Axios Vitals

A briefcase with a red cross on the front.

October 25, 2017

Good morning … Of course we got a new and important Affordable Care Act proposal just as Senate Republicans were headed into lunch yesterday to talk tax reform with the president. Nobody puts health care in a corner. (Oh, and it's one week until open enrollment.)

Republicans go toe-to-toe, again, with competing ACA bills

Now the Senate has two competing plans to fund the ACA's cost-sharing subsidies — which could mean it won't be able to pass either one. Senate Finance chair Orrin Hatch and House Ways and Means chair Kevin Brady outlined a new proposal yesterday as an alternative to the bipartisan ACA bill led by Sens. Lamar Alexander and Patty Murray.

The details: It's hard to call these competing ACA stabilization bills. Although they'd both fund cost-sharing reduction (CSR) subsidies for two years, Hatch-Brady would also waive the law's individual mandate for five years — effectively replacing one source of rising premiums with another.

  • Conservatives are not happy with Alexander-Murray. They've argued that if they're going to keep the law's cost-sharing payments flowing, they should be able to extract severe regulatory reforms in exchange.
  • Hatch-Brady is definitely more conservative than Alexander-Murray. The big unknown is whether its presence will stop more Republicans from accepting Alexander-Murray as "The Bill" — especially in the House, where its standing is weaker than in the Senate.
  • What they're saying: "Sad attempt at relevancy by health care staff on Finance who are upset that their boss is entirely focused on tax reform, as he should be," a senior GOP aide told my colleague Caitlin Owens.

The odds: 100% of the available evidence, from the entire Trump administration to date, suggests very strongly that Republicans are not capable of passing a health care bill on their own. They couldn't do it with 50 votes in the Senate, and either one of these bills would need 60.

  • Alexander-Murray has 60 votes in the Senate.
  • Hatch-Brady would have an extremely hard time getting there. Waiving the individual mandate will be too much to ask from most, if not all, Democrats.
  • Leadership will likely face a choice between passing Alexander-Murray, with only minor modifications; or not passing anything at all.
  • All of this still probably comes down to December, when lawmakers have to deal with a host of thorny must-pass bills.

Insurance and device taxes back on the chopping block

It's time once again for the insurance and medical device industries to ramp up their lobbying against the ACA's taxes on their products. Congress has frozen both taxes, but both are set to kick in again next year.

  • A trio of Senate Democrats — Heidi Heitkamp, Jeanne Shaheen and Joe Donnelly — introduced a bill last week to delay the insurance tax for another two years. House Republicans are also hoping to find some bipartisan support for a similar measure, though they also still need to finalize the policy details.
  • Opposition to the device tax is also bipartisan, and heating up. More than 175 House members, including 43 Republicans, signed on to a letter yesterday urging Speaker Paul Ryan to bring up a bill fully repealing the device tax.

Reality check: Both industries, but especially insurers, are more likely to win another delay than see their taxes repealed.

And though there will be public pushes here and there for stand-alone bills, or for inclusion in tax reform, getting onto Congress' massive end-of-year package is their best bet. Measures to delay the insurance or device taxes could be added to Alexander-Murray, if it comes up, as a way to win more Republican votes without losing Democrats.

​Express Scripts has an Anthem problem

Business at Express Scripts is humming along just fine — for now. The pharmacy benefit manager's profit in the third quarter climbed 16% to $842 million, my colleague Bob Herman reports. But there's a warning siren blaring:

  • Anthem is ending its pharmacy services contract with Express Scripts at the end of 2019 to create its own PBM, as we noted last week.
  • This is an immensely profitable contract for Express Scripts. Data released Tuesday show the company made roughly $10 in profit per prescription claim from Anthem last year, compared with its overall profit of less than $6 per claim.

Food for thought: Express Scripts has two years to figure out how to fill that gigantic profit hole. That could force the company to consider selling itself. A not-totally-crazy suitor could be Amazon, which has floated possible interest in getting into pharmacy services.

Ann Hynes, an analyst at Mizuho Securities USA, isn't convinced Amazon will jump into the drug supply chain. But a large acquisition like Express Scripts "is likely necessary to overcome the hurdles, especially to gain access to the patient," she wrote in a note to investors Tuesday.

Drug manufacturing still slow in Puerto Rico

Although most of the drug and device manufacturing facilities in Puerto Rico have come back online since Hurricane Maria tore through the island, they're operating at a substantially limited capacity, Food and Drug Administration commissioner Scott Gottlieb told a House panel yesterday.

  • Many facilities are operating at less than half their usual capacity, he said, and often at around 20%.
  • The FDA hasn't found a single drug-manufacturing plant on the island that's at more than 70% of its normal strength.

Why it matters: Roughly 8% of the U.S. supply of prescription drugs comes from Puerto Rico, raising concerns about shortages of some critical products as the island's slow recovery continues.

HHS loses abortion lawsuit

The D.C. Circuit Court of Appeals yesterday rebuffed the Trump administration's effort to stop an undocumented teenager from getting an abortion, likely bringing an end to one of the stranger legal sagas of the Trump administration so far.

The D.C. Circuit ordered the Health and Human Services Department to let the woman visit an abortion provider immediately, saying the department had violated her constitutional right to obtain an abortion by refusing to let her leave the detention facility where she's being held.

Go deeper: Read the court's 6-3 decision.

What's next: HHS can leave it here, or appeal to the Supreme Court.

Be smart: File this case as potential fodder for future Supreme Court confirmation hearings. Because the ruling came from the full D.C. Circuit, it involves several judges who could be future Supreme Court nominees. The majority included Judges Sri Srinivasan and Patricia Millett, both of whom are seen as potential SCOTUS contenders under a Democratic president.

What we're watching today: Anthem earnings call at 8:30am. Senate Aging Committee hearing on "working and aging with disabilities." House Energy and Commerce Committee hearing on federal efforts to combat the opioid crisis.

What we're watching this week: National Institute for Health Care Management briefing Friday on Capitol Hill.

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