House Committee urged to extend funding for federal safety net programs

Extend funding for the Children’s Health Insurance Program (CHIP) to ensure continuity of coverage for children, particularly in light of the current uncertainty surrounding other sources of health coverage in the U.S., witnesses urged at a House Committee on Energy and Commerce hearing titled “Examining the Extension of Safety Net Health Programs.” The purpose of the hearing was to examine the extension of funding for two federal safety net health programs that provide health care and coverage for low-income adults and children, CHIP and the Community Health Center Fund (CHCF).

CHIP

CHIP is a program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but have no health insurance. It is jointly financed by the federal government and states, and the states are responsible for administering the program. A memo from the committee majority staff states that in fiscal year (FY) 2015, 8.4 million children received CHIP-funded coverage.

Section 2101 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) increased the CHIP enhanced federal medical assistance percentage (E-FMAP), which varies by state, by 23 percent from October 1, 2013 through September 30, 2019. Since the ACA did not include additional or extended funding for CHIP, MACRA extended funding through September 30, 2017. The Medicaid and CHIP Express Lane Option, Child Enrollment Contingency Fund, CHIP Qualifying State Option, and CHIP Outreach and Enrollment Grants also expire September 30, 2017.

At the hearing, Cindy Mann, partner at Manatt, Phelps & Phillips, touted the success of CHIP, which covers 8.9 million children nationwide. She stated that Congress must consider the overall level of funding for CHIP, in addition to the E-FMAP funds, which “are now fully integrated into states’ budgets and a key source of funding for sustaining CHIP.” She said that Congressional action is needed as soon as possible to ensure program continuity, budget certainty for states, and stable coverage for children, particularly those with special health care needs. She urged a five-year extension instead of two to provide needed stability (see Extend CHIP, protect DSH payments, MACPAC tells Congress, March 16, 2017).

Jami Snyder, Director of the Medicaid and CHIP programs for the state of Texas, noted that a decision to not reauthorize the CHIP program would result in a loss of over $1 billion in annual funding to the state of Texas and a loss of coverage for more than 380,000 Texas children.

Health Center Program

The Health Resources and Services Administration’s (HRSA) Health Center Program, authorized under Section 330 of the Public Health Service Act, awards grants to federally qualified health centers (FQHCs). The program is supported by discretionary appropriations and the CHCF, a mandatory multibillion-dollar fund established by Section 10503 of the ACA. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10) extended funding through fiscal year 2017. According to the staff memo, the CHCF represents over 70 percent of the Health Center Program’s FY 2016 funding.

Michael Holmes, the chief executive officer of Cook Area Health Services, an FQHC in Minnesota, testified that as a result of CHCF investments new FQHC were added in more than 1,100 communities. With the extension nearing its expiration date, he “strongly urged” Congress to renew funding for at least five years to allow FQHCs to provide a stable and reliable source of access to patients and recruit and retain a comprehensive health care workforce.

User fee program reauthorizations necessary for product development

The House Energy and Commerce Subcommittee on Health focused its attention on the FDA’s generic drug and biosimilar user fee programs by inviting the FDA and industry leaders to a hearing to discuss how the programs have been implemented to date and recommendations on reauthorization. Both the Generic Drug User Fee Amendments of 2012 (GDUFA) and the Biosimilar User Fee Act of 2012 (BsUFA) expire in September 2017 and must be reauthorized for the Fiscal Years 2018 to 2022. The hearing also discussed H.R. 749, the Lower Drug Costs Through Competition Act, which seeks to increase generic competition through a shortened review cycle of six months.

Background

Since 1992 and based on the Prescription Drug User Fee Act (PDUFA), Congress has authorized the FDA to collect fees from regulated industry to supplement congressional appropriations. Revenues generated from these fees have been used on specific activities related to the review and regulation of medical products. In exchange for industry agreeing to pay fees, the FDA agrees to meet certain performance goals, such as completing product reviews within specified timeframes. Industry concerns about the length of time it was taking the FDA to review generic drug applications, known as abbreviated new drug applications (ANDA), and the backlog of such applications pending at the agency led Congress to pass GDUFA as part of the Food and Drug Administration Safety and Innovation Act (FDASIA).

Likewise, the Biologics Price Competition and Innovation Act (BCPIA) of 2009, as passed with the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), established a new regulatory authority for the FDA to create an abbreviated approval pathway for biological products demonstrated to be “highly similar” to, or “interchangeable” with, a previously licensed biological product. As part of FDASIA, Congress passed BsUFA to authorize FDA to collect user fees from biosimilar product manufacturers.

Pew Charitable Trusts

Allan Coukell, Senior Director of Health Programs, The Pew Charitable Trusts presented testimony on rising pharmaceutical costs, within and beyond the user fee context. He noted the rising cost of new medicines—especially high-cost specialty drugs, which are only used by 1 to 2 percent of the population, but account for more than one-third of drug spending. Although the FDA’s approval processes outlined in the generic and other user-free agreements offer some potential to address drug spending, he stressed that competition via generic drugs.

As such, the Lower Drug Costs through Competition Act (H.R. 749) would award a generic priority review voucher to any manufacturer that brings a generic drug to market in cases of limited competition or a drug shortage. It would also establish a six-month timeline for FDA review of priority applications, faster than the GDUFA review. In addition to accelerated review, the Pew Charitable Trusts called for Congress to consider requiring greater transparency of contract terms and definitions between payers and pharmacy benefit managers (PBM), as well as mandating the ability to audit these deals, and ensuring that entities that advise purchasers on PBM contracts do not also have financial relationships with the PBMs themselves.

Association for Accessible Medicines

David Gaugh, Senior Vice President for Sciences and Regulatory Affairs at the Association for Accessible Medicines (AAM), which was previously known as GPhA—the trade association representing the manufacturers and distributors of generic prescription drugs, manufacturers and distributors of bulk pharmaceutical chemicals—testified that the best way of achieving the goal of providing patients access to generic alternatives is through the development of policies that promoted competitive markets. The AAM stressed that the best way to control drug costs generally was through policies that incentivize competition, such as GDUFA.

The user fee program supports small business by exempting them from a facility fee until the first ANDA in that facility is approved. The proposal also provides for a tiered structure of annual ANDA program fees based on small, medium, and large companies. Designing GDUFA to spread fees across industry to keep individual amounts as low as possible, the AAM believed the program would help assure that patients continue to receive the significant cost savings from generics alternatives.

Biotechnology Innovation Organization

Kay Holcombe, Senior Vice president, Science Policy, Biotechnology Innovation Organization (BIO), offered testimony to the Subcommittee on reauthorization of BsUFA and H.R. 749. BIO supported the reauthorization of BsUFA, as well as expressed its support for competition in the prescription drug marketplace not only between innovator biologics and biosimilars, but also between innovator drugs and generic drugs, which is the subject of H.R. 749. BIO urged the FDA to lay out its thinking on interchangeability and believed it was crucial for the FDA to clarify its expectations for the data needed to determine that a biosimilar product is interchangeable with its reference biological product. Such a determination could serve to encourage greater prescribing and use of biosimilars as the availability of biosimilar products increases, provided the determination is sufficiently rigorous.

As for H.R. 749, BIO did not adopt a position on the question of timelines for generic drug review or awarding certain generic drug applicants with priority review vouchers under the proposed legislation. BIO did note that it supported policy intended to lower drug prices through the promotion of competition in the drug marketplace, including the timely entry of generics and biosimilars once patents and exclusivities for innovator drugs have expired.

Biosimilars Council

Bruce Leicher, Senior Vice President and General Counsel at Momenta Pharmaceuticals, and Chair of the Biosimilars Council Board of Directors, a division of AAM, noted that the BsUFA reauthorization user fees were now tied to the level of resources needed and adjust with resource demand. As such, it was vital that Congress understood that the funding provided by user fees is in addition to, not a substitute for, congressional appropriations.

Biosimilars Forum

Juliana Reed, Vice President of Government Affairs for Coherus BioSciences, stated that the Biosimilars Forum entered into the BsUFA reauthorization negotiation process with four primary goals: (1) ensuring solid financial support for the program; (2) improving communication between the FDA and biosimilars product sponsors during the approval process to improve efficiency; (3) increasing transparency during the approval process and regarding the spending of user fees; and (4) preventing the expenditure of BsUFA funds on extraneous policy issues or activities that are not exclusive to biosimilars. The Biosimilars Forum was pleased to see that the BsUFA draft met these goals.

In addition, the Biosimilars Forum urged Congress require CMS to review its current reimbursement policy for biosimilars and make it consistent with FDA biosimilar policies. Specifically, it noted that the FDA policy on biosimilars acknowledges the unique nature of each biosimilar, and CMS should align its policy by assigning unique, individualized billing codes to each biosimilar.

FDA

Janet Woodcock, Director of the Center for Drug Evaluation and Research (CDER) at the FDA, discussed both GDUFA and BsUFA during her testimony before the Subcommittee. GDUFA achieved a number of notable goals during the course of its five-year authorization. The FDA approved or tentatively approved 835 ANDAs—the most approvals in the history of the agency—in fiscal year (FY) 2016 alone. The previous high was 619. In addition, approximately 25 percent of all currently approved generic drugs were approved over the past four years. Prior to GDUFA, ANDAs were approved in one review cycle less than one percent of the time. Now, approximately nine percent of ANDAs are approved in the first review cycle.

The FDA did note some challenges to GDUFA, namely submission completeness and volume of applications. Historically, it has taken on average about four review cycles to approve an ANDA as a result of deficiencies by generic drug sponsors in submitting complete applications. More work by both the FDA and industry will be necessary to have the filings be accurate the first time. Moreover, in FYs 2012, 2013, and 2014, the FDA received over 1,000, nearly 1,000, and nearly 1,500 applications, respectively, which taxed the agency’s ability to timely process the ANDAs.

The FDA was also supportive of and fully engaged with the development and approval of biosimilar and interchangeable products. One of the first steps in the development and review process for a biosimilar is for an applicant to join the FDA’s Biosimilar Product Development (BPD) Program. As of February 2017, 64 programs were enrolled in the BPD Program and CDER has received meeting requests to discuss the development of biosimilars for 23 different reference products. Moreover, the FDA finalized six guidances and issued four draft guidances during the timeframe in question. The FDA’s challenge, however, was a result of staffing shortages. Without additional staffing to handle the increased workload for biosimilar review, the FDA warned that review performance would be impacted.

Mylan calculated profitability using 37.5% tax it doesn’t pay

Mylan is being met with yet more derision after a profitability analysis released by the company to the Securities and Exchange Commission (SEC) revealed that its profits are calculated after factoring in a U.S. tax rate that is much higher than the actual rate—which the Washington Post reports is nearly nothing.

When Mylan CEO Heather Bresch appeared before the House Committee on Oversight and Government Reform to address the pen’s price increases, she claimed that the company receives about $100 of profit from each sale of the $608 EpiPen® 2-Pak (see Mylan CEO highlights EpiPen® access improvement efforts before House committee, Health Law Daily September 22, 2016). The SEC’s profitability analysis revealed that Mylan includes a 37.5-percent tax rate when calculating its net product profitability.

According to the Washington Post, Mylan relocated its headquarters to the Netherlands, which reduced its tax rate. In 2015, the company’s overall tax rate was 7 percent in 2015, but an independent tax expert reported that the U.S. tax rate is actually close to zero. Mylan argued that standard profitability analyses include tax for the jurisdiction reviewed. Representative Elijah Cummings (D-Md) expressed Congress’s skepticism over the numbers provided, and noted that Mylan has until Friday, September 30, 2016, to give Congress files that will allow the government to determine the company’s actual profits.