CBO report examines bill designed to lower health care costs

The Congressional Budget Office (CBO) released a cost estimate stemming from S.1895, Lower Health Care Costs Act, which is intended to lower the cost of health care to individuals as well as to the federal government. The CBO and JCT estimate that several of the bill’s provisions would result in a reduction in the cost of health insurance that is subsidized through the federal government, through the Patient Protection and Affordable Care Act (ACA), or from employment-based plans. Overall, the agencies found that if S.1895 is enacted, there would be an increase in direct spending by approximately $18.7 billion in conjunction with an increase in revenues by $26.7 billion over the period spanning from 2019 to 2029, for a net decrease in the deficit of $7.6 billion (CBO Report, July 16, 2019).

The bill is divided into five titles, which the CBO considers individually in its cost estimate. The first title is related to surprise medical bills. Title I contains patient protections against surprise medical billing, such as prohibition against balance billing and by requiring insurers to treat out-of-network care as in-network care for purposes of computing copayments, coinsurance, deductibles and spending toward out-of-pocket limits. Moreover, Title I of the bill “would require insurers to reimburse out-of-network providers at the median in- network rate for a given provider type and geographic area.”

Title I would also affect private insurance premiums in four ways, each explained in the report. According to the CBO and JCT, estimated changes in the cost of these premiums varied according to insurance market and the type of plan. The net effect would be lower insurance premiums and savings to the federal budget. Additionally, in light of the creation of a means by which out-of-network services are reimbursed at median in-network rates, payments to all providers “would converge around those median rates.” This would reduce payments for in-network care. According to the CBO and JCT the most significant effects of Title I stem from these lower payments for in-network care. However, private insurance premiums are also affected by changes in payment rates.

Title II of the bill relates to reduction in the price of prescription drugs. The bill would modify the FDA’s framework for approval of certain drugs and biologics, which would ultimately pave the way for certain generics or biosimilar medications to make an earlier entry into the market. In the report, the CBO and JCT break down their estimates into various sections, citing the impact on direct spending and revenues for each section.

The CBO and JCT explain that in Title III, the bill imposes new rules governing insurers’ contracts with health care providers and pharmacy benefit managers, noting that sections 302, 303 and 306 of the bill specifically affect direct spending or revenues. The report describes the impact of tiered plans and estimates that increased enrollment in those type of plans would reduce spending for certain care, thereby reducing average health insurance premiums for employment-based coverage. The report also details the new requirements on pharmacy benefit managers.

The CBO and JCT also analyzes Title IV of the bill, noting that this section sets out to extend funding for certain federal health care programs, among other things raising the minimum age for the sale of tobacco products. One section of Title V delineates the requirements that health insurers create and maintain “application programming interfaces” the creation and maintenance of which would create new administrative costs. The CBO and JCT estimate the costs would be passed on to enrollees in the form of higher premiums. They estimate that balancing the increase in direct spending with the decrease in revenues, there would be an increase in the deficit for the relevant period.

The report also explains the estimates arising from the various sections of the bill are subject to uncertainty and lays out the nature of that uncertainty relating to different issues. It also explains that the bill imposes intergovernmental and private-sector mandates. CBO estimates that the former would average about $100 million annually and the latter, $15 billion annually. In each instance, the CBO estimates that in each of the first five years the mandates are in effect, those costs would exceed the respective threshold established in Unfunded Mandates Reform Act (UMRA). The CBO and JCT examine each mandate and estimate the impact upon outlays and revenues, as well as whether it applied to public, private or both types of entitles.

Trump nominates Gottlieb for FDA Commissioner

President Trump intends to nominate Scott Gottlieb, M.D., a resident fellow at the conservative American Enterprise Institute (AEI), clinical assistant professor at New York University School of Medicine, and a member of the HHS Federal Health IT Policy Committee, to the post of FDA Commissioner. The White House announced the nomination, which brought varied reactions from opposite sides of the aisle and a general positive response from the pharmaceutical industry, via a tweet from Press Secretary Sean Spicer.

Gottlieb served as the Deputy FDA Commissioner from 2005 to 2007 and previously served as a senior official at CMS. He has testified before Congress on numerous occasions as an AEI felllow, most recently with respect to EpiPen® price increases and “How Regulatory Barriers Inhibit Pharmaceutical Competition.” Gottlieb noted that FDA regulatory policy has made developing less expensive copies of complex drugs after patent expiration difficult, discussed how the 340B program has put “upward pressure on drug prices,” while noting other change in drug insurance coverage structure, and described obstacles to competitive single source drug pricing.

Various sources report that Gottlieb has close ties to the pharmaceutical industry. Scientific American noted that Gottlieb believes in a quicker approval process for new drugs, but has focused on shortening waiting times for large, clinical trials rather than doing away with efficacy considerations. He commented on this, to an extent, in remarks he made at the 21st Annual International Meeting of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) in May 2016.

Gottlieb has also issued commentary about the Patient Protection and Affordable Care Ac (ACA) (P.L. 111-148). In May 2016, he testified before Congress that the law’s tiered marketplace approach has aided consumers with plan selection, but has forced insurers into narrow design corridors. His testimony regarding the ACA also included a suggestion that CMS move away from mandates and towards incentives to encourage individuals to enter into the insurance market (see Is there a better way than the ACA? Hearing asks experts, Health Law Daily, May 12, 2016). More recently, he coauthored a piece with another AEI fellow, opining that President Trump’s election provided, “a generational opportunity to pursue a new direction for American health care” and making suggestions about how a new health care system should operate. The authors suggested that the system should provide a path to catastrophic health insurance for all, accommodate individuals with pre-existing health conditions, allow access to health savings accounts, and deregulate the medical services market.

Senator Lamar Alexander (R-Tenn), Chairman of the Committee on Health, Education, Labor & Pensions, touted Gottlieb’s “impressive qualifications” in a released statement. His colleague, Ranking Member Patty Murray (D-Wash), expressed “initial concerns” about the nomination, including Gottlieb’s “work with multiple pharmaceutical companies, medical device companies, and investment firms.”

FDA To Consider ‘Over-the-Counter-Plus’ for Certain Drug Approvals

The Food and Drug Administration (FDA) announced on February 28, 2012 it is seeking input on what it calls a “new paradigm” under which the agency would approve certain drugs that would otherwise require a prescription for over-the-counter (OTC) use under certain safe use conditions.

FDA said the safe use conditions would be specific to the drug product and might require the sale of the drug in predefined health care settings, such as a pharmacy. Additionally, some conditions of safe use could be designed to assist patients in self-selection of an appropriate drug or provide for follow-up monitoring during continued use. The conditions also could include requiring pharmacist intervention to ensure appropriate nonprescription use, the agency said in a notice published in the Federal Register.

FDA acknowledged that industry is developing technologies consumers can use to self-screen for a particular disease or condition and determine whether a particular medication is appropriate. For example, kiosks or other technological aids in pharmacies or on the internet could lead consumers through an algorithm for a particular drug product. The algorithm could consist of questions that help consumers properly self-diagnose certain medical conditions or determine whether specific drug warnings contraindicate their use of a drug, FDA said.

The agency said it also is considering whether the same drug product could be available simultaneously as both a prescription and as a nonprescription product with conditions of safe use. “Dual availability could help ensure greater access to needed medications by making obtaining them more flexible,” FDA said.

FDA said the requirement to obtain a prescription for appropriate medication may contribute to the “undertreatment” of certain common medical conditions, including high cholesterol, hypertension, migraine headaches, and asthma. For instance, some consumers do not seek necessary medical care, which may include prescription drug therapy, because of the cost and time required to visit a health care practitioner for an initial diagnosis and an initial prescription, the agency said. Some patients who obtain an initial prescription do not continue on necessary medication because they would need to make additional visits to a health care practitioner for a prescription refill. Additionally, some prescription drugs require routine monitoring by a doctor.

FDA said some doctor visits could be eliminated by making certain prescription medications available without a prescription but with certain other conditions of safe use that would ensure they could be used safely and effectively without the initial involvement of a doctor. In some cases, a doctor visit would be required for the initial prescription, but a certain number of refills could be authorized beyond those that would normally be authorized without a return visit under specialized conditions of safe use like with certain rescue medicines such as inhalers, the agency said.
In addition to improved health outcomes for consumers staying on their medications, the time and attention that physicians and other health care providers expend on routine tasks related to prescription refills reduces the time that they are available to attend to more seriously ill patients, FDA said. Eliminating or reducing the number of routine visits could free up prescribers to spend time with more seriously ill patients, reduce the burdens on the already overburdened health care system, and reduce health care costs.
“The world is changing and we have to change to with it,” said FDA Commissioner Dr. Margaret Hamburg. “We’re not talking about abandoning standards for safety and efficacy, we’re talking about leveraging opportunities in science so we can do a more effective job as regulators and also improve the drug development process.”
The over-the-counter-plus switch is one of several FDA proposals aimed at increasing access to established drugs or speeding up approval of experimental medications. After years of high-profile drug-safety cases in which the FDA restricted access to certain medications, the agency is increasingly highlighting its efforts help drugmakers get new innovative drugs on the market. The shift comes as drug companies and their allies in Congress have pressured the agency to speed up approvals. Interest in creating a third category of drug products – something other than prescription or over-the-counter status is not new. In October 2007, FDA announced a November 14, 2007 public meeting to discuss the creation of a “behind the counter” (BTC) class of drugs – i.e., a class of drugs available behind the counter at a pharmacy without a prescription but that would require the intervention of a pharmacist before dispensing. This meeting was followed by a March 2009 report by the Government Accountability Office (GAO) which laid out, among other things, arguments supporting and opposing the creation of a BTC drug category.

The FDA will hold a public hearing on the over-the-counter-plus proposal on March 22 and March 23, 2012 from 9 AM to 4 PM at the FDA’s White Oak Campus in Silver Spring, MD. Additional information on the meeting is available on the FDA Web site.