Legislative update

federal legislative update

April 30, 2019

Overview

Congress returned from a two-week recess and will pick up where they left off before the break on the budget and appropriations hearings for FY2020, the annual NationalDefense Authorization Act, as well as having many other issues on the horizon that include a major transportation and infrastructure bill, immigration, cyber, health insurance and drug pricing, and a new bipartisan deal raising the current budget caps. With the Justice Department releasing Special CounselRobert Mueller’s 448-page report (12% of which is redacted) on April 18 during the recess, lawmakers and staff have been reading through and responding.Judiciary Committee Chairman Nadler (D-NY) issued a subpoena for an unredacted version.

Budget & appropriations

Appropriations

G2G attended appropriations hearings in Congress, tracking the LHHS and DoD budget hearings in particular in the House and Senate. A range of issues were covered but it is clear that NIH Director Collins is very committed to increasing his budget and being able to make more NIH awards. He and several Members of Congress spoke about the importance of young investigators and building the pipeline of future research. While Director Collins stated the NIH does not develop drugs, it plays an essential role and through NCATS can partner with industry to accelerate development. Both he and Chairwoman DeLauro (D-CT) agreed that NIH must step in when the market won’t to address neglected diseases, such as rare cancers. Within the Defense hearings ranging from F-35s to Defense HealthAgency, the DoD is equally forthcoming on the need for increased spending and has put a renewed focus on R&D to deploy modern technologies for the warfighter. All of this points to the need for a new budget caps agreement to avoid sequestration by year’s end.

 

Despite no new deal and a failed attempt to pass a budget raising the caps in the House, the House appropriators forged ahead drafting appropriations bills during the recess, abiding the budget legislation that passed committee. House BudgetChairman John Yarmuth’s (D-KY) bill, H.R. 2021, passed committee along party lines and aims to increase the caps under the Budget Control Act for FY2020-21by raising nondefense cap for FY2020 to $631 billion (+$34 billion or +5.7%over FY2019) and the defense cap for FY2020 to $664 billion (+$33 billion, or+2.6% over FY2019). Before the recess, the House adopted a rule to provide consideration of Chairman Yarmuth’s bill and establish a budget for FY2020, which automatically allowed House appropriators to allocate $1.3 trillion in base discretionary spending, without specifying for defense and nondefense programs. This allowed appropriations bills to be drafted during the recess so we expect markups of the 12 appropriations bills to begin in May in the House.

President’s Budget Proposal

Space exploration, disease research and affordable housing programs are among dozens of suggested cuts in the President’s FY2020 budget request released in March.It calls for a 9 percent cut to non-defense discretionary spending, including:

  • NASA: Cut $198 million from NASA’s Space Launch System, funding Block 1 but deferring funding for the upgraded, more expensive Block 1B. Eliminate NASA’s Office of STEM Engagement, cutting $110 million.
  • NIH: Cut $4.5 billion from NIH to go from $38 billion to $33.5 billion.
  • National Cancer Institute (NCI): Cut funding from $6.2 billion to $5.2 billion, but include a new $50 million per year pediatric cancer research program.
  • Foreign Aid: Eliminate funding for the State Department’s $3 billion Development Assistance account and the $760 million Assistance for Europe, Eurasia and Central Asia account, which would be covered by a consolidated Economic Support and Development Fund.
  • UN Climate Efforts: Give $6.4 million to the United Nations Framework Convention on Climate Change set up in 1992 to oversee talks toward a global climate accord and coordinate the global response to the issue, but zero funding for the Green Climate Fund, which was zeroed out during Trump’s first year in office.
  • Export-Import Bank: Cut the Export-Import Bank’s administrative budget from $110 million to $96 million.
  • Interior Department: Cut $178 million to five discretionary programs, including grants for abandoned mine reclamation and an Indian loans program.
  • FCC: Cut 1 percent to $335.7 million, although it would support agency efforts to expand internet access to underserved parts of the country, promote new technologies and services, protect consumers, and reform agency processes.

health

NIH Appropriations

Although thePresident’s FY2020 budget proposal would cut $4.5 billion from NIH to go from$38 billion to $33.5 billion, in both the House and Senate LHHS Appropriations hearings the Members of Congress clearly stated that NIH would not be cut. The House just introduced the LHHS Appropriations bill on April 29 – the first of 12bills. It increases the Department of Health and Human Services by $8.5 billion to $99 billion, including $2 billion increase to NIH, an increase from $5.7 billion to $6.2 billion for NCI and an increase from $806 million to $845 million for NCATS (National Center forAdvancing Translational Sciences). It also includes increase to $921 million for the CDC, increase to $115 million for SAMHSA, increase to $475 million for HRSA and first-time ever $50 million for gun violence research. It would also provide $189.8billion in discretionary funds, $11.7 billion more than FY19 levels. TheDepartment of Labor would receive $13.3 billion, a $1.2 billion increase, and the Department of Education would receive $75.9 billion, a $4.4 billion increase.

Drug Pricing

Both theHouse and Senate committees of jurisdiction held hearings calling on key pharmaceutical companies to explain their drug pricing practices and to tackle ways to bring them down. Witnesses included Cigna Vice President and ChiefClinical Officer Steve Miller; CVS Health Executive Vice President Derica Rice;Humana Health Care Services President William Fleming; OptumRx CEO John Prince; and Prime Therapeutics Interim President & CEO Mike Kolar. A common themeis the PBMs are collecting rebates and not passing on the savings, effectively requiring the drug companies to raise their prices. Senator Leahy (D-VT) andRep. Cicilline (D-RI) took the lead in introducing the CREATES Act to promote competition in the market for drugs and biological products by facilitating the timely entry of lower-cost generic and biosimilar versions of those drugs and biological products. The House Energy and Commerce Committee passed the CREATESAct unanimously. Also, House Ways and Means Chairman Neal (D-MA) introduced thePrescription Drug Sunshine, Transparency, Accountability and Reporting Act(STAR Act) and passed it unanimously before the recess to call manufacturers to account for dramatic increases in drug prices. Meanwhile the House Energy andCommerce Committee marked up even more bills, including:

  • BLOCKING Act: to stop generic drug companies from sitting on the 180-day exclusivity period awarded to the first generic manufacturer that challenges a brand-name company's patent and keeping other competitors off the market. Has bipartisan support.
  • Protecting Consumer Access to Generic Drugs Act: to prohibit "pay-for-delay" patent     settlements, in which a brand name company pays the generic manufacturer     to stay off the market for a certain period of time. This is led by Democrats with limited Republican support. Has bipartisan support.
  • Purple Book Continuity Act: to provide generic and biosimilar makers more information about the patents on branded products. Does not have bipartisan support and is led by Democrats.
  • Orange Book Transparency Act: to require FDA to disclose additional patent information when listing but not any patent claims on a device that is used for the delivery of the drug and to require patent holders to notify HHS if the Patent Trial and Appeals Board issues a decision that a listed drug patent is invalid. Does not have bipartisan support and is led by Democrats.
  • Payment Commission Data Act: to provide MedPAC and MACPAC with access to drug pricing and rebate data, to help Congress better understand the cost of prescription drugs. Has bipartisan support.

Drug Advertising

The self-imposed deadline for drug companies to voluntarily put cost information in their television ads has arrived, as the White House reviews a rule to make prices a mandatory element in TV drug ads. Back in October major drug companies including Eli Lilly, Novartis, Allergan, and Johnson & Johnson’s Janssen promised to provide some type of information about drug costs in their direct-to-consumer ads by April 15. The voluntary move was an effort to satisfy the desire of President Trump and Congress for more transparency about pharmaceutical prices and to head off regulations making list price disclosures in ads mandatory.

Affordable Care Act

Since Trump has entered the White House, the uninsured rate has increased by 1.4 million people – uninsured Americans under age 65 rose from 27.5 million in 2016 to28.9 million in 2018, according to the Congressional Budget Office. During this time, Republicans in Congress and the White House enacted changes to ACA that included allowing groups of small businesses to form health insurance plans for their employees, expanding short-term limited-duration insurance plans, and reducing to zero the penalty for individuals who lack health coverage. TheTrump administration also allowed states to implement laws requiring Medicaid enrollees to work in exchange for benefits, leading to over 18,000 people being dropped from the Medicaid rolls in Arkansas in 2018, for example. Since 2013when ACA began, more than 20 million people have gained insurance coverage, nearly 13 million of whom became covered as a result of the ACA’s Medicaid expansion, not exchanges.

 

PresidentTrump is continuing to argue against ACA and is now pursuing its complete elimination. However, if repealed it would remove a key component regarding rising drug prices. The Biologics Price Competition and Innovation Act, which was included in the 900+ page ACA allows pharmaceutical companies to submit drug applications for products that mimic biologics without having to jump through all the costly hoops, i.e. clinical trials, associated with getting a novel medicine approved by the FDA. If ACA ends so does this program.

 

In Congress,ACA reform efforts are also underway. The House Energy and Commerce Committee considered six bills before the recess aiming to tackle ACA and health care costs. They mirror many of the House Democratic leadership plan to expandObamacare's benefits while reversing Trump administration policies, which means none are bipartisan:

  • State Allowance for a Variety of Exchanges Act (SAVE Act): to give states $200 million annually in federal funding to establish state-based marketplaces.
  • State Health Care Premium Reduction Act: to give states $10 billion each year for a reinsurance program, or to reduce out-of-pocket costs of individuals in qualified health plans.
  • Short-Term, Limited Duration Insurance: to reverse the Trump administration's expansion of short-term health plans.
  • Protecting Americans with Preexisting Conditions Act: to reverse Trump administration policies that weaken protections for patients with pre-existing conditions.
  • Marketing and Outreach Restoration to Empower Health Education Act (MORE Health Education Act: to restore ACA outreach and enrollment funding that was cut by the White House.
  • Expand Navigators’ Resources for Outreach, Learning, and Longevity Act (ENROLL Act): to provide $100 million to the Federal-Facilitated Marketplace Navigator program and make other changes to navigator requirements.

Health IT

The Senate Health, Education, Labor and Pensions Committee (HELP) plans a hearing in May to follow up on implementing electronic health information sharing provisions in the 21st Century Cures Act. The hearing will include witnesses from the Trump administration and will be the committee’s second of the 116th Congress discussing ways to bolster digital health records and improve information sharing.

 

American Cures Act and American Innovation Act

Senator Durbin (D-IL) and Reps. Foster (D-IL) and Underwood (D-IL) teamed up to announce the introduction of the American Cures Act and the American Innovation Act, which would create a mandatory fund to provide steady, predictable funding for breakthrough research at America’s top research agencies. This steady, long-term investment would allow the agencies to plan and manage strategic growth while maximizing efficiencies.

 

The AmericanCures Act would provide annual budget increases of five percent plus inflation at America’s top four biomedical research agencies: The National Institutes ofHealth, the Centers for Disease Control and Prevention, the Department ofDefense Health Program, and the Veterans Medical and Prosthetics ResearchProgram. The American Innovation Act would provide annual budget increases of five percent for cutting edge research at five important federal research agencies: The National Science Foundation, the Department of Energy Office ofScience, the Department of Defense Science and Technology Programs, theNational Institute of Standards and Technology Scientific and TechnicalResearch, and the National Aeronautics and Space Administration ScienceDirectorate.

 

Medicare Drug Spending

The cost for22 drugs shot up more than 500 percent per dose from 2013 through 2017, according to a Bloomberg Law analysis of Medicare Part D data. The median increase among drugs offered through Medicare’s primary prescription plan was28 percent from 2013 to 2017, but some medications went up in price more than others. The median is the midpoint of the spending-change distribution, meaning that the same number of drugs changed in price more and less than 28 percent.Overall, Medicare spent about $154.8 billion on 42.7 million Americans withPart D coverage in 2017. In March, CMS reported an average annual spending increase of 10.6 percent from 2013 through 2017.

 

NIH Funding Cliff

A funding cliff written into the 21st Century Cures Act that was enacted at the end of the Obama administration could hamper two major NIH projects:personalized medicine and new cancer therapies. The 2016 bipartisan law created a 10-year innovation fund to accelerate special projects in four areas, including precision medicine and President Barack Obama’s Cancer Moonshot initiative to double the rate of new cancer treatments and prevention therapies. Due to the challenge of paying for this new fund, which provided$4.8 billion to NIH and $500 million to FDA, through offsets and budget work-arounds, a funding cliff does loom ahead. One offset included a cap onMedicaid reimbursement for durable medical equipment at equivalent Medicare pay rates and a draw down from the Strategic Petroleum Reserve with funding staggered based on how the savings that offset the bill are implemented.

 

Rare Disease Drug Guidance

The FDA issued a new rare disease guidance on how to incorporate natural history studies, which follow how a disease progresses to understand how to treat it, into the development of rare disease drugs. This is welcomed by orphan drug companies aiming to treat rare conditions that affect just 200,000 or fewer people and can be extremely expensive to develop and market. The draft guidance describes the broad potential uses of a natural history study in all phases of drug development for rare diseases. It also examines the strengths and weaknesses of various types of natural history studies, data elements and research plans, and provides practical framework for the conduct of a natural history study.

Defense

Defense Funding
Before the April recess, the House passed the rule for consideration of H.R. 2021, Chairman Yarmuth’s (D-KY) bill to raise the spending caps, but it has not passed the actual bill yet due to battles over levels of increased funding for defense and nondefense programs. However, the adoption of that rule has led to committees moving forward with $733 billion for defense spending and $639 billion for nondefense spending in FY2020. The House Armed Services Committee Chairman Smith (D-WA) said he will authorize $733 billion in the National Defense Authorization Act (NDAA), following the lead of the Budget Committee. Meanwhile, in the Senate, Republicans may choose a higher defense figure. Senate Armed Services Committee Chairman Inhofe (R-OK) wants to use the $750 billion number instead. The Senate Appropriations Chairman Richard Shelby (R-AL) said he too favors the $750 billion requested by President Trump in his budget proposal.

Both the House and Senate committees of jurisdiction have held numerous hearings with Acting Secretary of Defense Shanahan, leadership from each of the services and the Defense Health Agency that is in the midst of taking over all healthcare and research for the military due to previous NDAA requirements. Chairman Inhofe (R-OK) and others have expressed concern about filling the Secretary of Defense position as well as others that have remained open for months. In addition, acquisition and procurement reform measures remain a top priority of Ranking Rep. Thornberry (R-CA) who lead initiatives in this area in last year’s NDAA when he was chairman. The HASC is expected to finish hearings in May and markup the NDAA in June and the Senate is close on their heels. Both chambers aim to complete the NDAA before the end of the fiscal year on September 30.


Defense Border Security
The reliance on active-duty military at the border is continuing and growing. At the request of DHS, Acting Defense Secretary Patrick Shanahan is sending 320 more troops to the U.S.-Mexico border to help transport and care for migrants, the Pentagon just announced, bringing the total number of active-duty troops to just over 3,200. This will free up U.S. Customs and Border Protection agents by managing movement of migrants and providing heating, meal distribution and monitoring. Additional military lawyers will be dispatched to assist as well. This number peaked to just below 6,000 in December 2018 as Army soldiers and Marines installed barrier fencing. Some 2,000 part-time National Guard troops have also been deployed to the Southwest since last spring.


Cyber
The Trump administration is asking for $592 million to fund U.S. Cyber Command in the next fiscal year—a decrease from the roughly $610 million Cyber Command and what NSA Chief Army Gen. Paul Nakasone previously testified the organization is expected to spend in FY2019. It is around 6 percent of $9.6 billion the administration wants for Pentagon cyber operations. Another $1.9 billion would go to support Cyber Command operations across four military locations in Georgia, Hawaii, Texas and Washington, D.C. Also, the Navy wants to add a new assistant secretary to shore up cybersecurity following an assessment last month that found widespread vulnerabilities throughout the service. Navy Secretary Richard Spencer said he is sending a legislative proposal to Congress asking lawmakers to add a fifth assistant secretary position. He also said other cybersecurity measures are in the pipeline, especially for contractors. Finally, the first established Democratic presidential candidate out of the gate is also the first candidate to offer a cybersecurity policy proposal. Former Maryland Congressman Delaney is proposing the creation of a Department of Cybersecurity to centralize all cyber activities. The idea of a Cabinet-level cybersecurity department has divided security experts. Some, such as former CIA Director David Petraeus, have embraced it, but others, such as former DHS cyber chief Suzanne Spaulding, have rejected it because it would set the U.S. government back on its cyber progress thus far.


Navy Priorities
The Navy has outlined $3.2 billion in priorities that didn't make the cut in its FY2020 budget request, including funding for two extra F-35 Joint Strike Fighters and additional ship depot maintenance to cut into a shipyard backlog. Of that, just under $2 billion is dedicated to the Navy's top 10 unfunded priorities, including $814 million to cover ship depot maintenance shortfalls for submarines and surface ships, $52 million for extra F/A-18 Super Hornet engine spares to achieve a Pentagon goal of 80 percent fighter mission readiness, $259 million for ordnance and $186 million to replenish funding that was diverted for repairs to facilities damaged by Hurricanes Florence and Michael. Just over $1.2 billion is dedicated to additional "lethality" requirements if extra funding becomes available. That includes $240 million to procure and two extra F-35C carrier variants as well as $393 million to purchase an extra two P-8 Poseidon maritime surveillance planes. In all, the Trump administration is proposing $750 billion in national defense spending under its fiscal 2020 budget request unveiled this month.


Veterans’ Health
The VA could spend $10 billion in FY2020 to implement a new veterans’ health care program without it counting against a statutory budget cap under a key amendment to House Democrats’ spending plan offered by Rep. Lee (D-CA). It would allow a $10 billion cap adjustment in FY2020 and a $12 billion adjustment in FY2021 to fund the VA MISSION Act. House Budget Chairman Yarmuth (D-KY) supports the amendment. The VA MISSION Act, which President Trump signed into law in June 2018, helps improve veterans’ flexibility to seek care outside VA facilities and shifted the program’s funding from mandatory to the discretionary spending, where it would count against the spending limits created under the Budget Control Act. Lee’s amendment would free the VA MISSION funds from that constraint, up to the $10 billion and $12 billion limits.

STEM & Innovation

Science Budget Proposals

The House and Senate Appropriations Committees are ramping up the pace of their hearings on President Trump's FY2020 budget request, which proposes cuts to a range of STEM education programs while favoring those tied to career and technical education. President Trump proposes across-the-board cuts to science programs, including:

  • NSF: Cut $1 billion, or 12 percent, compared to FY2019 under the proposal, with cuts spread relatively evenly across the agency’s research directorates.
  • DOE: Cut the Office of Science budget by 16 percent to just above FY2017 levels and slash funding for the department’s applied energy offices.
  • NOAA: Cut NOAA’s weather, climate, and oceans research programs by 40 percent to $335 million.
  • NASA: Cut NASA’s Science Mission Directorate by 9 percent with the cuts falling hardest on the Astrophysics and Earth Science Divisions.


Tech Transfer

On April 24, the Under Secretary of Commerce for Standards and Technology and NIST Director Walter Copan announced a 125+ page document outlining the administration’s thoughts regarding the movement of federal R&D into market use as a “discussion guide, not a policy document.” The guidance recommends government-use licensing and government “march in” rights, the latter being a right the government retains for all licensed technologies but has never exercised in the 39-year history of the Stevenson-Wydler and Bayh-Dole acts governing federal intramural and extramural tech transfer, respectively. It also includes 15 findings grouped across strategies intended to:

  • Reduce unnecessary restrictions or barriers for moving federally funded R&D to market and use;
  • Create new opportunities for private sector engagement of federal technologies, facilities and lab personnel;
  • Reduce public confusion and inconsistent interpretations of existing tech transfer law and regulations by and across agencies; and,
  • Improve the government’s future capacity to promulgate rules and changes to intramural R&D, consistent with existing authority within the Bayh-Dole Act governing extramural federal research investments.


Other less controversial guidance topics include:

  • Granting agencies the authority to extend information protection in Cooperative Research and Development Agreements (CRADAs) beyond five years;
  • Expanding authority allowing all federal agencies greater flexibility and speed in executing newer partnerships agreement tools such as the Department of Energy’s Agreements for Commercializing Technology and to enable translational R&D collaboration;
  • Allowing all federal agencies to establish nonprofit foundations to accept private funds to advance technology commercialization;
  • Expanding real property outleasing authority to all federal agencies, which could permit locating more commercialization centers, incubators and research parks within greater proximity to federal research installations;
  • Enabling the use of awarded federal extramural R&D funds to be used for intellectual property protection;
  • Implementing technology entrepreneurship programs within federal R&D agencies; and,
  • Allowing federal scientists and technologists to take sabbaticals or paid/unpaid leave for technology commercialization purposes for terms up to three years.


NASA to the Moon

Since 1969, 12 men have walked on the moon’s surface, leaving boot prints in the fine slate dust. Since the last lunar mission in 1972, president after president has promised to put an American astronaut back on the moon. With the 50th anniversary of the first moon landing on the horizon, the Trump administration is in a frenzy to actually achieve that elusive goal. NASA has said that it wants to put a human back on the moon by 2028, and unlike the Apollo program, this won’t be an in-house effort. NASA has asked American aerospace companies to submit designs for transportation systems that could be launched and tested, without a crew, as early as 2024. Applications were due in late March, and the winners stand to receive contracts worth from $300,000 to $9 million. Potential participants include longtime NASA contractors such as Boeing, Lockheed Martin, and Northrop Grumman; the quirky-billionaire-owned SpaceX and Blue Origin; and smaller, more obscure companies.

economic development

Support Startup Jobs, Innovation and Small Businesses

Senators Murphy (D-CT) and Toomey (R-PA) announced the introduction of the Helping Angels Lead Our Startups (HALOS) Act, legislation that would support small businesses by removing burdensome restrictions from individuals who want to invest in startups and help create jobs. In order to secure capital to grow their businesses, entrepreneurs commonly attend “demo days” or conferences that allow them to showcase their business in front of angel investors and venture capitalists. It is estimated that angel investors provide 90 percent of outside equity to help grow these startups. Due to recent burdensome regulations, angel investors have been deterred from attending demo days, which harms economic growth. The HALOS Act would preserve important investor vetting processes without forcing startups to jump through unnecessary hoops to get the investments they need to grow and create new jobs.


Senate Tax Extender and Disaster Tax Bill

Almost 30 temporary tax provisions would be renewed through 2019 and disaster victims would receive tax benefits under S. 617, which was sponsored by Senate Finance Committee Chairman Grassley (R-IA) and Ranking Senator Wyden (D-OR). It would allow filers to use the tax breaks on their 2018 returns if it’s enacted by the April 15 filing deadline. If enacted after the deadline, taxpayers could file amended returns to claim the breaks. This legislation is still pending in the Senate.


TRANSPORTATION


Ivanka Trump Has Big Role in Infrastructure Talks, Hoyer Says

House Majority Leader Steny Hoyer says President Trump’s daughter Ivanka is playing a large role in infrastructure talks, giving him optimism about reaching a bipartisan agreement.

“Ivanka Trump is playing a significant role in all of this. That gives me hope,” Hoyer said at the House Democratic retreat in Leesburg, VA. Hoyer of Maryland says there have been a number of meetings on infrastructure and the president has discussed a $1 trillion plan. Funding source for plan still under discussion, Hoyer says, adding he favors increasing gas tax. House Transportation Committee Chairman Peter Defazio says plan is to complete bill by end of July, says White House hasn’t indicated what funding source it would support.


Pelosi’s Broad $1T Infrastructure Bill

Speaker Nancy Pelosi (D-CA) wants at least a $1 trillion investment in a range of infrastructure needs — from roads and bridges, to airports and schools, to broadband and clean water. “This has always been bipartisan until recently. But now hopefully again it will be nonpartisan and it will be at least $1 trillion,” Pelosi told the North America’s Building Trades Union at their annual Washington event.

Transportation Secretary Elaine Chao, who would have programs under her jurisdiction for any infrastructure legislation, recently appeared before the House Transportation-HUD appropriations panel. In addition to questions about whether or not she’d support a gas tax and just how committed the administration is to infrastructure when the Transportation budget keeps facing cuts, Chao faced a certain grilling on the Gateway tunnel and bridge project spanning the Hudson River.

President Donald Trump’s request for $21.4 billion in FY20 discretionary funding for the Transportation Department would be $5 billion less than the FY19 enacted levels and included cuts to funds for Amtrak’s Northeast Corridor that would benefit Gateway.


Lawmakers Eye Summer for Surface Bill Action

The Senate committees tasked with writing a new surface transportation authorization are hard at work and eyeing a timeline for committee action by July or ideally before August recess, according to the heads of the Environment and Public Works Committee. Chairman John Barrasso (R-WY) and ranking member Tom Carper (D-DE) are working on a six-year bill that focuses on just highways, roads and bridges, Barrasso said. Though the current authorization does not run out until Sept. 30, 2020, Barrasso and Carper are moving swiftly to do their part, noting the challenge of paying for whatever they authorize.