We examine the Medicare Trustees 2018 Annual Report, which says Hospital Insurance funds will be depleted by 2026. Learn more.

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June 8, 2018


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Rocking (Into) the Red: Medicare Trustees Report Highlights Upcoming Deficits


On Tuesday, the Medicare Trustees released their 2018 Annual Report of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. Established by the Social Security Act, the Board of Trustees is responsible for overseeing the financial operations of Medicare’s Hospital Insurance (HI) (Part A) and Supplementary Medical Insurance (SMI) (Part B and Part D) Trust Funds and is required to publish these findings and assessments in an annual report to Congress.

The 2018 Trustees Report projects the depletion of the HI Trust Fund by the year 2026, 3 years earlier than last year’s report. According to the Board’s projections, 2017 marks the last year where trust fund income exceeds expenditures, and the fund will be operating at a deficit until it becomes depleted in 2026. The report explains that the increase in expenditures and decreased funding of the HI Trust Fund will be due to legislative-driven increases in spending and lower incoming payroll taxes and Social Security taxes, respectively.

Since the Trustees project Part B and Part D revenues to grow, they do not anticipate a similar depletion of the SMI Trust Fund. Specifically, the report indicates that the Part D account in the SMI trust fund will be adequately financed for an “indefinite” period under the current methodology of financing. In comparison to the 2017 report, the 2018 projected Part D expenditures are lower than previously projected. The Trustees largely attribute this discrepancy to “higher manufacturer rebates, a decline in spending for hepatitis C drugs, and a slowdown in spending growth for diabetes drugs.”

The findings and assessments provided in the 2018 report have considerable implications that are calling for action across multiple stakeholders, particularly to address the increasing rate of expenditures and the long-term financial viability of the Medicare program. Unfortunately, since the Part A depletion is projected to occur beyond the terms of current officeholders, program reform to restore sustainability may not occur until the situation grows more dire.


Don’t Go Back to Rockville, REMS Guidance Released


Last week, Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced the release of 2 draft guidances to help more generic drugs with safety restrictions get onto the market faster—a major goal of the Trump administration’s plan to lower drug prices.

One new guidance outlines the process in which brand and generic manufacturers must share the Risk Evaluation and Mitigation Strategies (REMS) that the FDA places on certain drugs whose safety monitoring is mandatory. Generics are required to carry the same REMS as their brand equivalents, but many believe reaching a deal on a “shared REMS” has been a tool used by brand manufacturers to delay generics entry to the market.

A second guidance outlines when and how the FDA will consider waivers from required single, shared REMS and how generic manufacturers can request the waivers. The FDA will waive the requirement if the generic’s REMS is different but comparable to that for the brand, if the burden for a single REMS outweighs the benefit, or an aspect of the REMS is covered by a patent or trade secret.

These 2 draft guidances further advance the FDA’s goal to encourage competition from generic manufacturers to lower prices by removing what it views as barriers to market entry.


On-Demand Webinar: The Emergence of Copay Accumulator Programs—Recent Research and Potential Impact on Patients


The Accumulator model presents new challenges to patients and manufacturers as it continues to gain traction in the marketplace.

Watch our on-demand webinar, featuring Lash Group’s Jim Dickey, Director, Product Experience, and Xcenda’s Corey Ford, Director, Reimbursement Strategy & Tactics, as they present exclusive research findings on copay Accumulator programs and their impact on manufacturers and patients.

Gain insights on:

  • Emerging trends in copay assistance
  • Research-based evidence on payer restrictions
  • Impact on patients and patient programs
  • Considerations for manufacturers



Legislative Bytes


HPW Rebuild


Nothing Cavalier About Expanding Medicaid in Virginia


Yesterday, Gov. Ralph Northam (D) signed Medicaid expansion into law, making Virginia the 33rd state to adopt the optional Affordable Care Act (ACA) program. The remaining 18 states are mostly Republican-led. Virginia had resisted expansion, but 2 factors allowed the change: Democrats gained seats in the legislature last fall, and the Trump administration’s allowance of work requirements gave Republicans cover to vote for the expansion. However, the expansion plan must still be approved by the Trump administration.

Approximately 400,000 Virginians are expected to qualify under the expansion guidelines. However, those newly eligible will face the strictest expansion program in the country. The Commonwealth will require Medicaid enrollees to prove they are employed, studying, or volunteering and to pay premiums for their healthcare. The work requirement will start at 20 hours per month and incrementally increase to 80 hours and will have a “3 strikes and you’re out” enforcement approach; anyone who fails to certify for 3 months that they have met the work requirement will be expelled from Medicaid and barred from reenrolling until the following year.

Should the Trump administration approve Virginia’s plan, other Republican-leaning states may adopt the strict requirements and pursue expansion of their own. And any states with governorships or legislatures flipping to Democratic control in November or future elections may find the path to expansion to be much easier.


Bigger and Better Than Ever: Reorg of CDER in the Forecast


This week, Dr. Janet Woodcock, Director of the FDA’s Center for Drug Evaluation and Research (CDER), announced proposed changes to the center that ensure over-the-counter and prescription drugs are safe and effective for consumers. With support from FDA Commissioner Scott Gottlieb, the proposal will alter regulatory and review operations and restructure the center to align with the changing landscape of how new innovative technologies and scientific and medical discoveries are affecting drug development and research.

In a blog post announcing the proposal, Dr. Woodcock outlined some of the potential changes, which focus on enhancing efficiency, strengthening collaborations, and supporting innovation in drug development and research. More specifically, she proposes:

  • To continue supporting development and approval of innovative therapies that meet unmet needs, the center will focus efforts on recruiting scientific leaders from many disciplines
  • To enhance collaboration efforts in reviewing new drug applications, cross-disciplinary teams from multiple offices will be assigned from the start of a review
  • To streamline administrative operations, project management functions will be centralized for all divisions
  • To improve knowledge management, IT capabilities will be enhanced to better store and manage data and information from prior reviews. In addition, the number of offices overseeing review divisions will be increased from 5 to 9, and the number of divisions within those offices will be increased from 19 to 30
  • To emphasize the importance of safety throughout a drug’s lifecycle, the center will develop a safety surveillance framework to monitor drugs both before and after approval
  • To incorporate the patient voice, the center will continue efforts in supporting patient-focused drug development

Before any changes can occur, approval is required from Congress, the White House Office of Management and Budget, the Department of Health and Human Services, and the FDA.

The creation of more new therapeutic-specific divisions should promote more efficient reviews while also deepening internal collaboration and enhancing external scientific exchange. One of Commissioner Scott Gottlieb’s goals has been to increase the efficiency and performance of the agency, and this proposed reorganization should advance those efforts.


Question Everything: OIG Finds Part D Beneficiaries Paid More for Brand Drugs


A recently published Office of Inspector General (OIG) report examined how increases in reimbursement for brand-name drugs in Medicare Part D may be affecting Medicare and its beneficiaries. The OIG analyzed reimbursement amounts and utilization changes for Part D brand-name drugs from 2011 to 2015 and found the percentage of beneficiaries responsible for out-of-pocket (OOP) costs of at least $2,000 per year nearly doubled during that 5-year period.

While this OOP cost did not take into account third-party assistance such as low-income cost-sharing subsidies, group health plans, State Pharmaceutical Assistance Programs, or independent charitable copay foundations, the overall reimbursement after rebates increased 62% within the same time frame.

Plans have been efficient in reducing use of brand drugs 17%, but reimbursement still increased 77%, with rebates trimming that total by 15%.

The data suggest that reinsurance reimbursements paid once beneficiaries reach the catastrophic coverage phase have helped mitigate market pressures designed to reduce rates and resulted in the burden shifting to patients and taxpayers. It is important to note the methodology described in this report did not account for the Part D coverage gap discount paid by brand-name manufacturers in the calculation of reimbursement nor the donations made to copay foundations in the patient’s OOP costs.  

Brand-name manufacturers should consider the limitations of this report and evaluate options to highlight those limitations in pricing discussions.


I’ll See Your Bet and Raise You 2%: COA Sues HHS


In response to the Administration's Blueprint to Lower Drug Prices, the Community Oncology Alliance (COA), representing over 5,000 independent community-based oncologists, recently expressed strong concern over a lack of any measures to address the ongoing 2% sequester cut to drugs under Medicare Part B.

Last Wednesday, in a letter to Health and Human Services Secretary Alex Azar, COA addressed how the current reimbursement landscape is unsustainable for community-based oncologists and why legal action is now necessary. Failure to remedy this situation and the exhaustion of all other possibilities has led the COA to file a Complaint in the federal district court for the District of Columbia against the relevant federal agencies to stop the "unconstitutional application" of the sequestration.

In 2011, when the federal government was unable to agree to a balanced budget, automatic cuts were introduced, and in 2013, a 2% mandatory reduction in payment for all Medicare Part B services was implemented.

This lawsuit maintains that Health and Human Services (HHS) and the Office of Management and Budget (OMB) acted illegally in bypassing Congress and reducing the Part B drug payment formula from average sales price (ASP) + 6% to ASP + 4.3%. COA asserts that, by altering the payment rate, the federal agencies are overstepping their authority and are in violation of the “separation-of-powers” doctrine.      
Recently, COA reported on how the number of community-based oncologists continues to decrease (covered by Health Policy Weekly on May 4). As a consequence of the 2% sequester cuts, reimbursement is often below acquisition costs for many community-based oncologists. These same providers are doubly disadvantaged when competing against hospitals purchasing discounted drugs under the 340B Drug Discount Program. Over the last decade, 1,653 oncology clinics/practices were closed, or were acquired by corporate/hospital entities, or continue to have financial strains.  

COA argues in the lawsuit that the continued application of the sequestration will force the closure or consolidation of these practices, which will compromise patient access to care and increase the cost of care, especially for those in rural and underserved counties. Congress's most recent appropriations bill, approved in March, contains no provisions to cancel the current sequestration, which is slated to continue through until 2027.


Information Buffet (AKA, Other Stuff That Caught Our Attention)


We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:

HPW Rebuild


Value Assessments in the Age of Personalized Medicine May Require a Cultural Shift


On the closing day of the International Society for Pharmacoeconomics and Outcomes Research 23rd Annual International Meeting, in Baltimore, Maryland, stakeholders gathered to grapple with the role of value assessments in a healthcare landscape that is increasingly focused on the use of precision medicine in treating disease. Read more >


“I expect a lot of these people who we already do business with to call us up and say, what can we do to help? As you know, quite a bit of them are pissed off, which kind of pissed me off. I mean, they’re going to tell me I can’t do a better job for my employee? Isn’t that what they’re supposed to help me do anyway? So that’s all we’re trying to do, is do a better job for the health of our employees and the wellness of our employees.”

 – Jamie Dimon, Chairman and CEO, JPMorgan Chase & Co., providing an update on the company’s partnership with Amazon and Berkshire Hathaway on their healthcare partnership

Source: “JPMorgan Chase & Co. (JPM) CEO, Jamie Dimon Presents at Bernstein's 34th Annual Strategic Decisions Conference (Transcript),” Seeking Alpha, June 1



150 Million


UnitedHealthcare expects 150 million members to be in value-based programs by 2025.

Source: “UnitedHealth Group (UNH) Presents at Bernstein Thirty-Fourth Annual Strategic Decisions Conference – Slideshow,” Seeking Alpha, June 1


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Senior Director,
Health Policy

Scott Shields
Associate Director,
Health Policy



Amy Grogg, PharmD
Senior Vice President | Strategy & Commercialization | AmerisourceBergen Corporation

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Reimbursement & Policy Insights | Xcenda


Jennifer Le | Reeya Patel | Scott Shields | Diane Smith | Stephen Wilson


Kylie Matthews | Ellen Olson


June 8, 2018


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