Welcome to the first Washington Update of 2020, where much has transpired since the last article. In December, Congress passed a spending bill to fund the government for fiscal year (FY) 2020 and fully repealed the medical device excise tax. Congress has also been active in the healthcare space, targeting efforts to lower the cost of prescription drugs and end surprise medical billing. In addition, the Administration has been busy proposing several new changes to Healthcare Common Procedural Coding (HCPCS) codes for medical devices to increase access to innovation. However, political dynamics continue to heat up at the start of the new year, with the House voting to impeach the president and the Senate voting to acquit the president, both along partisan lines. This division threatens to derail many of Congress’ bipartisan efforts, especially with lawmakers increasingly turning their attention to the upcoming 2020 elections.

Congress Repeals Medical Device Tax
On Dec. 17, 2019, the House passed two minibus packages that included appropriations for FY 2020. The first minibus, H.R. 1158—the Consolidated Appropriations Act 2020—contained the Defense, Commerce-Justice-Science, Financial Services and General Government, and Homeland Security appropriations bills, and passed the House on a 280-138 vote. The second minibus, H.R. 1865—the Further Consolidated Appropriations Act 2020—contained the Labor-Health and Human Services (HHS)-Education, Agriculture-Food and Drug Administration (FDA), Energy and Water, Interior-Environment; Legislative Branch, Military Construction-Veterans Affairs, State and Foreign Operations, and Transportation-Housing and Urban Development appropriations bills, and cleared the House on a 297-120 vote. Notably, the second bill permanently repeals three taxes established under the Affordable Care Act (ACA)—the “Cadillac” excise tax on high cost health plans, the annual tax on health insurance plans, and the 2.3 percent excise tax on medical devices. The Senate passed both bills on Dec. 19, 2019, and the next day, President Trump signed the bills into law. With the signing of the bill, the medical device excise tax was finally repealed after nearly 10 years of onerous uncertainty to medical device manufacturers. Repeal of the tax allows manufacturers the security to make multi-year investments in infrastructure and R&D to continue providing patients with lifesaving technology. Trade associations, business groups, and manufacturers played a key role in highlighting the burden and barriers to innovation posed by the tax, and commended members of Congress and the Administration for supporting innovation and a robust domestic manufacturing industry.

Other Congressional Actions in the Healthcare Space
Healthcare remains a top priority for Congress, as members of both parties strive to lower the cost of prescription drugs and end the practice of surprise medical billing. On Dec. 12, 2019, the House passed H.R. 3—the Elijah E. Cummings Lower Drug Costs Now Act—on a 230-192 vote, with all Democrats and two Republicans voting in favor. The bill would radically transform the payment system for prescription drugs by allowing the government to directly negotiate prices with manufacturers on a minimum of 50 of the most expensive drugs for both Medicare and private payers. The bill also caps seniors’ out-of-pocket spending in Medicare Part D at $2,000, while reforming the Part D benefit structure and shifting manufacturer exposure to 30 percent in the catastrophic phase and 10 percent in the initial coverage period.

However, H.R. 3 faces major hurdles in the absence of significant Republican support. In the Senate, Majority Leader Mitch McConnell (R-KY) said he would not allow a vote on H.R. 3 on the Senate floor. Meanwhile, the Administration has deemed House Democrats’ plan “unworkable.” The debate around drug pricing closely mirrors calls from the public to lower the cost of healthcare overall, which is seen as a high priority. This conversation has the propensity to affect all players in the healthcare system, including device manufacturers, heading into a chaotic 2020 election cycle. Legislative activity could intensify in late May when time-limited public health programs, known as “health extenders,” will expire without Congressional action. Donald Trump stated he would sign drug pricing legislation that makes it to his desk during his State of the Union address.

On Dec. 9, 2019, the Senate Health, Education, Labor, and Pensions (HELP) Committee and the House Energy and Commerce Committee reached a bipartisan agreement on surprise billing and measures to increase transparency in the healthcare system. The proposal would eliminate surprise billing by preventing providers from billing patients more than the in-network rate for out-of-network emergency care. Payment disputes between providers and insurers would be set at the median in-network rate for a geographic area, and third-party arbitration would kick in at disputes over $750. A statement from the White House applauded the bipartisan deal and the goal of holding patients harmless in surprise medical bills.

On Dec. 11, 2019, the House Ways and Means Committee announced its own bipartisan agreement to protect patients from surprise medical bills. The plan also attempts to hold patients harmless by preventing providers from billing more than the in-network rate for emergency services, but differs from the Energy and Commerce and Senate HELP Committee’s plan by relying more on arbitration to settle disputes between providers and insurers. Holding patients harmless from surprise medical bills has significant bipartisan support in Congress, but the details of a final surprise billing package are significant to insurers, hospitals, and physician groups; it remains unclear which proposal will win out. Like drug pricing, lawmakers face a looming deadline for action on “health extenders,” which could force Congressional action on surprise billing in late May.

Impeachment Divides Congress
On Dec. 18, 2019, the House voted along partisan lines to impeach President Trump on charges of abuse of power and obstruction of Congress. The first charge—abuse of power—cleared the House on a 230-197 vote. The second charge of obstruction of Congress passed on a 229-198 vote. No Republicans voted in favor of impeachment and Reps. Jeff Van Drew (D-NJ), Collin Peterson (D-MN), and Jared Golden (D-ME) were the only Democrats to vote no on one or both of the articles of impeachment. On Feb. 5, the Senate voted 52-48 to acquit the president of abuse of power and 53-47 to find him not guilty of obstructing Congress. Like the House, the vote was divided on partisan lines, with only one Republican, Senator Mitt Romney (R-UT), voting in favor of one of the articles of impeachment.

Although the process itself is over, the divisions created by impeachment still could impact how legislative and regulatory proposals advance through Congress and the Administration. The partisan impeachment process has increased friction between Democrats and Republicans working on legislation, such as bipartisan efforts to lower the cost of healthcare and prescription drugs. Additionally, the Trump Administration has had to dedicate significant resources to the impeachment inquiry, which may affect workflow in certain policy areas.

With just eight months until the Nov. 3 general election, impeachment will continue to complicate the narrative surrounding President Trump’s reelection campaign. With Republicans strongly united behind the President, votes against impeachment could impact several purple-state Republican Senators up for reelection in 2020, including Sens. Cory Gardner (R-CO), Martha McSally (R-AZ), and Susan Collins (R-ME). In the House, impeachment poses a significant challenge for the 31 Democrats currently representing districts won by President Trump in 2016. Out of these 31 Democrats, only three voted against one of the articles of impeachment; one Democrat—Van Drew—went as far as switching parties over impeachment, deciding to join the Republican Party on Dec. 19, 2019. Impeachment threatens to jeopardize Democrats’ hold on the House if voters see the party putting Trump’s impeachment ahead of other kitchen-table legislative priorities. The full impact of impeachment remains to be seen, but will ultimately be up to the voters at the ballot box in November.

HCPCS Coding Changes for Medical Devices
On Nov. 27, 2019, the Centers for Medicare and Medicaid Services (CMS) announced a long-awaited policy change that converted the coding cycle for HCPCS Level II codes from an annual cycle to either a bi-annual or quarterly cycle, depending upon the product, beginning in 2020. HCPCS Level II codes are alpha-numeric codes primarily used to identify products, supplies, and services not otherwise included in the Current Procedural Terminology (CPT) coding system. This policy has the potential to improve patients’ access to emerging medical technologies.

Prior to 2020, drug and device manufacturers only had one opportunity each year to apply for a HCPCS code. The annual process led to many coding complexities and work-arounds—for example, medical products are approved by the FDA throughout the year and need accurate codes in a more timely fashion than once per year. Now, as of January 2020, CMS has launched a quarterly HCPCS process for drugs and biologicals, as well as a bi-annual process for durable medical equipment, prosthetics/orthotics, and supplies (DMEPOS), and other non-drug/non-biological products. For medical devices, applicants will have two opportunities to apply for a HCPCS code: Cycle 1, where HCPCS applications were due by Jan. 6; and Cycle 2, where HCPCS applications are due by June 29. For Cycle 1, applicants will receive a preliminary coding decision from CMS by May 1, with final decisions in July. These codes will become effective on Oct. 1. For Cycle 2, applicants will receive a preliminary coding decision from CMS by Nov. 2, with final decisions by January 2021. These codes will become effective on April 1, 2021.

This change, however, has been highly anticipated for many months. On May 2, 2019, CMS Administrator Seema Verma spoke about prospective changes to the HCPCS coding processes at the Medical Device Manufacturers Association (MDMA) Annual Meeting. She alluded to the quarterly and bi-annual HCPCS processes for drugs and devices, respectively. Administrator Verma noted the Agency’s intent was to “unleash innovation” in the healthcare system, which would in turn, encourage a competitive marketplace that lowers the cost of care but increases the quality of and access to care. 

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Jeffrey J. Kimbell, president and founder of Jeffrey J. Kimbell & Associates Inc., represents 45 clients in the life sciences community seeking legislative and policy remedies in Washington. Founded in 1998, the firm provides strategic solutions to hand-selected clients seeking creation, modification, or proper implementation of public law.

David C. Rudloff is a senior manager of government affairs at Jeffrey J. Kimbell & Associates Inc.

Caroline P. Tucker is a senior manager of health policy and reimbursement strategy at Jeffrey J. Kimbell & Associates Inc.