Major health care regulatory activity still to come under the Obama Administration

As many in the US prepare to shift their attention to the upcoming presidential debates and the final weeks of the campaign, the Obama Administration is poised to release some far-reaching regulations, which will have a significant effect on the health care marketplace, including a final rule on the new Medicare payment law and some changes intended to help shore up the health insurance Exchanges established under President Obama’s signature health care law.

Highlights of some of the most significant regulatory actions still to come in the final months of the Obama Administration are provided below.

Medicare payment reform

A final rule on the Merit-based Incentive Payment System (MIPS) and Alternative Payment Model (APM) incentives under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) currently is under review at the White House. MACRA is poised to drive payment and delivery system reform efforts across all payers for the foreseeable future and spur greater movement to risk-bearing, coordinated care models.

The final rule is expected to provide:

  • Greater detail on the additional options for MIPS participation that the Centers for Medicare and Medicaid Services (CMS) announced on September 8, 2016
  • A final list of Advanced APMs for the 2017 performance year
  • Final criteria for the Physician-focused Payment Model Technical Advisory Committee (PTAC) to use as they evaluate public submissions for new payment models

More than 4,000 comments were submitted on the proposed rule, which was published in the Federal Register on May 9, 2016.

In the coming months, CMS may publish a final rule on a pilot program to change the way Medicare pays for outpatient prescription drugs under Part B. The proposed rule – published in the Federal Register on March 11, 2016 — outlined a five-year pilot program through the CMS Innovation Center (CMMI) that would include two phases:

  • The first phase would reimburse clinicians using a formula based on the average sales price (ASP) of a drug + 2.5 percent, plus a $16.80 flat rate. Medicare’s current reimbursement formula is based on ASP + 6 percent, which some stakeholders say could incentivize the use of more expensive prescription drugs
  • The second phase of the pilot would have CMS adopt certain value-based purchasing (VBP) strategies in conjunction with the new payment formula. The proposed rule mentions reference pricing, indication-based pricing, and outcome-based risk sharing as potential models for promoting value

The proposed rule was met with strong opposition from the life sciences sector, and Republican and Democratic members of Congress alike raised concerns with the CMS proposal. Although the Department of Health and Human Services (HHS) Fall Regulatory Agenda indicates that a final rule will not be issued until March 2019, a CMS representative said the Administration has not changed its plan to release the final rule on the Part B drug payment model this year.

Affordable Care Act (ACA)

The administration on September 6, 2016, published the annual proposed Notice of Benefit and Payment Parameters for the ACA’s health insurance Exchanges. The proposed notice came months earlier than it has in previous years to allow for HHS to incorporate some of the proposed changes in the upcoming open enrollment period for the 2017 benefit year, scheduled to run from November 1, 2016, through January 31, 2017.

Proposed changes to the risk adjustment program and use of special enrollment periods are intended to help boost the stability of the Exchanges. The proposed notice follows announcements by several national insurers that they would exit the health insurance Exchanges in a number of states.

Although Congress last year delayed by two years the effective date for the ACA’s so-called “Cadillac tax” on high-cost employer-sponsored health coverage, the Internal Revenue Service (IRS) and the Department of the Treasury still might issue a proposed rule on the tax before President Obama leaves office. Under current law, the Cadillac tax will take effect beginning on January 1, 2020, rather than January 1, 2018.

Under the provision, health insurers and administrators of certain other health care benefits would face an excise tax of 40% if the total value of applicable employer-sponsored health benefits exceeded certain dollar thresholds. The thresholds would begin at $10,200 for individuals and $27,500 for all other coverage (Note: certain limited adjustments would be made to the thresholds to reflect the growth in health care costs since the ACA was enacted in 2010).

The Cadillac tax faces strong bipartisan opposition in Congress, but the Obama Administration has maintained support for the provision as a tool to help control the growth rate in health care spending.

Prescription drugs, medical devices, biosimilars

Final omnibus guidance on the 340B Drug Discount Program is under review at the White House. The HHS Fall Regulatory Agenda indicates that the final omnibus guidance will be released by December 2016. The Health Resources and Services Administration (HRSA), the agency within HHS that oversees the 340B Drug Discount Program, released draft guidance in August 2015.

Stakeholders are eagerly awaiting the final guidance to see what, if any, changes HRSA incorporates into the final guidance. Provisions in the proposed guidance makes significant changes to which drugs the program applies to and which provider entities are eligible for the discounts.

The life sciences industry has reached agreements with Food and Drug Administration (FDA) outlining performance goals for the agency as part of the negotiations to reauthorize the Prescription Drug User Fee Act (PDUFA), the Medical Device User Fee Act, the Generic Drug User Fee Act (GDUFA) and the Biosimilars User Fee Act (BsUFA). The industry hopes to finalize the agreements and win congressional approval in this session of Congress.

The draft MDUFA agreement states that FDA would collect $999.5 million in user fees plus adjustments for inflation over five years starting in October 2017, up from $595 million in user fees over the current five-year agreement. The total dollar figures for the draft agreements on PDUFA, GDUFA and BsUFA have not been announced.

The industry has voiced strong support for the agreements, which would continue many current programs and aim to expedite approval of products.

Anne Phelps
Principal | Deloitte Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
Latest conversations from Anne Phelps on Twitter

Daniel Esquibel
Senior Manager
Deloitte & Touche LLP

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