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April 25, 2016

Washington Health Policy Week in Review Archive 2da3eea0-3a3a-4f27-806e-6a9600e3370c

Newsletter Article


Durbin Seeks Tool for Medicare Drug-Price Bargaining

By Kerry Young, CQ Roll Call

April 22, 2016 -- Senate Assistant Minority Leader Richard J. Durbin stands apart on a key point from the crowd of Democrats with bills to allow direct Medicare negotiations on drug prices. He wants the federal health program to have the same powerful tool that insurers use in bargaining, which is the right to decline or limit coverage of certain medicines through the creation of a so-called formulary.

This aspect of Durbin's plan is a "refreshing admission" about how direct Medicare negotiations for the Part D drug plans likely would have to work, said Robert Moffit, a senior fellow at the conservative Heritage Foundation. In contrast, Sen. Bernie Sanders, I-Vt., and Democrats who introduced five competing Medicare drug negotiation bills have included language in their measures specifically excluding the creation of a government-run formulary.

"It's honesty in public policy," said Moffit, a former federal health official, about the Illinois Democrat's bill (S 1884), which he opposes. Durbin "is telling them upfront that, no, they are not going to be able to have access to the drugs that they have today."

The drug industry is fiercely opposed to Durbin's idea of a new Medicare-run drug plan as an option for the Part D program, which serves about 40 million seniors and people with disabilities in its traditional fee-for-service program. The idea of a broad Medicare formulary is commonly seen as politically unviable because of the perspective of the drug industry, which cooperated with the Obama administration on the 2010 health care law.

Yet Durbin's plan for a Medicare-operated drug formulary resembles an approach already used by the Department of Veterans Affairs. Insurers in both the Medicare Part D drug program and private health insurance coverage also use formularies. Under his plan, drugs would be evaluated on their therapeutic merits, and an appeals process would address disputes by consumers about coverage limits. Restrictions on coverage are common in cases where several drugs offer similar benefits, such as cholesterol-reducing pills.

Durbin sees this as a bid to use the clout of Medicare, the nation's largest single buyer of health care, to drive steeper discounts than Part D now gets with private insurers creating their own individual formularies for their portion of the Medicare population. The cost of the Part D program may near $100 billion this year, up from $44 billion in its debut year, 2006, according to the Medicare board of trustees.

"Competition gives the consumer a fighting chance," Durbin said in an interview.

Lawmakers designed the Medicare drug benefit in a 2003 law (PL 108-173) so that insurers such as Humana and UnitedHealth negotiate with drugmakers over covering medicines in their formularies.

But proposals to allow the federal government to negotiate directly save little if they do not provide tools for the government, which could include a system-wide formulary, to exert pressure on drugmakers, according to the Congressional Budget Office.

"Your negotiating power is creating by your willingness to make choices about which drugs to offer," said David Blumenthal, president of nonprofit Commonwealth Fund, who previously published research on the VA drug formulary. "It's a way of having your cake and eating it, too, saying, 'We are going to get you a lower price without any restriction on your choice.'"

Political Realities

Still, even liberal Democrats are reluctant to call for Medicare to develop a Part D formulary. A sentence specifically saying that the Department of Health and Human Services isn't authorized to create a Part D formulary is in each of a handful of pending Medicare drug negotiation bills. They include companion measures by Sanders and Rep. Elijah E. Cummings of Maryland (S 2023, HR 3513), and companion measures from Sen. Amy Klobuchar, D-Minn., and Rep. Peter Welch, D-Vt.(S 31, HR 3061). Rep. Jan Schakowsky, D-Ill., offered a companion House bill (HR 3261) to Durbin's Medicare Part D bill that allows the creation of a formulary, but also separately introduced a bill (HR 4207) that specifically blocks a formulary.

These measures may be opening bids in Democratic attempts to change how Medicare approaches the Part D plans. Some advocates for this approach see it as a chance to use Medicare's enormous purchasing clout to push for price discounts, without asking the consumers in the Part D plans to face the limitations of a formulary. Others see it as an acknowledgment of political realities.

The introduction of the formulary-free Medicare Part D bills reflects the growing interest in halting rising drug prices, said John Rother, president of the nonprofit National Coalition on Health Care.

"There is going to be posturing in this area because it's such a hot issue," he said.

Congress almost certainly won't take any major steps this year to address the rising cost of the Part D program, which roughly doubled to an annual cost of $88 billion in its first decade of existence. The drugmakers' trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA), is among the powerful lobbying organizations seeking to preserve the current approach of having insurers handle the negotiations.

"Harmful proposals to fundamentally alter the structure of the program could jeopardize access to affordable prescription drug coverage for seniors and people living with disabilities, drive up premiums, reduce choice and restrict coverage," PhRMA said in a statement.

Still, lawmakers will face continued pressure to rein in growth in the prices of drugs, especially for senior citizens, Rother said. AARP earlier this month released results of a new survey in which 81 percent of respondents age 50 and older said drug prices are too high and 87 percent want politicians to support efforts to make them more affordable.

"The cost of drugs is a top-of-mind issue now for voters, both Democratic and Republican, and they are really demanding action," Rother said. "Next year, Congress will want, for lots of reasons, to address drug prices. The idea of leaving things the way they are now is unsustainable and not politically smart anymore, either."

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Doctors Ask Lawmakers for Caution on Doctor Pay Overhaul

By Kerry Young, CQ Roll Call

April 14, 2016 -- Medicare on Wednesday reported disappointing early results from its Comprehensive Primary Care Initiative, which is designed to shape an eventual overhaul of federal payments for basic medical services for the elderly and disabled. The savings in the program's first two years failed to offset its expenses, while the quality of medical care did not improve as expected, Medicare officials reported.

"It's a cautionary note that after two years we haven't seen those goals achieved yet. There's still the prospect of further improvement" in the program's last two years, said John Ayanian, a University of Michigan researcher who studied the initial results of the program, in an interview. "But it may also signal the need for more substantial changes to primary care."

Monthly expenses fell by an average of about $11 per patient in the program, with reductions ranging from $1 to $21, according to a Mathematica Policy Research report for the Centers for Medicare and Medicaid Services (CMS). That adds up to about $91.6 million in total savings, possibly because closer contact between doctors and patients reduced the need for hospitalizations and use of skilled nursing centers. The reduced costs, though, were not enough to offset a fee averaging $18 a month per person enrolled in Medicare, the report said. The New England Journal of Medicine on Wednesday published the initial results.

The program should be viewed as a "down payment" on broader changes that Medicare officials are seeking to make in the program, said Ayanian, director of the University of Michigan's Institute for Healthcare Policy and Innovation and the author of an editorial accompanying the results. The Obama administration is moving away from the traditional fee-for-service program, which some say results in uncoordinated patient care and needless expenses, such as duplicated tests and hospitalizations.

The authors of The New England Journal of Medicine paper included Patrick Conway, the chief medical officer for CMS. Conway on Monday announced plans for another primary-care test program.

"There are a few possible reasons why these findings were not more favorable," the authors wrote, explaining that doctors may need more time to adjust to a coordinated approach to care and greater incentives may be needed to shift away from the fee-for-service approach. 

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Nursing Home Proposal Outlines New Value-based Payment Model

By Erin Mershon, CQ Roll Call

April 22, 2016 -- The Obama administration outlined a new way to pay nursing homes, the latest in its ongoing efforts to transition Medicare payments away from fee-for-service medicine.

The proposed rule, released late Thursday by the Centers for Medicare and Medicaid Services (CMS), outlined new quality measures and performance benchmarks for the program and also proposed timelines for when the agency would begin to measure the facilities based on the new standards. The program is set to apply to services performed on or after October 2018.

This value-based payment program "is an important step toward transforming how care is paid for, moving increasingly toward rewarding better value, outcomes, and innovations instead of merely volume," the agency said in the proposal.

The regulation also spelled out new details about a quality reporting program that will penalize nursing homes that don't report certain quality metrics to the agency, beginning in 2018. Both the value-based payment model and the quality reporting program were first outlined in a post-acute care overhaul passed in 2014 (P.L. 113-185).

Nursing homes are still evaluating the new plan and declined to weigh in at all on the proposed quality measures and payment program. But they eagerly praised the administration for a payment update of 2.1 percent, also spelled out in the proposal, calling it "essential."

"We are facing unprecedented pressures, and with MedPAC reporting our margins at only 1.9%, a failure to keep track with inflation would be devastating," said Mark Parkinson, president of the American Health Care Association, in a statement.

The agency also proposed payment updates for hospice centers and inpatient rehabilitation facilities, of 2.0 percent and 1.6 percent respectively. Proposed regulations for those industries also included new quality measures aimed at improving the data and measurement surrounding post-acute care.

Representatives for both industries noted that those measures will require substantial new data collection efforts, but said they were optimistic about the potential to improve patient care.

"Claims-based measures may actually help rehabilitation hospitals and units to learn more about the consequences of the care they have provided but are otherwise unable to have access to," said Bruce Gans, chairman and CEO of the American Medical Rehabilitation Providers Association. "This could lead to better care and better outcomes for our patients."

Theresa M. Forster, vice president for hospice policy and programs at the National Association for Home Care & Hospice, also praised the agency for proposing to start the new quality measurements next April.

"Fortunately," she said in an email, "hospices have some time to get ready."

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Study: Few Premiums to Rise If United Drops Out of Exchanges

By Erin Mershon, CQ Roll Call

April 18, 2016 -- UnitedHealth Group's potential withdrawal from the federal health insurance exchanges would have a limited effect nationally but could significantly affect premiums and competition in certain counties, according to a new study by the nonpartisan Kaiser Family Foundation.

The nation's largest health insurer has repeatedly broadcast its unhappiness with the exchanges after disclosing millions of dollars in losses from that part of its business in November. The company already announced it's leaving marketplaces in Arkansas, Georgia, and Michigan and could still withdraw from some or all of the 31 other state exchanges in which it participates. UnitedHealth executives are expected to address the issue on a quarterly earnings call Tuesday.

Kaiser found that the insurer's withdrawal wouldn't drastically affect competition in most of the markets created by the 2010 health care law. Despite its dominance in employer-sponsored insurance, United isn't the primary conduit for people buying coverage on their own. However, in about 34 percent of counties, a United exit would drop the number of participating insurers below three, the number generally considered sufficient for competition. That means about 2.9 million people enrolled in exchanges would find themselves in markets with just one or two options, the study found.

That decrease in marketplace competition would affect premiums most in Alabama, Arizona, Iowa, Nebraska, and North Carolina, the study found. Nationally, however, premiums for the second-cheapest silver plan, a common benchmark, would rise by just 1 percent on average.

"In many ways, United has not been seen as an important player on the exchanges. Nationally, on average, United's exit would have a very modest effect," said Cynthia Cox, an associate director for the Kaiser Family Foundation Program for the Study of Health Reform and Private Insurance. She added that the effect would be very different in certain markets where United offered an especially low-cost option, or was the only insurer offering plans.

Still, United's losses and withdrawals doesn't necessarily portend trouble for other insurers, she said.

"United is unique and it is one of the first large established insurers to make these sort of announcements. I don't think they are characteristic of other large insurers that have been participating on the exchange," she said.

A spokesman for the Department of Health and Human Services, Ben Wakana, said the report highlights how small a player United is on the federal exchanges. United has enrolled about 6 percent of exchange customers.

"As with any new market, we expect changes and adjustments in the early years with issuers both entering and exiting states," he said in an email. "It's clear that this is a growing business for insurers, and it's a product consumers want and need. The Marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer. That data shows that the future of the Marketplace remains strong."

He also said that so far, the markets United has exited were places where the company had priced its plans higher than competitors'.

Cox agreed that United plans were often more expensive than competitors' in Arkansas and Michigan, but said there were some counties in Georgia where United offered the lowest-cost plan or even was the only insurer. Harken Health, a United subsidiary, will continue to participate in some parts of that state.

A United spokesman declined to comment on the study.

In its analysis, Kaiser assumed no new players will enter markets where United is currently participating.

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Hospitals Get Delay on Overall CMS Star Ratings

By Kerry Young, CQ Roll Call

April 20, 2016 -- The American Hospital Association (AHA) on Wednesday welcomed the Centers for Medicare and Medicaid Services' (CMS's) decision to delay the launch of its overall star ratings program, which had been slated to be made public tomorrow.

CMS on Wednesday said it had pushed the public release date until July. Hospitals will have 30 days to review their data before its release, the agency said.

Hospital officials had rallied more than half of the members of the House and Senate to support the ultimately successful bid to delay the kickoff, said Rick Pollack, chief executive and president of the AHA, in a Wednesday statement.

"The delay is a necessary step as hospitals and health systems work with CMS to improve the ratings for patients, and the AHA commends CMS for their decision," Pollack said. "Health care consumers need reliable, factual information to make critical care decisions. We will continue to share our concerns with CMS as we look for ways to make changes to the ratings system, and ensure it is useful and helpful for patients."

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Drug Industry Lobbying Spikes Amid Focus on Drug Costs

April 21, 2016 -- The pharmaceutical industry is spending record sums in Washington, amid rising congressional and regulatory interest in high drug prices. The Zika virus, opioid abuse, and annual spending bills also are keeping the lobbying business afloat.

The Pharmaceutical Research and Manufacturers of America (PhRMA) spent more than $5.9 million on its lobbying activities between January and March of this year—the most it spent in a single quarter since 2010, at the height of the frenzy over the federal health law. The Biotechnology Innovation Organization (BIO) dropped over $2.2 million on influencing Congress and the federal government in the first quarter, about $100,000 more than its usual spend in recent years.

Most of the country's major pharmaceutical companies also spent more on K Street this quarter, including Pfizer Inc.; AbbVie Inc.; Gilead Sciences Inc.; AstraZeneca PLC; Novartis International AG; and Merck & Co. Inc. Together, those companies spent more than $14.3 million in the first quarter, up from $10.9 in the same period in 2015.

GlaxoSmithKline PLC and Amgen Inc. dropped their spending, as did a handful of smaller companies.

These sums underscore the industry's increasing concerns about regulatory oversight. Presidential candidates in both parties have railed against the costs of prescription drugs, and the Centers for Medicare and Medicaid Services issued a controversial proposal earlier this year that would dramatically change the way Medicare pays for drugs provided through outpatient care such as physicians' offices. And when companies aren't defending against regulatory changes, they are pushing for major initiatives like the 21st Century Cures package.

Representatives for PhRMA and BIO didn't immediately respond to inquiries about their spending.

The pharmaceutical industry's numbers aren't reflected elsewhere in health. America's Health Insurance Plans, the major lobbying arm of the insurance industry, spent $2.2 million, more than $600,000 less this quarter than it did in the same period last year.

Insurers such as Humana Inc.; UnitedHealth Group Inc.; Anthem Inc.; and Cigna Corp. also spent less—even as the industry worked this quarter to ensure high payment rates for Medicare Advantage, a private Medicare option that has become profitable for many insurers. The Blue Cross Blue Shield Association and Aetna both spent more in the first quarter of this year than in the first quarter of 2015.

Provider spending trends were mixed. The American Hospital Association ramped up its spending, dropping about $5.1 million this quarter, up from $4.6 million in the same timeframe in 2015. Many physician groups—including the American Academy of Family Physicians, the American College of Cardiology and the American College of Emergency Physicians—increased their spending.

Those groups are fighting hard to influence CMS as it prepares to write new physician payment rules, after Congress last year permanently replaced the much-maligned formula that routinely called for annual cuts that lawmakers often revoked.

Still, the American Medical Association actually spent less this quarter than it did during the same period last year. And many hospital organizations also reduced their spending —despite the higher spending by the AHA, the largest group.

Abortion rights groups also ramped up their K Street investment in the last three months. Planned Parenthood Federation of America and its separate action fund together spent $315,000, more than double the $142,000 they spent in the same period in 2015. The Center for Reproductive Rights also more than doubled its spending. Among abortion opponents like the Susan B. Anthony List and the National Right to Life Committee, spending stayed on par or even dropped.

One health care provider, 21st Century Oncology, more than tripled its spending, dropping $1.6 million, up from $480,000 in the first quarter last year. That company settled a federal investigation of its Medicare and Tricare billing practices in December, and is currently investigating a data breach.

Getting Down to Business

The U.S. Chamber of Commerce boosted its spending in the first quarter of this year, according to disclosures filed with Congress this week. But other prominent players, such as the Business Roundtable, Squire Patton Boggs, and Comcast Corp., are seeing business slow.

More players are expected to follow suit, with both chambers due to be in session for only about 13 weeks before the elections.

"In presidential election years, you're going to get a slowdown in the second and third quarters, which will be more enhanced this year with the conventions being moved up and Congress being done here in the next six weeks with serious legislation," said Rich Gold, who heads the lobbying practice at law firm Holland & Knight.

The U.S. Chamber, the biggest spender on K Street, reported $15.8 million in lobbying, up from $14.7 million in the fourth quarter of 2015 and $13.8 million in the first quarter of last year. The sum doesn't include chamber affiliates such as a legal reform institute that reported nearly $7 million for this year's first quarter.

The Business Roundtable, meanwhile, scaled back its lobbying efforts to $3.3 million for the first quarter from $4.8 million in the last quarter of 2015 and $4.5 million in the first quarter of last year. It disclosed lobbying on budget and tax measures as well as the aviation bill.

Interest in Zika

The American Medical Association spent $6.6 million in the first three months of this year, a boost over its $4.5 million from last year's fourth quarter but slightly less than its first quarter 2015 tab of $6.7 million. The prominent doctors' trade group reported lobbying on policy responses to Zika, a mosquito-borne virus that public health officials say could reach 30 U.S. states this year.

In total, 70 lobbying entities—such as the American Academy of Pediatrics, the March of Dimes, and the National Pest Management Association—reported work on Zika in the first quarter. It marked the first reporting period that the virus, which has been connected to birth defects, has appeared on lobbying forms.

In the tech industry, Facebook got more social on K Street.

The company reported $2.8 million on federal lobbying in January through March of this year, up from $2.1 million in the fourth quarter of last year and from the first quarter of last year, when it reported $2.4 million. The social media company is involved in cybersecurity, government surveillance, immigration, and tax matters.

Keeping Busy

Brownstein Hyatt Farber Schreck reported it was paid $6.8 million in the first quarter, a drop from last year's fourth quarter tally of $7.4 million but a boost over the first quarter of 2015, when it reported $5.9 million.

"We're well positioned to be helpful to our clients in a number of areas where there's still congressional activity," said Republican Marc Lampkin, managing partner of the firm's Washington office. "People still have an interest in the appropriations process."

Brownstein Hyatt signed clients including the Credit Union National Association, the National Restaurant Association and Safe Rx, a Colorado company that is marketing secure prescription drug containers as a way to curb illegal sales of opioids, Lampkin said.

The task forces that House Speaker Paul D. Ryan, R-Wis., established on a tax overhaul and other issues have generated client interest, he added.

"What the speaker is trying to do is not just fill the gap of the extended presidential race but keep congressional Republicans at the forefront of policy development," Lampkin said.

At Holland & Knight, executives expect a busy fourth quarter as clients prepare for the next Congress and the new president, Gold said. His shop reported a decline in federal lobbying revenue from $5 million in the last quarter of 2015 to $4.8 million in the first three months of 2016. Holland & Knight also reported $4.8 million in the first quarter of 2015.

The reportable lobbying revenue at another top lobbying firm, Squire Patton Boggs, dipped to $4.6 million from $6.7 million during the same period last year and from $5.5 million in last year's fourth quarter.

Dave Schnittger, a senior policy adviser at the firm, said much of the shop's revenue growth is taking place outside the scope of the federal disclosures, which he said "only captures a fraction of the policy work the firm does."

He noted the firm has added new lobbyists and policy wonks, especially in its health care team.

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