Strengthening Health Care and Lowering Prescription Drug Costs Act - H.R.987
BACKGROUND:
Three of the bills were bipartisan measures intended to help reduce prescription drug prices: HR 965, Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act (approved by a 51-0 vote, and by the Judiciary Committee by voice vote); HR 938, Bringing Low-cost Options and Competition while Keeping Incentives for New Generics (BLOCKING) Act (approved by voice vote, H Rept 116-46); and HR 1499, Protecting Consumer Access to Generic Drugs Act (approved by voice vote).
The other four bills seek to strengthen the Affordable Care Act; HR 987, Marketing and Outreach Restoration to Empower (MORE) Health Education Act (approved by a 30-22 vote); HR 1010, Prohibiting Short-Term, Limited Duration Insurance (approved by a 30-22 vote, and by the Education and Labor Committee by a 26-19 vote, H Rept 116-43); HR 1385, State Allowance for a Variety of Exchanges (SAVE) Act (approved by a 29-22 vote, H Rept 116-49); and HR 1386, Expand Navigators' Resources for Outreach, Learning and Longevity (ENROLL) Act (approved by a 30-22 vote, H Rept 116-50).
Drug Prices
Both Democratic and Republican lawmakers agree that the direct cost to patients for health care, especially for drugs, needs to be addressed quickly. Both sides also agree that one way to lower the cost of prescription drugs is to increase the availability of, and therefore patient access to, generic versions of brand name drugs.
Brand name drug companies, on the other hand, would rather retain their exclusive ability to make and sell the drugs they developed. Under the law, they have a period of exclusivity — a period of years where only the company that discovered and created the new drug is allowed to sell it and no generic versions can be made. Once this period of exclusivity is over, other companies are free to develop and sell generic versions of the drug. A generic version usually sells for a fraction of the price of the branded drug, and more generic versions lower the price even more.
Under current law, to encourage companies to make generic versions of existing drugs, the first company to substantially complete an application to the Food and Drug Administration for developing a generic drug secures a 180-day exclusivity period starting on the date they begin to market the drug — where they are the only company allowed to sell a generic version of the drug. Without this generic exclusivity period, most companies would never bother to develop the much-less-profitable generic versions of existing drugs.
To retain control over the market and maximize their profits, brand name drug companies strive to delay the entry of lower cost generic drugs.
Affordable Care Act
The 2010 health care overhaul (the Affordable Care Act, or ACA; PL 111-148, PL 111-152) was enacted in an effort to expand health care coverage for uninsured Americans through a combination of changes to the employer-based health insurance system, the creation of state-based health insurance exchanges through which individuals who don't get insurance through their employers could more easily purchase health insurance, and expansion of the joint federal-state Medicaid program.
The law sets minimum federal standards for health insurance sold on the state markets (including by establishing 10 essential health benefits that insurers must cover), it prohibits insurance companies from rejecting individuals based on preexisting health conditions or charging such individuals more for health insurance policies, and it allows insurance companies to charge older individuals premiums no more than three times the premiums charged to younger persons.
To help sustain the individual insurance markets and ensure that individuals don't buy insurance only when they get sick, the law also required most Americans to obtain and maintain health insurance or face a tax penalty (the individual mandate, which Congress effectively repealed in 2017 by setting the tax penalty at zero). And to help make insurance purchased on the state exchanges more affordable, it provides tax subsidies for the purchase of such policies.
Recent Actions
Republicans have sought to weaken or repeal the ACA since it was enacted, saying it is too costly and forces people to purchase plans they don't want.
In the 115th Congress, with GOP control of both chambers and the White House, Republicans had their best chance to repeal and replace the ACA but fell short in the Senate. President Trump and his administration subsequently began taking executive actions to modify the law, including by cutting funding for health exchange outreach and education, reducing the enrollment period, and allowing and encouraging the sale of health insurance plans that don't have to comply with the ACA's consumer protections — such as extending from three months to three years the length of time an individual can be on a less-costly short-term, limited-duration health insurance plan that is exempt from ACA patient protections.
Republicans in the 115th Congress did, as part of the 2017 tax law (the Tax Cuts and Jobs Act; PL 115-97), effectively repeal the ACA's individual mandate for health insurance. That was followed in February 2018 by a lawsuit by 20 Republican states, which argued that without the individual mandate the entirety of the ACA is unconstitutional. A federal court in Texas in December struck down the entire ACA, stating that the loss of the individual mandate makes the law unworkable and unconstitutional. Democratic state attorneys general appealed the decision, which is currently pending, and the House under its new Democratic majority filed a brief in support of the ACA, while the Trump administration has filed a brief supporting invalidation of the law.
Member Concerns
Supporters of the bill, primarily Democrats, say it will facilitate faster development and marketing of generic and biosimilar drugs and thereby help bring down drug prices, while also promoting enrollment in ACA health exchanges — which will reverse Trump's enrollment sabotage and help make affordable insurance available to more Americans. The navigator program and federal advertising and outreach efforts have been crucial in helping Americans understand the ACA and determine the best plan for their needs, but deep cuts to those programs have made it more difficult for Americans to get insurance through the ACA exchanges. They note that CBO estimates that expanding advertising and outreach alone will increase enrollment in ACA individual health plans and Medicaid by some 500,000 a year through 2029 and help reduce insurance premiums by 1% a year. Enabling more states to operate their own exchanges will also increase access to insurance and lower health care costs, they say, since state-based exchanges can be tailored to better serve the unique needs of their citizens and have been more effective at increasing enrollment and lowering costs than the federal HealthCare.gov portal.
Supporters also argue that revoking the administration's rule that expands junk health insurance will protect people from purchasing insurance that will provide little to no coverage when they really need it. Short-term, limited duration insurance plans were intended to provide temporary coverage in an emergency, such as when people are between jobs. By allowing individuals to carry such insurance for up to three years, rather than just three months, it appears similar to regular insurance — yet studies have shown that individuals buying such policies are not aware that it would not cover their preexisting conditions. And because of its lower cost, such policies will siphon off the healthiest individuals from the health insurance exchanges, thereby increases premiums for everyone else who needs full, comprehensive insurance.
Opponents of the bill, primarily Republicans, say they support the bipartisan provisions aimed at more quickly facilitating the development and marketing of generic and biosimilar drugs in order to reduce prescription drug prices, but say that by including partisan provisions dealing with ACA exchanges, Democrats have undermined the bill and ensured it will never be signed into law. The ACA's health care exchanges and the insurance policies sold through them, like the whole of the ACA, are too expensive and don't function well, they say, and it makes no sense to throw more money at the problem — money they argue would be much better spent addressing the opioid crisis, for which the need is great and the results more apparent and immediate. Moreover, spending hundreds of millions of dollars on navigators, education and outreach are now unnecessary, they argue, since with elimination of the individual mandate people are no longer required to purchase health care insurance. They contend the navigator program in particular is wasteful and inefficient, but say if it must be funded the navigators should be required to help consumers by promoting all health insurance options, including association and short-term plans.
Opponents also object to bill provisions that would revoke Trump administration rules to make short-term, limited duration insurance plans more readily available to people seeking insurance. They say the most common complaint about health insurance under the ACA is that people cannot afford it because they are forced to purchase plans that cover things they don't want or need, and argue that younger, healthier people should not be required to pay for health care they don't want or need in order to subsidize the health care of older, sicker people. Despite no longer being required to have health insurance, they say people who want some form of minimal coverage should have equal access to the lower-cost short-term health insurance plans and association health plans that have been made available under the Trump administration.
SUMMARY: The Rules Committee is expected to make in order a modified version of the bill that combines the text of seven measures. Following is a summary of the bill as it is expected to be considered.
This bill includes a number of provisions intended to lower the price of prescription drugs by helping to bring generic and biosimilar drugs to market more quickly, and it seeks to bolster enrollment in Affordable Care Act marketplaces by restoring funding to promote ACA health plans and help individuals find affordable plans while also providing funding for states to establish their own state-operated health insurance marketplaces (rather than relying on the existing federal marketplace). In addition, it revokes a Trump administration rule that expands the availability of short-term health plans that don't have to comply with ACA consumer protections, such as protections for individuals with preexisting conditions.
In general, the savings to the government that would be generated by bringing generic drugs to the market more quickly are used by the bill to offset the increased spending for ACA outreach and enrollment navigators and the development of state-operated exchanges. As of press time Friday, the Congressional Budget Office (CBO) had not released a cost estimate for the combined seven-bill measure.
Accelerate Marketing of Generic Drugs
The bill includes several provisions intended to lower the price of prescription drugs by helping to bring generic and biosimilar drugs to market more quickly, including by: providing legal remedies to generic drug manufacturers to discourage brand name drug manufacturers from delaying the development of generic versions by withholding samples of the brand name drug; prohibiting agreements between brand name drug manufacturers and generic manufacturers to delay the entry of a generic drug into the market; and allowing the 180-day exclusivity period for a generic drug manufacturer to be triggered, and other generic versions to enter the market when that period concludes, in certain cases where the manufacturer with rights to exclusivity has failed to gain final Food and Drug Administration (FDA) approval and actually bring their generic to market.
Require Brand Name Companies to Provide Drug Samples
One tactic brand name drug companies use to delay the development of generic versions of a drug is to deny access to the drug to the company seeking to make a generic version. The FDA requires manufacturers of generic drugs to demonstrate that their version is chemically identical to the branded drug and produces the same results in patients. In order to meet these requirements, generic drug companies sometimes need as many as 5,000 samples of a drug to meet the generic drug testing requirements.
The bill establishes the right of a generic drug company to bring civil action against the license holder for a brand name drug if the license holder refuses to provide sufficient quantities of the drug to the generic manufacturer on commercially reasonable, market-based terms.
Under the measure, the generic drug manufacturer must demonstrate that the drug in question is not subject to Risk Evaluation and Mitigation Strategy (REMS) with elements to assure safe use (ETASU) or, if the drug is REMS with ETASU, that the generic drug company has developed its own safety protocol that has been authorized by the FDA (see below). The generic drug company must also demonstrate that it has requested to purchase samples of the drug and that the brand name company did not provided sufficient quantities of the drug on commercially reasonable, market-based terms within 31 days of receiving the request.
"Sufficient quantities" is defined by the measure as being enough drug to allow the generic manufacturer to conduct the drug testing required by the FDA.
(The measure's drug sample provisions constitute the text of HR 965. CBO estimates that these provisions would decrease direct spending by $3.3 billion and increase revenues by $609 million over 10 years, for net deficit reduction of $3.9 billion. CBO also estimates that the provisions would reduce spending subject to appropriations by $118 million over the 2019-24 period, assuming appropriation actions consistent with the provisions.)
Affirmative Defenses for Brand Name Manufacturers
The bill places the burden of proof on a generic drug company that brings a complaint that the brand name license holder withheld drug samples, and it provides an affirmative legal defense for brand name drug companies.
Specifically, defenses for a brand name drug company would include proof that when the generic drug company requested the samples it was not manufacturing the drug and did not have access to the drug; that if the drug is sold through agents, distributors or wholesalers the drug can be purchased through these agents in sufficient quantities and the brand name company did not restrict sales to the generic drug company; and that the generic company did not purchase the brand name drug from the licensed manufacturer when it offered to sell sufficient quantities at commercially reasonable market-based terms.
Legal Remedies
If the generic drug company wins a civil suit against a brand name drug company, the court must order the brand name company without delay to provide the generic drug company with sufficient quantities of the drug on commercially reasonable terms.
The brand name company must also pay the generic drug company's reasonable attorney's fees and the costs of the civil action, and courts must award to the generic drug company a monetary amount sufficient to deter the brand name company from failing to provide sufficient quantity of drugs to generic drug companies in the future. The maximum monetary penalty that can be awarded is the revenue that the brand name drug company earned on the drug from 31 days after the generic drug company made the request until it received sufficient quantities of the drug.
REMS with ETASU Drugs
Currently, brand name drug companies often deny access to samples of their drug if the drug is considered high-risk for side effects and is subject to an FDA distribution safety protocol called the Risk Evaluation and Mitigation Strategy (REMS).
The bill establishes a separate process by which a generic drug company can obtain samples of a branded drug that is subject to Risk Evaluation and Mitigation Strategy (REMS) with elements to assure safe use (ETASU).
Under the measure, within 120 days of receiving a request from a generic drug company for samples of a drug subject to REMS with ETASU, HHS must provide written notice of authorization for the generic drug company to receive enough drug samples for development and testing that does not involve human clinical trials, as long as the generic drug company complies with any conditions HHS deems necessary. If the generic drug company has also submitted safety protocols, informed consent documents and informational materials that include protections comparable to those provided by the existing REMS for the drug, HHS must will authorize the generic drug company to receive sufficient samples to conduct human clinical trials.
The measure also eliminates the current requirement that manufacturers of generic or biosimilar versions of high-risk drugs must use the same REMS risk management system as used by the brand-name manufacturer, instead allowing the FDA on a case-by-case basis to approve the use of comparable safety systems by generic manufacturers. If an alternate REMS would not satisfy the safety protocols, the manufacturer must use the same system as used by the brand name manufacturer.
Prevent Pay-for-Delay Agreements
One way brand name drug companies try to protect their drugs is to compensate other drug companies if they delay marketing generic versions of the drug. This tactic has been called "pay for delay" and is also known as a reverse payment agreement. Drug companies that want to sell a generic version may challenge an existing patent; the brand name drug manufacturer can then sue for patent infringement. Often the companies decide to settle: the generic company delays marketing its version and the brand name company provides compensation (the "reverse payment") to the generic company for the delay. The terms of these agreements are confidential, known only by the Federal Trade Commission. In 2013 the Supreme Court ruled that the FTC could scrutinize these pay-for-delay agreements and the FTC has been opposing them ever since. Consequently, drug companies no longer pay their competitors to delay marketing generic versions; instead, they offer compensation in different ways.
The bill prohibits brand name and generic drug manufacturers from entering into agreements under which the brand name company pays the generic company to delay the entry of a generic drug or biosimilar into the market, and it charges the FTC with enforcement — statutorily requiring the agency to investigate agreements between drug companies.
Specifically, the measure makes it unlawful for a drug patent holder and a company that wants to make a generic version of the drug to enter into an agreement or settle a patent infringement claim by having the manufacturer of the generic drug receive, directly or indirectly, anything of value from the brand name manufacturer. Generic drug companies that enter into unlawful settlements would forfeit their 180-day market exclusivity for the generic version of the drug.
Manufacturers would be permitted to enter into patent settlements if the payment of the settlement does not exceed $7.5 million for reasonable litigation expenses.
These provisions would apply only to future agreements entered into after the date of enactment. (These provisions are substantially similar to the text of HR 1499. CBO estimates that HR 1499 as reported by Energy and Commerce would decrease direct spending by $520 million and increase revenues by $93 million over 10 years, for net deficit reduction of $613 million. CBO also estimates that the provisions would reduce spending subject to appropriations by $24 million over the 2019-24 period, assuming appropriation actions consistent with the provisions.)
FTC Enforcement
In designating the Federal Trade Commission as the enforcing agency for preventing pay-for-delay agreements, the bill authorizes the FTC to issue penalties for violations and to initiate civil actions to recover penalties against drug companies that violate the law. Such civil penalties would be assessed separately from penalties for violating an FTC order. Penalties imposed under a civil action must be sufficient to deter future violations, but not greater than three times the value that can be reasonably attributed to the violation.
The measure provides for a six-year statute of limitations for the FTC to act on a settlement or agreement, and it authorizes the FTC to exempt certain agreements if it finds that the agreements would foster market competition and benefit consumers.
Allow Multiple Generic Applications
In recent years generic drug companies have engaged in a practice a practice known as "blocking," under which a company substantially completes the application for a generic drug and gains the right to 180 days of market exclusivity — but delays in getting final FDA approval and bringing the generic to market, which blocks other manufacturers from marketing their generic versions because the commencement and completion of the generic exclusivity period is also delayed. A company may do this because it has a deal with the brand name manufacturer to delay introduction of the generic.
The bill authorizes the FDA to give final approval for the generic version of a subsequent company under certain circumstances — at which time the 180-day exclusivity period for the initial company would begin, even if that company is not yet ready to market its generic drug, with the subsequent company eligible to market its generic once the exclusivity period concludes.
Specifically, under the measure the FDA could give final approval for a subsequent application for a generic version of a brand name drug and trigger the 180-day exclusivity period for the initial generic applicant if the following four conditions are met: the subsequent application is ready for full FDA approval; at least 30 months have passed since at least one company submitted an application for a generic version of the drug; any related patent litigation has been fully resolved; and no prior applicant has yet received final FDA approval.
(These provisions constitute the text of HR 938. CBO estimates that these provisions would decrease direct spending by $374 million and increase revenues by $68 million over 10 years, for net deficit reduction of $442 million. CBO also estimates that the provisions would reduce spending subject to appropriations by $17 million over the 2019-24 period, assuming appropriation actions consistent with the provisions.)
Promote ACA Health Plans
The bill includes a number of provisions that seek to bolster enrollment in Affordable Care Act marketplaces by restoring funding to promote ACA health plans and help individuals find affordable health care plans, while also providing funding for states to establish their own state-operated health insurance marketplaces (rather than relying on the existing federal marketplace).
It also revokes a Trump administration rule that expands the availability of short-term health plans that don't have to comply with ACA consumer protections, such as protections for individuals with preexisting conditions. Increasing the number of individuals who purchase ACA-compliant plans through the ACA's state exchanges would broaden the insurance risk pool and help reduce the cost of ACA health insurance.
Promote Enrollment on ACA Exchanges
The ACA provided for the establishment in every state of an online marketplace (or exchange) where individuals who were not otherwise covered by insurance could shop for health insurance plans. Plans sold on these exchanges must cover certain essential health benefits and include consumer protections defined by the law, although various levels of plans are sold (e.g., Bronze, Silver and Gold) that vary in premiums charged and amounts covered individuals must pay in out-of-pocket expenses. Financial assistance in the form of tax credits is provided to help subsidize the cost of health insurance for low-income individuals.
To help individuals understand the different health care plan options available to them and assist them in choosing a plan that best serves their needs, the law established "navigators" — people hired with federal funding to work one-on-one with individuals to help them choose a health plan through the exchange. The law also funded advertising and outreach efforts to help educate the public regarding the exchanges, requirements to have health insurance, enrollment periods, and other elements of the law.
Starting in 2017, as part of an effort to dismantle and replace the ACA, the Trump administration reduced funding for the navigators and shortened the amount of time the health insurance exchanges were open for annual enrollment and re-enrollment. The administration also reduced advertising of the open enrollment period. That funding was further reduced in 2018, with $10 million being provided for navigators (versus $63 million in 2016) and $10 million for public education and outreach (versus $100 million in 2016).
The bill provides $100 million per year for the ACA navigator program, starting FY 2020 (with the funds to be obligated from amounts collected through the user fees from participating health insurance providers), and it appropriates $100 million a year for consumer outreach and education activities.
The measure requires that in each state there be at least two separate entities that receive funding to provide navigator services, and it requires that such organizations provide face-to-face counseling and certain other services. The Health and Human Services (HHS) Department would be prohibited from selecting navigator program grant recipients on the basis of the entity's ability to provide information regarding short-term, limited duration health insurance or association health plans. HHS would also be prohibited from spending funds to promote association health plans, short-term, limited duration insurance plans, or any other plans that fail to provide comprehensive consumer protections, including coverage of the ACA's essential health benefits.
(The bill's navigator funding and provisions constitute the text of HR 1386, which CBO says would affect direct spending and revenues but for which it did not provide an estimate of the amounts, while the education and outreach funding and provisions constitute the text of HR 987, which CBO estimates would increase direct spending by $11.8 billion and decrease revenues by $1.7 billion over 10 years, for a net increase in the deficit of $13.5 billion.)
State-Based Health Insurance Exchanges
In requiring every state to have a health insurance exchange where individuals could purchase private health insurance coverage, the ACA generally gave states the option of establishing their own state-based exchange, using a federal exchange (which was established as HealthCare.gov), or jointly operating an exchange. Generally, states with Republican legislatures that opposed the ACA declined to establish their own exchange, and defaulted their citizens to seek insurance coverage through HealthCare.gov.
The Energy and Commerce Committee in its report on HR 1385 says that states that operate their own marketplaces have greater control over their insurance markets and can tailor consumer outreach and financial assistance to meet the needs of their population. It notes that enrollment in state-based marketplaces has remained stable with lower overall premiums compared to those on HealthCare.gov, and that state-based marketplaces that opted for longer open enrollment periods beyond the HealthCare.gov's shortened six-week period experienced higher enrollment gains in 2018.
The bill appropriates $200 million to allow states to establish their own state-based health insurance exchanges (prior federal funding under the ACA for states to establish their own exchanges ended after 2014). The funding would be provided to states in the form of grants for a period of two years; grants could not be renewed, and no grant could be awarded after Dec. 31, 2022. Grants can only be made to states that do not yet have a state-based exchange, and states must ensure that exchanges are self-sustaining starting Jan. 1, 2024. State-based exchanges could charge assessments or user fees to participating health insurance issuers (currently, health insurers offering plans through an exchange are charged a user fee of 3% on state exchanges and 3.5% on the federal exchange).
(These provisions constitute the text of HR 1385. CBO estimates that these provisions would increase direct spending by $196 million over 10 years.)
Revoke Short-Term, Limited Duration Insurance Rule
The bill prohibits the Health and Human Services, Treasury and Labor departments from taking any action to implement, enforce or otherwise give effect to the regulation entitled "Short-Term, Limited Duration Insurance" that was issued by the Centers for Medicare and Medicaid on August 1, 2018, and it prohibits the departments from developing any substantially similar rule.
Short-term, limited duration insurance plans are outside the ACA and do not have to comply with the ACA's patient protection requirements. Consequently, insurers selling such plans may charge higher premiums based on health status or other factors such as gender or age, may exclude coverage for preexisting conditions and for other categories of benefits such as prescription drugs, and may impose annual or lifetime limits on benefits.
Such plans traditionally have been considered emergency health insurance intended to provide coverage for periods when an individual might be between jobs or recently unemployed. The Obama administration in 2016 issued a rule that limited the duration of such plans to three months, but the Trump administration's August 2018 rule allows that insurance to be effective for almost one year — with such coverage eligible to be extended for up to 3 years total.
(These provisions constitute the text of HR 1010. CBO estimates that these provisions would decrease direct spending by $7.8 billion and increase revenues by $1.1 billion over 10 years. CBO further estimates that the provisions would reduce spending subject to appropriations by $3.6 billion over the 2019-24 period, assuming appropriation actions consistent with the provisions.)
CBO Cost Estimate
As of press time, the Congressional Budget Office had not released a cost estimate for the modified version of the bill that combines seven measures.
