United States: Capitol Hill Healthcare Update - October 2016

Congress Adjourns, Eyes Election Then Lame Duck

Congress completed work last week on a stopgap budget that keeps the government open until a post-election lame-duck voting session in December, when lawmakers are expected to move on legislation dealing with medical innovation, mental health reform and possibly efforts to stop CMS's proposed Medicare Part B drug demonstration program.

The November 8 election will be a key inflection point not only for determining who will be president and which party controls Congress, but also for forecasting potential healthcare reforms in December and into 2017.

Lame Duck: 21st Century Cures

Shortly before lawmakers left Washington, bipartisan healthcare leaders pledged to advance the medical innovation legislation called "21st Century Cures" during the lame duck voting session. In fact, Senate Majority Leader Mitch McConnell, (R-KY), told reporters he thought Cures "could end up being the most significant piece of legislation we pass in the whole Congress."

But that says more about partisan gridlock that has largely seized Capitol Hill in recent years than it does about the sweeping nature of the bill. Championed by House Energy and Commerce Committee Chairman Fred Upton, (R-MI), the initiative began in 2015 with far-reaching regulatory and reimbursement changes, including a host of new exclusivities for drug companies and automatic coverage for certain new medical devices.

That effort, which met immediate resistance from Democrats, later stalled amid growing criticism over rising prices for both branded and generic drugs. Democrats also insisted on billions of dollars in automatic funding for NIH and FDA, money outside of Congress's ability to review and change priorities.

Upton hopes to revive Cures in December with a slimmed-down version that includes a few billion dollars in new funding for NIH and the White House's Cancer Moonshot initiative, along with modest changes to regulatory approvals and clinical trials. Unresolved is how to offset that new funding with cuts to existing healthcare programs and reimbursements.

Lame Duck: Medicare Part B

CMS is expected to soon publish its final rule on the controversial Part B drug demonstration project, triggering potential congressional action in December. Republicans, the pharmaceutical industry and medical specialty groups want to kill the pilot, hatched by the Center for Medicare and Medicaid Innovation, saying its near-national scope and mandatory participation is a politically-driven effort to address drug prices. Even some Democrats have raised concerns about the rule, calling for it to be scaled back. Democrats' reaction to the final rule – and whether the Obama administration will adopt any of its critics' suggestions – will be a key signal indicating whether any post-election legislative effort to undermine the rule would be bipartisan.

Before leaving Washington last week, 179 House lawmakers wrote to CMS acting administrator Andy Slavitt, calling on him to kill the demonstration. They said the agency has, among other things, failed to adequately consult with stakeholders on Medicare's knee- and hip-replacement bundle model, the Part B drug pilot and CMS's expected cardiac bundled-care model.

Lame Duck: Trans-Pacific Partnership (Exclusivity for Biologic Drugs)

The White House in December, with the election in the rear-view mirror, will push for a vote in Congress on the multi-nation trade agreement known as the Trans-Pacific Partnership. But among the stumbling blocks is a key healthcare provision included in the agreement: eight years of marketing exclusivity for biologic drugs, which receive 12 years of protection in the United States. It's possible the exclusivity language will change after the election, but the White House won't announce it before November.

Even if the exclusivity aligns with U.S. law – a key demand of Senate Finance Committee Chairman Orrin Hatch, (R-UT) – the trade deal faces significant political obstacles on the Hill. In addition to near-unanimous Democratic opposition, the political center of gravity among the GOP also has shifted on trade, fueled in part by Donald Trump's criticism of trade deals, calling into serious question whether it could win congressional approval in December.

2017: Debt Ceiling, FDA User Fees

Healthcare stakeholders will face an early test in 2017, when a key vote on raising the government's borrowing authority may accompany a general deficit reduction package that could include reimbursement and policy changes unfavorable to providers. Washington is expected to reach the debt ceiling in March. No matter who wins the White House, congressional Republicans will want spending cuts in return for raising the debt ceiling. In the healthcare space, Democrats will want to shield beneficiaries from cuts, leaving providers vulnerable to adverse legislation.

After the debt ceiling, Congress will have to renew industry user fees for FDA by next September. Although the branded, generic and biologic drug manufacturers as well as the medical technology industry have agreed with the FDA on user fees and agency performance goals, Congress must approve them – and could include regulatory provisions not agreed to by the industry and the FDA.

Drug prices are likely to remain a politically potent issue into the new year, as congressional investigations will continue into several companies' pricing history for drugs.

Finally, at the end of 2017, the medical technology industry will see its hard-fought two-year suspension of the device tax expire. The industry will battle all year for renewal of the suspension, hoping to be included in any comprehensive tax reform legislation that may be considered. More probably, the issue will be debated at the end of 2017 as Congress considers a series of other expiring tax provisions.

Note to readers: With Congress adjourning, we'll resume our healthcare update with a focus on Capitol Hill activity when Congress reconvenes after the November 8 election.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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