HHS Sec. Price: Trump’s FY 2018 budget does not ‘confuse spending with success’

On May 23, 2017, President Trump submitted his fiscal year (FY) 2018 budget proposal to Congress. The proposed budget contained the administration’s tax, spending, and policy proposals for FY 2018. The proposed budget was greeted with much criticism due to various program cuts (see $3.6T in cuts spells R-E-S-P-E-C-T in Trump budget, Health Law Daily, May 23, 2017). On June 8, 2017, HHS Secretary Price appeared before the House Ways & Means Committee and discussed the President’s proposals involving HHS programs.

Confusing spending with success

Because the President’s FY 2018 budget was met with so much criticism due to various program cuts, Price began by taking on that issue directly: “President Trump’s budget request does not confuse government spending with government success. The President understands that setting a budget is about more than establishing topline spending levels. Done properly, the budgeting process is an exercise in reforming our federal programs to make sure they actually work—so they do their job and use tax dollars wisely.”

Price continued: “The problem with many of our federal programs is not that they are too expensive or too underfunded. The real problem is that they do not work—they fail the very people they are meant to help. Fixing a broken government program requires a commitment to reform — redesigning its basic structure and refocusing taxpayer resources on innovative means to serve the people that the program is supposed to serve. And sometimes it requires recognition that the program is unnecessary because the need no longer exists or there are other programs that can better meet the needs of the people that the program was originally designed to serve.”

To emphasize this point, Price spoke directly about two federal programs, Aid to Families with Dependent Children and Medicaid.

Aid to Families with Dependent Children

According to Price, the Aid to Families with Dependent Children program undermined self-sufficiency and work. He applauded Congressional action that created the Temporary Assistance for Needy Families (TANF) program that promoted the empowerment of parents through work. He pointed out that TANF caseloads have declined by 75 percent through FY 2016. And that under the TANF program, the employment of single mothers increased by 12 percent from 1996 through 2000, and even after the 2008 recession, employment of single mothers is still higher than before welfare reform.

Medicaid

With regards to the Medicaid program, Price stressed that 20 years ago, annual government spending on Medicaid was less than $200 billion; and that within the next decade, that figure is estimated to top $1 trillion. Despite these investments, Price noted that: (1) one-third of doctors in America do not accept new Medicaid patients; and (2) research shows that enrolling in Medicaid does not necessarily lead to healthier outcomes for the newly eligible enrollee.

To illustrate the failure to achieve healthier outcomes, Price pointed to the results of an Oregon Health Insurance Study that replicated a randomized clinical trial by enrolling some uninsured people in Medicaid through a lottery. Comparing this population to those who remained without coverage, the data showed an increase in emergency room use for primary care, the probability of a diagnosis of diabetes, and the use of diabetes medication. The data also showed no significant effects on measures of physical health such as blood pressure, cholesterol, or average glycated hemoglobin levels (a diagnostic criterion for diabetes).

According to Price, “This mixed impact of Medicaid coverage on health outcomes suggests we need structural reforms that equip states with the resources and flexibility they need to serve their unique Medicaid populations in a way that is as compassionate and as cost-effective as possible.” This is what the President’s FY 2018 budget does, according to Price. It uses state innovation to save and strengthen Medicaid by unleashing state-level policymakers to advance reforms that are tailor-made to meet the unique needs of their citizens. Price estimates that over the next decade, these reforms will save American taxpayers $610 billion.

CHIP

Price further testified that the FY 2018 budget includes provisions to extend funding for the Children’s Health Insurance Program (CHIP). The budget would rebalance the federal-state partnership through a series of reforms, including ending the requirement under section 2001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) that states move certain children from CHIP into Medicaid and capping eligibility at 250 percent of the federal poverty level to return the focus of CHIP to the most vulnerable and low-income children.

Health security and preparedness

Price affirmed HHS’ role as “the world’s leader in responding to and protecting against public health emergencies — from outbreaks of infectious disease to chemical, biological, radiological, and nuclear threats — and assisting the health care sector to be prepared for cyber threats.”

To support HHS’ public health emergency preparedness and response, Price noted that the President’s budget provides $4.3 billion for disaster services coordination and response planning, biodefense and emerging infectious diseases research, and development and stockpiling of critical medical countermeasures.

Key Public Health Priorities

In his testimony, Price described three new public health crises: (1) serious mental illness; (2) substance abuse, particularly the opioid abuse epidemic; and (3) childhood obesity. He stressed his commitment to these new challenges and noted that the President’s budget would:

  • invest $5 million in new funding authorized by the 21st Century Cures Act for Assertive Community Treatment for Individuals with Serious Mental Illness;
  • include a demonstration within the Children’s Mental Health Services program to test the applicability of new research from the National Institute of Mental Health on preventing or delaying the first episode of psychosis;
  • provide $811 million — an increase of $50 million above the FY 2017 continuing resolution — in support of HHS’ five-part strategy to combat the opioid epidemic; and
  • establish a new $500 million America’s HealthBlock Grant, which will provide flexibility for states and Tribes to implement specific interventions, including those designed to spur improvements in physical activity and the nutrition of children and adolescents, and to treat leading causes of death such as heart disease.

Women’s health services

Price also testified that the President’s budget would increase funding for the Maternal and Child Health Block Grant and Healthy Start to improve the health of mothers, children, and adolescents, particularly those in low-income families. The budget would also maintain funding for a variety of programs serving women, including, community health centers, domestic violence programs, women’s cancer screenings and support, mother and infant programs, and the Office on Women’s Health.

FDA considers simplifying agricultural water standards under the FSMA produce safety rule

In response to industry feedback, the FDA is considering the simplification of the microbial quality and testing requirements for agricultural water established by the Food Safety Modernization Act’s (FSMA’s) (P.L. 111-353) produce safety rule while still protecting public health.

The FSMA’s produce safety rule (80 FR 74353) establishes two sets of criteria for microbial water quality of agricultural water, both of which are based on the presence of generic E. coli, which can indicate the presence of fecal contamination:

  • No detectable generic E. coli are allowed for certain uses of agricultural water in which it is reasonably likely that potentially dangerous microbes, if present, would be transferred to produce through direct or indirect contact. Examples include water used for washing hands during and after harvest, water used on food-contact surfaces, water used to directly contact produce (including to make ice) during or after harvest, and water used for sprout irrigation. The rule establishes that such water use must be immediately discontinued and corrective actions taken before re-use for any of these purposes if generic E. coli is detected. The rule prohibits use of untreated surface water for any of these purposes.
  • The second set of numerical criteria is for agricultural water that is directly applied to growing produce (other than sprouts). The criteria are based on two values, the geometric mean (GM) and the statistical threshold (STV). The GM of samples is 126 or less colony forming unit (CFU) of generic E.coli per 100 mL of water and the STV of samples is 410 CFU or less of generic E.coli in 100 mL of water.

If the water does not meet these criteria, corrective actions are required as soon as is practicable, but no later than the following year. Farmers with agricultural water that does not initially meet the microbial criteria have additional flexibility by which they can meet the criteria and then be able to use the water on their crops. These options include, for example:

  • Allowing time for potentially dangerous microbes to die off on the field by using a certain time interval between last irrigation and harvest, but no more than four consecutive days.
  • Allowing time for potentially dangerous microbes to die off between harvest and end of storage, or to be removed during commercial activities such as washing, within appropriate limits.
  • Treating the water.

The produce safety rule bases testing frequency on the type of water source (i.e. surface or ground water).

Testing Untreated Surface Water

In testing untreated surface water that is directly applied to growing produce (other than sprouts), the FDA requires farms to do an initial survey, using a minimum of 20 samples, collected as close as is practicable to harvest over the course of two to four years. The initial survey findings are used to calculate the GM and STV (these two figures are referred to as the “microbial water quality profile”) and determine if the water meets the required microbial quality criteria.

Testing untreated ground water

For untreated ground water that is directly applied to growing produce (other than sprouts), the FDA requires farms to do an initial survey, using a minimum of four samples, collected as close as is practicable to harvest, during the growing season or over a period of one year. The initial survey findings are used to calculate the GM and STV and determine if the water meets the required microbial quality criteria.

For untreated ground water that is used for the purposes for which no detectable generic E. coli is allowed, the FDA requires farms to initially test the untreated ground water at least four times during the growing season or over a period of one year. Farms must determine whether the water can be used for that purpose based on these results.

Testing public water supplies

There is no requirement to test agricultural water that is received from public water systems or supplies that meet requirements established in the rule (provided that the farm has public water system results or certificates of compliance demonstrating that the water meets relevant requirements), or if the water is treated in compliance with the rule’s treatment requirements.

Industry feedback

The feedback that the FDA has received in response to the produce safety rule is that some of these standards, which include numerical criteria for pre-harvest microbial water quality, may be too complex to understand, translate, and implement. These factors can be important to achieving high rates of compliance.

FDA response

In response to these industry concerns, the FDA is considering how it might simplify the water standards. The FDA indicates it intends to work with stakeholders as these efforts related to the water standards proceed.

 

PDUFA VI reauthorization would aid 21st Century Cures Act implementation

Since 1992, the Prescription Drug User Fee Act (PDUFA) has authorized the FDA to collect user fees from biopharmaceutical manufacturers to supplement Congressional appropriations. Revenues from these fees are used on activities related to the review and regulation of new drug products. In exchange for these fees, the FDA commits to meeting certain performance goals, such as reviewing applications within specified timeframes. The FDA’s ability to collect these fees must be reauthorized every five years. Each five-year reauthorization sets a total amount of fee revenue for the first year and provides a formula for annual adjustments to that total based on inflation and workload changes.

On March 22, 2017, the House Energy and Commerce Committee’s Subcommittee on Health held a hearing to examining the PDUFA program. PDUFA, as reauthorized by the Food and Drug Administration Safety and Innovation Act of 2012 (FDASIA) (P.L. 112-144), expires in September 2017, and must be reauthorized for the fiscal years 2018 to 2022.

This will be the sixth reauthorization of PDUFA. The proposed agreement (PDUFA VI), builds upon process improvements enacted pursuant to FDASIA, including enhanced support for the Breakthrough Therapy Program. Further, it would aid in the implementation of several key provisions in the 21st Century Cures Act and further streamline the development and review of innovative new drugs for patients. The FDA estimates that the fees negotiated in PDUFA VI will average approximately $1 billion per year.

At the hearing, the following individuals testified on how the program has been implemented to date and presented recommendations pertaining to its reauthorization:

Allen

In his testimony, Allen pointed out that: “Prior to the initial user-fee authorizations, patients in other parts of the world were gaining access to new medicines faster than Americans, with only about 10 percent of new treatments reaching U.S. patients first.” That paradigm has largely been reversed, according to Allen. “Between 2003 and 2016, 73 new cancer drugs were approved by both the FDA and EMA [European Medicines Agency]. Of those drugs, 97 percent (71 of 73) were available in the U.S. before Europe. Furthermore, the FDA approved new cancer drugs on average nearly 6 months faster than the EMA.”

Allen also stated that PDUFA VI:

  • Advances the role of patients and their experiences;
  • supports the continued success of the Breakthrough Therapy Designation, a designation that may be given to a drug intended to treat a serious illness for which preliminary clinical evidence indicates a substantial improvement over any existing interventions. To date, 170 Breakthrough Therapy Designations have been granted, leading to 79 indications approved by the FDA using this process;
  • promotes qualifications and the use of drug development tools;
  • enhances the use of real-world evidence in regulatory decision-making; and
  • effectively communicated scientific advances.

Allen cautioned, however, that “proposed cuts to biomedical research will put the brakes on the engine of discovery, abandon progress on new tools to enhance product evaluation, impede opportunities for new businesses in the biotech sector, and most perilously, jeopardize the development of new medicines for patients desperate for progress.”

Pritchett

In supporting PDUFA VI reauthorization, Pritchett stated: “For nearly twenty-five years, PDUFA has provided much needed resources to the FDA’s human drug review program that has resulted in greater certainty and predictability for patients who depend on safe and effective innovative medicines.” Pritchett also noted the following benefits under PDUFA:

  • The FDA has approved over 1,500 new drugs and biologics since 1992, including treatments for cancer, cardiovascular, neurological, infectious and rare diseases.
  • The number of new medicines being approved on their first review cycle is at a historic high, including approvals for new medicines to treat rare diseases.
  • Review times for drug applications have dropped by nearly 55 percent.
  • The median approval time for standard applications has decreased from 22.1 months in 1993 to an estimated 10 months in 2015.
  • The median approval time for priority applications has similarly decreased from 13.2 months in 1993 to an estimated 7.9 months in 2014.

Pritchett concluded: “At a time when the U.S medical innovation ecosystem is facing severe strains and increased global competition, it is imperative that the FDA is equipped to help us deliver the next generation of new treatments and cures to meet patients’ unmet medical needs. PDUFA VI will help the FDA ensure that patients receive effective and lifesaving drugs, while maintaining the United States’ global leadership in biomedical innovation.”

Holcombe

Holcombe’s testimony cautioned Congress on the cost of the program: “Since 2002, the PDUFA program has grown at an average of 11 percent per year; this is unsustainable moving into the future. Changes are needed that address the fee collection structure to increase efficiency and reduce administrative burdens for both FDA and companies.”

Holcombe believes that the proposed PDUFA VI agreement would address these concerns by:

  • limiting the carryover balance levels, thus reducing possible over-collection of fees and the need for complicated administrative mechanisms to deal with such over-collections;
  • eliminating supplement fees, which will further simplify fee collections;
  • replacing the current product and manufacturing fees with a new program fee that will constitute 80 percent of the annual fee collections; and
  • reducing the percentage that application fees contribute to the total from the current 33 percent to 20 percent, thus mitigating the overall impact of this difficult-to-predict revenue source.

Holcombe also pointed out the benefits of important overlaps between provisions in the 21st Century Cures Act and the proposed PDUFA VI agreement. She offered the following examples of overlap:

  • The 21st Century Cures Act and PDUFA VI are complementary, in terms of ensuring that FDA (1) has and uses effectively an efficient process for qualifying biomarkers; (2) publishes guidance to help applicants for biomarker qualification understand the taxonomy and data standards; (3) makes public a list of qualified biomarkers and pending applications; and (4) engages external experts in biomarker qualification.
  • Patient-focused drug development. Guidance development, public meetings, development of methods and standards for collecting information and data, and use of patient perception and experience information in the FDA regulatory decision about the benefits and risks of a drug are all elements of both 21st Century Cures and the PDUFA VI agreement.
  • Real-world evidence. The 21st Century Cures Act provides helpful context for the work under PDUFA VI, and provisions of the two that differ are easily harmonized.
  • Innovative trial design. While the 21st Century Cures Act focuses on adaptive trials and Bayesian approaches, PDUFA VI takes a broader approach, opening its pilot program to other trial designs while also highlighting adaptive trials and Bayesian approaches.

Holcombe concluded by indicating the Biotechnology Innovation Organization strongly supports and applauds the enactment of 21st Century Cures, and it strongly supports the PDUFA VI proposed agreement.

Woodcock

At the hearing, Subcommittee Vice Chairman Brett Guthrie (R-Ky) asked Woodcock for an update on the FDA’s Oncology Center of Excellence, a key component of 21st Century Cures and a committee-supported initiative. Woodcock elaborated on the center’s structure and the important work it will be doing.

With regards to PDUFA VI, Woodcock noted: “The PDUFA VI reauthorization proposal . . . was submitted to Congress in December under the previous Administration, and reflects a different approach to the federal budget.” She also stated: “Center to PDUFA VI, and its largest single investment component, are plans to elevate patient voices in developing new drugs to treat their diseases. The agreement shares the committee’s goals reflected in the 21st Century Cures Act – and the highest priority of our stakeholders – to leverage essential patient input and insights to fight disease.”

Will the AHCA affect Medicaid’s nonelderly adults with disabilities?

The changes to Medicaid under the American Health Care Act (AHCA), as approved by the House Energy and Commerce Committee, carries potential implications for the nearly seven million nonelderly adults with disabilities currently covered under Medicaid, according to a Kaiser Family Foundation (KFF) issue brief. KFF’s issue brief describes how the AHCA would change Medicaid and offers insight on its potential effect upon nonelderly adults with disabilities by examining the type of insurance nonelderly adults with disabilities have, how they qualify for Medicaid, what their characteristics are, what services they receive from Medicaid, and how much Medicaid spends on the disabled.

The AHCA would change Medicaid in three major ways: (1) it would change Medicaid’s financing structure to a per capita cap, resulting in an estimated $880 billion reduction in federal Medicaid spending from 2017 to 2026, according to the Congressional Budget Office (CBO cost estimate of AHCA) (see CBO: Republican plan saves billions as 24M lose coverage, Health Law Daily, March 14, 2017); (2) it would repeal the enhanced federal matching funds for Patient Protection and Affordable Care Act’s (ACA, section 2001) (P.L. 111-148) enrollees as of January 1, 2020, except for those enrolled by December 31, 2019, who do not have a break in eligibility of more than one month; and (3) it would end the enhanced federal matching funds for Community First Choice (CFC) (ACA, section 2401), which provides attendant care services for people with disabilities, as of January 1, 2020 (see ‘American Health Care Act’ earns first stamp of approval, Health Law Daily, March 9, 2017).

Here is a summary of the KFF findings:

  • Type of health insurance. Thirty-six percent of nonelderly adults with disabilities are working for pay compared to 77 percent of those without disabilities. Among those who are working, 64 percent have access to employer-sponsored health insurance, compared to 68 percent of nondisabled workers. Thirty-one percent of nonelderly adults with disabilities have Medicaid, compared to 10 percent of those without disabilities. Only 41 percent have private insurance, compared to 74 percent of those without disabilities.
  • How do they qualify for Medicaid? KFF found that some nonelderly adults with disabilities are eligible for Medicaid through the ACA’s Medicaid expansion and some through a disability-related pathway based on both their low income and functional limitations.
  • Nearly 85 percent of nonelderly adults with disabilities have incomes below 200 percent of the federal poverty level (FPL) ($24,120 per year for an individual in 2017). Fifty-seven percent are white, 23 percent black, 16 percent Hispanic, and 3 percent Asian. About one-third of those enrolled in Medicaid have three or more functional limitations, which is more than two and one-half times the rate for those disabled who are privately insured and more than double the rate of those who are uninsured.
  • What services do they receive from Medicaid? Through Medicaid, nonelderly adults with disabilities have access to regular preventive care as well as medical care for illnesses and chronic conditions. States must provide certain minimum services for adults, such as inpatient and outpatient hospital, physician, lab and x-ray, and nursing home services. States also can choose to provide a broad range of optional services, including prescription drugs, physical therapy, private duty nursing, personal care, rehabilitative services, and case management. Most home and community-based services (HCBS) are also provided at the option of the state.
  • ACA expansion options. Section 2001 of the ACA offered states the option to expand Medicaid to nearly all nonelderly adults with income up to 138 percent of the FPL. As of 2017, 32 states have adopted the expansion. Section 2401 of the ACA created the CFC option to provide attendant care services and supports with a 6 percent enhanced federal matching funds. Eight states elected this option as of 2016. Section 2402 of the ACA also allowed states (17 as of 2015) to offer HCBS through the section 1915(i) option ( Sec. Act §1915(i)), which allows states to serve people with functional limitations that do not yet rise to an institutional level of care. Section 2703 of the ACA also created the Medicaid health homes option, which enables states (22 as of 2016) to provide care coordination services for people with chronic conditions at a 90 percent enhanced federal match for the first two years.
  • How much does Medicaid spend on people with disabilities? As of 2011, people with disabilities accounted for 15 percent of total Medicaid enrollment but 42 percent of program spending. Per enrollee spending for people with disabilities totaled $16,643 in 2011, more than five times higher than for adults without disabilities ($3,247) and nearly seven times higher than for children without disabilities ($2,463). One-half of states spend between $15,000 and $19,999 per enrollee for people with disabilities, and another third of states spend between $20,000 and $34,999 per enrollee for people with disabilities.

KFF believes that the AHCA’s per capita cap and elimination of the enhanced federal financing under the ACA expansion will put the states under budgetary pressures due to a reduction in Medicaid funds. It believes that these budgetary pressures may result in the limitation of Medicaid services for recipients, including the nonelderly disabled. KFF believes that careful consideration of the AHCA implications is warranted.