Weekly Healthcare Update for April 2, 2012

Last Week in Congress

Last week, the Supreme Court heard an unprecedented six-and-a half hours of oral arguments in the case 26 states have brought against the 2010 Affordable Care Act. Three days of arguments were held, with justices lodging a barrage of tough questions about the healthcare law, especially the individual mandate provision. The nine justices gathered last Friday for an initial vote on the constitutionality of the law. The outcome of the Court's deliberations, expected in June, will have a profound impact on the future and substance of health care reform efforts in Congress and the states.

Meanwhile, the big-ticket item on the Hill was passage of House Budget Committee Chairman Paul Ryan's (R-WI) 2013 budget resolution, which included overhauls to Medicare and Medicaid. After two days of often heated debate, the House approved Ryan's budget plan last Thursday in a 228 -191 vote. Before passing the GOP budget outline, the House rejected four alternatives — including a more conservative option from the Republican Study Committee and a Democratic proposal.

In other activity, Congress approved a three-month extension of transportation programs last Thursday, giving Congressional leaders more time to negotiate a multi-year funding plan. The House acted first, passing the extension in a 266-158 vote. The Senate approved the House bill by a voice vote a few hours later.

Last Tuesday, the House voted 247-174 to approve a bill that would slow the release of FCC regulations affecting the communications industry. In the Senate, lawmakers failed to invoke cloture on a bill to end tax breaks for the five largest oil companies, falling nine votes short of the 60 needed to move forward. The Senate also defeated a cloture motion on a postal reform bill, 51-46, and cleared several judicial nominations.

At the committee level, the House Ways and Means Health panel heard testimony last Thursday on the ACA's individual and employer mandates. Also Thursday, the Senate Judiciary's Intellectual Property panel held a hearing on the "Preserving Our Hometown Independent Pharmacies Act of 2011." That afternoon, Senate HELP convened a hearing on FDA user fees.

Yesterday, House Ways and Means Health Subcommittee Chairman Wally Herger (R-CA) and Oversight Subcommittee Chairman Charles Boustany (R-LA), along with Senate Finance Committee Ranking Member Orrin Hatch (R-UT) and Committee member Tom Coburn (R-OK), asked CMS Acting Administrator Marilyn Tavenner, whether the agency is fully utilizing its resources to safeguard Medicare from waste, fraud and abuse.

The letter.

Off the Hill, the FTC voted 3-1 yesterday to approve Express Scripts' acquisition of Medco Health Solutions, the final hurdle in a $29 billion deal that has created the nation's largest pharmacy benefits provider. The agency's approval marks the closing of one of the largest deals of 2011, and one that was subjected to a host of antitrust concerns.

The Week at a Glance

The House and Senate are in recess until April 16.

Supreme Court Determining the Constitutionality of ACA

Last week, the U.S. Supreme Court held three days of oral arguments on the multi-state lawsuit challenging the 2010 Affordable Care Act. By the time oral arguments ended, supporters were rattled by the justices' tough questions, and

legal experts noted that the Court seemed focused not on whether to invalidate parts of the law, but how much of it.

On Monday, the justices heard arguments on the jurisdictional issue of whether the individual mandate is a tax. A 19^th—century statute prohibits the courts from striking down tax laws before they take effect. But the justices suggested that the rational for the statue didn't apply to the insurance penalty. On Tuesday, the Court heard arguments on the individual mandate, with Justice Anthony Kennedy — often the swing vote — suggesting the government faced "a very heavy burden" on the requirement. Justice Kennedy said the mandate took "a step beyond what our cases have allowed," echoing the basis of the challengers' argument. The skepticism of Justice Kennedy raised the prospect that the insurance mandate — if not the entire law — could be overturned.

On Wednesday, the Court's five conservatives appeared inclined to strike down the entire law if it found the mandate invalid. Justices also questioned the basis for the health law's Medicaid expansion, giving credence to an argument many observers had considered a long shot. "One way or another, Congress is going to have to reconsider this," said Justice Antonin Scalia. "Why isn't it better to have them reconsider it in toto?" Justice Ruth Bader Ginsburg, the Court's senior liberal, appealed for a more cautious approach. She said the Court should do a "salvage job" rather than undertake a "wrecking operation."

The justices met in private session last Friday to cast their votes. Their comments during oral arguments do not necessarily forecast the eventual ruling. And it has been widely assumed that the justices, particularly Chief Justice John Roberts and Justice Kennedy, would try mightily to avoid striking down a major law by a 5-4 vote. A decision is expected by the end of June.

White House: No ACA Contingency Plan; GOP Readies 'Replace' Options

After three days of landmark Supreme Court hearings that raised doubts about the law's constitutionality, the White House said it remains confident that the 2010 Affordable Care Act will be upheld by the Supreme Court and said there are no contingency plans in the event justices strike down all or part of the law. Appearing at a news conference today, President Obama said he believes that the healthcare law will be upheld when justices issue their ruling in June.

But Administration officials have spoken openly about possible contingencies in the past. At a health summit last May, HHS Secretary Kathleen Sebelius said there would be a number of ways to expand health coverage if the mandate were overturned. "There are all kinds of sign-up possibilities, auto enrollment and a variety of strategies," she said.

If the Court struck down the law or its main provisions, Administration insiders say the White House would likely postpone any decision on how to move forward until after the November 6 general election. They add that the loss of the individual mandate alone could leave the healthcare law at the mercy of Congressional gridlock months after the election and raise doubts about the White House's ability to usher key reforms into place by a Jan. 1, 2014, deadline.

Meanwhile, GOP Congressional leaders have quietly started to piece together a health care 'replace' agenda. While they're waiting on the Supreme Court ruling, senior GOP aides say their plan will focus on containing cost and not expanding coverage. At a policy conference last Friday, aides pointed to several health policy ideas that Republicans have routinely supported that are likely to be in the plan - such as giving the tax break for health insurance to the employee instead of the employer, medical liability reform, creating high-risk medical "pools" and allowing insurers to sell their products across state lines.

Ryan Budget Passes House, Sets Up Spending Fight With Senate

Last Thursday, the House approved Budget Committee Chairman Paul Ryan's (R-WI) fiscal 2013 budget resolution that would provide a premium support system for Medicare and convert the federal share of Medicaid funding into block grants for states. House members passed the bill in a vote of 228-191, but the legislation is not expected to advance in the Senate. Prior to the final vote, the House rejected a $3.6 trillion Democratic budget alternative from Budget Committee Ranking Member Chris Van Hollen (D-MD) in a 163-262 vote.

Members also defeated a budget alternative offered by the Republican Study Committee (RSC) in a 136-285 vote. The RSC plan proposed $2.2 trillion more in spending cuts over the next decade, compared to the Ryan plan. The House also voted down a budget proposal from the Congressional Progressive Caucus (CPC), which failed in a 78-346 vote. On Wednesday, the House unanimously rejected an alternative budget proposal based on President Obama's 2013 budget plan in a 0-414 vote. The House also rejected two other budget alternatives, including one based on the recommendations of the Bowles-Simpson deficit reduction commission, which was rejected in a 38-382 vote. The House also rejected a budget proposal from the Congressional Black Caucus (CBC) in a 107-314 vote.

Overall, the House GOP budget plan proposes a 2013 discretionary spending level of $1.028 trillion, $19 billion below the $1.047 trillion level included in last year's Budget Control Act (BCA). Senate Democrats will not seek to move a fiscal 2013 budget resolution, vowing to adhere to the $1.047 trillion spending level set in the BCA. As a result, when lawmakers return in mid-April from their spring recess, House and Senate Appropriations Committees will write their annual spending bills using two sets of instructions. Given the impasse, members in both chambers acknowledge that a continuing resolution will be needed to keep the government funded past Sept. 30.

House Rejects Centrist Budget Plan with Health Care Curbs

Last week, the House soundly defeated a bipartisan budget alternative based on the recommendations of President Obama's fiscal commission. Led by Reps. Jim Cooper (D-TN) and Steven LaTourette (R-OH), the group put forward the budget as a substitute amendment to the House GOP's 2013 budget resolution, authored by Rep. Paul Ryan (R-WI). The Bowles-Simpson commission's recommendations would reduce the deficit through a combination of spending cuts and revenue increases from tax reform. The budget alternative's sponsors say their plan would cut the deficit by more than $4 trillion over the next 10 years, with two-thirds coming from spending cuts and one-third through tax increases.

For 2013, the Cooper-LaTourette amendment would set discretionary spending at $1.043 trillion, below the Budget Control Act's $1.047 trillion but above the $1.028 trillion in the Ryan plan. The amendment cuts $685 billion beyond the August debt deal over 10 years, split evenly between defense and non-defense spending. The Ryan plan increases defense spending by $200 billion over the August debt deal.

On Medicare and Social Security, the alternative resolution calls on Congress to consider raising the Social Security eligibility age and limiting the growth of Medicare and other health entitlements like Medicaid to GDP plus 1 percent. That cap is similar to the cap in a plan Ryan wrote with Sen. Ron Wyden (D-OR) to partially privatize Medicare. The Ryan budget features deeper cuts to Medicare spending.

While the amendment was resoundingly rejected in a 38-382 vote, the bipartisan group hopes their efforts will bear fruit in a lame-duck session after the election, when Congress has to deal with the Bush-era tax rates, a debt-ceiling increase and the automatic spending cuts stemming from the supercommittee failure.

Sens. Warn Colleagues Not To Derail FDA User Fee Bill

At a Senate Health, Education, Labor and Pensions (HELP) hearing last Thursday, the drug and device industries urged lawmakers to quickly approve their user fee agreements with the FDA, and the panel's top members warned colleagues not to derail the bill with controversial amendments. Ranking Member Mike Enzi (R-WY) emphasized the importance of timely authorization of user fee agreements covering drugs, medical devices, generic drugs, and biosimilar products. "The prescription drug and medical device user fee agreements expire on September 30 -- six months from now. Congress must act on this crucial legislation in a timely manner," said Senator Enzi.

The proposed deal, which the White House signed off on earlier this month, calls for a doubling of the fees companies pay to the Center for Devices & Radiological Health (CDRH) to review medical devices in exchange for meeting certain performance goals. But Senator Richard Burr (R-SC) expressed skepticism about the new user fee agreements, noting a "disturbing trend" in the FDA's performance and approval timelines, as outlined in a GAO report issued that morning.

Burr (R-NC) grilled CDRH chief Dr. Jeffrey Shuren over the GAO study, which concluded that decision times for 510(k) submissions have increased 61% from 2005-2010. Although the agency has come up with some strong concepts on how to improve the medical device review pathway, Burr said, "comments were made 5 years ago and they haven't been met; a doubling of user fees isn't going to make sure the agency meets its goal."

The GAO report.

HELP Drafts Drug-Shortage Bill for Stakeholder Discussion

A drug-shortage bill has been included in the discussion draft of the FDA's user-fee reauthorization bill, requiring drugmakers to notify the FDA about a "meaningful disruption" in manufacturing at least six months in advance. The Senate HELP Committee released the draft of the user-fee reauthorization bill last Thursday.

The draft contains provisions similar to what Sen. Amy Klobuchar (D-MN) introduced in a bill last year, meant to help mitigate the record numbers of critical drug shortages. It would also direct the FDA to expedite inspections and reviews of manufacturing sites or new products that could help prevent a drug shortage and would commission a report on price gouging and what role pricing structures might play in the problem. Senators cautioned that the draft "does not represent a completed product, but rather the start of bipartisan work that will hopefully lead to consensus language to be marked up," according to a statement on the HELP committee's website.

The discussion draft.

Report: Deep Cuts Loom for Medical Research if Sequester Goes Through

According to a new report from United for Medical Research, (UMR), the U.S. medical research sector could lose tens of thousands of jobs if Congress doesn't act to avert automatic budget cuts slated to take effect Jan. 1. The advocacy group released its report last Wednesday.

Last August's debt-ceiling deal called for an automatic 7.8 percent across-the-board cut to non-defense spending if lawmakers can't find $1.2 trillion in spending cuts and revenue increases. Such a hit on the budget for the National Institutes of Health (NIH) would "jeopardize high-quality jobs in the life-sciences sector and result in a massive step backwards for biomedical research in the United States," UMR President Carrie Wolinetz said in a statement.

The report projects that total employment triggered by NIH extramural spending would fall by more than 33,000, to 398,390 jobs. "Additionally, the new economic activity generated by NIH investment would drop from $62.1 billion to $57.5 billion, a decrease of more than $4.5 billion," the report says. The report was released just as Senate appropriators prepared to question NIH Director Francis Collins about the President's $30.7 billion budget request for the agency in fiscal 2013.

The UMR report.