Post-Election Analysis 2020: Life Sciences & Healthcare
With Democrats winning the White House and maintaining control of only one of the two chambers of Congress, the broad ambitions of a comprehensive health agenda must now be moderated to focus on what is achievable with a Senate Republican majority. Prospects for another COVID-19 relief package have improved with Senate Majority Leader Mitch McConnell's (R-KY) recent call to act before the end of the year, but key negotiators remain divided on scope. Congress must also act on the bipartisan healthcare program extensions expiring on December 11, 2020, which could be complicated if congressional leaders seek to attach relief measures to year-end spending legislation.
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, once they are authorized or approved, the president-elect will have to rebuild trust in public health agencies and overcome the Trump White House's legacy of perceived political interference. To achieve legislative wins, however, Senate Republicans may extract tough concessions from the Biden Administration on issues such as liability protections for employers and other stakeholders otherwise subject to tort claims by individuals harmed during the COVID-19 pandemic.
On November 10, 2020, the Supreme Court will hear oral arguments in California v. Texas, cert granted, 140 S.Ct. 1262 (2020), which challenges the constitutionality of the Affordable Care Act (ACA). The Biden Administration is expected to do everything it can to prevent invalidation of the ACA, including changing the Justice Department's position from opposition to defending its constitutionality. The outcome of this case could transform the healthcare agenda in the next Congress. Should the Supreme Court rule to invalidate all or significant parts of the ACA, Congress will face tremendous pressure 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. This could be complicated by a push from the Biden Administration and Democrats to bolster the ACA, such as adding a public option, that would be rejected by the Republican Senate. Senate Republicans may use the major risk presented by an adverse Supreme Court decision to negotiate for legislative concessions to limit federal expenditures on the Medicaid and Medicare programs.
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 favor some of the concepts contained in the executive orders, they may prefer to rescind these orders in favor of 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. Senate Republicans, however, uniformly oppose Medicare price negotiation and will block repeal of the interference provision. The president-elect may find room for a deal with Senate Republicans on other drug pricing policy priorities. For example, Sen. Chuck Grassley (R-IA) is a strong supporter of increasing transparency in drug pricing, eliminating Medicare beneficiary exposure to catastrophic drug costs, and curbing drug price increases through reference to an international price index and inflationary rebates. Although Sen. Mike Crapo (R-ID) is expected to chair the Senate Finance Committee, we do not count out incoming Senate Judiciary Chairman Grassley as playing a role in a compromise, particularly with a narrow Republican majority and his previous work to garner Democratic support for such measures. Another area ripe for legislative compromise is limiting "surprise medical billing," which can arise when out-of-network providers participate in the care of insured individuals.
Over time, we expect the Food and Drug Administration (FDA) to 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 focus 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 continue 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 new administration.
During the campaign, President-elect Biden 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 tenuous relationship with his public health advisors, President-elect Biden has vowed to "listen to the scientists" when developing policies. We expect a more centralized response effort with enhanced public health guidance. The President-elect is already standing up a shadow COVID-19 task force with key personnel in order to hit the ground running after inauguration. Although President-elect Biden initially floated a national mask mandate, in response to constitutional concerns, he narrowed it to a mask mandate on federal property and is expected to encourage governors to issue mask mandates. The Biden Administration will prioritize rebuilding scientific agencies, such as the Centers for Disease Control and Prevention (CDC), and attempt to restore 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 push for significantly 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. President-elect Biden will work toward expanding the Department of Defense (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 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 DOD and National Guard, and the Health Disaster Assistance Medical Teams and Medical Reserve Corps deployable by the US Department of Health and Human Services (HHS) to address COVID-19 hot spots. During his campaign, President-elect Biden pledged to "use all available authorities," including the Defense Production Act, in an effort to increase testing capacity, improve the ability to trace contacts, and surge equipment and supplies to any new disease hotspots.
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 the US responds to the current crisis, it must be better prepared for the next one. He plans to establish and manage a permanent, professional, 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. It remains to be seen, however, whether a Republican-controlled Senate will agree to fund new and expanded federal programs.
Congressional Relief Efforts: We can expect continued gridlock on the potential for additional multi-trillion dollar COVID-19 relief packages. After months of negotiations, Speaker of the House Nancy Pelosi (D-CA) and Treasury Secretary Steven Mnuchin failed to reach a deal before election day. Although the Democrats' $2.2 trillion proposal is not significantly higher than the White House's $1.9 trillion offer, they remain divided on several key issues, including testing, state and local government relief, and liability protections for businesses. Challenges will remain in the lame duck, as congressional Republicans will continue to resist to a multi-trillion dollar stimulus package and Democrats may hold out in hopes of striking a better deal under President-elect Biden. President-elect Biden has pledged to pass another relief package, in particular supporting robust funding to ensure no individuals pay out of pocket for COVID-19 testing, treatment, or a vaccine.
Pandemic Preparedness: Legislation to prepare for future pandemics likely will garner attention during the lame duck session of Congress. Retiring Senate Health, Education, Labor, and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) is likely to push for his legislation, the Preparing for the Next Pandemic Act (S. 4231), to pass during lame duck session in combination with a healthcare extenders package or additional COVID-19 relief legislation. The legislation includes 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 strengthening the Strategic National Stockpile (SNS). With Republicans retaining control of the Senate, and pandemic preparedness being a bipartisan issue, Congress has a good chance of giving Chairman Alexander a "legacy" win by including his legislation with healthcare extenders during the lame duck session.
Should pandemic preparedness fail to be addressed during the lame duck session, long-time pandemic hawks are likely to pick up the mantle. House Energy & Commerce Subcommittee on Health Chairwoman Anna Eshoo (D-CA) and potential Senate HELP Chairman Richard Burr (R-NC) worked together to pass the Pandemic and All-Hazards Preparedness Act in 2006 (Pub. L. 109-417), and subsequent reauthorizations that strengthened the law. They are likely to take the lead on pandemic preparedness legislation in the 117th Congress. Such pandemic preparedness legislation could use Sen. Alexander's bill as a starting point and is likely to significantly boost resources for the Biomedical Advanced Research and Development Authority (BARDA) and the SNS.
Both Chairwoman Eshoo and Sen. Burr are proponents of partnerships between BARDA and pharmaceutical manufacturers and will seek to boost private industry's role in preparing for future pandemics. Pandemic preparedness legislation that will earn President-elect Biden's support will also need to do the following: (1) substantially increase federal investment in the National Institutes of Health (NIH) and BARDA; (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 that 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 the 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, but will encounter resistance from Senate Republicans on legislation to significantly expand the government's authority over pricing. The Biden Administration likely will take a more active role in vaccine distribution, centralizing efforts in lieu of 50 variant state plans as was directed by the Trump Administration's plan.
Congressional Democrats are expected to ramp up oversight efforts of COVID-19 vaccine issues, including approval and distribution. Congress likely will include additional funding for vaccines in future COVID-19 response legislation, and further protections for the FDA against potential political interference, including through increased transparency requirements. Continued attention will be placed on distribution of COVID-19 vaccines and on efforts to increase public trust in the vaccine and drive high vaccination rates. This will include efforts by the Biden Administration to "correct the record" of President Trump's messaging on the vaccine, while 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 likely will change in significant ways under President-elect Biden. 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 the Centers for Medicare and Medicaid Services (CMS). Under the Trump Administration, the overall COVID-19 data collection process, including HHS Protect, 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 visible to first responders and public health officials at federal, state, and local levels. The HHS Protect data reporting system likely will face internal changes under a Democratic administration and House Democratic congressional oversight.
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. The incoming Biden Administration is expected 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 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 U.S. 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 that the entire ACA should be found invalid, the Trump Administration is asking the Supreme Court to bar enforcement only of the ACA provisions found to "harm" the individual plaintiffs. The Trump Administration Department of Justice has not clearly identified which ACA provisions would be encompassed in this more limited remedy and is asking the Supreme Court to remand the case on that issue.
The Supreme Court plans to hear oral arguments on November 10, 2020, and is likely to hand down its decision in the first half of 2021. With Justice Amy Coney Barrett now seated as the most junior member of the Court, she will be entitled to participate in the decision. The addition of a sixth conservative Justice to the Court increases the likelihood the ACA will be stricken in its entirety. If the Court affirms, the ACA's fate will rest on the justice's determination of whether the mandate can be severed from the rest of the law, in whole or in part. Justice Barrett declined to reveal her position, though she stated in her confirmation hearing that the presumption "is always in favor of severability."
Should the Supreme Court choose to invalidate the entire law, the consequences of a seemingly technical drafting omission of a severability clause cannot be overstated. Over the past decade, and 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 preexisting 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 of expanding 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; establishing a pathway for FDA approval of biosimilars; establishing the Center for Medicare and Medicaid Innovation; expanding the 340B program; making changes to the Medicaid Drug Rebate Program; establishing the Sunshine Act; and requiring menu labeling at restaurant chains. If the Court were to strike down all or part of the ACA, Congress and President-elect Biden would be required to unravel these varied programs and consider alternatives or replacements.
If the Supreme 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. Perhaps, depending on the tone of the oral arguments before the Supreme Court, the House might pass remedial legislation preemptively, soon after President-elect Biden takes office, but what might emerge from compromise with Senate Republicans is not yet clear. Bipartisan support is strong for certain provisions, such as the prohibition on insurers taking preexisting conditions into account and retaining young adults on their parents' insurance. Republicans have advocated for "repeal and replace" since the ACA as passed, but they have no clear comprehensive replacement. Democrats will want to give as little ground as possible, and while a narrow Senate Republican majority with two potential swing votes could give Democrats a simple majority on the issue, it is still well-short of the threshold to invoke cloture. Seeing legislation to repair the situation as "must-pass," both parties are likely to push for inclusion of provisions relating to other aspects of their healthcare agendas, even if not on point with the ACA. President-elect Biden can be expected to exert strong leadership to help shape the deliberations and the outcome, though compromises with the Senate Republicans, which will be essential to enact legislation, may require concessions from both parties.
If the Supreme Court does not strike down the ACA, we expect other efforts to strengthen the law. President-elect Biden indicated he will work to expand the ACA to ensure coverage for all Americans. Most notably, President-elect Biden advocated creating a "public health insurance option," which would be available in the ACA marketplaces, and contain costs by negotiating payment rates with providers.
President-elect Biden also 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 might otherwise access employment-based insurance, and tie 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. The president-elect refrained from endorsing "Medicare for All" during his campaign for the nomination, but, following discussions with Sen. Bernie Sanders (I-VT), backed lowering the Medicare eligibility age from 65 to 60 years. This change would be much simpler than implementing Medicare for All, but increased risk to the solvency of the Medicare Part A Trust Fund resulting from the COVID-19 pandemic could complicate its viability. Additionally, with Republicans in control of the Senate, many of the President-elect's more ambitious attempts at health reform may be stymied.
The Biden-Harris win invigorates drug pricing reform advocates given the President-elect's aggressive anti-pharma platform. President-elect Biden has long advocated for lower prescription drug prices and has generally 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 congressional Democrats on a legislative framework to advance these reforms.
While President-elect Biden will assume office with a clear record on drug pricing issues, a divided Congress likely means legislative reform of drug pricing remains in limbo. During the 116th Congress, Senate Finance Committee Chairman Grassley and Ranking Member Ron Wyden (D-OR) began bipartisan talks regarding a drug pricing bill. The Grassley-Wyden bill, the Prescription Drug Pricing Reduction Act of 2019 (S. 2543), ultimately failed to get significant Republican support in the Senate and lost the support of Senate Democrats as they hedged their bets on a more favorable environment to move a progressive bill next Congress.
While this bill held the most promise of passage, Sen. Grassley's term limit as chair of the Finance Committee shifts the focus to the moderated package introduced by Sen. Crapo and his Republican colleagues, the Lower Costs, More Cures Act (S. 3129/H.R. 19). This package did not include Part B inflationary rebates—a provision that was critical in binding the agreement between Chairman Grassley and Ranking Member Wyden but undermined Republican support and prevented floor consideration.
In the House, the Elijah E. Cummings Lower Drug Cost Now Act ( H.R. 3) was approved by the chamber but was considered dead-on-arrival in the Senate due to partisan policies such as Medicare price negotiation and excise tax authority. The legislation may reemerge early in the 117th Congress but will meet the same fate even with support from the new administration. House Republicans may reintroduce the Lower Costs, More Cures Act of 2019 (H.R. 19) to set markers for their policy solutions this Congress. There are clear areas of policy agreement among these bills and the Biden-Harris platform, most notably structural reforms to the Part D program to cap beneficiary out-of-pocket costs. This could present a tremendous opportunity for the Biden Administration to moderate a deal if they can convince the liberal base to move ahead without more aggressive reforms.
Congress may also 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. Grassley and Amy Klobuchar (D-MN) and Reps. Jerry 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.
The 340B program continues to receive attention with recent congressional inquiries into some manufacturers' move to limit the role of contract pharmacies. Overlaid with the Trump Administration's 30 percent cut to Medicare Part B drugs in the program, we expect continued interest in addressing critical program elements. Several years back, Congress struggled to move 340B reform legislation. While comprehensive reform may ultimately prove elusive in a divided Congress, the Biden Administration may seek to enhance the role of the Health Resources and Services Administration (HRSA) in managing the program, despite legal questions surrounding their authority to do so.
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 payment for telehealth services. CMS 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.
There has been bipartisan support for making some of these changes to telehealth coverage and reimbursement permanent. CMS issued a proposed rule in August 2020 soliciting public comment on issues including expanding the list of telehealth services reimbursable by Medicare. CMS intends to publish the final rule in early December 2020. Additionally, bipartisan bills introduced in both houses 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 support regulatory and legislative efforts in this area. President-elect Biden also 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, announced it would exercise enforcement discretion and not impose 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 difficulty trying to tailor these flexibilities for providers and patients who have 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 likely would support some form of flexibilities as implemented by HHS.
Despite broad bipartisan support to address surprise billing legislation in the 116th Congress, a final deal has yet to make it across the finish line. The bills under consideration in the 116th Congress proposed benchmarking, where payment rates are set at a median-contracted rate for a geographic area, and/or independent dispute resolution, where providers and payors reconcile payment disputes through arbitration. While the majority in Congress agree patients should be held harmless from surprise medical bills for out-of-network services, how (and how much) providers are paid remain critical sticking points driving extraordinary stakeholder advocacy and media initiatives. This disagreement cuts across traditional party lines. The Senate HELP Committee and House Energy and Commerce Committee coalesced behind the bipartisan No Surprises Act (H.R. 3630), which employs a benchmark payment approach, and would send payment disputes to arbitration for bills greater than $750. Conversely, the House Ways and Means-backed Consumer Protections Against Surprise Medical Bills Act of 2020 (H.R. 5826) would direct providers and payors to immediately enter into mediated negotiations to settle payment disputes.
Passing legislation to address surprise billing remains a "legacy" priority for both retiring Senate HELP Committee Chairman Alexander and retiring House Energy & Commerce Committee Ranking Member Greg Walden (R-OR). Modifications under consideration this summer would allow providers to batch claims over a 30-day period to hit the $750 trigger for dispute resolution to address stakeholder concerns of narrowing networks and lower rates. However, without House Ways and Means Chairman Richard Neal's (D-MA) sign-off, and competing legislative priorities this fall, surprise billing most likely will not get done in the lame duck session.
In the absence of legislative action, earlier this year, HHS included a ban on surprise billing as part of the terms and conditions for healthcare providers accepting CARES Act funds, a step that has kept public attention on the issue of surprise bills but falls short of comprehensive reform. Additionally, President Trump recently released an executive order that directs HHS to take administrative action to prevent surprise bills if Congress fails to pass legislation by the end of the year, which we expect to be rescinded by the incoming administration hoping to work with congressional leaders to hammer out a deal.
Addressing surprise billing is a prominent feature of President-elect Biden's healthcare agenda and will be a high priority for the new Congress regardless of political division between the Senate and House. While the respective committees likely will pick up where they left off in terms of policy, pressure from the administration hoping for an early healthcare win could encourage Speaker Nancy Pelosi (D-CA) to steer a deal among the competing chairs' proposals. In an environment where there will be little agreement on healthcare issues, surprise billing legislation likely will be enacted in the 117th Congress.
Role of FDA and the VALID Act: In recent years, the clinical laboratory and diagnostic technology industries 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. In 2020, following several years of working with stakeholders and the FDA, Reps. Diana DeGette (D-CO) and Larry Bucshon (R-IN) and Sens. Burr and Michael Bennet (D-CO) 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 pre-market 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 pre-market review requirements outlined 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 U.S. 66 (2012), Association for Molecular Pathology (AMP) v. Myriad Genetics Inc., 569 U.S. 576 (2013) and Alice Corp. v. CLS Bank International, 573 U.S. 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 in 2021.
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 that 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 2021.
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 plays in poor health and outcomes. With Democrats in control of the White House and the House, 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. According to national data from the Kaiser Family Foundation, 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. President-elect Biden will urge Congress to move swiftly to create the public option in the ACA marketplaces and make changes to the law to ensure individuals who would be eligible for expanded Medicaid but live in non-expansion states are automatically enrolled at no cost. The Biden Administration and House Democrats are expected to advance legislation to increase ACA subsidies and overall federal investment in Medicaid and possibly to encourage expansion among the twelve states that have not expanded Medicaid, such as by providing financial incentives for expansion. Republicans in control of the Senate, however, are likely to block most, if not all, of these efforts over concerns of adding to the federal deficit.
The president-elect also will focus on improving care for patients with chronic conditions such as diabetes and hypertension, which disproportionately impact African Americans, by incentivizing better coordination among providers and tackling the high African American maternal mortality rate. To the extent he can address some of these goals through executive orders, regulations, and program changes, the president-elect may be able to avoid Senate Republicans' ability to block legislation. One of the few campaign promises that could enjoy bipartisan support is increasing federal investments in community health centers, which Republicans have supported in the past.
House Democrats will continue efforts to advance policies intended to narrow health disparities for communities of color. In the 116th Congress, 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) formed the Black Maternal Health Caucus, of which Vice President-elect Harris is 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). The Momnibus Act aims to fill gaps in existing legislation to comprehensively address disparities in African American maternal health and minority infant mortality rates. Democrats also introduced the Anti-Racism in Public Health Act of 2020 (H.R. 8178/S. 4533). Under President-elect Biden and the Democratic House, these areas will receive 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. Despite the president-elect's ability to reach across the aisle, many of these efforts will stall in the Senate.
As Vice President, President-elect Biden actively engaged with the FDA in the Cancer Moonshot and the enactment of the 21st Century Cures Act (Pub. L. 114-255). His prior work with the FDA suggests the Biden Administration's FDA likely will 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 adjust to fit the current policy environment.
The FDA's immediate priority likely will be authorizing the distribution of COVID-19 vaccines, therapies, and diagnostics. To support this goal, President-elect Biden will emphasize the FDA's scientific and regulatory independence, which is also 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 and transparency.
The Biden FDA is also expected to strengthen oversight over the global drug supply chain and prepare 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. The Biden FDA is expected to increase enforcement, potentially initiating actions against, or investigating, companies with poor compliance records or accused of wrongdoing. Congressional Democrats will support this more aggressive enforcement environment.
As part of its drug pricing initiative, a Biden Administration will likely increase activities focused on alleged anti-competitive behaviors that limit generic and biosimilar competition, and expand efforts to more rapidly review and approve generic competitors to increase competition and reduce prices. Such policies will likely garner support of Republicans and Democrats in Congress. Congressional Republicans likely will continue to push for ways the FDA can better support innovators, including through reducing regulatory hurdles for new entrants and breakthrough products.
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.
Congressional Democrats are expected to push for increased regulation and enforcement regarding e-cigarettes, clarifying FDA's authority to review and approve laboratory developed tests, and stronger enforcement of nutrition claims asserted by food manufacturers. Congressional Democrats likely will also push for cosmetic reform legislation to cross the finish line, including provisions to increase FDA authority over cosmetics and implementing 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, but this effort could encounter Republican opposition.
Following allegations of political interference by the Trump Administration over the FDA, House Democrats will look to exercise oversight of the FDA and protect its scientific and regulatory independence. As has been the case throughout his career, potential Senate HELP Committee Chairman Burr likely will use his chairmanship to exercise strong oversight over the FDA's activities, especially pertaining to regulation of the tobacco industry.
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 are set to expire in September 2022, teeing up the 117th Congress to pass reauthorizations. As "must pass" legislative items, the User Fee Acts (UFAs) are likely to be vehicles for a number of FDA priorities. In addition to reauthorizing the user fee program, the UFAs may include provisions to boost use of Real-World Evidence (RWE) and patient perspectives in FDA reviews and increase inspection resources and regulatory authority over manufacturer supply chains. 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 Senate HELP Committee are expected to take the lead. Congressional action 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.
Lastly, with the confirmation of Justice Amy Coney Barrett to the Supreme Court, the new 6-3 conservative majority 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).
With split control in 117th Congress, the oversight approaches in the House and Senate will look very different even as they tackle similar issues, including drug prices and the pandemic response. As COVID-19 continues to take a toll on Americans' health and the country's economy, House Democrats in the 117th Congress 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. Further, with a Democratic administration, House Democrats are likely to turn their oversight focus toward private stakeholders. Entities, especially large corporations, 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.
House oversight committees also likely will investigate perceived problems in health and scientific agencies weakened under the Trump Administration and spotlight gaps in coverage or patient access to care to support the Democratic healthcare agenda. Finally, as the risk of insolvency in the Medicare Hospital Insurance fund looms closer and Medicaid spending continues to rise, Democratic oversight leaders may focus on fraud and abuse involving payers and providers, particularly industry practices or processes that they believe put patients at risk of harm.
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. What is certain is that Democratic oversight leaders will 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
Senate Republicans will challenge the Biden Administration's policies and decisions, particularly around its COVID-19 response, efforts to curb drug prices, and actions to increase access to health insurance under the ACA and Medicaid, and advocate for Republican policy alternatives.
Drug Prices: As Democrats seek to move forward on broad drug pricing and transparency reform, committees in the House likely will double down on oversight efforts of drug pricing. In the 116th Congress, House Democrats launched numerous investigations into the practices of pharmaceutical companies and pharmacy benefit managers to ascertain the causes of high prescription drug costs and advance their policy agenda, including price negotiation in Medicare Part D. For example, in September the House Committee on Oversight and Reform 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. Committee Chair Carolyn Maloney (D-NY) likely will hold similar hearings in the early months of the 117th Congress to once again draw public attention to drug pricing issues and provide a platform for discussion of Democratic drug pricing reform efforts. We expect the committee's prior focus on Medicare's costliest drugs to expand to include COVID-19 vaccines and therapeutics, given the public's interest in affordable access to these countermeasures. We also expect the subcommittee to direct its attention to the prices for COVID-19 vaccines and therapies.
Incoming Senate Finance Committee Chairman Crapo likely is to hold his own oversight hearings on drug pricing issues to highlight alternative, Republican approaches to reform. However, unlike former Chairman Grassley, Sen. Crapo's Finance Committee will be more supportive of pharmaceutical innovators and likely target pharmacy benefit managers (PBMs), payers, or other actors in the supply and distribution chain for their contribution to high drug prices.
House Democrats also may examine manufacturers' role in the 340B program. Policymakers' positions on the 340B program tend not to split along traditional party lines, as evidenced by recent bipartisan letters to HHS calling attention to pharmaceutical manufacturers' decisions to limit 340B discounts offered to contract pharmacies. However, 340B providers may face a counterpoint oversight effort from Sens. Crapo and Grassley, given their new committee perches. Sen. Grassley is a staunch critic of the 340B program, and Senate Republicans may see an opportunity to investigate alleged abuses of the program by providers, such as failure to pass along 340B savings to patients, to lay the groundwork for legislation to reform the program.
Pandemic Response: With a new Democratic administration, the subject and tone of House Democrats' pandemic-related oversight will shift to support of the Biden Administration's initiatives and transparency. Despite the change in administration, however, we expect House 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. Such inquiries undoubtedly will bleed into the private sector, sweeping pharmaceutical and device manufacturers and healthcare providers into oversight committees' crosshairs. The House Energy and Commerce Subcommittee on Oversight and Investigations and House Committee on Oversight & Reform, including its newly created Select Subcommittee on the Coronavirus Crisis, likely 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.
In the Senate, Republican chairs of committees with oversight jurisdiction undoubtedly will launch inquiries and investigations into the administration's management of the pandemic, which is certain to encounter challenges as the virus continues to take its toll.
*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.
*Casey Patchunka contributed to this Advisory. Ms. Patchunka is a graduate of The George Washington University School of Law and is employed at Arnold & Porter's Washington, DC office. Ms. Patchunka is not admitted to the practice of law in Washington, DC.
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© Arnold & Porter Kaye Scholer LLP 2020 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.