HealthCare Roundtable e-News – Aug. 18, 2017

Stopping Cost-Sharing Reduction Payments Would Increase Federal Spending: CBO

Ending the cost-sharing reduction payments that the government makes to keep down out-of-pocket health care costs would actually increase federal spending while driving up the cost of premiums in the health insurance exchanges, according to the Congressional Budget Office (CBO).

The Patient Protection and Affordable Care Act (ACA) provides for federal cost-sharing reduction payments to insurers to lower expenses for some consumers in the state-level exchanges that were created by the ACA. (The payments total about $7 billion this year.) In 2016, a federal judge ruled, in a case filed by House Republicans, that the Obama administration’s payment of the subsidies was unconstitutional because, although they were included in the ACA, the GOP-controlled Congress had not appropriated the funds for the payments. The judge who issued the ruling, though, put it in abeyance, pending an appeal. Under Trump, the government has been making the payments as usual, but has not decided whether to appeal. In May, in a joint filing with congressional Republicans,┬áthe administration asked the U.S. Court of Appeals for the District of Columbia Circuit to delay the implementation of last year’s ruling for at least 90 more days.

Trump has indicated that he may stop the payments to gain leverage with Democrats in Congress.

The CBO found that, if the government does not make the $118 billion in scheduled cost-sharing reduction payments through 2026, it will result in other budgetary changes that will lead to a net increase in spending of $194 billion over the next decade.

Most exchange consumers receive tax credits to help cover the cost of their premiums, and the tax credit amount is based on an individual’s income and on the average price of the second-lowest cost silver plan in the exchange. So if insurers raise silver premiums in the absence of cost-sharing payments, the tax credits paid by the federal government will go up, and CBO estimates that those increases will total $365 billion through 2026.

“The average amount of subsidy per person would be greater, and more people would receive subsidies in most years,” CBO stated.

CBO also found that ending the payments would result in premiums for silver plans being 20 percent higher in 2018 and 25 percent higher in 2020. Because of the increased amounts of the tax credits, though, “Most people would pay net premiums (after accounting for premium tax credits) for nongroup insurance throughout the next decade that were similar to or less than what they would pay otherwise.”

Even if the payments are stopped, CBO projected, “the nongroup insurance market would … continue to be stable in most areas of the country,” because of the tax credits, as well as the individual mandate.

“Substantial uncertainty about how consumers might respond to the significant increases in premiums following the termination of CSR payments would lead some insurers to withdraw from or not enter the nongroup market in some states, but the agencies anticipate that the situation would be temporary,” CBO stated.

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FDA Commissioner Again Chides Drug Companies Who ‘Game the System’

The head of the Food and Drug Administration (FDA) again criticized brand-name drug companies for using tactics that block the development of generic drugs.

Critics say that brand-name companies use the FDA’s risk evaluation and mitigation strategies (REMS) and similar programs that are typically intended to control the distribution of medicines for which there are safety concerns to deny generic firms access to their products. Without such access, generic firms are unable to show the bioequivalence – or, in the case of biologics, biosimilarity – that is needed for approval by the FDA.

FDA Commissioner Scott Gottlieb has publicly denounced this practice several times this year, and he did so again in an Aug. 15 interview with USA Today. Gottlieb flatly stated that brand-name firms “game the system and game the rules” to prevent lower-priced generic competitors from reaching the market.

USA Today paraphrased Gottlieb as saying that this approach “seems anti-competitive to him … even if it isn’t illegal.” The newspaper reported that Gottlieb may have the FDA publicly release letters in which generic companies complain about being denied access to brand-name medicines.

At a July 18 public meeting, Gottlieb identified three approaches that the FDA is taking to increase generic drug competition. He said the agency is:

  • Reviewing its guidance for generic companies that seek a letter from the agency assuring a brand-name company that providing drug samples would not be a REMS violation
  • Looking at “scientific and regulatory obstacles” that may block generic competition, especially in the case of complex drugs
  • Improving the efficiency of its generic drug program

The FDA will accept public comments related to that meeting through Sept. 18.

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Bill to Promote Generic Competition Signed into Law

President Donald Trump has signed into law a Food and Drug Administration (FDA) funding bill that includes a provision aimed at enhancing generic drug competition.

The “FDA Reauthorization Act” (H.R. 2430) reauthorizes user fee programs for brand-name prescription drugs, generic drugs, biosimilars, and medical devices. User fees account for about one-fourth of the FDA’s total budget, including two-thirds of its budget for the review of brand-name drugs and 58 percent of its budget for the review of generic drugs. The House passed the bill by a voice vote in July, and the Senate approved it by a 94-1 vote on Aug. 3.

The legislation also includes several provisions aimed at promoting the development of generic drugs, including one that would direct the FDA to prioritize the review of applications for generics when there are not already more than three competing drugs, or when a drug is on the shortage list. The agency would have eight months to make a decision on such an application. (Summary)

House Energy and Commerce Committee Chairman Greg Walden, R-Ore., said the legislation “will bring lower-cost generic drug alternatives to patients sooner, helping bring down the cost of these often life-saving medications.”

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