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1 Friday, March 1, 2013 Volume II, Issue 2 Story The Fiscal Crisis Continues Legislative News CBO Says Prescription Drugs Help Lower Medicare Costs Health Policy Congress Continues Scrutiny of 340B State Medicaid Policy News and Trends Across the States Illinois Tax Disclosure Bill Opposed by Business Fails in Committee Story The Fiscal Crisis Continues

2 On January 31, Congress and the President averted yet another fiscal showdown by reaching an agreement to increase the federal debt limit until at least May 19, or possibly into August if the U.S. Treasury takes extraordinary measures. The agreement forestalls risk of the US exceeding the debt limit and defaulting on its obligations, but Congress must still deal with two other major fiscal issues in March. On March 1, 2013, the sequester went into effect, automatically reducing government spending, unless Congress decides to act to modify, stop or further delay it. President Obama is urging Congress to enact a smaller package of spending cuts and tax increases that would delay the economically damaging effects of the sequester while Congress works on a long term deal. As expected, however, Republican leaders immediately voiced opposition to enacting any tax proposals not part of a larger, comprehensive tax reform. So for now, the sequester will go into effect, but questions remain as to whether Congress might step in to stop it, or at least modify it to give the executive branch discretion over which programs are cut (and by how much). Also, on March 27, 2013, current FY13 appropriations bill will expire, causing a government shutdown if nothing is done. Both the House and Senate are actively working on legislation to flat fund the federal government through the end of September (the end of the government s fiscal year). Observers speculate that the political fallout from the sequester process may impact Congress ability to negotiate a deal to fund the federal government for the rest of FY13. Stay tuned. Astellas Government Affairs will follow the fiscal issues closely and keep you informed of anything that could affect our industry. Mary Lacey Reuther, Director, Federal and External Relations Mary Lacey.Reuther@astellas.com Legislative News CBO Says Prescription Drugs Help Lower Medicare Costs

3 The Congressional Budget Office (CBO) recently released a report that, for the first time, acknowledges that increased patient adherence for prescription drugs can help reduce costs under Medicare. The CBO report, Offsetting Effects of Prescription Drug Use on Medicare s Spending for Medical Services, determined that a one percent increase in the number of prescriptions filled by beneficiaries would reduce Medicare s spending on medical services by about.2%, a modest but still noteworthy reduction. CBO will now use this calculation when estimating the cost/savings of future legislation and proposals. CBO previously said there was insufficient evidence to determine any offset prescription drug adherence might have on spending for medical services, but the agency acknowledges that more data has now been published that demonstrates the link. In its report, CBO noted that most often pharmaceuticals have the effect of improving or maintaining an individual s health and offers some examples of how the use prescription drugs could control a chronic condition or prevent an acute condition from worsening. CBO makes clear that its new policy only applies to future legislation or proposals that will affect the number of prescriptions filled. For example, a policy that decreased prescription drug co pays in the Medicare Part D program would likely increase the number of prescriptions filled, and reduce the cost of medical services. On the other hand, a policy that would apply Medicaid style rebates in the Medicare Part D program would not affect the number of prescriptions filled, and would therefore not yield any cost savings. Also, CBO s conclusions are limited to the Medicare program; CBO said that it would need to do further research before it could determine if similar dynamics are present in other programs, such as Medicaid or veterans health programs. Click here to read the full report. Click here to read PhRMA s blog post about this report. Karen Lencoski, Assoc. Director, Government Policy Karen.Lencoski@astellas.com Health Policy Congress Continues Scrutiny of 340B

4 As we reported in the August 23, 2012 issue of GU, Congress has increased its scrutiny of the 340B program, which requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices. Since its inception, the 340B program has been questioned by many who see a big gap between the program s original purpose and the way it has been broadened by the executive branch in recent years to significantly increase access to the program s steep price controls. Observers also worry about the increase in fraud in the 340B program by participating entities that have diverted discounted drugs for unintended and illegal purposes. In response to Congressional scrutiny, the Health Resources and Services Administration (HRSA), which is charged to administer the program, conducted its first audits for compliance with drug discount rules just last year. HRSA investigated 45 randomly selected entities and six targeted entities that were the subject of specific allegations of non compliance. In addition, about 250 hospitals have been decertified from 340B and may have to pay back discounts to drug makers. On January 31, 2013, Senators Chuck Grassley, Orrin Hatch, Lamar Alexander and Michael Enzi and Representatives Joe Pitts and Bill Cassidy sent a letter to HRSA Administrator Mary K. Wakefield, BSN, MS, PhD, seeking more detail about the audits, including the selection process used to identify targeted audits, the timeframe for audit completion, and what legal action will be taken against those who were found ineligible to participate in the program. The Congressmen gave the agency until February 14, 2013 to respond. There has not yet been word as to the extent of HRSA s response to the Congressmen. Astellas Government Affairs (AGA) will continue to monitor the results of this federal inquiry and any changes made to the 340B Drug Discount Program. AGA will also continue to work with both external and internal stakeholders to assess the potential impact of any proposed changes. Emily Rath, Assoc. Director, Government Policy Emily.Rath@astellas.com State Medicaid Policy News and Trends The number of states expanding their Medicaid programs under the Affordable Care Act is slightly ahead of the number of states declining that option. In an unexpected development, three Republicans, New Jersey Gov. Chris Christie, Arizona Gov. Janice K. Brewer and Florida Gov. Rick Scott, recently announced they will pursue expansion of

5 their Medicaid programs, joining North Dakota, Nevada, Ohio, New Mexico, and Michigan as the only states with Republican governors to commit to the expansion. They join 16 other states California, Connecticut, DC, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Missouri, Minnesota, Montana, Oregon, Rhode Island, Vermont, Colorado, and Washington that have committed to expanding eligibility, raising the total to 24. States can reverse their decisions at any time, as there is no deadline for expanding Medicaid under the ACA. Meanwhile, 16 states have indicated they will not expand the eligibility of their Medicaid population, including Alabama, Georgia, Idaho, Iowa, Indiana, Louisiana, Nebraska, North Carolina, Mississippi, Oklahoma, South Carolina, Maine, South Dakota, Texas, Utah, Virginia and Wisconsin. In addition to expanding Medicaid eligibility, several states are also moving forward with an additional care coordination demonstration program for patients eligible for both Medicaid and Medicare. Several states have indicated interest in exploring this type of demonstration project (see the June 20, 2012 Issue of GU for more background), though not all are ready to move forward. In December, Washington posted a draft three way contract for the capitated portion of their proposed MFFS demonstration, which will start in Of the six states that were expected to begin capitated demonstrations in 2013, only three of those states Massachusetts, Illinois and Ohio have signed MOUs with CMS, and five have delayed their initial implementation dates. Minnesota is likely to also push back its planned January implementation date, as it has not yet signed an MOU or selected plans. To date, twenty three states are pursuing the Financial Alignment Demonstration (FAD). In total, 15 states are pursuing the capitated financial alignment model, 6 states are pursuing the managed fee for service model, and 2 states are pursuing both. All states that are using the capitated option include Part D in the set of services provided to dual eligibles under the capitated plans, while states using the managed fee for service option will not change the administration of Part D services for dual eligibles. Operationally, fourteen states are planning to implement demonstrations in 2013, and the remaining eleven states are planning for implementation in Of the states pursuing the capitated option, six plan to implement in State Policy & Government Affairs will continue to keep you updated on the progress of both the Medicaid expansion and the demonstration projects for patients eligible for both Medicare and Medicaid. Source: Avalere Health Adam Miller, Director, State Health Policy Adam.Miller@astellas.com

6 Across The States Illinois Tax Disclosure Bill Opposed by Business Fails in Committee The Illinois House effectively killed legislation that would have made it more cumbersome for companies to conduct business in the state than anywhere else in the nation, jeopardizing future business development across multiple business sectors. The state Senate narrowly passed the Illinois Corporate Tax Disclosure Bill in December, but the legislation never made it to the House floor after failing in Committee. This bill would have required publicly traded companies to reveal their confidential tax information to the Secretary of State and subsequently have it posted on a searchable website. No other state requires such detailed financial disclosures, which would have put an unfair burden on Illinois companies, including Astellas. This tax information is already currently provided to the Illinois Department of Revenue, but not publicly disclosed. Businesses expressed concern that the disclosure of complex tax information could reveal business strategies and positions to competitors. They also argued that the legislation could deter companies from relocating to or staying in the state, negatively impacting the financial health of Illinois and its municipalities. State Policy & Government Affairs will continue to work with the Illinois State Legislature and Governor s Office to identify proactive, positive and sustainable approaches to keep Illinois a great place in which to live and do business. Adam Miller, Director, State Health Policy Adam.Miller@astellas.com Government Update is also available on the Astellas Government Affairs page of Astellas InSite. Please send any comments, suggestions or unsubscribe requests to Astellas.Government.Affairs@astellas.com.

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