Unlike many topics under discussion in Congress this year, the issue of health care costs is a priority across party lines. With bills pending in both the U.S. House of Representatives and U.S. Senate, and a recent executive order issued on the topic, we have broken down the details on the latest cost control developments below.
H.R. 987
In May, the House passed H.R. 987, the Strengthening Health Care and Lowering Prescription Drug Costs Act—which, in addition to addressing health insurance Marketplaces and transparency, also contains provisions designed to curtail prescription drug costs, including:
- Narrowing the exclusivity rights that hinder new product development and market competition by:
- Tightening terms for first generic exclusivity;
- Enacting restrictions on terms that can be included in agreements between brand patent holders and generic filers regarding patent infringement claims in order to ensure that the agreements do not delay the entry of generic products into the market; and
- Requiring that patent holders provide samples to aid in the development of generics.
- Requiring reports regarding the role of federal assistance in drug development, as well as the impact of drug price increases on Medicare beneficiaries.
- Requiring outreach regarding generic drugs and biosimilar biologic products.
S. 1895
While H.R. 987 is not expected to advance in the Senate due to some of the other provisions in the bill, the Senate is advancing its own health care cost control bill that includes many similar measures.
S. 1895, the Lower Health Care Costs Act, was filed by Senator Lamar Alexander (R-TN), chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, and is also sponsored by Senator Patty Murray (D-WA), ranking minority member of the committee. The bill passed out of the HELP Committee at the end of June and is expected to go to the Senate floor in the fall.
Like H.R. 987, the Senate bill seeks to lower prescription drug costs by promoting the availability of generic drugs and biosimilar biologics. Its proposed methods of doing so are:
- Increasing the availability of information about biologics and brand drugs for the developers of biosimilar products and generic drugs.
- Ensuring that citizen petition processes and the transition of certain drugs to the biologic pathway cannot be used to delay the entry of generics and biosimilars to the market.
- Limiting exclusivity for first to file generic manufacturers and limiting eligibility for new chemical entity exclusivity.
- Requiring outreach and education regarding biosimilar and interchangeable products.
- Updating authorities regarding generic drug labeling.
S. 1895 also includes a number of provisions related to surprise balance billing, an issue of growing concern lately. With standalone legislation also pending on this issue, S. 1895 would limit the amount that insured individuals can be required to pay for out-of-network emergency care, care provided by out-of-network ancillary providers (such as anesthesiologists and radiologists) and out-of-network diagnostic services at in-network facilities. In such circumstances, individuals could only be charged the in-network cost sharing and could not be balance billed above that amount. Once an emergency room patient is stabilized, the patient would have to be given advance notice of any out-of-network care, an estimate of costs and referrals for in-network care, or, in the alternative, they would also be protected from surprise balance bills and out-of-network cost sharing. The amount the insurer would pay for such services would be based on the local median contracted commercial amount negotiated with other providers in the area or based on external sources. These provisions would also apply to air ambulance providers, an issue of much attention lately. Finally, the Department of Health and Human Services (HHS), the Federal Trade Commission and the Attorney General would be required to study the impact of these provisions on horizontal integrations, health care costs and enforcement.
The bill provides other protections specific to health care emergencies, requiring that emergency charges be counted toward in-network deductibles and that patient protections related to emergency services apply in all care delivery settings.
Another avenue by which S. 1895 seeks to tackle health care costs is promoting transparency. Specifically, the bill would:
- Ban provisions in contracts that stand in the way of transparency, including:
- Gag clauses in contracts between providers and insurers that prevent enrollees and others from seeing cost and quality data and create barriers to access to de-identified plan data for plan administration and quality improvements purposes; and
- Anti-competitive terms in facility and insurer contracts that limit access to higher quality and lower cost care, such as anti-tiering and anti-steering clauses.
- Create a nongovernmental nonprofit charged with improving health care cost transparency by analyzing and reporting on de-identified claims data—and provide grants to states for similar initiatives.
- Require health plans to make accurate, up-to-date provider directories available online;
- Require that providers give patients an itemized list of services upon discharge, send timely bills, and provide adequate time for bill payment. Providers and insurers would also be required to provide patients with good faith estimates of expected out-of-pocket costs.
- Increase health plan oversight of pharmacy benefit managers (PBMs) by:
- Requiring PBMs to provide quarterly reports on costs, fees and rebates;
- Prohibiting PBMs from charging more than their costs for drugs; and
- Requiring PBMs to pass 100% of rebates on to plan sponsors.
- Provide funding for a study on profit-sharing arrangements.
- Require disclosure of broker compensation arrangements.
- Require carriers to conduct and disclose (as required) a comparative analysis of nonquantitative treatment limits relative to mental health and substance use disorders.
The bill also provides funding and outlines requirements for education activities specific to public health initiatives—such as those related to vaccines, maternal health and health care equity, as well as ones in support of community health centers and federal programs. Finally, S. 1895 addresses issues relative to health information exchange, including patient access to information and cybersecurity.
The Congressional Budget Office (CBO) found that, if enacted, S. 1895 would lower health care costs for both individuals and the federal government, resulting in a $7.6 billion net decrease in the deficit by 2029.
The Senate is also considering bipartisan legislation targeted specifically at prescription drug costs within Medicare and Medicaid. The Prescription Drug Pricing Reduction Act of 2019, introduced by Senators Chuck Grassley (R-IA) and Ron Wyden (D-OR) (Chairman and ranking minority member of the Senate Finance Committee, respectively) passed out of the committee yesterday but still faces challenges on both sides of the aisle as it moves toward the Senate floor. The bill would:
- Simplify the Part D program design and realign incentives, including: changing and capping enrollee cost sharing; modifying federal reinsurance coverage; and sunsetting the manufacturer discount program in the coverage gap and instituting a new discount program for catastrophic coverage.
- Require manufactures to report and justify certain price increases.
- Add to both the Part D and Part B programs protections against excessive drug price increases, including mandatory rebates for drugs with prices increasing faster than inflation (a particularly controversial provision).
- Put in place incentives for negotiation between Part D plans and manufacturers.
- Require Part D insurers to provide real time information about formularies and benefits to providers.
- Permanently authorize retroactive Part D coverage for low-income beneficiaries.
- Increase public reporting of PBM and insurer practices and pricing.
- Change how Part B prescription drug payments are calculated.
- Allow HHS to share Medicare and Medicaid drug rebate information with MedPAC and MACPAC for the purposes of monitoring, analysis and making recommendations;
- Increase transparency of information to be used to establish drug payments by Medicaid programs, including via audits and surveys and related to managed care plans.
- Allow Medicaid to pay for gene therapy for rare diseases through risk-sharing value-based agreements.
- Enhance requirements relative to Medicaid Pharmacy and Therapeutics Committees and Drug Use Review Boards and require a report by the Government Accountability Office.
The CBO found that the bill would save $85 billion to the Medicare program and $15 billion to Medicaid programs, as well as $32 billion to beneficiaries in premium and out-of-pocket costs, over the next ten years.
The House is expected to release a bill targeting prescription drug costs in the fall. The bill is expected to include a provision allowing Medicare to negotiate prescription drug costs.
Executive Order
In June, the executive branch broached concerns about health care costs when the President signed the Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First, which aims to lower rising health care costs through price disclosures. The order:
- Requires the HHS to draft a new rule requiring hospitals to post standard charge information—for both hospital and employee services—in an easily-understandable format.
- Requires HHS and the Departments of Treasury and Labor to propose requirements on providers, insurers, and self-insured plans, ensuring that these parties provide consumers with access to information about out-of-pocket costs for items and services.
- Requires HHS, in collaboration with the Attorney General and the Federal Trade Commission, to issue a report outlining public and private barriers to health care price and quality transparency, as well as recommendations for eliminating those barriers.
The executive order also requires HHS to report on surprise medical bills, and seeks to promote:
- A coordinated federal health quality roadmap.
- Access to de-identified claims data for research and analysis.
- Use of high-deductible health plans, health savings accounts, and similar arrangements—and allowing them to be used to fund expenses relative to direct primary care arrangements and health care sharing ministries.
As is the case with all executive orders—and unlike the pending Congressional legislation—the executive order does not change any existing policy. Instead, it directs members of the administration to advance those changes.
Action targeted at prescription drug costs is also expected out of the White House. The administration is reportedly working on an executive order aimed at cutting the cost of brand prescription drugs for public health care programs, including Medicare, by ensuring that these programs pay no more than the lowest price paid worldwide.
