HRI regulatory center

Regulatory and legislative updates and analysis


Trump administration: Latest regulatory and legislative news and analysis

Weekly insights from Capitol Hill

Highlights – July 13, 2018

CMS halts ACA risk adjustment transfers 

CMS announced on July 7 that it can no longer make or collect payments under the Affordable Care Act’s (ACA) risk adjustment program, citing a February ruling from a US District Court judge in New Mexico. The decision halts for now $10.4 billion of transfer payments for 2017, expected to be made or received by payers participating in the ACA exchanges in the coming months. The risk adjustment program balances risk among payers participating in the ACA exchanges to prevent organizations that attract sicker and older populations from being financially penalized. The program uses a formula to determine how much payers in each market either have to pay toward the program, or how much they will receive, with the goal of remaining budget neutral.

CMS said in a press release that it asked the court to reconsider its decision and that until the litigation is resolved, the ruling prevents CMS from making further collections or payments. As of Wednesday, CMS hasn’t said whether the decision would affect previous or future risk adjustment transfers.

HRI impact analysis: CMS’ decision presents two sets of issues for payers. One is an immediate question of cash flow for payers that were expecting to receive, in some cases, millions of dollars in payments (for example, one Florida insurer was set to receive $666 million under the risk adjustment program, according to a CMS report released this week). Payers off the hook for making a transfer for now may find themselves with short-term, but probably temporary, windfalls.

Longer term, for payers, the decision creates a large amount of uncertainty about the viability of remaining in the ACA markets. They likely will have to decide whether they think the program will continue as planned in 2019 and remain in the markets or whether to abandon the markets altogether. Even payers that have historically been required to pay millions toward the program likely will have to reconsider participation because of the possibility that the market will plunge into turmoil.

America’s Health Insurance Plans and the Blue Cross Blue Shield Association said that CMS’ decision could cause further upheaval in the individual and small group markets and significant premium increases in both markets in 2019. Since failing to repeal and replace the ACA through a single piece of legislation in 2017, the Trump administration and Republican lawmakers have succeeded in rolling the 2010 law back using legislative, regulatory and legal actions. These include eliminating cost-sharing reduction payments, reducing the individual mandate penalty to $0 starting in 2019, issuing a final rule exempting association health plans from certain ACA rules starting as early as September, and cutting funding for groups that help people choose ACA plans for this fall’s enrollment season.

Highlights – June 29, 2018

HHS’ Azar promotes generic competition as drug price remedy

Speaking before the Senate Finance Committee this week, HHS Secretary Alex Azar emphasized the FDA’s work on expanding the number of generic drugs available to consumers as one remedy to rising drug prices. Azar’s appearance before the committee came 47 days after the White House released its drug pricing plan, which also prominently featured generic competition as a solution to high prices. Pressed for results to date, Azar pointed to an FDA study that found drug buyers have saved $8.8 billion in pharmacy acquisition costs from new generic competition. He also said that Medicare beneficiaries would save $320 million a year from the changes to Part B Medicare reimbursement for 340B drugs. And he cited difficulties that companies seeking to develop generics sometimes have in obtaining branded drug samples.

HRI impact analysis: Though the FDA has approved a record number of generic drugs, it may not affect drug spending dramatically because the number of patent expirations is decreasing, and the number of biologics in the market is growing. Biologic drugs require biosimilar—not generic—competition, and competition has been slow to develop. Only three biosimilar products are being marketed. According to an HRI analysis, generic competition won’t affect 41 percent of the top 100 drugs’ estimated sales revenues through 2023.

FDA: Hurricanes led to modest increase in new drug shortages

New drug shortages in the US increased slightly last year as the result of major disruptions caused by Hurricanes Harvey, Irma and Maria, a report by the FDA found. The report noted several critical shortages, including IV fluids, injectable opioid pain medications and injectable epinephrine. While the number of new shortages increased year-over-year to 39 in 2017, shortages are down significantly from 250 in 2011. The number of ongoing drug shortages decreased to 41 in 2017, the fourth year in a row the number has declined. The FDA also said it succeeded in preventing 145 shortages using a combination of authorities, including regulatory discretion and expedited reviews and inspections.

HRI impact analysis: Drug shortages can be caused by many factors, including natural disasters, quality manufacturing issues, discontinuation of a product for market reasons and supply chain disruptions, according to a report by The Pew Charitable Trusts and the International Society for Pharmaceutical Engineering. Amid industry consolidation, disruptions and shortages can have an outsize effect on the market. A recent analysis by HRI found that 71 percent of all Medicare Part D drugs are made by just one manufacturer. Manufacturers have options available to help mitigate shortages and disruptions, however. Contacting the FDA, for example, can help them address issues early and creatively. Companies also should review their business continuity plans. For products with significant revenues, capacity agreements with contract manufacturers can help smooth spikes in demand or shortages.

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Payers: Trump administration briefs

Ten states are seeking to change eligibility standards for Medicaid by instituting community engagement components, requiring beneficiaries to maintain regular employment, job seeking, educational enrollment, or community service in order to continue to receive benefits. HRI’s analysis of state waivers found potentially millions of beneficiaries and billions of dollars associated with these requirements.

Read HRI’s regulatory insight: Medicaid work requirements could affect millions of beneficiaries and billions in spending (April 2018)

 

While the Obama administration championed value-based care, the Trump administration has taken a more measured approach, slowing or eliminating some programs while expanding and creating others. Value-based care will continue to drive provider and payer decision-making, though the pace of change is likely to be moderate. The Trump administration is likely to focus on reforms that prioritize voluntary participation and minimize reporting requirements.

Read HRI’s insight: The Trump administration’s slower, more voluntary value-based care (February 2018)

 

After President Donald Trump and Republican leaders canceled a vote on the American Health Care Act (AHCA), the world became more complicated for health industry leaders and their consumers. Amid the multiple unknowns, health leaders may be tempted to wait for clarity. But in this atmosphere, it is even more important for organizations to lean into the unknowns and build resiliency. Healthcare companies can make some “no regrets” moves to build resilience amid periods of change and uncertainty.

Read HRI’s spotlight, What’s next for health reform? (April  2017)

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Providers: Trump administration briefs

Ten states are seeking to change eligibility standards for Medicaid by instituting community engagement components, requiring beneficiaries to maintain regular employment, job seeking, educational enrollment, or community service in order to continue to receive benefits. HRI’s analysis of state waivers found potentially millions of beneficiaries and billions of dollars associated with these requirements.

Read HRI’s regulatory insight: Medicaid work requirements could affect millions of beneficiaries and billions in spending (April 2018)

 

While the Obama administration championed value-based care, the Trump administration has taken a more measured approach, slowing or eliminating some programs while expanding and creating others. Value-based care will continue to drive provider and payer decision-making, though the pace of change is likely to be moderate. The Trump administration is likely to focus on reforms that prioritize voluntary participation and minimize reporting requirements.

Read HRI’s insight: The Trump administration’s slower, more voluntary value-based care (February 2018)

 

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is transforming the way physicians are paid for Medicare services. But the law also could have profound effects on hospitals and health systems, potentially hitting their bottom lines, changing the way they evaluate consolidation and how they design provider networks. For hospitals and health systems, MACRA is a strategic puzzle to solve, requiring greater enterprise resilience in these times of change and uncertainty.

Read HRI’s spotlight, MACRA is a strategic puzzle that requires greater resilience (September 2017)

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Pharma and life sciences companies: Trump administration briefs

In its first year under the Trump administration, the Food and Drug Administration (FDA) has sharply cut back on the issuance of new regulations and warning letters while approving record-setting numbers of new drugs, generic drugs and drugs for orphan diseases; the FDA has carried on with long-running trends in enforcement, facility inspections, the issuance of guidance documents and policy, and crackdowns on drug quality; and the pharmaceutical industry, the FDA under Gottlieb’s tenure has been predictable, stable and consistent. Learn what this means for 2018.

Read HRI’s insights: Continue to take as prescribed - The FDA under the Trump administration  (February 2018)

 

The pharmaceutical industry is facing a growing threat from safety data on the drugs it produces. The FDA has fostered unprecedented transparency on drug safety data, forcing companies to manage novel challenges from parties already busy mining those data: regulators, the public and data analytics firms. In this climate, pharmaceutical companies have the opportunity to find ways to mitigate risks, unlock savings, make new discoveries and create competitive advantages.

Read HRI’s spotlight: Pharmaceutical companies face the changing future of pharmacovigilance (September 2017)

 

The FDA’s new commissioner, Dr. Scott Gottlieb, has extensively argued that the agency is in need of regulatory reform meant to get critical medical products to patients more quickly and efficiently. Gottlieb’s previous statements signal a greater likelihood of significant change at the FDA, which has been given new authority – both statutory and executive – by legislators and President Donald Trump to streamline and accelerate the way it regulates. As change takes place, life science companies may benefit and find reasons to celebrate – but so, too, will their competitors. 

Read HRI's spotlight, The FDA leans forward: Dr. Scott Gottlieb’s opportunity to reshape the agency (July 2017)

 

After President Donald Trump and Republican leaders canceled a vote on the American Health Care Act (AHCA), the world became more complicated for health industry leaders and their consumers. Amid the multiple unknowns, health leaders may be tempted to wait for clarity. But in this atmosphere, it is even more important for organizations to lean into the unknowns and build resiliency. Healthcare companies can make some “no regrets” moves to build resilience amid periods of change and uncertainty.

Read HRI’s spotlight, What’s next for health reform? (April 2017)

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Health industry strategy: Trump administration briefs

The Tax Cuts and Jobs Act (TCJA) will likely affect the US health industry unevenly; many for-profit organizations will gain billions in tax dollars and repatriated funds, whereas their tax-exempt peers will face increased costs. The law will affect tax-exempt organizations’ executive compensation, employee benefits and unrelated business taxable income. Providers could see an uptick in uninsured patients.

Read HRI’s insight: Tax reform imposes costs on tax-exempt healthcare organizations as for-profit peers weigh benefits (February 2018)

 

Healthcare reform efforts by Congress will create challenges and opportunities that may require changes in operating models across the US healthcare industry. As the legislation undergoes debate and negotiation in Congress, healthcare organizations face considerable uncertainty. Organizations that have developed enterprise resilience—the ability to adapt the business model to change, anticipate disruption and recognize opportunities to generate a competitive advantage—may be best positioned to survive and thrive in these conditions.

Read HRI’s spotlight, Developing enterprise resilience in the face of health reform (March 2017)

 

Months and even years after the winds subside and the floodwaters recede, hospitals and health systems in regions battered by a hurricane will still be dealing with the financial, physical and reputational wreckage caused the storm. Hospitals face closure, chaotic revenue cycle operations, disrupted supply chains, possible credit downgrades, destroyed and damaged physical assets and displaced workforces and patients. Partner institutions, such as long-term care facilities and retail pharmacies, may temporarily, or permanently, operate at diminished capacities. To survive such an event, hospitals and health systems should plan for the complex challenges left in the wake of a hurricane or other natural disaster.

Read HRI 's report, Hospitals and health systems feel the impact of hurricanes long after the floodwaters recede (September 2017)

 

The death of health reform has been greatly exaggerated. Though Congress was unable to pass a comprehensive national health reform bill in 2017, many other reforms are playing out in Congress, regulatory agencies and state capitals that could profoundly impact the healthcare landscape over the next year and beyond. 

These changes include efforts by Congress to reform the federal tax code; by HHS to reshape how the Affordable Care Act (ACA) is administered and how government pays for value over volume; and by states to control Medicaid and drug spending. These efforts make it clear that this is no time for companies to take a relaxed or reactive posture. On the contrary, they should act now to anticipate which changes are most likely to occur and how those changes might affect their business operations, then decide what they’re going to do about it. 

Payers, providers, life sciences companies and employers no longer have just one high-profile reform effort to monitor, but dozens. There are several that require their immediate attention. 

Read HRI and Strategy&'s report, Health reform 3.0: Thriving in a permanent state of policy disruption (November 2017)

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About the center

As the US healthcare system continues to undergo transformation, health industries are confronted with an evolving and complicated regulatory environment. With an eye towards how public policy impacts the business of healthcare, the HRI regulatory center serves as a vital resource for executive decision makers who must navigate the changes that lie ahead.

HRI's regulatory center is a group of seasoned professionals that analyze legislative and regulatory policy in Washington and in key states. The group, which focuses on all health sectors, publishes a weekly newsletter and more focused reports that detail the interconnection between Washington and healthcare. The HRI regulatory center calls upon key contacts in government and industry to develop a point of view that is both informative and actionable for health industry leaders.

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Benjamin Isgur
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Trine K. Tsouderos
HRI Regulatory Center Leader, PwC US
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Alexander Gaffney
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Jason Ranville
Senior Manager, PwC Health Research Institute, PwC US
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