part D plans, HealthPocket divided plans into three groups — plans in the bottom third of
premium expense with a premium range between $12.60 and $65.70 a month; plans in the middle third of premium
expense with a premium range between $65.80 and $118.20 a month; and plans in the top third of premium expense
with a premium range between $119.10 and $171.90 a month. Annual deductibles in the bottom and middle third of
plans ranged between $0 and $320 — which is the Medicare cap on Part D deductibles, and plans in the top third
had no deductibles.
The study found that as the average premium increased between groups the average deductible decreased. But the
decrease in average deductible was not proportional to the increase in average premium. The study compared plans in the
bottom and middle groups and found a 146 percent increase in average premium with an 84 percent decrease in average
deductible.
“Selecting a Part D plan based on a lower deductible could result in paying a higher premium than necessary
for the coverage a senior needs, and this added premium expense could cost much more annually than the value of the
deductible reduction,” said Kev Coleman, Head of Research & Data at HealthPocket.
The study found that Medicare Part D plans with higher premiums offered more enhanced coverage in the “donut
hole” — the coverage period with higher out-of-pocket costs for beneficiaries between when initial Part D coverage ends
and catastrophic drug coverage begins. Almost all of the plans in the top group, 98 percent, offered enhanced “donut
hole” coverage compared to 6 percent of plans in the bottom group and 76 percent of plans in the middle group. The
enhanced coverage to control cost-sharing in the “donut hole” varies, however, with some plans offering the coverage
only for certain tiers of drugs.
For most seniors, the study says, enhanced coverage for the “donut hole” should be lower on their list of priorities
when choosing a Part D plan because most Medicare beneficiaries’ drug costs don’t enter the “donut hole.” The study also
notes that provisions of the Affordable Care Act get rid of the “donut hole” coverage gap by 2020. — Todd Allen Wilson
HRSA Delays 340B Rule . . . begins on page one
the long-standing issues associated with 340B that merit examination.”
HRSA’s decision not to move forward with the omnibus rule is essentially a punt to Congress, a health care lobbyist
said. The HHS Office of Inspector General and the Government Accountability Office are both expected to release
reports on the 340B program, and after those reports are released the next step is for the House Energy & Commerce
Committee to hold a hearing. Such a hearing would signal that Congress is considering action on 340B reform, the
lobbyist said.
If Congress does take up 340B reforms, those who favor reforms to make the program smaller and say that it has
grown beyond congressional intent could have a better chance of achieving those reforms with the retirement of Rep.
Henry Waxman (D-CA), the lobbyist said. Waxman has previously said that drug manufacturers have tried to undermine
the program, and that Congress wanted discounts to be available for safety net providers.
Stakeholders had originally expected a mega-rule rule from HRSA this summer, but HRSA said last week that
it instead will issue a series of guidance documents in 2015 to lay out parameters for the drug discount program. The
mega-reg was anticipated to address a variety of stakeholder concerns, including the definition of a 340B patient,
compliance requirements for contract pharmacy arrangements, hospital eligibility criteria and eligibility of off-site
facilities. The regulation originally went to the White House Office of Management and Budget for review in April.
But a court decision in May limited HRSA’s rulemaking ability to three areas surrounding 340B — ceiling prices,
dispute resolution and civil monetary penalties. While some believed HRSA would likely be able to defend its authority
to put forward the mega-rule and tie the expected provisions to one of those three areas, others said it was unlikely the
14
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
agency would move forward with the rule.
HRSA Office of Pharmacy Affairs Director Krista Pedley told stakeholders over the summer the agency was looking
carefully at the implications of the court case for the omnibus rule. The 340B program is in need of clear regulatory
policy that provides stakeholders the necessary information to follow the program’s rules and HRSA to oversee the
program, Pedley said. She added that the agency was looking at options to meet that goal.
Last week HRSA revealed in a website post that it was scrapping plans for the mega-rule.
“HRSA places the highest priority on the integrity of the 340B Program and continually works to strengthen the
oversight of this program,” HRSA posted on its website. “In 2015, HRSA plans to issue proposed guidance for notice and
comment that will address key policy issues raised by various stakeholders committed to the integrity of the 340B
program.”
But HRSA says it will propose rules specifically addressing civil monetary penalties for manufacturers,
calculation of the 340B ceiling price, and administrative dispute resolution — the three areas laid out as appropriate
for regulatory action in the court’s orphan drug decision.
One lobbyist following the issue says HRSA is likely concerned that rules in any other areas would lead to more law
suits similar to those over the agency’s orphan drug policy. Rather than end up in another legal battle, the agency will
simply put out guidance, the lobbyist added.
Both Safety Net Hospitals for Pharmaceutical Access, which represents 340B hospitals, and PhRMA say they look
forward to working with HRSA on its guidance. However, PhRMA also says Congress should move on bigger changes to
the program that guidance likely won’t address.
The agency does not lay out exactly which areas will be addressed in the upcoming guidance on its website post,
though a HRSA spokesperson tells IHP it is planning on addressing the definition of a patient, along with other key policy
issues.
SNHPA General Counsel Maureen Testoni told IHP the group believes HRSA will address the same issues in
guidance that it had planned to address in the rule using a similar approach to how the agency handled the orphan drug
matter through interpretive rules.
One lawyer following the issue says that since guidance doesn’t have the weight of law, some stakeholders will likely
not follow it. Guidance is not terribly enforceable, the lobbyist said, so it’s difficult to see how HRSA would make sure
any guidance it releases is followed. — Michelle M. Stein
Dozens Of Provider, Consumer Groups Urge SGR Fix During Lame Duck
A large coalition comprising provider groups, consumer advocates and the U.S. Chamber of Commerce is
pressing congressional leaders to fix the Medicare physician payment formula during the lame-duck session to take
advantage of a bicameral, bipartisan deal from earlier this year that lobbyists worry could fall apart when the new
Congress convenes.
Republicans this week warned the president that his plan for executive action on immigration, coupled with his
climate deal with China and his announcement on net neutrality, threatens to kill bipartisanship on legislation with
common ground, and it’s not clear how that environment affects the prospects of replacing the Medicare Sustainable
Growth Rate payment formula.
“We write to you today urging you to consider and pass bipartisan-bicameral legislation to repeal the flawed Medicare Sustainable Growth Rate (SGR) formula, reform payment for physicians and other health professionals, and address
the equally important healthcare ‘extenders,’ during the lame duck session of Congress,” the Thursday (Nov. 13) letter
from dozens of lobbying groups states.
Last week, the House GOP Doctors Caucus and more than 110 lawmakers said the lame duck session offers an
opportunity to pass SGR legislation. The Senate Finance and House Ways & Means and Energy & Commerce committees
negotiated an SGR replacement deal this past spring, but the two parties couldn’t agree on how to pay for it. That bill
likely would have to be renegotiated if Congress doesn’t pass it this year. That puts some pressure on lawmakers to vote
on the measure before the new Congress starts in January, but offsets remain a huge obstacle, and the real deadline for
action is when the funding patch runs out at the end of March.
Nevertheless, Congress will have to fund the government’s operations, and an SGR fix could ride with that or a taxextenders package, a consumer lobbyist says. The letter does not say whether or how Congress should pay for SGR
legislation, but some providers are still pushing to pass the measure without paying for it. Although some lobbyists
believe it’s highly unlikely that Republicans would vote for a bill that adds significantly to the deficit, a couple of recent
conservative editorial pieces could give the GOP cover for passing SGR without offsets. An Oct. 7 editorial in Forbes,
written by Galen Institute founder Grace-Marie Turner, and an Oct. 29 editorial the Washington Times both argue for
replacing the SGR without offsets to get a true accounting of the broken formula’s cost prior to potential Medicare
reforms next Congress. — John Wilkerson
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
15
Therapy Cap Coalition Renews Call For A Permanent Cap Replacement
The Therapy Caps Coalition — which includes both providers and patient groups — is urging lawmakers to
replace the outpatient therapy cap when it repeals the flawed Medicare physician payment formula, and one official
with the American Physical Therapy Association said the lame duck session provides lawmakers with a great
opportunity to do so.
The coalition, which includes the APTA, American Health Care Association, Parkinson’s Action Network and others,
say in a Nov. 19 letter to Senate Finance Chair Ron Wyden (D-OR) and Ranking Republican Orrin Hatch (UT) they were
happy to see an alternative to therapy caps included in the Senate Finance Committee’s SGR reform proposal last year,
and urge lawmakers to “address a long-term solution for the outpatient therapy cap as it considers repeal of the Sustainable Growth Rate.”
The Senate Finance Committee last December included provisions to repeal the therapy caps, which are set at $1,920
for occupational therapy and $1,920 for physical therapy and speech-language pathology, and replace it with a new
medical review process as part of the extenders package tied to the replacement of the SGR. When the bipartisan SGR
deal stalled, Congress extended for a year the therapy cap exceptions process and the manual medical review process for
claims over $3,700.
The House did not include language on a therapy cap replacement in it’s SGR bill, though the Therapy Caps Coalition says a bipartisan group of more than half the House has signed on to cosponsor separate legislation to permanently
repeal the cap. The coalition says a majority of House members signed on to support the bill in September, and over a
third of the Senate is cosponsoring that chamber’s legislation.
“We believe now is the time to repeal the therapy cap permanently and to implement the reform provisions negotiated by Senate and House committees of jurisdiction,” the letter said. “Completing this legislation this year or before the
March 31st, 2015 deadline provides an opportunity to end the pattern of yearly extensions that puts access to medically
necessary therapy for 1 million Medicare beneficiaries a year at risk.” — Michelle M. Stein
CGI Appeal Delays RAC Contracts . . . begins on page one
the awards process.
CGI Federal, which currently holds a RAC contract, filed a protest that covers three of the five RAC contracts CMS
is looking to award. CGI is protesting the contracts over planned changes that would make RACs wait until providers
wishing to appeal a RAC denial have gone through the second level of the process before collecting a contingency fee. A
U.S. federal claims court initially sided with CMS over the protest, and the agency said it planned to move the awards
process for all five contracts forward and hoped they could be done by the end of the year. But CGI appealed, and the
courts blocked CMS from moving forward with the new contracts until the appeal is decided.
In a Nov. 4 website update, however, CMS says the procurement process continues for a durable medical
equipment and home health RAC and the RAC for Florida, Tennessee, Alabama, Georgia, West Virginia, Virginia,
North Carolina, and South Carolina. The agency reiterated that it hopes these two contracts will be awarded before
the end of the year.
One lobbyist said that the protests expected after the RAC contracts are awarded could mean that even contracts
awarded by the end of the year will not go into effect until well into 2015. The new contracts for multiple RAC regions
were contested, and CGI Federal’s protest is the last outstanding pre-award protest. Another lobbyist said that if the
contracts for the different RACs begin at different times, then CMS would likely either be forced to end them at different
times as well, or have the later ones awarded for a shorter time period.
CMS did not respond by press time to questions about how contracts awarded at different times would be handled
going forward.
One provider said CMS has indicated it is also likely to extend the limited contracts it used to restart the program in
August after a few month hiatus. CMS said in February it planned to wind the program down to provide a smoother
transition to the new RACs, and CMS paused the program . But in August, CMS said that the delay in awarding the new
contracts meant that CMS needed to restart the program with the current contractors on a limited basis.
The limited contracts end at the end of the year, but CMS told IHP that the program restart may continue
until the new RAC contracts are awarded and there is time for an orderly transition.
This makes sense, the provider said, as CMS doesn’t want to be in a situation where it doesn’t have any RACs in
certain areas.
Arika L. Pierce, vice president of federal and state government relations for HMS Holdings Corp., which owns the
RAC HealthDataInsights, Inc., told those at the summit that the work stop is concerning because when the RACs don’t
have work they need to re-deploy or scale back on staff. That’s not good for anyone because it means that the contractors
will have to reacquire staff again once the program comes back online and staff will have to be re-trained.
— Michelle M. Stein
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INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
Avalere CEO: Unions Negotiate Higher Wages Instead Of Health Benefits
The Affordable Care Act has led unions to negotiate higher wages in return for accepting fewer health care benefits
in collective bargaining agreements, Avalere Health CEO Dan Mendelson said at a Center for Healthcare Supply Chain
Research event, but labor representatives said there is no evidence that higher wages are replacing those benefits. Either
way, Mendelson and labor agree the law’s exchange plan benefit design and so-called Cadillac tax on expensive employer-provided plans have led employers to offer up less costly plans under which workers pay more for their health care
services.
Employers and employees lose when unions demand rich health care benefit packages because, starting in 2018, the
Affordable Care Act taxes employers 40 percent of the cost of plans with values greater than $10,200 for individuals and
$27,500 for families, Mendelson suggested. “In cases in which both lose, because of fees and taxes, it’s in the interest of
unions to get concessions elsewhere,” Mendelson told Inside Health Policy.
Mendelson said some of his clients have already negotiated wage concessions for employees while dropping health
care benefits. He declined to name those clients, but he pointed to the deal announced this month between Atlanta
Symphony Orchestra musicians and management as an example of the trend. The four-year collective bargaining agreement gives musicians a 6 percent raise over four years, but they have a new high-deductible health care plan that increases their premiums, according to a press release of the deal on the Atlanta Symphony Orchestra’s website.
Mendelson said the law is driving all plans, including union health care plans, toward the benefit designs of
exchange plans. He did not pass judgment on the trend, but said the law is meeting Congress’ goal of making people pay
a greater share of their health care expenses. However, he said, the jury is still out on whether schemes to increase costsharing so far have been designed to encourage people to choose health care services wisely. Mendelson also said he
hasn’t seen data showing whether the value of wage concessions equals the value of benefits that workers are losing in
collective bargaining.
Labor representatives don’t agree that unions are negotiating wage concessions. Labor Campaign for Single-Payer
National Coordinator Mark Dudzic said he realizes that economists insist that when health benefits go down, wages go
up, but he doesn’t think that in practice wages rise in proportion to lost benefits. He said multi-employer pension plans
collectively bargained by unions and groups of employers, often called Taft Hartley plans, are especially vulnerable
because the administration decided against subsidizing them, which encourages those employers to push employees into
the exchanges, where plans are subsidized.
“I don’t think it works as easily and naturally as academic economists say,” he said. “It’s a competitive market, and
the employers hold most of the cards.”
Employers said they’ll lobby Congress to get rid of the Cadillac tax now that Republicans are taking control of
Congress, although some view that repeal measure as less urgent than other Obamacare reforms.
The American Health Policy Institute reported Nov. 11 that employers already are taking actions to avoid the tax. The
group reported that 17 percent of businesses, and 38 percent of large employers, will pay the tax in 2018 if they don’t cut
benefits.
AHPI also said the excise tax could cost 12.1 million employees an average of $1,050 in higher payroll and income
taxes per year from 2018 to 2014, if employers increase their taxable wages as they reduce the cost of health care
benefits. “Alternatively, these employees could see up to a $6,150 reduction in their health care benefits and little or no
increase in their pay,” according to AHPI.
Last month, Towers Watson reported that the tax could hit nearly half of large employers in 2018. The employeebenefits consulting firm found that 62 percent of companies surveyed reported the tax will have a “moderate or greater”
impact on their health care decisions over the next two years. — John Wilkerson
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17
Cost Of SGR Fix Dips . . . begins on page one
freeze is often cited as the cost of a doc-fix, but Congress wants to increase physician pay somewhat. CBO estimates that
giving physicians annual 0.5 percent pay increases would cost $140.2 billion over 10 years. The bipartisan policy
agreement that providers want Congress to pass this year also includes other so-called Medicare extenders that further
increase the cost of the package.
If physician lobbyists convince Republicans to replace SGR without paying for it, the cost doesn’t matter. CQ Roll
Call reported Monday (Nov. 17) that Sen. Orrin Hatch (R-UT), who is expected to take the Senate Finance Committee
gavel next year, and three House GOP Doctors Caucus members are open to replacing SGR with either partial or no
offsets. Those House Republicans whom CQ Roll Call quoted are Phil Roe (TN), Joe Heck (NV) and Charles Boustany
(LA).
Nevertheless, physician lobbyists say passing SGR legislation during lame duck session is a long-shot, and some
don’t believe that Republican leadership will go along with the idea. Also, the relationship between Republicans and
Democrats is going downhill fast, and that could hurt the prospects of passing SGR legislation, said Julius Hobson, a
senior policy adviser with Polsinelli. — John Wilkerson
Vit
als: A
Vitals
continued on next page
Health P
olicy Blog
Po
Excerpts of Inside Health Policy Blogs
Teva, Lannett, Marathon To Appear At Senate
Hearing On Generic Drug Price Hikes
Three pharmaceutical companies under intense scrutiny
from Congress — Teva Pharmaceutical Industries Ltd.,
Lannett Company, Inc. and Marathon Pharmaceuticals— are
set to testify Thursday at a Senate health committee hearing
targeted at finding answers to rate increases for some generic
drugs. At least one of the companies, Lannett, is under
investigation by the Department of Justice, according the
company’s Securities and Exchange Commission filing.
The three companies were among 14 generic drug
companies that received a letter from Sen. Bernie Sanders (IVt) and Rep. Elijah Cummings (D-Md) last month asking
why prices for generic drugs have surged as much as 8,200
percent in less than two years, according to data from the
Healthcare Supply Chain Association. Lannett, which
produces Doxycycline Hyclate and Digoxin, has had its prices
increase by as much as 884 percent in the same amount of
time.
Also set to appear is Stephen W. Schondelmeyer, from
the Prime Institute at the University of Minnesota, Scott
Gottlieb of the American Enterprise Institute, Carol Ann Riha
of Des Moines, Iowa and Aaron Kesselheim, professor of
medicine at Harvard Medical School.
Kesselheim co-authored an article in the New England
Journal of Medicine last week outlining the implications of
generic drug price increases. While the article cited no
definitive cause for the price surge, it stated that numerous
factors may cause price increases for non patent-protected
drugs, including drug shortages, supply disruptions, and
consolidations within the generic-drug industry.
The article pointed to some temporary fixes FDA has
implemented to offset the costs in the past. The article said
increases in the price of unpatented drugs could spur FDA to
seek other manufacturers for generic variations of the
product. As a result, companies that respond could be given
expedited reviews.
“Entry into the market of more generics manufacturers
should increase competition and reduce prices. Of course,
18
other players along the drug-distribution chain, such as
wholesalers or pharmacies, may also contribute to price
markups, and further investigation is needed into the relative
contribution of these different actors to the high prices of
drugs,” the article says.
The hearing is on Thursday, Nov. 20 at 1 p.m. in Dirksen
Senate Office Building, room 430. — David Hood
Gallup: ACA Support Hits New Low Ahead Of
Second Enrollment
A Gallup poll taken in the days after the midterm
elections found support for the Affordable Care Act hitting a
new numerical low, which the polling outfit concludes “could
indicate a loss of faith in the law amid the aftermath of the
2014 midterms.” The Gallup poll released Monday found just
37 percent of Americans in favor of the law, and 56 percent
of people disapproving.
“Americans have never been overly positive toward the
ACA, at best showing a roughly equal division between
approval and disapproval early on in the law’s implementation,” Gallup wrote in its assessment of the poll. “The
percentage of Americans who approve of the law represents a
new numerical low, which could indicate a loss of faith in the
law amid the aftermath of the 2014 midterms.”
Gallup also points out that approval has remained low
throughout the year, even as the law has had success in
reducing the uninsured rate, which suggests that Americans’
views on the law may be stuck. “(W)ith approval holding in a
fairly narrow range since last fall, it may be that Americans
have fairly well made up their minds about the law, and even
a highly successful second open enrollment period may not
do much to boost their approval,” Gallup says.
The poll was held Nov. 6-9, days after the GOP swept
the election. It also occurred just as the Supreme Court was
making headlines by agreeing to take up a case challenging
the provision of ACA subsidies to people purchasing
coverage through the federal exchange.
Despite the law’s unpopularity, HHS Secretary Sylvia
Burwell reported Sunday (Nov. 16) that more than 100,000
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
people had submitted applications, 500,000 people had
created accounts since the site had gone live the previous day,
and more than 1.2 million people had already used the
window-shopping feature launched last week. — Amy Lotven
Bill Requiring FDA Action On Sunscreen
Ingredients Clears Congress
The House Thursday (Nov. 13) passed the Sunscreen
Innovation Act, which is intended to break up a logjam of
sunscreen applications pending at FDA. The bill, which
builds on an earlier House-passed measure, cleared the Senate
in September, passed the House by unanimous consent
Thursday and now awaits the president’s signature.
The bill requires FDA to review pending sunscreen
submissions within a year. The Public Access to SunScreens
(PASS) Coalition, which has pressed for action on sunscreen
ingredients, said the bill if enacted would require FDA to
conclude reviews of eight pending ingredients by the end of
2015.
“The last over-the-counter (OTC) sunscreen ingredient to
be approved by FDA was in the 1990s,” the group said in a
statement lauding the congressional action. “Since 2002,
eight new sunscreen applications have been filed and are still
awaiting review 12 years later.”
The bill also calls for FDA to establish timelines for
requested pending non-sunscreen over-the-counter time-andextent applications.
“Regulatory delays and unnecessary bureaucracy at the
FDA should not stand in the way of sunscreen technologies
that could help save thousands of lives,” Sen. Johnny Isakson
(R-GA), the Senate bill’s original co-sponsor, said in a
statement. — Alaina Busch McBournie
IRS Assures Americans Subsidies Available In All
States
In light of the Supreme Court’s surprise decision to
review arguments in King V. Burwell last week, the IRS on
Wednesday (Nov. 12) posted a notification on its website
assuring Americans that the federal subsidies will be available in all states at this time
“It’s important for individuals receiving advance
payments of the premium tax credit to know that at this time,
nothing has changed and tax credits remain available,” IRS
says. “Whether enrolled in coverage through a federally-run
or state-run Health Insurance Exchange, also known as a
Marketplace, individuals do not need to take any additional
action or make any changes in response to the announcement
by the Supreme Court.”
SCOTUS on Friday (Nov. 7) shocked many observers by
announcing that it would take up the case, even as similar
cases are under review in lower courts and there is no existing
split in the appeals circuit. At issue is whether the IRS
overstepped its authority by promulgating a rule that allows
people purchasing coverage through a federally-facilitated
exchange to receive tax credits, even though the language
says the credits are available through an exchange” established by the state.
In July, a three-judge panel of the United States Court of
Appeals for the District of Columbia ruled in favor of the
plaintiffs in Halbig v. Burwell. The same day a federal court
in Richmond ruled in favor of the administration. The
plaintiff’s in the second case, King. v. Burwell, petitioned the
high court for the review, while the administration requested
— and received - an en banc review from the Court of
Appeals in DC in the Halbig case
After SCOTUS’ Friday announcement, the plaintiffs in
King requested that the Halbig case, which was widely
expected to come out in favor of the administration, be put on
hold until the high court rules. The court has granted that
request.
Another similar case filed by Oklahoma Attorney
General Scott Pruitt was also recently decided in favor of the
plaintiffs.
The administration appealed that case to the Tenth
Circuit Court of Appeals in Denver, and arguments had been
expected in January, although a date has not been set. A court
clerk says that neither party, as of yet, has submitted a request
for the case to be set aside until SCOTUS rules.
Arguments in a fourth case, Indiana v. IRS, have already
been heard. According to a recent blog by Michael Cannon,
the health policy director for the Cato Institute who supports
the suits challenging the IRS regulation, a ruling on that case
is imminent. — Amy Lotven
Pelosi Asks For More Democratic Seats On Ways
& Means, Energy & Commerce
House Minority Leader Nancy Pelosi (D-CA) is asking
House Speaker John Boehner (R-OH) to give Democrats
more seats on key committees in the new Congress.
“On behalf of the House Democrats and in the spirit of
bipartisan cooperation, I am writing to ask that Democratic
members be treated fairly in regards to membership on
standing committees,” Pelosi writes in a Nov. 12 letter.
Pelosi is asking that Boehner give Democrats a similar
number of seats to those the Republicans received when she
was speaker in 2009. The Democrats should have more seats
on the Appropriations, Energy & Commerce, Financial
Services, Transportation, and Ways & Means committees,
Pelosi says.
“We are only asking that you treat us in similar manner
as the smaller Republican minority was treated in regard to
our membership on committees,” Pelosi says. “By doing so, it
would send a strong signal at the beginning of the new
Congress that Republicans and Democrats are prepared to
work better together to advance the interests of our great
country.” — Michelle M. Stein
MACPAC Seeks Input On Adequacy Of Exchange
Coverage For Kids
As Congress faces pressure to fund the Children’s
Health Insurance Program, congressional advisers for
Medicaid and CHIP on Wednesday (Nov. 12) requested
public input on whether private insurance bought in the
exchanges adequately covers children and is affordable for
their parents. The Medicaid and CHIP Payment and Access
Commission (MACPAC) also seeks advice on making the
transition for Medicaid and CHIP to private insurance
seamless.
“As we develop our analyses and future recommendations, we would like to hear from you on the factors affecting
how well exchange coverage meets children’s health and
developmental needs, and any changes that should occur to
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
19
ensure that such needs are met,” the MACPAC memo states.
Due to changing income, some Medicaid beneficiaries
and their children will move between public and private
insurance, and MACPAC wants to avoid disruptions in
services.
CHIP funding runs out after Sept. 30, 2015. MACPAC in
June recommended two more years of funding, during which
time Congress could figure out the affordability and adequacy
of children’s coverage. A group of nearly 1,200 stakeholders,
including hospitals, physicians and families advocates,
recently asked Congress to appropriate four years of additional CHIP funding. — John Wilkerson
FDA Issues Sixth EUA For Ebola Diagnostic
FDA has issued its sixth emergency use authorization for
an Ebola diagnostic since August. The agency this week
granted an EUA for the RealStar Ebolavirus RT-PCR Kit 1.0
for the presumptive detection of several strains of the Ebola
virus, although the test cannot distinguish among the various
strains.
HHS Secretary Sylvia Burwell highlighted the six EUAs
during a Senate Appropriations Committee hearing Wednesday (Nov. 12) where lawmakers explored FDA’s flexibility to
address the Ebola outbreak.
The diagnostic was developed by the German company
altona Diagnostics and only is authorized for use on specified
instruments by (Clinical Laboratory Improvement Amendments) high complexity laboratories, according to the EUA,
which was issued Monday (Nov. 10). It can detect the virus in
“EDTA plasma from individuals with signs and symptoms of
Ebola virus infection in conjunction with epidemiological
risk factors,” FDA said. — Alaina Busch McBournie
Initial Analyses Of Exchange Plans’ Landscape Data Show Wide Variation
Analysts HealthPocket and Avalere Health quickly put out initial assessments of the landscape for exchange plans
from the national and state-based perspective following CMS’ Friday (Nov. 14) release of detailed information on
qualified health plans (QHPs) a day before open enrollment was set to kick in. HealthPocket’s national assessment finds
rates will decrease for Bronze plans, stay flat for Silver and Gold plans, and increase for Platinum plans, while Avalere’s
state-based assessment shows wide variety based on geography and market dynamics.
HealthPocket — which looked at rates for non-smoking adults aged 30, 40, 50 and 60 — says the average Bronze
Plan rates for all ages will go down 12 percent from 2014. The average premium for a 30-year-old is now $231.78,
compared to $262.69 last year. The average Silver plan premium is basically flat. The average premium for a 30-year-old
is now $283.16 compared to $284.02 in 2014. Gold plan premiums are flat as well, with the average rate for a 30-year
old at $334.56 compared to $335.71 in 2014, according to HealthPocket’s analysis.
Platinum plan premiums, however, are set to increase by an average 20 percent for people in each age group. For a
30-year-old, average rates for 2015 are $415.16 compared to $344.85 last year.
Kev Coleman of HealthPocket notes that the landscape files he analyzed had all FFM or FFM-supported states,
including Nevada, Oregon, New Mexico as well as Utah. They did not include California, Colorado, Connecticut, District
of Columbia, Kentucky, Massachusetts, Maryland, Minnesota, New York, Rhode Island, Vermont and Washington. They
also didn’t include Idaho, which is switching to a state-based marketplace for 2015.
Avalere Health also provided an initial analysis of the 2015 premiums, but only for the federally facilitated marketplace states. Avalere breaks down the average rate changes for lowest cost Bronze and Silver plans as well as the second
lowest Silver plan for each state.
Avalere notes in its analysis that changes in 2015 premiums vary widely by geography and regional market
dynamics.
For example, Avalere’s analysis found that the premium for the average Bronze plan in Mississippi decreased by 19
percent, while in neighboring Arkansas rates increased by an average 28 percent. Rates for lowest cost Silver plans in
Mississippi decreased 12 percent but increased 28 percent in Arkansas, and rates for the second lowest cost Silver plan
also decreased 19 percent in Mississippi while increasing 28 percent in Arkansas.
On average, Avalere found Bronze plan rates increased by an average 3 percent, lowest-cost Silver plan rates
increased by 4 percent and second lowest Silver plan rates increased by 3 percent.
But Avalere warned that averages do not show the whole picture. “The bottom line is that exchange enrollees’
2015 premiums will vary widely based on geography,” said Avalere’s Elizabeth Carpenter. “Consumers should be wary of
reports detailing national or state-wide premium changes and should instead focus on the details of their particular plan.”
The report also shows the number of areas in each state where the second-lowest Silver plan (SLS) will be changing
in 2015. This is critical because the SLS is the benchmark used for premium subsidies, therefore in areas where rates have
decreased the financial assistance will also be lower. Avalere shows that in two states — Delaware and West Virginia —
every county will see a new SLS plan, while 13 states will have no new SLS plans in any county.
“While automatic renewal could increase continuity of care for many consumers, many enrollees will be better off
shopping and comparing again in 2015,” Avalere Vice President Caroline Pearson adds. “In particular, people who do not
undergo a redetermination during the open enrollment period could end up paying more than they need to for insurance.”
20
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
CMS offered no analysis of rates, except to say that they remain “stable,” but said that with 25 percent more
issuers participating in 2015, 90 percent of consumers can now choose products from three or more issuers — up
from 74 percent in 2014. Consumers also now can choose from an average of 40 health plans, up from 31 plans last year,
CMS said.
“When open enrollment begins tomorrow, November 15, many consumers will have even more affordable choices
for renewing their coverage and signing up for the first time through the Health Insurance Marketplace,” CMS Administrator Marilyn Tavenner said Friday (Nov. 14).
She added: “We are committed to transparency and providing consumers with the information they need to choose
the right health plan for them. Today’s data provide further evidence that the Affordable Care Act is working to improve
competition and choice among Marketplace plans in 2015.”
Tavenner urged consumers to shop around, saying that with new options available this year consumers are “likely to
find a better deal.” —Amy Lotven
Enroll America Raises More Than $20 Million For Year-Two Outreach Effort
Enroll America has raised $20 million to support its outreach and enrollment activities for the forthcoming open
enrollment period, somewhat less than the $27 million the group raised in year one, but the group is still pleased with the
result, its president said Wednesday (Nov. 12). The group is using the money to expand outreach and enrollment activities
in the 11 federally-facilitated marketplace states that it worked in last year.
“We’re not resting on our laurels after millions of consumers found coverage last year — in fact, our outreach campaign in
year two will be smarter and reach farther than in year one,” Enroll America President and former White House staffer Anne
Filipic said. “Our field program is positioned to reach even farther than last year, and the new tools we’ve built and new
partnerships we’ve developed will allow us to move beyond what we can do alone, and bring together an unprecedented
coalition to reach consumers in communities across the country with the information they need to get covered,” she adds.
Following the first enrollment effort in 11 states, Enroll America maintained staff in 200 communities across the
country to continue building partnerships with local stakeholders and growing the number the volunteers. There are now
11,500 volunteers, an increase of more than 4,000, and the group has also recruited more than 2,000 certified application
counselors to help provide in-person assistance.
Enroll America is also launching the Get Covered Connector, a web-based tool that allows consumers in
participating states to find appointments with in-person assisters in their areas as well as receive reminders through
email, phone or text. The connector is based on a model used by advocates in North Carolina during the first open
enrollment period. Nineteen organizations from 14 states have signed on to work with the tool, and the number is expected to increase, according to Enroll America. Filipic says that the groups must pay a “nominal” fee to help cover the
maintenance of what she called a “living, breathing” tool.
In a call with reporters, Filipic said that while the amount raised for year-two outreach is less than what was raised
last year, she is pleased that it exceeds the $20 million mark. There had been questions as to whether the first-year donors
would remain supportive, she said. But, although some of the funders did offer less than in year one, others actually
increased their funding, she said.
Enroll America’s year-two campaign also has a longer, more diverse list of donors, which include more state and
local level donors than in year one, she says. According to the announcement, 66 percent of funding came from philanthropies, 17 percent from hospitals, and 17 percent from others in the health care sector and individual donors
A list of significant funders includes several of the five organizations that had been contacted by then-Secretary
Kathleen Sebelius prior to the first enrollment period. The secretary’s actions were criticized by GOP members as
inappropriate since since she was responsible for regulating some of the entities, but the administration argued the
outreach was within her authority. Sebelius acknowledged that she had asked two organizations— the Robert Wood
Johnson Foundation and H & R Block — to donate funding to the enrollment effort. She did not, however, ask the other
three — Ascension Health, Johnson & Johnson, and Kaiser Permanente — for funding despite Enroll America’s request
that she do so, according to a Government Accountability Office report from April
RWJF provided funding last year but H & R Block did not. Ascension provided $3 million following the secretary’s
call, according to the GAO.
Ascension, Kaiser Permanente and RWJF are on the list of donors for 2015.
Other major donors include: American Hospital Association, BlueCross BlueShield of Tennessee, Blue Shield of
California, Catholic Health Association, CHE Trinity Health, Catholic Health Initiatives, CHRISTUS Health, The
Colorado Health Foundation, Health Care Foundation of Greater Kansas City, Houston Endowment, Independence Blue
Cross, The Jacob and Valeria Langeloth Foundation, The Kansas Health Foundation, The Kate B. Reynolds Charitable
Trust, The Nathan Cummings Foundation, Presence Health, St. Luke’s Health Initiative, Sunflower Foundation, Tennessee
Hospital Association, The REACH Healthcare Foundation, and United Methodist Health Ministry Fund. —Amy Lotven
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
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Actuaries Suggest Policies To Handle Unexpected High Cost Of Specialty Rx
In response to the high-cost of new hepatitis C drugs, the American Academy of Actuaries suggests policies to
improve state Medicaid officials’ handling of the approaching wave of specialty drugs, including use of risk-mitigation
strategies already used in Medicare Part D for unexpectedly expensive deliveries. Actuaries say they are having trouble
setting capitated Medicaid rates because FDA accelerated its reviews of breakthrough drugs, and such drugs tend to be so
expensive that the current approach of using historical experience to set rates does not work.
“The speed of the approval process for a BTD medication could mean that the actuary is not able to completely and
accurately incorporate the BTD medication expenses in the rate-setting process,” the American Academy of Actuaries
states in a Nov. 11 letter to CMS, referring to FDA’s Breakthrough Therapy Designation.
The American Academy of Actuaries points to the hepatitis C drug Sovaldi as an example of an expensive drug that
states could have handled much better had they not been caught off guard.
Actuaries say adding a risk pool, reinsurance or risk corridors would help plans deal with expensive, widely
used drugs. Congress included reinsurance and risk corridors to shield Medicare drug plans against the uncertainties of
what was a new market when lawmakers were writing the law. The cost of reinsurance and risk corridors is paid by tax
payers, although risk corridors also protect the government when plans overbid. It’s not clear whether the federal government, which may run deficits, or state governments, which must stay within annual budgets, would pick up the tab. Risk
pools typically are budget neutral because they shift funds to plans disproportionately hurt by high drug prices.
Risk adjustment is another Part D policy that could be adopted in Medicaid to offset the cost of sick patients who use
the expensive specialty drugs, the actuaries say. Plans are paid more for sicker patients, but they would still need policies
that smooth out unexpectedly high aggregate costs, such as risk corridors.
Supplemental payments also should be considered, the letter states. The payments are outside capitation rates
and are paid once spending exceeds a predetermined level. Medicaid uses supplemental payments for maternity delivery
and neonatal care in Medicaid managed care. Medicaid plans at times don’t know beneficiaries exist until they present at
emergency rooms during delivery, and those deliveries can be extremely expensive when babies are born prematurely or
have other complications. Supplemental payments also have been used when new treatments are added to Medicaid
managed care. The payments could cover most of treatment costs to give plans the incentive to manage unit-cost spending.
Several states also have used pass-through payments or reconciliation for risks that are outside the control of plans.
“Under reconciliation, plans would be paid capitated rates, with subsequent cost reconciliation,” the letter states.
“This methodology removes the pricing risk for the health plans, but creates budget uncertainty for the state.”
Medicaid also could exclude specialty drugs from the managed care benefit package and instead cover them under
fee-for-service. This approach would help plans but leave state budgets vulnerable. — John Wilkerson
‘Cures’ Initiative Could Be ‘Bright Spot’ For GOP-Controlled Congress
The incoming Republican-controlled Senate will be a key factor in whether and how the House’s 21st Century Cures
initiative takes hold in the next Congress, with some stakeholders viewing the initiative as a “bright spot” for the new
GOP Congress to pass a bipartisan measure. One consultant anticipated a scenario unfolding where the “cures” bill is
limited in scope with some of the more contentious issues held over until user fees are reauthorized in 2017.
The House Energy and Commerce Committee, which is driving the 21st Century Cures effort, is expected to unveil a
draft bill in January that could include a broad spectrum of drug and device provisions. Many stakeholders are optimistic
about continued support for the effort and note the Senate health committee has a track record of working on FDA and
drug industry issues in a bipartisan manner.
A key player on the Senate side likely will be Sen. Lamar Alexander (R-TN), who expected to take the helm of the
health committee. One industry source said GOP control of the Senate could mean that certain topics, like changes to
FDA’s structure and additional drug exclusivity, could gain more traction than they would have if Democrats remained in
control. Another consultant noted that more contentious issues, like exclusivity, could be considered but held off until the
FDA user fee reauthorizations.
Either way, sources watching the progress of the initiative predict something will get through the incoming
Congress as Rep. Fred Upton (R-MI), who is spearheading the effort, will in two years reach the limit to his term at the
helm of Energy and Commerce, meaning he likely will not remain chair during the next user fee reauthorization.
Ted Thompson, CEO of Parkinson’s Action Network, noted during a post-election panel hosted by Research!America
that Republicans more broadly will want to advance something.
“(The result of the election) actually enhances the chances of something comprehensive and substantive
getting done because from broad political standpoint Republicans — (future Senate Majority Leader Mitch) McConnell
in particular — want to show that they can get something done,” he said. He said that the effort likely will be a “bright
22
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
spot” for the next Congress.
Increased funding for NIH has been a consistent issue discussed throughout the initiative and key senators also have
voiced support for upping the NIH budget. Brent Del Monte, vice president of federal government relations at the
Biotechnology Industry Organization, which has actively floated several ideas for the “cures” initiative, said he is
optimistic about legislative activity in 2015.
“We at BIO are hopeful that there will be at least be funding for NIH but we’re also hopeful that on the other side
there could be changes within the government to better incentivize the creation of these therapies and treatments,” he said
during the panel. “And we believe, combining those two things, we are about to really take a major step forward.”
Consultants from FaegreBD Consulting also noted that the effort remains a “bright spot” for patient advocates and
stakeholders.
“One key question will be the scope of the draft legislation and if it can continue to attract bipartisan support.
Another will be whether or not Cures catches hold in a now Republican-controlled Senate,” they said in an election
analysis. “One potential scenario could be a two-step process in which a more limited Cures package moves this year,
while other reforms are teed up for debate as part of the next user fee package, due in 2017.”
Nick Manetto, a director at FaegreBD, said so far Senate offices have shown interested in pieces of legislation
that fit into the eventual “cures” bill, but there has not been a move to take the lead and up to now senators largely
haven’t weighed in on the larger initiative. Manetto added that Senate Republicans would likely support policies similar
to those backed by House GOP members — topics focusing on innovation, research and results. But he said there still
remains the question: “Will this catch fire?”
The Senate health committee, the committee that would take up the initiative, will face some changes with the new
Congress. With the retirement of Sen. Tom Harkin (D-IA), Sen. Patty Murray (D-WA) is expected to take over the
ranking member spot on the committee and sources said she has a history of working on life science and biotech issues.
Sen. Kay Hagan (D-NC) lost her re-election bid, while current members Al Franken (D-MN) and Pat Roberts (R-KS)
were re-elected. — Alaina Busch McBournie
Advocates Of State ‘Right To Try’ Laws Eye Texas As Next Battleground
A key advocate of state “right to try” laws views Texas as the next battleground for legislation, already passed by five
states, that would let seriously ill patients access experimental drugs, outside the FDA approval process, following phase I
trials. The debate in Texas could become political: State Rep. Eddie Rodriguez’s office said that the Texas lawmaker is
contemplating introducing state “right to try” language, just as House Rep. Michael McCaul (R-TX) is pushing language
as part of the Energy and Commerce Committee’s 21st Century Cures initiative that could undermine such a state effort.
“While well intended, these [“right to try”] laws take a fragmented and piecemeal approach to a problem that deserves
comprehensive federal attention,” according to a white paper McCaul provided to the House committee. The white paper
outlines ways Congress could instead require companies to make their expanded access processes more transparent.
The Goldwater Institute, the driving force behind the state laws, would not be supportive of McCaul’s proposal
because the group doesn’t favor putting mandates on companies, said Victor Riches, vice president of external affairs for
the group. He also noted that in the past 15 years initiatives similar to “right to try” have been introduced on the federal
level but did not make much progress.
“The states are at a much better place to pass meaningful legislation,” said Riches.
Now that right-to-try laws have passed in Colorado, Louisiana, Michigan, Missouri and Arizona, Riches said the
Goldwater Institute will turn its attention to several other states, including Texas, which he said is poised to become the
next battleground. The Goldwater Institute began introducing these initiatives because it believes FDA’s Expanded
Access program still moves too slowly for terminally ill patients, according to a February report.
The Goldwater Institute has also been working behind the scenes to pick up support from drug companies and
doctors, with some success, according to Riches. The state laws have been criticized by the Pharmaceutical Research and
Manufacturers of America (PhRMA) for posing risks to public health by bypassing FDA regulations. But Riches said that
the group has heard from some pharmaceutical companies and doctors that are willing to work with the state laws.
One such company has been Neuralstem Inc., which received orphan status designation from FDA for its ALS cell
therapy. The company suggests that the state laws could serve as a “scaffold” on which to build an industry-wide national
infrastructure, “state by state if that’s what it takes.”
“Supporters of RTT are not suggesting that the FDA is not doing all it can,” the company says on its website. “However,
their existing programs do not have to be the only tools available to patients fighting for their lives. RTT is not ‘the answer,’ but
it is a very important and fundamental piece of a new structure that we believe can have a serious impact on expanding early
access to experimental drugs for dying patients. We look forward to working with the FDA and anyone else who is interested in
helping to expand access to experimental drugs to patients who have been diagnosed with fatal diseases.”
However, the company stresses it is not suggesting this process take the place of the existing clinical trial process and
will not offer access to a drug if the agency tells it not to. — Erin Durkin
INSIDE CMS — www.InsideHealthPolicy.com — November 20, 2014
23
Tapping legal firepower ...
ACLA Signals Litigation If FDA Proceeds With LDT Oversight Plan
If FDA finalizes its draft framework for laboratory developed tests (LDTs), the American Clinical Laboratory
Association (ACLA) would consider litigation, the group said as it tapped a former Solicitor General and Harvard
professor to represent the group as it resists FDA’s controversial move to regulate LDTs. This occurs as stakeholders on
opposing sides of the issue Tuesday (Nov. 18) ramped up lobbying: ACLA and almost 50 other organizations asked FDA
to rescind its proposed LDT guidance, while clinical oncologists and other organizations supporting FDA held an event
on Capitol Hill.
FDA released draft guidance last month that applies the existing device classification system to LDTs and once it’s
finalized agency oversight would be phased in over a nine-year period. ACLA has long opposed FDA regulation and
Tuesday (Nov. 18) hired high-profile lawyers to fend off the agency.
“If the FDA does move ahead, we wanted to be prepared with all possible options, and those options could include
litigation,” said ACLA President Alan Mertz. ACLA hired Harvard University law professor Laurence Tribe and former
Solicitor General Paul Clement, now a partner with Bancroft PLLC.
Tribe said FDA is overreaching its statutory authority by regulating LDTs, regardless of whether the agency pursues
it through regulation or guidance. FDA does not have the authority to regulate these types of tests because they are not
commercially manufactured, he said. He noted that Congress gave this authority to CMS through the Clinical Laboratory
Improvements Amendments (CLIA) in 1988 .
CMS’ framework is also more capable of keeping pace with rapidly changing technology, he said. “To do this
through guidance is really executive overreach on steroids,” Tribe said.
Elizabeth Mansfield, FDA’s director of the personalized medicine staff, said ACLA notified the agency about
the legal hiring. Rather than fight off FDA oversight, she called on groups to work with the agency because it would
benefit patients.
“Of course there are lots of labs that prefer not to be regulated and they will look in all the legal corners and see if
there is a way to overturn this,” Mansfield told FDA Week at the congressional event. “But my personal opinion is that if
you really think that your first priority is patients then you ought to start by perhaps policing your own industry and then
if something like this comes along, get on board and try to make it work for you.”
The American Cancer Society Cancer Action Network, the American Heart Association and the Ovarian Cancer
National Alliance held a roundtable discussion in cooperation with Rep. Louise M. Slaughter (D-NY) to tout their support
for increased FDA oversight over LDTs.
By contrast, ACLA, the American Medical Association and several other groups called on the agency to rescind the
guidance, saying the proposed requirements should go through a notice-and-comment rulemaking as outlined under the
Administrative Procedures Act (APA).
“Notice and comment will increase the likelihood that the agency will be able to achieve regulatory goals without
jeopardizing the current delivery of testing services to patients and the continued advancement in testing and patient
care,” the groups say in the letter.
The letter also clarifies that the “undersigned organizations do not waive their legal claim that the FDA lacks the
statutory authority to regulate laboratory developed testing services.” — Erin Durkin
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