The House and Senate face a packed summer agenda that includes work on must-do spending bills, infrastructure proposals, new trade deals, drug pricing plans, and more. Speaker Nancy Pelosi (D-CA) said she’s ready to cut deals with President Donald Trump and Republican leaders on traditional bread-and-butter issues although most recent talks on an infrastructure bill fell apart with the Mueller report and impeachment considerations looming over Washington. Agreement was forged on the $19.1 billion disaster-aid bill passed by the Senate but stalled in the House three times by a few Republican conservatives balking at the high cost of the legislation and objecting to the lack of a separate emergency spending request for President Trump’s border wall. The House is expected to take a recorded vote with open floor debate next week instead of using the unanimous consent procedure. Both Pelosi and Majority Leader McConnell (R-KY) aim to avoid the record 35-day government shutdown tied to last year’s appropriations bills so we expect some deal will be reached on setting budget caps and moving appropriations bills this summer. G2G has met with several in Congress over the past month regarding appropriations and the National Defense Authorization Act and hear repeatedly the need to get these caps set from both sides of the aisle.
Possible Gas-Tax Hike as Trump Weighs Infrastructure
The Trump administration hasn’t ruled out increasing the gas tax to help finance a $2 trillion infrastructure plan, but the idea has little support among many wary of the 2020 election. A near doubling of fuel levies wouldn’t cover the additional cost over a decade of the infrastructure package, according to an internal administration document. Officials intend to pressure Democrats to come up with funding mechanisms that don’t risk undermining growth, according to a 6-page OMB draft. The infrastructure plan the administration released last year was rejected by Democrats and others because it proposed only $200 billion in federal funds over 10 years, mostly in incentives to encourage spending by non-federal entities to reach a promised $1.5 trillion in investment. President Trump and Democrats are at a standoff over plans to restore and revamp the nation’s roads and bridges, stymied by the question of how to pay for it. One idea floated by Democrats and Trump himself months ago is to increase the 18.4-cents-a-gallon gasoline tax, which has remained unchanged since 1993. Besides changes to the fuel surcharge, Trump officials are also considering requiring states and localities to put up some of their own money to win grants for financing. The administration is also weighing a 13-year re-authorization of the federal surface transportation bill that expires in September 2020.
House Democrats scrapped plans to vote on a spending cap bill (H.R. 2021) last month because of disputes over balancing military and domestic discretionary spending. The House instead adopted a resolution (H. Res. 293) that permits House Appropriations Committee to write measures reflecting the bill’s proposed caps of $664 billion for defense (plus oversees funding not restricted by budgetary caps) and $631 billion for nondefense and started passing bills out of committee in April and May. President Trump and congressional Republicans want at least $750 billion for defense, including funds that are outside the spending cap. Senate Appropriations Chairman Richard Shelby (R-AL) has chosen not to schedule markups while waiting for a budget deal to be struck and aims to bundle bills. Meanwhile, the debt ceiling limit will be reached this summer so the White House indicated it prefers a debt limit deal done quickly to avoid instability in the economy.
As for the FY2020 appropriations process, several bills have already been marked up in the House and passed by full committee including Labor-HHS, MilCon-VA, State-Foreign Operations, Commerce-Justice-Science, Defense, Energy-Water, and Interior-Environment. Two other bills have passed subcommittees and will be voted on in the full committee next week and then bills will start to be considered on the House floor throughout June and leading up to the August recess. See details below.
Status of current U.S. House & Senate FY20 Appropriations Bills:
The Senate GOP recently behind closed doors added a permanent ban on earmarked spending to their conference rules even though House Democrats and Republicans had begun discussions on how to return to earmarking bills. A moratorium on earmarks from 2011 expired in January. House Appropriations Chairwoman Nita Lowey (D-NY) said in March that earmarks wouldn't return this year, but left the door open for the future, saying when applicable, they can change rules to permit members to request earmarks.
The House Appropriations Committee passed the Labor-HHS bill that totals $189.9 billion on May 8, which contrasts the 12% cut proposed in President Trump’s FY2020 budget. The bill provides $99 billion for the Department of Health and Human Services (HHS) and includes significant funding increases since FY2019, i.e. NCI’s funding is increased from $5.7 billion to $6.2 billion and NCATS’ funding is increased from $806 million to $845 million. It also launches a new multi-year public health surveillance initiative and funds cybersecurity efforts. However, it cuts CMS by $3 billion from $276 billion to $273 billion in FY2020. Chairwoman DeLauro (D-CT) said she was able to accommodate 90% of the requests made by members in crafting the bill and accompanying report. G2G wrote up a summary and distributed it a few weeks, which is available here. The bill will go to the floor in June and the Senate is finalizing their version now and is expected to introduce it in June and conference negotiations should occur August-September. Details include:
HHS funding would include the following for various programs:
On May 23, HHS announced an invitation for comment on how to accelerate bringing medicines and treatments into patients’ hands faster under ReImagine HHS: Accelerate Clinical Innovation Initiative. HHS is seeking participation for meetings on June 20 and 21 and welcomes written comments due June 12 at http://src.bna.com/IsA from all interested parties, including, but not limited to, patients, physicians, researchers, medical product developers, commercial health insurance plan sponsors and carriers, private investors, and the community at large. In 2011, NIH created a center to get new treatments on the market faster as it takes an average of 17 years to translate medical discoveries into patient care, according to a 2011 study.
Drug-Pricing Transparency Bills
Republicans are warning House Democratic leaders they’ll sink legislation that would address rising drug prices if they pair it with measures to bolster Obamacare. However, House leaders plan a vote on H.R. 987 to do just that. It would combine seven bills, that together, are designed to bring more low-cost generic drugs to the market, ban short-term insurance policies Democrats deride as “junk” plans, and restore funds for Obamacare programs cut by the Trump administration. The drug-pricing bills bundled into the package have support from members of both parties, but the ones bolstering the Affordable Care Act are generally backed only by Democrats. The White House has issued a veto threat.
Medicare Part D plays a central role in the drug pricing debate. On May 23, the House Energy & Commerce and Ways & Means committees released a draft, bipartisan bill to cap seniors’ drug costs in Medicare Part D and shift most of the program’s catastrophic drug costs from the government to insurers. It aligns with the approach being considered by Senate Finance Committee, but contrasts the Medicare-negotiation approach that Speaker Pelosi was trying to sell to the White House. These House committees are requesting feedback on the draft bill now. Specifically, it would increase insurers’ share of their enrollees’ Part D catastrophic drug spending from 15% to 80% over four years. (Currently, once seniors’ out-of-pocket costs hit $5,100, they enter the catastrophic coverage stage. At that point, they pay 5% of their drug costs, insurers pay 15% of the cost and Medicare pays 80%.) The bill would also gradually change the percentages: seniors 0%, Medicare 20% and insurers 80%. Lawmakers on both sides of the aisle have expressed interest in capping out-of-pocket costs and the White House has also backed the idea, most recently in Trump's fiscal 2020 budget proposal. The Trump proposal to cap expenses would also move 80% of liability to plans but do it over a 10-year period, which would cost an estimated $14 billion over a decade. Policy experts predict that shifting the burden to insurers would pressure them to choose lower-priced drugs in formularies and negotiate better deals with drug companies. The bill does not appear to shift drug makers' burden for covering drug costs though.
Drug Samples for Generic Development
Recently, two House committees approved (H.R. 965, the CREATES Act), which would allow generic-drug developers to sue brand-name drug makers for not selling them samples needed for testing during the FDA approval process. It also would give the FDA more flexibility to allow generic companies to use separate safety protocols than those in place for the branded drug. The generic drug maker would have to prove that the branded drug maker hasn’t delivered sufficient quantities generally within 31 days of a request. Generic drug makers could request FDA authorization to obtain a sample of a branded drug that’s subject to an FDA safety protocol, called a risk evaluation and mitigation strategy (REMS) with “elements to assure safe use” (ETASU). Some drug companies have withheld samples from generic drug makers due to being subject to such protocols. The measure would also create an affirmative defense if the branded drug company offered to sell sufficient quantities of the product on reasonable terms and the generic developer didn’t accept the offer in a specified time frame. Products not subject to a safety protocol would have to be offered within 14 days of receiving a request and accepted within 7 days. Those subject to safety protocols would have to be offered within 20 days and accepted within 10 days. The Congressional Budget Office estimated the bill would reduce the federal deficit by $3.9 billion from fiscal 2019 through 2029 by allowing earlier entry of lower-priced generic drugs, which would reduce federal spending on prescription drugs and subsidies for health insurance.
House Panel Releases Surprise Medical Bill Plan
House Energy & Commerce Committee recently released a bipartisan plan to protect patients from receiving pricey and unexpected medical bills, offering the first fleshed-out blueprint in the chamber to address the high-profile issue. The draft would bar providers from billing patients for the unpaid balance of bills for emergency services. Patients would pay as if the hospital used was in their health plan's network. It would also require patients be notified and give their consent before scheduled care is delivered by an out-of-network provider. Patients not told in advance would be protected from hefty bills. States would still be able to set their own payment standards for health plans they regulate. The draft bill also would provide $50 million in grants for states to create all-payer claims databases.
Pharmacists are a step closer to seamlessly switching between a biologic drug and a cheaper alternative called a biosimilar thanks to the final industry advice for drug makers the FDA released recently. Biologic drugs are some of the most expensive products on the market due to manufacturing complexity, as they’re made from living cells, and treat serious conditions like cancer. So far, there are no biosimilars available in the U.S. that are considered interchangeable. But this FDA advice could help change that and consequently could increase biosimilar utilization.
Reps. Diana DeGette (D-CO) and Tom Reed (R-NY) introduced bipartisan legislation (H.R. 2668, Special Diabetes Program Reauthorization Act) recently to continue funding a key federal diabetes research program for an additional five years and increase its annual funding from $150 million to $200 million a year. The Special Diabetes Program for Type 1 Diabetes is a decades-old federal program that’s currently providing researchers at the National Institutes of Health $150 million a year to study Type 1 diabetes. Significant debate has ensued on the cost of insulin within health committees of jurisdiction over the past couple of months and furthering research on diabetes remains a bipartisan priority.
The Second Look at Drug Patents Act, which was just introduced by John Cornyn (R-TX) and Patty Murray (D-WA), would require the U.S. Patent and Trademark Office to initiate a process to reexamine the validity of patents over 30 days before they are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”) because some manufacturers use “patent evergreening” by applying for follow-on patents for disingenuous “improvements” to their original drugs to extend their period of market exclusivity. Once listed in the Orange Book it has the legal effect of blocking generic entry. The Act would require all new patents be submitted to the Official Gazette of the Patent and Trademark Office (“Gazette”) within 30 days of approval, which enables soliciting additional information about the strength of those patents and invite patent challenges. Then any patent included in the Gazette would be listed in the Orange Book on a provisional basis unless the Patent Trial Appeal Board confirms the patent to be patentable or if the patent is not challenged within a specific timeframe. The Second Look at Drug Patents Act would provide a way to prevent disingenuous “improvements” that are insubstantial, e.g. mere dosage changes to help bring generic drugs to market in a timelier fashion.
The Defense Department would receive $690.2 billion in discretionary appropriations for fiscal 2020 under a draft measure from the House Appropriations Committee – an increase of $15.8 billion above last year and $8 billion below the request. The measure, which the Defense Subcommittee approved by voice vote on May 15, includes $68.1 billion in Overseas Contingency Operations (OCO) funds that aren’t subject to discretionary spending caps. That amount would be $96.2 billion less than the president requested, which is opposed by Committee Republicans. Details include:
The FY2020 Military Personnel recommendation is $149.438 billion in base funding for active, reserve and National Guard military personnel, $1.854 billion below the budget request and $3.368 billion above FY2019 enacted level.
The FY2020 Operation and Maintenance recommendation is $206.691 billion in base funding, an increase of $82.746 billion above the budget request and $13.003 billion above the FY2019 enacted level.
The FY2020 Procurement recommendation is $130.304 billion in base funding, an increase of $11.4 billion above the budget request and $5 billion below the FY2019 enacted level.
The FY2020 RDT&E recommendation is $100.692 billion in base funding, an increase of $1.9 billion below the budget request and $5.7 billion above the FY2019 enacted level.
Defense Health Programs
Senate NDAA Authorization
The Senate held closed markup on May 22 and has not made public the bill report. The legislation totals $750 billion and contrasts with the $733 billion in funding that House leaders envision for national security programs. The Senate Armed Services Committee signaled in approving the bill on a bipartisan 25-2 vote it will head off battles over setting new budget caps. Instead of approving almost $174 billion in war funds not subject to the annual cap on defense spending, the Senate panel moved authorization of $97.9 billion into the Pentagon’s regular budget, leaving an overseas contingency operations account of $75.9 billion.
Overall, the Senate bill authorizes $642.5 billion for the Defense Department’s regular budget, and $75.9 billion in war funds. The measure allows $23.2 billion for national security programs within the Energy Department. The panel also counts $8.4 billion in other defense-related activities outside the committee’s jurisdiction to reach the total of $750 billion. The measure would authorize a 3.1 percent pay increase for troops. It also would offer President Donald Trump and the Pentagon a win on their efforts to build barriers along the U.S.-Mexico border by authorizing $3.6 billion that could replace money pulled from the military’s construction budget to pay for the work. More details are below.
Supporting our Troops and their Families
The Senate NDAA includes many provisions to rebuild readiness, modernize our force, and preserve our status as the world’s preeminent military power. The bill authorizes funding for new battle-force ships, aircraft, combat vehicles and weapons, as well as for investments in our future fighting force. The legislation invests in critical research, development, test and evaluation programs, including hypersonic weapons and missile defense, and prioritizes our cybersecurity strategy and capabilities.
Building a More Efficient, Effective Pentagon
It continues to reform the Pentagon’s business operations, ensuring leaner, more effective administration that provides strong support to our Armed Forces. Building on reforms enacted in years past, the legislation:
DoD Plans to Cut 18,000 Uniformed Health Positions
The Defense Department’s 2020 budget proposes the Defense Health Program reduce nearly 18,000 personnel — a 22 percent decrease compared to the size of the active duty medical force in 2019. Senior officials indicated the department intends to convert a large number of military medical billets to civilian ones so that it can redirect uniformed manpower toward more direct warfighting functions. But there are no corresponding increases for civilian staff in the 2020 budget. In fact, their numbers would shrink slightly as well. Although DoD has determined it needs the military manpower for other operational and modernization priorities, it hasn’t yet determined how it will replace the medical care that’s no longer being delivered by those military members. Defense officials say around 2,000 of their currently-authorized medical billets are already vacant. The military services plan to move the remaining roughly 16,000 into other non-medical areas over the next three-to-four years, mostly through attrition.
Opening DOD to Venture Capitalism
Long kept out of one of the Pentagon’s coveted innovation programs, small companies financed through venture capital investments would have a way to sell their technology to the military under legislation (H.R. 3014, the Small Business Act to Improve Innovation in Defense Procurement) proposed by Rep. Mac Thornberry (R-TX), Ranking on the House Services Committee. The proposal expected to be offered as an amendment to the House NDAA that is being marked up next week would create a pilot program to allow innovative companies to be eligible for the Small Business Innovation Research (SBIR) Program. In 2003, the courts ruled that companies with more than 50% venture capital ownership were ineligible for grants given under that program, effectively shutting them out of the DoD. With Congress’ help there’s a waiver that allows companies owned by domestic investors to participate but the Pentagon has never used it, essentially turning away innovative businesses with promising military and commercial technologies. Thornberry’s proposal would also increase the Pentagon’s engagement with commercial tech companies and allow for new technologies to come out of universities and defense laboratories and introduce small businesses to cybersecurity practices early on in the process. Separately, Thornberry will seek to ensure that the Pentagon enforces reforms that Congress has enacted—63 of those were authored by Thornberry when he was Chairman. He is also proposing to withhold funding if the Pentagon doesn’t make progress on key provisions, including development of a policy for defense business systems, establishment of an intellectual property policy, and the overhauling the Fourth Estate -- the moniker for defense support agencies and implementing policies for rapid prototyping and rapid fielding of weapons.
Storm Damage Impacting Military Bases
Heather Wilson, the outgoing Air Force secretary, thinks the Defense Department desperately needs Congress to quickly bankroll recovery from recent storm damage at military bases, which officials say will cost nearly $10 billion to fix. The pending $19.1 billion disaster aid supplemental bill that can aid Tyndall Air Force Base in Florida, Camp Lejeune in North Carolina and Offutt Air Force Base in Nebraska. The military services have already shifted scores of millions of dollars from other projects to address the most pressing disaster damage. Without getting at least some of the rest of the money soon, more construction, training and other activities will have to be curtailed, officials have argued. Secretary Wilson also said that readiness rates for F-22 Raptor fighter jets have been adversely affected by the Tyndall damage.
Barrett Nominated for Air Force Secretary
President Trump recently nominated an aerospace executive and former ambassador to Finland to be the next secretary of the Air Force. Barrett, 68, of Arizona, served as ambassador to Finland in 2008 during President George W. Bush's administration. She also previously served as deputy administrator of the Federal Aviation Administration and was vice chairman of the U.S. Civil Aeronautics Board. She was previously picked for this position in 2003 by President Bush but never officially considered since the AF secretary John Roche, who was to become Army secretary, had his nomination blocked in the Senate and remained at AF. Barrett, an attorney, serves on a number of boards, including for RAND Corporation, the Smithsonian Institution and the California Institute of Technology, and she's held a number of senior executive positions for Fortune 500 companies.
President Trump’s budget request for FY2020 includes approximately $134.1 billion for research and development, according to a new definition. In FY2018, the Office of Management and Budget (OMB) adopted a change to the definition of development, applying a narrower definition of “experimental development.” This change was intended to harmonize the reporting of U.S. R&D funding data with the approach used by other nations. Under the new definition of R&D (applied to both FY2018 and FY2020 figures), President Trump is requesting approximately $134.1 billion for R&D for FY2020, a decrease of $1.7 billion (1.2%) from the FY2018 level. Adjusted for inflation, the President’s FY2020 R&D request represents a decrease of 5.1% below the FY2018 level. In FY2018, eight federal agencies received 96.3% of total federal R&D funding, with the Department of Defense (DOD, 38.6%) and the Department of Health and Human Services (HHS, 27.2%) combined accounting for nearly two-thirds of all federal R&D funding. The same eight agencies account for 97.2% of the FY2020 request, with DOD accounting for 44.3% and HHS for 25.1%
STEM Opportunities Act
Recently, House Science Committee Chair Eddie Bernice Johnson (D-TX) reintroduced H.R. 2528, STEM Opportunities Act, a bill she has championed during the past three Congresses that seeks to increase the participation of underrepresented groups in STEM fields. Notably, this is the first time she has introduced the bill with Democrats in control of the House, and it is also the first time the bill has found a Republican cosponsor, Science Committee Ranking Member Frank Lucas (R-OK). The legislation would expand collection of demographic data on federal research grant applicants and promote the identification and dissemination of best practices for increasing diversity in STEM. It also emphasizes the National Science Foundation’s (NSF) role in supporting research and initiatives related to broadening participation.
The bill also instructs NSF to support research that uses the data and to back efforts to improve undergraduate STEM education and increase the diversity of faculty, including directing NSF to target grants toward computer science education within its Tribal Colleges and Universities Program. The agency is currently focusing its efforts on diversity through its INCLUDES program. To promote the use of best practices across STEM diversity efforts, the bill includes a number of directions for the White House Office of Science and Technology Policy:
National Artificial Intelligence Strategy
Senators unveiled a bipartisan bill recently that would create a centralized office overseeing a national artificial intelligence strategy and authorize $2.2 billion in research and development. Senators Martin Heinrich (D-NM), Rob Portman (R-OH), and Brian Schatz (D-HI) introduced the S. 1558, Artificial Intelligence Initiative Act to create a national interagency committee to develop a 10-year plan for the public and private sectors. The intention of the bill is to ensure the U.S. remains ahead in the global race to develop artificial intelligence technologies. The bill would authorize $2.2 billion from fiscal 2020 to 2024 for A.I. research, including $1.5 billion for the Energy Department, $500 million for the National Science Foundation and $200 million for the National Institute of Standards and Technology. Funding would be appropriated through separate legislation. The bill would also establish an artificial intelligence office that would coordinate research and development across federal agencies, to ensure consistency and reduce duplicity.
NSF Materials Research Decadal Survey
The latest National Academies decadal survey for materials research expressed a strong concern with the status of materials research at universities, where it observes equipment and facilities are inadequate. The survey broadly recommends federal agencies develop a “national strategy to ensure that university research groups and national laboratories have local access to develop, and continuing support for use of, state-of-the-art midscale instruments and laboratory infrastructure essential for the advancement of materials research.” As examples of the nation’s materials research infrastructure, the survey identifies materials growth and synthesis facilities, helium liquefiers and recovery systems, cryogen-free cooling systems, and advanced measurement instruments, as well as large facilities such as the light source user facilities at national laboratories. Linda Sapochak, the director of the National Science Foundation’s Division of Materials Research (DMR), was critical of the survey as she had expected it to offer a stronger sense of what research areas merit more attention. NSF and the Department of Energy initiated the survey in 2016, and this is the third such review of the materials research field, following ones released in 1989 and 2007.
Fixing 2017 Tax Law
The House Ways and Means Committee plan to hear members’ priorities during a hearing on June 4th. The agenda will likely include expired tax breaks, an issue that lawmakers will need to address before they can fix errors in the 2017 tax law. A lot of Ways and Means members remain interested in technical fixes, including addressing the “retail glitch.” That error in the 2017 law prevents restaurants and retailers from immediately writing off the costs of interior improvements. A preliminary draft of provisions for House legislation extending temporary tax breaks would renew the expired breaks through 2019 while tweaking the estate tax exemption. The draft document would let the estate tax exemption that went into effect after passage of the 2017 Republican tax law expire at the end of 2023 instead of at the end of 2025. The 2017 law expanded the exemption to $11.18 million per person, from $5.49 million. The estate tax change would bring in the government $25 billion, which would be enough to pay for the temporary tax breaks. A bill resembling the draft would be considered dead on arrival in the Senate, where Republicans are unlikely to entertain any change in the estate tax exemption.
In addition, U.S. Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) just announced the formation of several bipartisan taskforces to examine temporary tax provisions that expired, or will expire, between December 31, 2017 and December 31, 2019 – a total of 42 provisions. The taskforces will be charged with examining tax policies within workforce and community development, health, energy, business cost recovery, and a combined group consisting of individual, excise and other temporary policies. A separate taskforce will examine whether there is a core package of tax relief provisions that should be available when natural disasters strike. AdvaMed is working to shape the health task force’s efforts regarding the Medical Device Tax as this still has not been permanently eliminated and is just on hold until the end of 2020.
Retirement Savings Overhaul
Individuals would have more flexibility to save for retirement and unrelated businesses could offer joint retirement plans under H.R. 1994, the Setting Every Community Up for Retirement Enhancement Act. The measure, introduced by Chairman Richard Neal (D-MA) would allow individuals to temporarily withdraw money from their retirement accounts following a birth or adoption, and would modify contribution limits and mandatory minimum distribution requirements for older Americans. It would also allow 529 education savings accounts to be used for apprenticeship fees and student loans. Most provisions would apply to plan years beginning after Dec. 31, 2019. The rule for floor debate would automatically modify the bill with a manager’s amendment from House Ways and Means Chairman Richard Neal (D-MA).
Relative to the committee-approved bill, Neal’s amendment:
Senator Sanders’ Plan to Tax Stock, Bond and Derivatives Trades
Democratic presidential candidate Bernie Sanders (I-VT) plans to introduce legislation that would impose a tax on trades of all stocks, bonds and derivatives in the U.S., a move he says would help curb Wall Street speculation and help finance his campaign promise to provide tuition-free college and cut student debt. Sanders has been promoting a financial transactions tax since his run for the Democratic nomination in 2016. The plan he’s offering would apply a 0.5% tax rate for stock trades, a 0.1% rate for bond trades, and 0.005% for derivatives transactions.