Post-Election Analysis 2020: Life Sciences & Healthcare
*Updated January 6, 2021
During its first year, much of the incoming administration's focus will necessarily be on containing the ongoing pandemic, improving testing and contact tracing, and executing a massive vaccination campaign. While the Trump Administration's Operation Warp Speed funded public-private partnerships to accelerate the development of COVID-19 vaccines and therapeutics, the President-elect will face the enormous challenge of taking over a bumpy vaccination effort already underway and rebuilding trust in public health agencies and scientific integrity.
On November 10, 2020, the Supreme Court heard oral arguments in California v. Texas, which challenges the constitutionality of the ACA. The Biden Administration is expected to do everything it can to prevent invalidation of the law, including changing the Justice Department's position from opposing the law to defending its constitutionality, and working with a Democratic Congress to correct potential constitutional infirmities in the legislation (e.g., imposing a small financial penalty for violation of the individual mandate).
Even before the Court's ruling, which is expected in mid-2021, we anticipate that the Biden Administration will submit proposals to the Democratic-led Congress to add a public option to the ACA. Should the Court invalidate all or significant parts of the ACA, the Biden Administration and Democratic Congress will move quickly to advance legislation to support the 20 million Americans who stand to lose coverage. A narrower ruling could lead to targeted efforts to shore up protections for those with preexisting conditions, an issue that has bipartisan support.
Major drug pricing reform is also likely to be part of the new administration's policy priorities. In the first hundred days of the new administration, we expect President-elect Biden to revisit all healthcare executive orders issued by President Trump leading up to the election. While Democrats generally support some of the concepts contained in certain executive orders, the new administration may prefer to rescind these orders in favor of more comprehensive reform that would include both executive and congressional action.
A core element in President-elect Biden's campaign platform was legislation to eliminate the "non-interference clause" in Part D, Medicare's prescription drug coverage program, which prevents the government from using its leverage to negotiate lower drug prices. The President-elect is also likely to introduce legislation to limit launch prices for drugs with no competition and allow consumers to purchase prescription drugs from other countries so long as they are certified as safe by the Food and Drug Administration (FDA). House Democrats laid the foundation for such reforms in the 116th Congress, and we expect the incoming Democratic Congress to renew this effort in the 117th.
We expect FDA to, over time, revert to its posture in prior Democratic administrations, with a significantly more aggressive enforcement posture and a focus on measures to support generic and biosimilar product market entry. Trump Administration "Buy American" efforts intended to address supply chain vulnerabilities are likely to be reframed significantly, with a greater emphasis on advanced manufacturing and quality metrics. That said, there is considerable bipartisan support for measures to advance biomedical innovations, and we expect the upcoming reauthorization of user fees to be an important vehicle to advance those efforts.
In the sections below, we take a closer look at the healthcare issues that will dominate the 117th Congress and the Biden Administration.
On December 7, President-elect Biden announced his intention to nominate Xavier Becerra, current Attorney General of California, as Secretary of Health and Human Services (HHS). Previously, Becerra served 12 terms in the House, holding several prominent positions including Democratic Caucus chair, Chairman of the Congressional Hispanic Caucus, and a senior member of the House Ways and Means Subcommittee on Health. Attorney General Becerra is currently leading California's legal challenges against Republican governors and attorneys' general efforts to overturn the ACA in California v. Texas and is leading a bipartisan coalition of state attorneys general advocating for increased oversight of the 340B Drug Pricing Program.
Becerra's nomination proceedings are not expected to be without challenge. While his support among Democrats has been strong, several Republican senators have already raised concerns about the perceived lack of healthcare experience and support for universal healthcare. Should he be confirmed, he would be the first Latino-American to serve as Secretary of HHS.
President-elect Biden continues to announce intended appointments and nominations for administration healthcare roles, both at the White House and within HHS and its agencies. Biden Transition co-chair and former Obama Administration official Jeff Zients will serve as COVID-19 Coordinator. The President-elect has also tapped Dr. Vivek Murthy to serve as US Surgeon General. Dr. Murthy served in the same role in the Obama Administration but is expected to have a broader portfolio in the new administration, playing a lead role in COVID-19 containment and recovery efforts. Dr. Marcella Nunez-Smith, a Biden COVID-19 Advisory Board co-chair, will serve as COVID-19 Equity Task Force chair. Dr. Rochelle Walensky, current Chief of the Division of Infectious Diseases at Massachusetts General Hospital, will serve as Director of the Centers for Disease Control and Prevention (CDC). Current Director of the National Institute of Allergy and Infectious Diseases, Dr. Anthony Fauci, will continue his role in COVID-19 response under the Biden Administration as Chief Medical Adviser on COVID-19 to the President. Natalie Quillian, a former White House and Pentagon senior advisor who will serve as Deputy Coordinator of the COVID-19 Response.
The President-elect has also named the following to serve on the White House's COVID-19 Response Team: (1) Sonya Bernstein, COVID Senior Policy Advisor; (2) Bechara Choucair, Vaccinations Coordinator; (3) Eduardo Cisneros, COVID Intergovernmental Affairs Director; (4) Clarke Humphrey, COVID Digital Director; (5) Carole Johnson, Testing Coordinator; (6) Tim Manning, Supply Coordinator; (7) Osaremen Okolo, COVID Policy Advisor; (8) Courtney Rowe, Director of Strategic Communications and Engagement; and (9) Cyrus Shahpar, COVID Data Director.
During the campaign, the President-elect drew a sharp distinction between his COVID-19 response plans and President Trump's efforts. President-elect Biden points to his role in the Obama Administration's response to the H1N1 pandemic and Ebola epidemic, and his leadership in implementing the American Recovery and Reinvestment Act (Pub. L. 111-5) during the 2009 recession, as evidence of his ability to lead a decisive and effective public health and economic response to the coronavirus pandemic.
Unlike President Trump, who has had a strained relationship with his public health advisors, President-elect Biden vowed to "listen to the scientists" when developing policies. On December 4, President-elect Biden declared that he would initiate a three-point plan to contain the pandemic, including distributing 100 million vaccine shots in his first 100 days in office, asking all Americans to wear masks for 100 days, and working to reopen schools safely. He also announced he would issue an executive order directing mask wearing in federal buildings and on interstate transportation. We expect the Biden Administration will prioritize rebuilding scientific agencies, such as the CDC, and restoring public trust by having scientists and public health leaders provide regular briefings and transparent data on the pandemic to the American public.
President-elect Biden will also push for greater US involvement and strong global coordination in combatting COVID-19 and preparing for future pandemics. During his campaign, President-elect Biden promised to direct the US Agency for International Development (USAID) to work with vulnerable nations to support their COVID-19 response. We expect President-elect Biden will work to expand the Department of Defense's (DoD) and CDC's global disease monitoring and prevention initiatives. He supports active US participation in global health organizations like the World Health Organization (WHO) and has proposed creating a Global Health Emergency Board that would convene leaders and other stakeholders to collaborate on "offset[ting] the cost of bringing any eventual vaccines to developing countries."
President-elect Biden may make broader use of active and reserve military resources, including the DoD and National Guard, and the Health Disaster Assistance Medical Teams and Medical Reserve Corps deployable by the HHS to address COVID-19 hot spots. In addition, President-elect Biden is expected to follow through on his campaign promise to establish an Assistant Secretary at the State Department to oversee an office of Global Health Security and Diplomacy. The Assistant Secretary's role would be to "improve health security readiness, governance, and global coordination" through work with nations' ambassadors and regional health bureaus. He has committed to providing funding to the WHO to reverse President Trump's decision to withhold funding based on the organization's response to the COVID-19 pandemic and treatment of China.
President-elect Biden has said that even as we respond to the current crisis, we must be better prepared for the next one. He plans to establish and manage a permanent, sufficiently-resourced public health and first responder system that scales up biomedical research, deploys rapid testing capacity and vaccine administration without cost-sharing, ensures robust nationwide disease surveillance, sustains a well-trained public health and first responder workforce, and establishes flexible emergency budgeting authority.
Congressional Relief Efforts: Even with the $892 billion bipartisan COVID-19 relief package passed in December, President-elect Biden and congressional Democrats will continue to push for a broader relief package. President-elect Biden has referred to the year-end omnibus as a "down-payment" for COVID-19 relief and will likely look to enhance economic stimulus and healthcare spending, particularly as the vaccination campaign gets underway in earnest and additional investments may be needed to address new coronavirus strains. A Democratic package will likely support robust funding to ensure no individuals pay out-of-pocket for COVID-19 testing, treatments, or a vaccine. Additionally, we can expect funding allocated to the healthcare sector and to state and local governments to shore up public health systems and sustain community healthcare delivery systems. The HEROES Act (H.R. 6800), passed by the House in May 2020, likely will serve as the baseline for COVID-19 relief under a Democratic-controlled 117th Congress.
Pandemic Preparedness: Despite the urging of retiring Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) to include his legislation, the Preparing for the Next Pandemic Act (S. 4231), Congress failed to pass pandemic preparedness legislation along with the omnibus bill in December. The bill included additional funding for domestic manufacturing of medical countermeasures needed in future pandemics (including tests, therapies, and vaccines), improving state stockpiles of personal protective equipment, and bolstering the Strategic National Stockpile (SNS). Congressional Democrats, however, never rallied around the bill anticipating they would have sufficient majorities to enact their own reforms in the 117th Congress.
As the COVID-19 pandemic crisis becomes more manageable, preparedness for future pandemics will remain on the agenda of bipartisan congressional health leaders. House Energy and Commerce Subcommittee on Health Chairwoman Anna Eshoo (D-CA) played a leading role in passage of the Pandemic and All-Hazards Preparedness Act in 2006 (Pub. L. 109-417) and would naturally take the lead on pandemic preparedness legislation in the 117th Congress. Working closely with expected Senate HELP Committee Chairwoman Patty Murray (D-WA), Democratic-led pandemic preparedness legislation likely will provide the government with much broader authority over the SNS. Democrats may push for legislation to bolster domestic manufacturing capacity for designated critical products such as personal protective equipment, tests, vaccines, and therapies, and to provide targeted investments and incentives for companies to manufacture designated critical products in the US We also expect the incoming administration to make more use of authorities under the Defense Production Act (DPA) to mobilize the domestic industrial base toward emergency preparedness, while working with our allies to protect their supply chains and open new markets to US exports. Pandemic preparedness legislation is likely to significantly boost appropriations for the Biomedical Advanced Research and Development Authority (BARDA) and the SNS to ensure adequate production and reserves of vaccines and other medical countermeasures to address COVID-19 and future pandemics. Should Sen. Richard Burr (R-NC) assume the role of HELP Committee Ranking Member, he will bring decades of preparedness expertise to the table in his own right. Sen. Burr co-authored the Pandemic and All-Hazards Preparedness and Advancing Innovation Act with the late Sen. Ted Kennedy (D-MA) in 2006, and most recently spearheaded efforts for its reauthorization with Sen. Bob Casey (D-PA).
Ultimately, pandemic preparedness legislation that will earn President-elect Biden's support will also need to: (1) substantially increase federal investment in the National Institutes of Health (NIH); (2) support robust collaboration between the FDA and NIH on clinical trials for medical countermeasures and vaccines; (3) strengthen the US pharmaceutical supply chain and decrease US reliance on foreign countries for pharmaceuticals and supplies; and (4) ensure future medical countermeasures can be made available to Americans at no cost.
COVID-19 Vaccines and Therapies: President-elect Biden likely will push for increased federal investment in NIH and BARDA to support further development of COVID-19 vaccines and therapies. Along with congressional Democrats, the Biden Administration will work to limit the price of COVID-19 vaccines and therapies developed with federally funded research to a "fair and reasonable" price, approved by the Secretary of HHS.
Congressional Democrats are expected to ramp up oversight of the COVID-19 response, further investigating the activities of Operation Warp Speed (OWS) and BARDA under the Trump Administration. Congress is also likely to include further protections for the FDA against potential political interference, including through increased transparency requirements.
Perhaps the most pressing COVID-19 issue for the incoming President will be taking the reins of vaccine distribution. The Biden Administration will assuredly take a more active role in vaccine distribution, centralizing the effort, drawing sharp contrasts to the disparate effort directed by the Trump Administration. With vaccinations well underway, the new administration will have to manage the great challenge of establishing new systems and protocols without disrupting existing campaigns. The Biden Administration will work to increase public trust in the vaccine and drive high vaccination rates, including defending the integrity and scientific bona fides of the FDA's approval of vaccine candidates.
Data Reporting and Modernization: Health policy surrounding data modernization and reporting will likely change in significant ways under President-elect Biden and a Democratic Congress. The Biden Administration likely will transition the data reporting systems, which are currently contracted out to third-party providers, back to a more centralized government entity, including the CDC and Centers for Medicare and Medicaid Services (CMS). Under the Trump Administration, the overall COVID-19 data collection process faced intense Democratic criticism. HHS Protect was a system created at the beginning of the COVID-19 pandemic to create a central way to make data collected by various operating divisions, including CDC, CMS, the Health Resources and Services Administration (HRSA), and others, visible to first responders at federal, state, and local levels. Given bipartisan support for comprehensive data modernization, future relief packages likely will direct funding toward a coordinated data collection process between state and federal agencies.
Healthcare Access and Coverage
When the ACA was signed into law in 2010, then-Vice President Biden colorfully expressed his view that it was a very big deal. We expect the incoming Biden Administration will work to protect the ACA and seek to build on its key provisions.
However, a wild card in the first months of President-elect Biden's term is the Supreme Court's decision in California v. Texas, which could result in the entire ACA being declared unconstitutional. Plaintiffs challenge the ACA on the grounds that the elimination of the individual mandate in the Tax Cuts and Jobs Act (Pub. L. 115-97) obviated any taxing power basis for upholding the law. In the first Supreme Court challenge to the ACA, a five-member majority, including Chief Justice John Roberts, upheld the individual mandate as a constitutional exercise of Congress's taxing power in NFIB v. Sebelius, 567 US 519 (2012). With the Court already having ruled the individual mandate is not a valid commerce clause exercise, the plaintiffs contend the lack of a severability clause in the ACA requires the entire statute to fall. After initially taking the position the entire ACA should be found invalid, the Trump Administration is asking the Court to bar enforcement only of the ACA provisions found to "harm" the individual plaintiffs. The administration has not clearly identified which ACA provisions would be encompassed in this more limited remedy and is asking the Court to remand the case on that issue.
The Court heard oral arguments on November 10, 2020, and will likely hand down its decision in the spring of this year. Despite the addition of a sixth conservative, Justice Amy Coney Barrett, to the Court, it appears unlikely that the ACA will be stricken in its entirety. If the Court affirms, the ACA's fate will rest on the justices' determination of whether the mandate can be severed from the rest of the law, either in whole or in part. During oral arguments, questions by Chief Justice Roberts and Justice Kavanaugh suggested support for striking down the individual mandate provision, while allowing the rest of the ACA to stand. Justice Barrett declined to reveal her position in her confirmation hearing, though she stated the presumption "is always in favor of severability."
Should the Court decide to invalidate the entire law, the consequences of a seemingly technical drafting omission of a severability clause cannot be overstated. Over the past decade, despite steadfast Republican opposition, the ACA has reshaped the healthcare system in the US The ACA made significant changes to the individual insurance market, including requiring protections for people with pre-existing conditions, creating insurance marketplaces, authorizing premium subsidies for people with lower incomes, and extending family insurance coverage of children until they turn 26. The number of non-elderly individuals who are uninsured decreased by 18.6 million from 2010 to 2018. The ACA also made other far-reaching changes such as giving states the option to expand Medicaid eligibility for low-income adults (adopted by 39 states and the District of Columbia); requiring coverage of preventive services with no patient cost-sharing; phasing out the "donut hole" in Medicare prescription drug coverage; requiring drug and device manufacturers to report payments to physicians; expanding the 340B program; modifying the Medicaid Rebate Act; codifying the Sunshine Act; establishing a pathway for the FDA's approval of biosimilars; establishing the Center for Medicare and Medicaid Innovation; and requiring menu labeling at restaurant chains. If the Court were to strike down all or most of the ACA, Congress and the new President would be faced with the challenge of unraveling these varied programs and proposing legislative alternatives or replacements.
If the Court strikes down the ACA in whole or in part, the pressure for congressional action to prevent instability in the insurance markets will be extreme, and an attempt at speedy action appears likely. Given the slimmest of Democratic majorities in the Senate, the Republican minority could have a strong role in crafting a compromise, which could reshape the ACA in some respects. Seeing legislation to repair the situation as "must-pass," both parties are likely to push for inclusion of provisions related to other aspects of their healthcare agendas, even if not on-point with the ACA. President-elect Biden can be expected to help shape the deliberations and the outcome, though what compromise might emerge from interactions with Senate Republicans cannot be predicted.
The incoming Biden Administration has indicated support for expanding the ACA to ensure coverage for all Americans. Most notably, during his campaign President-elect Biden advocated creating a "public health insurance option," which would be offered to those seeking insurance. This option, which would be available in the ACA marketplaces, would contain costs by setting payment rates for providers.
President-elect Biden has called for expansion of the premium tax credit, which provides support for middle-class families who purchase insurance through the ACA marketplaces. This proposal would eliminate the current income cap on tax credit eligibility (now 400% of the federal poverty level), open up the credit to more people who could otherwise access employment-based insurance, and key credit levels to a more generous set of plans. These steps would increase the number of people qualifying for the tax credits and lower out-of-pocket spending.
President-elect Biden refrained from endorsing "Medicare for All" during his campaign for the nomination, but following discussions with Sen. Bernie Sanders (I-VT), he backed lowering the Medicare eligibility age from 65 to 60 years. This change would be much simpler and less costly than implementing Medicare for All. However, increased risk to the solvency of the Medicare Part A Trust Fund resulting from the COVID-19 pandemic could complicate its viability.
With Democrats controlling both chambers of Congress and the White House, progressive Democrats are likely to push their colleagues and the President-elect to embrace more liberal healthcare measures than were included in President-elect Biden's campaign platform. These might include further steps to ensure all Americans are covered, expansions of Medicare or Medicaid, or a Medicare buy-in program. Ultimately, we expect legislation to shore up the ACA to be a top priority in a Democratic sweep—with careful drafting to avoid the challenges that kept the law in legal limbo since its passage in 2010.
The Democratic sweep emboldens drug pricing reform advocates, and we anticipate significant changes to drug pricing since the inception of the Medicare drug benefit to be on the agenda. President-elect Biden has long advocated for lower prescription drug prices and generally has been critical of the pharmaceutical industry. He has consistently supported Medicare drug pricing negotiation and allowing drug reimportation from Canada, positions President Trump also supports. President-elect Biden supports policies intended to limit pharmaceutical launch prices and price increases, and efforts to expand access to generic drugs to enhance competition. To date, the President-elect has provided few details on enforcement mechanisms that HHS could employ to create leverage over manufacturers with respect to price negotiations (such as penalties for manufacturers that refuse to negotiate), or how government negotiation would affect the ability of Part D plan sponsors to design their plan benefits, but those details could begin to emerge in the early days of the Biden Administration as he coordinates with Congress on a legislative framework to advance these reforms.
The 116th Congress generated tremendous activity on drug pricing issues that helps set the stage for what is almost certain to be an aggressive package of changes in the new Congress. President-elect Biden is expected to revisit President Trump's recent executive orders on drug pricing to move his own agenda, particularly now that more can be achieved through legislative action with the Democrats holding the majority in both chambers. As in the 116th Congress, drug pricing reform likely will claim a single-digit bill number, and the Elijah E. Cummings Lower Drug Cost Now Act (H.R. 3) could serve as a framework for a new legislative package. The bipartisan bill that originated in the Senate Finance Committee by Sens. Chuck Grassley (R-IA) and Ron Wyden (D-OR), the Prescription Drug Pricing Reduction Act (PDPRA) of 2019 (S. 2543), has notable overlaps with H.R. 3. With Sen. Mike Crapo (R-ID) assuming the role of Ranking Member, however, a Finance Committee bipartisan bill on drug pricing will be challenging in the 117th Congress, potentially leaving Chairman Wyden and other Democrats to move their own bill. Democrats likely will pull together a package early in the new Congress, which potentially could include structural changes to Part D; direct negotiations for drug prices tied to international reference pricing with severe penalties for non-compliance; requirements that lower drug prices negotiated by Medicare be available to patients with private insurance; inflationary caps on price increases with stiff tax penalties for violations; limits on launch prices; and stringent transparency requirements. The package could ultimately be moderated given the challenges of moving such a progressive package through the narrowly controlled Senate and House, potentially leaving more aggressive policies by the wayside in order to garner enough votes for final passage. Alternatively, congressional Democrats could pursue aggressive reforms through the reconciliation process, which would allow Vice President-elect Kamala Harris to serve as the 51st vote to approve such measures.
While Democrats will control legislative action, congressional Republicans will also face tremendous pressure to support drug pricing reforms, and they have set clear markers for their policy solutions this Congress. Provisions such as capping out-of-pocket costs for seniors in Medicare Part D, monthly beneficiary caps for the cost of insulin, transparency provisions such as explaining certain drug price increases, and public disclosure of certain drug discount information were common priorities on both sides of the aisle. Similar provisions were included in the Lower Costs, More Cures Act (H.R. 19/S. 3129), the Republican response to H.R. 3. Congressional Republicans likely will introduce their legislation to communicate their own agenda as the Democratic majority moves more comprehensive reform.
Congress also may act on pay-for-delay, reforms to the 340B Drug Pricing Program, and direct to consumer advertising. Regarding pay-for-delay bills, the Preserve Access to Affordable Generics Act (S. 64/H.R. 2375), introduced by Sens. Chuck Grassley (R-IA) and Amy Klobuchar (D-MN) and Reps. Jerrold Nadler (D-NY) and Doug Collins (R-GA), would prohibit brand name drug companies from paying drug companies to delay the entry of a generic drug or biosimilar to market. This policy enjoys bipartisan support and could be added to a drug pricing package in the 117th Congress. With a Democratic sweep, penalties for anti-competitive behavior by manufacturers seeking to block generic competition likely will be increased, as Democrats will seek to strongly condemn perceived "big pharma" abuses.
The 340B program continues to receive attention with recent congressional inquiries into some manufacturers' moves to limit the role of contract pharmacies. In December, California Attorney General Xavier Becerra led a letter urging the Secretary of HHS and Administrator of HRSA to address drug manufacturers' alleged unlawful refusal to provide discounts for 340B drugs shipped to contract pharmacies that administer drugs on behalf of covered entities. If confirmed as Secretary of HHS, we would expect Becerra to act early on this issue. Congress struggled in recent years to move 340B reform legislation, making it likely that Congress will look to Becerra and HHS to take the lead on 340B issues before pursuing legislative reforms to expand the program and support providers.
As Democrats pursue transparency policies, efforts directed at direct-to-consumer advertising by drug companies are also likely to re-emerge. During his campaign, President-elect Biden was vocal about eliminating tax cuts to the drug industry for advertising costs, in addition to requiring more transparency. While a federal court blocked a Trump Administration rule requiring manufacturers to include pricing information in television ads, a Democratic congressional majority could look to move legislation requiring such a change. President-elect Biden has not specifically adopted a direct-to-consumer advertising policy; however, he has reiterated concerns with negative outcomes of drug advertising practices.
The public health emergency (PHE) declaration in response to the COVID-19 pandemic, signed by the Secretary of HHS on January 31, 2020, granted the country's federal health agencies authority to institute regulatory flexibilities that would require legislative action or regulatory rulemaking to implement outside of the PHE. Among some of the most sweeping changes were those to expand Medicare coverage and payments for telehealth services. CMS significantly expanded the list of healthcare practitioners (HCPs) who may bill Medicare for telehealth services from physicians authorized to practice medicine or surgery (including dentists, podiatrists, optometrists, chiropractors or practitioners including physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, certified nurse-midwives, clinical social workers, clinical psychologists, and registered dietitians or nutrition professionals) to all healthcare practitioners who are authorized to bill Medicare for their professional services (including physical therapists, occupational therapists, speech language pathologists, and others). Other waivers removed restrictions as to the site of service for telehealth services, allowing patients and the treating HCP to be located in their homes at the time a telehealth encounter takes place and eliminated the need for a HCP to be at the originating site. Additionally, CMS is not requiring state Medicaid programs who wish to reimburse telehealth services at the same rate as face-to-face services to submit to CMS separate state plan amendments.
The end of the year COVID package expanded access to mental health services furnished through telehealth, and there has been bipartisan support for making broader changes to telehealth coverage and reimbursement permanent. In December, CMS finalized a rule expanding the list of telehealth services reimbursable by Medicare. Additionally, bipartisan bills introduced in both chambers of Congress would simplify Medicare reimbursement for telehealth services and make permanent changes made by CMS to Medicare coverage of telehealth services during the COVID-19 pandemic (S. 3998/H.R. 7663). While it is not clear whether expanding access to telehealth services through reimbursement reform will be a priority for the Biden Administration, the administration generally will be supportive of regulatory and legislative efforts in this area. President-elect Biden also has said he would expand grant funding under the US Department of Agriculture's (USDA) Community Facility Direct Loan and Grant program to accelerate deployment of telehealth for mental health and specialty care in rural areas and increase funding and expand access to telehealth through the Department of Veterans Affairs (VA) to facilitate rural veterans' access to healthcare.
In parallel with the CMS efforts, the HHS Office for Civil Rights (OCR), charged with implementing and enforcing the Health Insurance Portability and Accountability Act (HIPAA), and the privacy and security regulations promulgated thereunder, is exercising enforcement discretion and not imposing penalties for noncompliance under the HIPAA rules against covered healthcare providers in connection with the good faith provision of telehealth during the COVID-19 PHE. For example, according to OCR, HIPAA-covered providers could use non-public-facing communication technologies such as FaceTime, Facebook Messenger, Google Hangouts, Zoom, or Skype, even if the technology does not fully comply with HIPAA security regulations. Use of public-facing video communication applications, such as Facebook Live, Twitch, and TikTok, remain prohibited.
Following the COVID-19 PHE, Congress and the administration may face difficulties trying to tailor these flexibilities for providers and patients who become accustomed to these telehealth platforms that often save time and money. Congress will be pressured to codify some of these flexibilities past the PHE, albeit within reason and accounting for safety and privacy protocols. The Biden Administration would likely support some flexibilities as implemented by HHS, and efforts to expand telehealth will be met with bipartisan support in Congress.
Role of FDA and the VALID Act: In recent years, the clinical laboratory and diagnostic technology industries have pushed Congress for legislative diagnostic reform to clarify the role the FDA should play in pre- and post-market review of in vitro clinical diagnostic tests and related software and hardware. In 2017, stakeholders criticized a discussion draft of the Diagnostic Accuracy and Innovation Act (DAIA). In 2020, following several years of working with stakeholders and the FDA, Reps. Diana DeGette (D-CO) and Larry Bucshon (R-IN) and Sens. Michael Bennet (D-CO) and Richard Burr (R-NC) introduced the Verifying Accurate Leading-edge IVCT Development (VALID) Act of 2020 (S. 3404/H.R. 6102), which would modernize FDA regulation of diagnostic tests. This bipartisan legislation would grant the FDA regulatory authority over in vitro clinical tests (IVCTs), including those tests produced by and used within a single Clinical Laboratory Improvements Act (CLIA) certified facility—tests which historically have been subject to the FDA's exercise of enforcement discretion.
The VALID Act would also create a new premarket review pathway for IVCTs, allowing for breakthrough IVCTs and a technology certification review process intended to streamline incremental changes to previously reviewed core technologies. A significant number of tests—those lawfully on the market prior to passage of VALID, including enforcement discretion tests—would be "grandfathered" and not subject to the new premarket review requirements in the legislation. Despite the urgency of developing a more rational lab testing oversight model in the wake of COVID-19, due to the complexity of the legislation, it likely will go through regular order in the 117th Congress, perhaps as part of the reauthorization of the Medical Device User Fee Act.
Patents: In May 2019, Sens. Thom Tillis (R-NC) and Chris Coons (D-DE) and Reps. Doug Collins (R-GA), Hank Johnson (D-GA), and Steve Stivers (R-OH) proposed a bipartisan, bicameral draft bill to reform Section 101 of the Patent Act, which defines patentable subject matter. A series of seminal Supreme Court cases (i.e., Mayo Collaborative Services v. Prometheus Laboratories, 566 US 66 (2012), Association for Molecular Pathology (AMP) v. Myriad Genetics Inc., 569 US 576 (2013) and Alice Corp. v. CLS Bank International, 573 US 208 (2014)) created exceptions to patentable subject matter, namely "laws of nature, natural phenomena, and abstract ideas," which includes human genes. However, the proposed legislation seeks to amend Section 101 in favor of patent eligibility by abrogating "all cases establishing or interpreting" implicit or judicially created exceptions to patentable subject matter and shielding eligibility determinations from considerations such as novelty and obviousness of a claimed invention. While these reform efforts have stalled, Congress could revisit patent reform this year.
Reimbursement: Medicare's determination of payment rates for laboratory tests paid under the Clinical Laboratory Fee Schedule (CLFS) underwent a major transformation pursuant to the Protecting Access to Medicare Act of 2014 (PAMA, Pub. L. 113-93), which required CMS to set rates based on rates paid by private insurers. CMS estimated this change would result in substantial savings to Medicare. Industry criticized CMS for basing new rates largely on rates paid to independent laboratories, while hospital-based and physician office laboratories (which arguably receive higher payments from private payers) were underrepresented, thus leading to artificially low Medicare payment rates. The American Clinical Laboratory Association, a trade association dominated by independent laboratories, sued the Department over this issue. The American Hospital Association, on the other hand, opposes requiring more hospital laboratories to report data.
Legislation promoted by the laboratory industry and passed late in 2019 delayed reporting for a year and required a Medicare Payment Advisory Commission (MedPAC) study on how to improve the rate-setting methodology and data collection from all segments of the laboratory industry. At a recent meeting, MedPAC staff indicated, while CLFS utilization was stable from 2017 to 2019, aggregate spending increased from $7.1 billion to $7.5 billion, driven partially by new, high cost tests such as molecular pathology tests. Commissioners raised concerns about the impact of new technologies, administrative burdens associated with data reporting, and whether the PAMA reforms are achieving intended results. A final report is expected in June.
While these PAMA issues do not appear to have a direct partisan flavor, at least within the context of the current methodological framework, they pit lab and hospital interests against each other. Congress may hesitate to legislate changes in this area given the scorable costs (giving up some of PAMA's savings when aggregate CLFS spending is rising).
Health Elements of Social Justice Reforms
COVID-19 has disproportionately stricken communities of color, people with disabilities, LGBTQIA+ communities, and other underserved communities, who are at a heightened risk of contracting and dying from the virus, laying bare the role that longstanding structural inequities and greater frontline exposure play in poor health and outcomes. With a unified Democratic government, Congress and the administration are expected to take a hard look at the elements of structural racism and social determinants as they impact public health and debate policy solutions to improve health equity and reduce disparities.
During his campaign, President-elect Biden laid out a detailed plan to address the root causes of racial health disparities, recognizing health disparities are linked to factors across the economy and not just the healthcare sector. The core of the President-elect's plan focuses on expanding access to quality, affordable healthcare. Nationally, 11% of nonelderly African Americans are uninsured, compared to 8% of white Americans. The gap is far greater in states that have not expanded Medicaid. A unified Democratic-led government likely will attempt to move swiftly to create the public option in the ACA marketplaces, which President-elect Biden supports, to ensure individuals who would be eligible for expanded Medicaid but live in non-expansion states are automatically enrolled at no cost. The administration and the Democratic Congress likely will look to increase ACA subsidies and overall federal investment in Medicaid, and may condition financial incentives on states expanding Medicaid within their borders. Given the tight margins in both the House and the Senate, realizing these priorities will prove difficult.
The President-elect will also focus on improving care for patients with chronic conditions such as diabetes and hypertension, which disproportionately impact African American people, by incentivizing better coordination among providers; tackling the high African American maternal mortality rate; restoring funding for Planned Parenthood to support breast cancer screenings and HIV/AIDS counseling, screening, and treatment; and increasing the federal investment in community health centers.
Some of the groundwork for reforms was laid by congressional Democrats in 2020. For example, the 116th Congress held multiple hearings regarding healthcare inequities, including a House Energy and Commerce Committee hearing on COVID-19 racial and ethnic health disparities and a Senate Aging Committee hearing on disparate health impacts on seniors from racial and ethnic minority communities. In addition, the chair of the Congressional Black Caucus Health Braintrust, Rep. Robin Kelly (D-IL), introduced the Ending Health Disparities during COVID-19 Act (H.R. 8200), setting out a framework for improving the health of minority communities during the pandemic. Reps. Lauren Underwood (D-IL) and Alma Adams (D-NC) also formed the Black Maternal Health Caucus, of which Vice President-elect Kamala Harris was a member. In September, the caucus introduced a set of bills known as the Black Maternal Health Momnibus Act of 2020 (H.R. 6142/S. 3424) to fill gaps in existing legislation to address the African American maternal health crisis and minority infant mortality rates. Similarly, Sen. Elizabeth Warren (D-MA), Rep. Ayanna Pressley (D-MA), and Rep. Barbara Lee (D-CA) introduced a bicameral bill aimed at confronting structural racism in public health, the Anti-Racism in Public Health Act of 2020 (H.R. 8178/S. 4533). The bill would create a National Center for Anti-Racism at the CDC, which would declare racism as a public health crisis and would develop the research base and knowledge in the science and practice of racism.
With a Democratic sweep, Congress may give these proposals increased attention, focusing particularly on data collection and analytics, community outreach and partnerships, access to care, and other challenges facing minorities lacking access to physical and mental healthcare.
As Vice President, President-elect Biden actively engaged with the FDA in the Beau Biden Cancer Moonshot and the enactment of the 21st Century Cures Act (Pub. L. 114-255). His prior work with the agency suggests an FDA under the Biden Administration will likely resemble the Obama Administration's FDA in its relationship with HHS and the rest of the executive branch. It will continue with some of the Obama-era FDA's general policy and enforcement priorities, but those would be adjusted to fit the current policy environment.
The FDA's immediate priority will continue to be issuing emergency use authorizations (EUAs) and approving COVID-19 vaccines, therapies, and diagnostics. President-elect Biden will emphasize the FDA's scientific and regulatory independence, which would also be a priority of congressional Democrats. Moreover, the Biden Administration likely will retract the recent HHS order removing the FDA Commissioner's authority to approve regulations and might announce new procedures to safeguard the FDA's scientific independence.
The FDA under the Biden Administration is expected to be more aggressive on oversight and enforcement, potentially initiating actions against, or investigating, companies with poor compliance records or accused of wrongdoing. As part of its drug pricing initiative, a Biden Administration will likely increase enforcement of allegedly anti-competitive behaviors that limit generic and biosimilar competition and will continue efforts to more rapidly review and approve generic and biosimilar competitors to increase competition and reduce prices. Such pro-competitive policies will likely garner support of congressional Republicans and Democrats.
The Biden FDA likely will move forward on long-standing nonpartisan and bipartisan priorities, including supporting implementation of the new over-the-counter drugs monograph reform law, clarifying regulation of hemp and cannabidiol products, and liberalizing regulation and enforcement of marijuana products. The Biden FDA will likely work towards strengthening oversight over the global drug supply chain and preparing for drug shortages through increased inspections and enforcement and delayed approvals for companies with high-risk supply chains. President-elect Biden proposed a $700 billion "Buy American" campaign, under which he would bring back to the US critical supply chains, including for medical equipment and supplies. FDA will likely also increase enforcement of the Food Safety Modernization Act of 2011, particularly over imports, with support from congressional Democrats who would look to enhance food safety and labeling standards.
Congressional Democrats will likely push for increased regulation and enforcement regarding e-cigarettes and flavored cigarettes, clarifying FDA's authority to review and approve laboratory developed tests, and stronger enforcement of nutrition claims asserted by food manufacturers. Congressional Democrats also will push for cosmetic reform legislation to cross the finish line, including provisions to increase FDA's authority over cosmetics and implement more stringent registration and reporting requirements. This would build off of bipartisan cooperation on the Cosmetic Safety Enhancement Act of 2019 (H.R. 5279) in the House Energy and Commerce Committee during the 116th Congress. Furthermore, congressional Democrats will look to amend the Dietary Supplement Health and Education Act (DSHEA) to require dietary supplement manufacturers to list their products with the FDA. As expected for all agencies under a united Democratic government, the 117th Congress likely will appropriate increased funds to the FDA and work to ensure the FDA has sufficient resources for staffing and review.
The current authorizations for the Prescription Drug User Fee Act, Generic Drug User Fee Act, Medical Device User Fee Act, and Biosimilar User Fee Act (known as the "UFAs") are set to expire in September 2022, teeing up the 117th Congress to pass reauthorizations. As "must pass" legislative items, UFA legislation may serve as a vehicle for partisan drug pricing reform proposals, though historically any policy "riders" attached to UFA legislation have focused predominantly on FDA issues. In addition to reauthorizing the user fee programs, the UFAs may include provisions to increase inspection resources and regulatory authority over manufacturer supply chains. Reps. Diana DeGette (D-CO) and Fred Upton (R-MI) may look to the UFAs as a potential vehicle for elements of their "21st Century CURES 2.0" proposals, such as provisions to boost use of real-world evidence in FDA reviews and to support diversity in clinical trials. Industry stakeholders are likely to push for the UFAs to streamline communication between manufacturers and FDA reviewers and boost FDA staffing. UFA legislation has been bipartisan in the past, and the chairs of the House Energy and Commerce Committee and the Senate HELP Committee are expected to take the lead. Congressional action, however, may be impacted by an adverse ruling from the Supreme Court on the ACA and the potential need for reenactment of the Biologics Price Competition and Innovation Act if not found to be severable.
With the confirmation of Justice Amy Coney Barrett to the Supreme Court, the new 6-3 conservative-majority Court may have important implications for the FDA's authority in terms of the Chevron doctrine (which requires that courts defer to an agency's interpretation of the statutes it administers); the First Amendment and product-related communications; FDA's use of guidance, rather than regulations, in making policy; and the Park doctrine (which allows for criminal prosecutions of individual actors for violations of the Federal Food, Drug, and Cosmetic Act without proof of criminal intent).
Given the challenges facing Democrats to enact their healthcare priorities with slim majorities in both chambers, Democratic committee chairs may depend more heavily on oversight than legislating to draw attention to pandemic and healthcare issues. As COVID-19 continues to take a toll on Americans' health and the country's economy, congressional Democrats are likely to focus their policy agenda on ensuring affordable access to vaccines and treatments, and healthcare reform more broadly. As a result, they will continue to take a hard look at medical product pricing through an oversight lens, but also at healthcare companies perceived to have been "under-regulated" or inappropriately benefitting from close relationships with President Trump or senior administration officials, especially those accused of exploiting the pandemic. As Congress has become more polarized in recent years, unified party control typically results in tepid oversight challenges to executive actions, making it unlikely for Democratic-led committees to aggressively investigate the Biden Administration or Xavier Becerra's HHS. Instead, oversight committee chairs in the 117th Congress are likely to use their gavels to focus on private stakeholders. Entities that received COVID-19 relief funds, grants, or regulatory relief, or that are otherwise involved in COVID-19 response efforts including vaccine and drug manufacturers, may face the risk of becoming a high profile target of a congressional investigation.
Intense scrutiny from one or more congressional committees carries not only serious reputational risk for any company, but, for regulated healthcare companies, the risk of parallel litigation and regulatory action as well. Democratic oversight leaders will certainly use their investigative authorities and leverage the media attention that a congressional hearing can garner to advance their policy agenda and highlight health services delivery, pricing, and financing practices perceived as abusive to patients or consumers, exposing companies to reputational and parallel litigation risk.
To the extent Democrats take a problem-solving approach, some Republican oversight veterans may find common ground and avoid hearings that devolve into partisan theater. In most cases, however, Republicans will take the opportunity presented by public hearings, especially where executive branch witnesses appear, to challenge the Biden Administration's policies and decisions, advocate for Republican alternatives, and create a record to reverse the Republican party's fortunes in the 2022 mid-terms.
Drug Prices: Democrats are expected to double down on oversight of drug pricing issues. In the 116th Congress, Democrats, particularly the leaders of the House Energy and Commerce Committee, the House Committee on Oversight and Reform (COR), and then-Chairman Grassley and Ranking Member Wyden of the Senate Finance Committee, launched significant investigations into the practices of pharmaceutical companies and pharmacy benefit managers (PBMs) to ascertain the causes of high prescription drug costs. For example, in September, the House COR heard testimony from six pharmaceutical company CEOs over two days of hearings and issued a number of company-specific staff reports, the culmination of nearly two years of a sweeping investigation into drug pricing. The House Energy and Commerce Subcommittee on Oversight and Investigations also will play a major role in conducting oversight hearings. As Democrats seek to advance sweeping drug pricing reforms, these committees likely will hold additional oversight hearings involving manufacturers in early 2021, including with respect to COVID-19 vaccine and therapeutic pricing issues.
Democratic oversight efforts also will likely examine the 340B program to shore up support for the program and for providers and patients that benefit from the program. As previously discussed, recent bipartisan letters regarding pharmaceutical manufacturers' decisions to limit 340B discounts offered to contract pharmacies suggest Democratic congressional leaders may investigate manufacturers' decisions and whether they violate the program's requirements.
President-elect Biden will be eager to fulfill campaign promises to address prescription drug prices, and is likely to support lawmakers' use of oversight hearings, along with legislative hearings, to frame the need for results.
Pandemic Response: With a new Democratic administration, the subject and tone of Democrats' pandemic-related oversight will shift to support of the Biden Administration's initiatives and transparency. Despite the change in administration, however, we expect Democrats' rebuke of the Trump Administration's COVID-19 response to continue into the 117th Congress, particularly as oversight entities created by the CARES Act (Pub. L. 116-136) release reports related to the use of pandemic relief funds. In June, Sens. Elizabeth Warren (D-MA), Richard Blumenthal (D-CT), and Chris Coons (D-DE) and Reps. Pramila Jayapal (D-WA), co-chair of the Congressional Progressive Caucus, and John Sarbanes (D-MD), chair of the House Democracy Reform Task Force, introduced the Coronavirus Oversight and Recovery Ethics (CORE) Act (S.3855/H.R. 7076), which provides a framework for potential governmental reforms to increase transparency and accountability in pandemic management and address some of the perceived corruption by President Trump. The bill would ban involvement of contractors or advisers in the relief effort who have conflicts of interest, establish a "good cause" removal for inspectors general, require weekly reporting from the executive branch, strengthen COR's Select Subcommittee on the Coronavirus Crisis, increase whistleblower protections, restrict and require disclosure of lobbying and political spending related to relief programs, and improve transparency of bailout funds. The bills were referred, respectively, to COR and the Senate Homeland Security and Government Affairs Committee, and provide a preview of some of the likely oversight activities of those committees early in the 117th Congress.
COR, including the Select Subcommittee on the Coronavirus Crisis, the House Energy and Commerce Subcommittee on Oversight and Investigations, and Senate Finance Committee will continue oversight of federal funding related to the development and manufacturing of COVID-19 vaccines and therapeutics; the criteria for approving tests, vaccines, and therapeutics; distribution plans for these countermeasures; ways to restore public trust in federal scientific agencies; data reporting and surveillance; and vaccine and therapeutic pricing, particularly of candidates funded by Operation Warp Speed or other federal initiatives.
*Jessica Morris contributed to this Advisory. Ms. Morris is a graduate of American University, Washington College of Law and is employed at Arnold & Porter's Washington, DC office. Ms. Morris is not admitted to the practice of law in Washington, DC.
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© Arnold & Porter Kaye Scholer LLP 2021 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.