Boost NIH funding, but in exchange for what?

As I am sure many of you are well aware, on July 10th the 21st Century Cures Act passed the House by a vote of 344 to 77. Those advocating in support of the mandatory National Institutes of Health (NIH) funding breathed a sigh of relief when the amendment offered by Rep. David Brat (R-VA), which would have made the funding discretionary, failed mere minutes before the House went on to vote for the entire bill.

Several other trivial amendments by comparison were agreed to by a voice vote earlier that day. But, what else made its way in? Important content of the bill regarding spending offsets had been negotiated before heading to the House floor. A provision that would have altered the timing of reinsurance payments to stand-alone prescription drug plans in Medicare Part D was removed, a decision that forced House Energy and Commerce Committee leadership to find $5 billion in savings elsewhere. Some pay-fors added to the bill during the Energy and Commerce’s mark up, such as limiting federal Medicaid reimbursement to states for durable medical equipment and reducing Medicare’s payment rates under the physician fee schedule for x-ray and other imaging services that do not use digital imaging technology, were preserved in the version that made it to the House floor. Other provisions that reformed Medicaid and Medicare spending were later added. These included:

  • A provision that would exclude authorized generics from the calculation of the average manufacturer price,
  • A provision that alters payments for Medicare Part B drugs infused via durable medical equipment,
  • A provision that extends and expands that use of prior authorization for power mobility devices so individuals under Medicare would have to obtain approvals before payments are made, and
  • A provisions that would expand HHS’s Office of Inspector General’s authority to use civil monetary penalties in cases of proven HHS grant or contract fraud.

In a Dear Colleague distributed on July 8th, Chairman Fred Upton (R-MI), Rep. Andy Harris (R-MD), and Rep. Michael Burgess (R-TX) wrote that the Act made cuts to Medicare and Medicaid spending resulting in a total of “$7 billion in additional savings for taxpayers.” In a clear attempt to win over fiscal hawks, they continued by writing, “For comparison, the widely-heralded Bipartisan Budget Act of 2013 (commonly referred to as “Ryan-Murray”) included less than $2 billion in Medicaid savings.”

Those numbers are likely based on a previous Congressional Budget Office (CBO) report, though. According to an updated CBO report, the section of 21st Century Cures Act that contains the cuts to Medicare and Medicaid spending results in a $10.6 billion decrease in mandatory spending. However, that section also includes a pay-for provision that directs the Department of Energy to sell crude oil from the Strategic Petroleum Reserve (SPR). Unfortunately, the updated CBO report doesn’t break down the numbers in the same way. The older CBO report indicates that spending could be offset by $5.4 billion by selling a total of 64 million barrels of oil. The most current version of 21st Century Cures increases the number of barrels to 80 million. After reasoning through the numbers, it seems that Medicaid and Medicare spending cuts are likely well below $7 billion in the version of the bill that passed the House and that a substantial portion of the savings is based on drawing off the SPR.

Taking a look at next steps forward as the Senate develops their version of a bill that reforms NIH and the Food and Drug Administration (FDA), using the SPR to offset costs will likely be contentious. In a Statement of Administration Policy, the White House opposed diminishing the SPR. Additionally, Senate Energy and Natural Resources Chairman Lisa Murkowski (R-AK) expressed concerns saying that the SPR “should not be used like an ATM” according to a CQ report. What is also of interest is that these conversations will likely be taking place as bigger budget and deficit deals are being discussed.

Chairman Upton met with Senate Committee on Health, Education, and Labor and Pensions leadership this week to urge them to use the 21st Century Cures Act as a foundation, but all sources indicate that the Senate Committee is taking a look at NIH and FDA reform with a fresh perspective. We expect the Committee to release their own draft legislation soon, but not before August recess. Stay tuned.

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