Transcript of BioCentury This Week TV Episode 158
Yvette Fontenot, Partner, Avenue Solutions
Charles "Chuck" Clapton, Partner, Hogan Lovells
Representative, Michael Burgess (R-TX)
PRODUCTS, COMPANIES, INSTITUTIONS AND PEOPLE MENTIONED
Representative Howard Morgan Griffiths (R-VA)
Margaret A. Hamburg, Commissioner, Food & Drug Administration
Janet Woodcock, Director, Centers for Drug Evaluation & Research, FDA
Jeffrey E. Shuren, Director, Center for Devices and Radiological Health, FDA
Anthony Atala, Director, Institute for Regenerative Sciences, Wake Forest
New England Compounding Centers
Department of Health and Human Services
The Commonweath Fund
Sandy Dennis, Deputy General Counsel for Healthcare, Bio
Steve Usdin, Senior Editor
STEVE USDIN: Will Affordable Care start with a bang or a whimper? We'll speak with insiders on both sides who helped shape Obamacare. And how should government promote biomedical innovation? We'll put that question to physician and legislator, Representative Michael Burgess of Texas. I'm Steve Usdin, welcome to BioCentury This Week.
NARRATOR: Your trusted source for biotechnology information and analysis, BioCentury This Week.
STEVE USDIN: On Tuesday, the Affordable Care Act's insurance exchanges are supposed to open for business across the country. But in Washington, House Republicans have launched a final effort to derail Obamacare. Whatever happens, this story isn't going away. Starting this week, BioCentury is launching a special weekly Affordable Care update.
Today, two Affordable Care insiders will handicap the political battles. From the Democratic side, Yvette Fontenot, a partner at government relations firm Avenue Solutions. As a Senate staffer, she helped draft the ACA, then she held senior positions in the White House and Department of Health and Human Services. On the Republican side, Chuck Clapton was a Senate staffer where he negotiated with Democrats on Obamacare.
He's now a partner at the law firm Hogan Lovells. I'm pleased to be joined by these two insiders who helped shape the Affordable Care Act.
Yvette, next week the Exchanges are supposed to open. There's going to be a tremendous amount of noise around that, and coverage of whatever kind of glitches there are that happen in it. What should people be looking for? What are the kind of measures of success in the next week, and the weeks to come?
YVETTE FONTNENOT: Yeah, it's a good question. I think you know initially, as you point out, there will be a bunch of process stories about whether the website is actually functioning correctly, whether consumers can see all the relative pricing, whether they're able to enroll and select a plan. I think all of those process measures will be -- they will resolve themselves within the first three months.
And by January 1, when people actually start to get coverage, they will be addressed. Over time, though, the real measure of success, which does happen over a longer period of time, is the number of people, Americans in this country that get coverage, health insurance.
And then I think even looking past that, the reasons that we enacted the Affordable Care Act were not just to expand coverage, but to reduce costs, and to improve the quality of the healthcare that Americans get. And I think everyone agreed that in order to address cost and quality, you really need to have everybody in the system, so that there's no cost shifting.
STEVE USDIN: So one of the other measures is are we going to have healthy people as well as sick people? What's the balance going to be there?
YVETTE FONTNENOT: Well, what's the balance going to be there? And ultimately, do we contain healthcare costs? I think we've seen tremendous movement towards reduced health cost growth. And can we improve quality over time?
STEVE USDIN: So Chuck, we're in the middle of yet another round of brinksmanship over the Affordable Care Act, where House Republicans are basically trying to continue to defund and delay the Act. Will they switch at some point to trying to fix and improve the Act, or are we going to have a continual fighting the same battle over and over again?
CHUCK CLAPTON: I think Republicans are always going to continue to convey the same messages they have since the original debate on the law, identifying the areas they think are problems, to the extent that they believe that the law is going to increase premiums. It's going to cause employers to want to drop coverage for folks who have existing coverage.
I expect those are going to continue to be the messages that people are going to talk about. Part of it, though, is going to be subject to what happens starting in January when coverage goes live.
If some of the predictions that have been made, I think, veer out, you're going to continue to see opposition to the law, and a desire to make changes to it, whether that's characterized as improving the law, or trying to -- I think most people recognize that so long as the President continues to be in the White House, it's not going to be repealed.
But to be able to make changes, I think, consistent with the message Republicans have conveyed since 2010. People are going to still talk about those things.
STEVE USDIN: So in this past week, we've seen some information come out from the Administration about the Exchanges, how many plans are going to be available. Some headlines about the premiums. What's your take on that?
YVETTE FONTNENOT: Well, I think it's great news for consumers. I mean, it proves that competition in the marketplace is working. The fact that consumers are going to have 53 qualified health plans to choose from is a clear advance from where the market is today.
The fact that premiums are going to be 16% lower than was ever projected, and that 95% of consumers live in states where they're going to have lower premiums than anyone projected, I think is a clear win for consumers. But ultimately, this is a system where consumers can actually buy products, compare them apples-to-apples, which has never been the case before in the individual market, and compare them based on price and quality, rather than risk selection. And that's a win.
STEVE USDIN: Chuck, a win?
CHUCK CLAPTON: I think, talking about the analysis that the Department of Health and Human Services put out is largely irrelevant to the question that people are going to ask, which for them is looking and knowing how much they're paying for a plan now, how much are they going to be paying for that plan next year if they're going through the Exchange. And I think it's going to vary based on geography and health status.
But for many, many people they're going to see significant increases in their premiums. And I think a lot of people are going to be unhappy with that.
STEVE USDIN: One of the other things that is starting to get highlighted is the fact that one of the techniques for limiting premiums is creating narrow provider networks, which basically means limiting the number of hospitals and doctors that people can get. Is there going to be a backlash against that?
YVETTE FONTNENOT: Well, I'll just say that I know there's been a lot of anecdotal information about the networks. No one's actually seen the networks, except the exchanges and the regulators. But once they come out, I imagine there will be a lot of review of what those networks look like.
I think that the insurance commissioners and the regulators who have historically evaluated plans to make sure the networks are adequate are looking, and will be closely looking at this, just the way that they should be, but the plans are trying to strike a balance here between offering an affordable product with a network that works for consumers.
STEVE USDIN: Chuck, we'll get your views on narrow provider networks when we come back. First, here's what President Obama said to Republicans about efforts to defund and delay the Affordable Care Act.
BARACK OBAMA: It actually plunged this country back into recession, all to deny the basic security of healthcare to millions of Americans. That's not happening, and they know it's not happening.
NARRATOR: BioCentury This Week.
STEVE USDIN: On Tuesday, the Affordable Care Act calls for nationwide health exchanges to go into effect. We're continuing our discussion with Democrat Yvette Fontenot and Republican Chuck Clapton. Chuck, we ended there, we were talking about the effect of narrow provider networks. That's the idea that some of the plans are going to have lower premiums because they're going to limit the choices that people are going to have. What's your sense of how that's going to be received?
CHARLES CLAPTON: I think that's probably one of the most important measures in terms of an individual whether you think this is a success or a failure. One is going to be how much you're going to pay, second is going to be, can I see the doctor I want to see. And we've heard a lot anecdotally about many of these plans are going to be having very tight networks, which means that the access to preferred providers isn't going to be there.
The thing that struck me in this was that up to 25% of the plans that are being offered in these exchanges have never even been in the individual market before. So they're not going in with the networks like some of the big plans do today. So I think that's going to be a real challenge. And if you look at other programs like Medicaid, which historically have always had very real problems with getting physicians and other providers to participate, that's led to satisfaction problems, but it's also led to access problems as well.
STEVE USDIN: So, Yvette, that's interesting Chuck mentioned Medicaid. One of the premises for the Affordable Care Act that you helped to draft was that there would be this expansion of Medicaid everywhere, and that that would lead to a reduction in uncompensated care for hospitals and all kinds of other things or a lot of other things that, after the Supreme Court decision, that expansion isn't happening in a lot of states. What's going to be the effect?
YVETTE FONTENOT: Well, I think there's no doubt that there are states that are not willing to expand their Medicaid coverage at this moment, but on the flip side, there are several states that have expanded and there are any number of states, and increasingly by day, that are coming in to seek waivers to expand Medicaid. Maybe not on the terms that we traditionally think of Medicaid, but in the way that the state wants to do.
So, Arkansas, Iowa, they're seeking waivers from the Department to expand Medicaid in the way that they want by adding people to the exchanges and paying their premium with Medicaid dollars. And that's a flexibility that the Administration is --
STEVE USDIN: But aren't we still going to see a lot of people showing up in emergency rooms and using emergency rooms as their primary care physicians because they haven't got access to healthcare?
YVETTE FONTENOT: Well, I think you'll continue to see some of that. Less and less so, obviously, as growth in the Exchanges happens and I think as states, either because it benefits the hospitals, because it benefits their providers, because it does cause uncompensated care and is a detriment to their clinics, expanding Medicaid over time.
And the Administration has said there is no time certain by which they have to do it and receive the enhanced federal aid that they get for doing it.
STEVE USDIN: I'd like to ask you about on another topic, what's going to be employer's response to the Affordable Care Act? Because I think that's something that a lot of people are going to use as a measure of whether the Act was successful for them personally or not.
CHARLES CLAPTON: I think that the law is going to have a very significant impact on employers. We've already seen that the Administration has already delayed for a year the impact of the employer mandate. That was, in part, because the concerns they were hearing from employers. But it's still going to be implemented a year from now.
So, as we look at what employers are doing right now in response to the law, they are cutting health insurance benefits for part-time workers, other employers have eliminated coverage for spouses. And I think this is a trend you're going to see continue and accelerate to the extent that employers are confronting a marketplace where there's a lot of pressure, and it's in their economic interest to be able to get rid of the coverage and ship people to exchanges.
STEVE USDIN: Yvette, very quickly.
YVETTE FONTENOT: Well, I think 96% of employers are already offering the coverage that's required by the law. They do that to remain competitive and to offer the highest quality care for their employees. I think they'll continue to do that, any trend that we were seeing far before the Affordable Care Act that maybe has been slightly accelerated.
But I think employers are watching the exchanges very closely to see how they can learn, in terms of containing their costs and improving quality, from the Exchanges.
STEVE USDIN: Yvette, to make the Affordable Care Act work, it's going to need a balance, a mix of people who are healthy and people who were sick, young, old, and that's going to require a tremendous amount of communication, a selling job or marketing job. We haven't seen that so far from the Administration. What's the deal?
YVETTE FONTENOT: Well, I think you've seen some of it, but the Administration has made a conscious decision to start it later, closer to when the open enrollment period actually starts. And let's not forget that this is a six-month open enrollment period, so not everybody has to come to the door October 1. They did an ad buy for $12 million that they start September 30th, and you'll see it ramp up from there so that you're giving people information in a timely manner, not giving it to them two months beforehand when they forget it or misplace it.
But I think you've already seen an important effort amongst the Baltimore Ravens have come to the table, DC United. There's been an outreach effort in Hollywood. There's a number of social media activities going on. So, it is ramping up, and I think you'll see it in earnest as we get much closer to the beginning of open enrollment.
STEVE USDIN: Chuck, your sense. Do you think - is the Administration going to be successful in getting the so-called Young Invincibles? The people who don't think that they actually need health insurance to get insurance?
CHARLES CLAPTON: That's the $64,000 question. And at this point, I think no one knows for sure who's going to show up in that marketplace. But depending on who does show up, it's ultimately going to determine whether this benefit succeeds or not. Because, as you said, if they don't get the right mix of young, healthy people showing up, premiums are going to go up and the care's going to be unaffordable.
I personally think that, because of the issues we've talked about before in terms of premiums, also employers dropping, there's going to be a lot of adverse selection that's going to go on in that marketplace. And as a result, I think it's going to make it much more difficult for this Administration to convince young people to sign up for care.
STEVE USDIN: And Yvette, what happens if you have that adverse selection, as Chuck mentioned happens, and only sicker people sign up for the plans?
YVETTE FONTENOT: Well, I think if only sicker people signed up, then you would see increased federal costs for the tax credits and the premiums would rise. But the Commonwealth Fund did a study in 2009 where they found in the three preceding years, 3/4 of people who are trying to buy coverage on the individual market failed to do so because they were excluded because of a pre-existing condition, or they couldn't find an affordable or plan that fit them.
So, that's a lot of people. That captures a lot of healthy people who were knocking on the door and couldn't get in. Those people are going to come in to the program now because they can afford the coverage, and it's high quality, and they can actually shop and compare products.
STEVE USDIN: Well, thanks very much to both of you. I hope to have you both back on the show later in the year to talk about how the Affordable Care Act has unfolded. Next up, we're going to speak with Representative Michael Burgess, a physician and legislator.
MICHAEL BURGESS: A legislative limitation on funding to counter decisions made by the executive branch is an obligation of the House. Congress historically has used the authority provided for them by the separation of powers in the Constitution to place limits on presidential level decisions.
NARRATOR: Now back to BioCentury This Week.
NARRATOR: On September 8, BioCentury This Week explored a vicious cycle that's holding back the development of precision medicine. We discussed how inconsistent regulation and low prices are making it harder and harder to turn scientific advances into new diagnostics. Roche's Kate Claessens said FDA should step in and regulate diagnostic tests that are performed in a single laboratory.
STEVE USDIN: Do you think that FDA should expand and exercise what it says its regulatory authority is over the labs?
KATE CLAESSENS: Yes, I do. I think, for patient safety, however, we believe strongly there should be a risk-based approach to that oversight.
NARRATOR: Some members of Congress disagree, like Representative Michael Burgess, a Texas Republican, and physician whose opinion holds special sway in the key House Subcommittee on Health.
STEVE USDIN: I'm pleased to have the opportunity to speak with Representative Michael Burgess, a Texas Republican who's a leading voice in the House on medical regulation and innovation. Representative Burgess, we had a show a couple of weeks ago where we talked about the regulation of diagnostics and the need for reforming the regulation of diagnostics to make personalized medicine a reality.
One of the controversial issues is what FDA's role should be in regulating tests that performed in a single laboratory, what are called LDTs, Laboratory Developed Tests. What your position on that?
MICHAEL BURGESS: Well, I've had legislation in the past Congress, and managed to get some of that language in the Food and Drug Administration User Fee Reauthorization that was passed last year that we really don't need the device section of FDA regulating Laboratory Developed Tests. And at the very least, we want them to give us some notice if they are issuing guidelines that would result in such regulation.
My opinion, for what it's worth, is that you already have within the CLIA structure, you have a way of regulating those tests. Unfortunately, my experience has been that when things get into the drug and device evaluation section of the Food and Drug Administration, it sometimes takes a long time for them to emerge on the other end, and I respect the fact that they are there to assure that products are safe and effective, and I want them to do that.
But at the same time, the regulatory burden that is applied in the instance of laboratory developed tests may be something that's not only unnecessary, but actually holds back the development of personalized medicine.
STEVE USDIN: So one of the things that some of the companies that produce drugs that are used in conjunction with tests have said, FDA officials have said is that there's some laboratory developed tests that are critical, people are making life and decisions. For example, should a particular patient get a particular cancer drug? And they're saying, really, that those tests should be regulated by the FDA. What would be your response to that?
MICHAEL BURGESS: Again, the regulatory regime in place in the Food and Drug Administration has been one that has, in my opinion, held back innovation.
And I've also spoken to a number of people in the industry, the people who are developing so-called laboratory developed tests who come in with examples and reasons that made me think that there was perhaps a good case to be made for limiting the amount of why do we need to allow the Food and Drug Administration to claim even larger jurisdiction in this area when they're not doing that great a job with the jurisdiction that they already have?
So that was the purpose of the bill that I introduced in the last Congress. That was the purpose for those discussions when the Food and Drug Administration Reauthorization was going through in 2012. And interestingly, on the Food and Drug Administration User Fee Reauthorization of 2012, so many people said at the beginning of 2012, oh, it's an election year. Congress is dysfunctional.
Nothing can get done. And then no one bothered to report it when we finished up three months early and got the product to the president's desk.
STEVE USDIN: With strong bipartisan support.
MICHAEL BURGESS: Absolutely.
STEVE USDIN: So I'm talking about jurisdiction. Here's another big issue that's hot right now, which is compounding. What's your position? The FDA says they need more authority to prevent more deaths, like the ones that happened from the New England Compounding Center's contamination.
MICHAEL BURGESS: I've got a lot of difficulty with what we've heard over this last year from the evidence and the emails that have been made available to us from the Food and Drug Administration. Look, this is a problem that has been going on for a long time through a couple of administrations.
And you read through those email chains, and it's just screaming out at you, why doesn't someone pull the plug on these people, the New England Compounding Center? Everybody knew they were bad actors.
STEVE USDIN: And it's not just them, by the way.
MICHAEL BURGESS: Correct. There were others. But this is where a lot of the difficulty was focused, and people within the FDA were saying, well, we can't just send them another warning letter. We've already done that. We're going to have to do something. And then they would stop short of doing something. So they weren't going to use the regulatory authority that they already had in their hands.
Why would I think that giving them more regulatory authority would somehow improve that process? You have over 50 dead Americans, probably 10 times that many that are going to live with a disability, and they knew the problem was occurring real time, when it was going on, and they did nothing to stop it.
So, OK, you give them a vast new regulatory structure to be within, but if they're not willing to pull the plug on someone where clearly the problem is not -- you have a serious problem in the manufacturing process. Why do I have any confidence that they will do that with more authority? They had the authority. They could have used the authority. They did not. That is what bothers me on the Compounding case.
STEVE USDIN: And in a moment, we'll continue our discussion of government's role in protecting patients and promoting innovation.
NARRATOR: Now in its 21st year, visit biocentury.com for the most in-depth biotech news and analysis. And visit biocenturytv.com for exclusive free content.
STEVE USDIN: We're discussing medical innovation and regulation with physician legislator Representative Michael Burgess. Represent Burgess, is there any legislation on compounding that you would support, or do you think that FDA just has to do the best it can with the authority it has gotten?
MICHAEL BURGESS: Well, a representative from Virginia, Morgan Griffith, who's a lawyer, has drafted, or in the process of drafting legislation that essentially restates current law. Not a bad idea, because current law was actually drafted some 20 or 25 years ago, and obviously, the world has changed a lot in this space since that time.
So, I'm very interested in what he's doing, following what he's doing, and there is very likely we'll have an opportunity to review that at the committee level, and maybe that will be attached to some larger piece of legislation that will come through the House and the Senate before the end of the year.
STEVE USDIN: So, you mentioned also earlier in the conversation, user fees. One of the things that happened at FDA is this kind of Alice in Wonderland situation where companies are paying user fees, Prescription Drug User Fees, and because of sequestration, those user fees aren't getting to the FDA, and they're not being used to reduce the deficit.
They're just getting diverted into some black box somewhere. One, does that make sense?
MICHAEL BURGESS: No, absolutely not. And the Office of Management of the Budget, in my opinion, really has dropped the ball on this. And I'm surprised that there has not been a greater outcry now, just in the Rules Committee this week, in discussing the continuing resolution.
I had a question to both the Chairman of the Appropriations Committee and the ranking member, what about these user fees that are being unreasonably held up by Office of the Management of the Budget. This is not the government's money to begin with. There's no reason in the world that it should be included in a sequestration grab.
Basically, my understanding is the Office of Management and Budget is relying upon language from the Graham-Rudman compromise from the '80s. Well, wait a minute, the user fee agreements actually started somewhere in the '90s, so they shouldn't even be part of the Graham-Rudman discussion. And you're right.
They are monies provided by the industry to help the FDA do its core mission. They recognize that, OK, things might work a little bit better if they had a little bit more funding. The normal appropriations process may not provide that. We'll help. So, they provided that help. The user fee agreements, yes, last year were a triumph of bipartisanship.
And it makes no sense at all for the Administration through the guys at the Office of Management and Budget to hold those fees. It is almost, to me, an illegality that they are holding those fees and not allowing them to be used.
STEVE USDIN: So, can and will Congress do anything to change it?
MICHAEL BURGESS: There are ongoing discussions now between my staff and the staff of the Appropriations Committee. I want those funds released. Certainly, the committee is looking at doing some work on that as well.
STEVE USDIN: So, another issue that's related to sequestration, there's a lot of concern about the NIH budget. What's your sense? Should sequestration continue to apply to NIH budget? Is there any prospect for increasing NIH budget going forward this year?
MICHAEL BURGESS: Well, the bigger picture is that the country's $17 trillion in debt. And that number at some point is going to cause big difficulty. I don't know when. Neither does anyone else. At some point, when the United States public debt does not sell on the open market, interest rates are going to go up. And when that happens, when that happens, then the service on the national debt is going to rapidly start to eclipse both mandatory and discretionary spending.
And every department, every department will be hurt, including the National Institute of Health. It is incumbent upon us, it is imperative that we do bring down the spending level. In my opinion, an across the board spending cut. Again, it's what I had to do when I was in business for myself. When you get into a time of financial constraint, you have got to do an across the board type of reduction.
STEVE USDIN: That's this week's show. I'd like to thank my guests, Yvette Fontenot, Chuck Clapton, and Representative Michael Burgess. Before I go, I'd like to take a moment to remember Sandy Dennis, Deputy General Counsel for Healthcare at Bio. Sandy passed away on September 18th. She was a tireless advocate for medical progress, especially women's health.
She turned her own experience with breast cancer into an opportunity to help others. Her blog, Cancer Diva, reflected her passion, humor, and joy. I'm Steve Usdin. I'll see you next week.