Opinion: What Do the U.S. Election Results Mean to the Clinical Trials Industry?

David Vulcano

David M. Vulcano, LCSW, MBA, CIP, RAC, VP for Research Compliance & Integrity, HCA Healthcare

Undoubtedly, the actions and inactions of the U.S. Congress have direct and indirect effects on the clinical trials industry. Also undoubtedly, anxiety is heightened at times after elections, especially when they result in changes of the administration.

Times like these result in the struggle between those on their way out having last-minute opportunities to complete or build immunity into their previous efforts, those incom- ing into the system preparing new efforts, and those  who will carry over between administrations trying to find their place in it all. While the upcoming lame duck Congressional session still may try to address several lingering bills that affect the clinical trials industry  (e.g., 21st Century Cures Act, Right to Try Act, Medical Innovation Act, Reciprocity Ensures Streamlined Use of Lifesaving Treatments [RESULT] Act of 2015, etc.) all eyes seem to be turning away from the legislative branch and toward the executive branch of government as President-elect Donald Trump prepares to take  office.

We Don’t Know What We Don’t Know

While there are many unknowns to sort out, one certainty that the change of leadership will bring calls into question the longevity of the Patient Protection and Affordable Care Act (PPACA) (plus the Senate’s “fix-it bill” entitled Health Care and Education  Reconciliation Act [HCERA] that passed little more than a week later, or together commonly known as “Obamacare”). The repeal of this piece of legislation (with or without replacement) and/or its defunding, has been a highly touted campaign staple  of many representatives (including President-elect Trump) who were elected or re-elected this cycle. Therefore, just as we analyzed the act upon its passage in 2010, it bears reanalyzing for the reverse reason—what goes away in the event of a repeal and/or defunding.

Whether you get a repeal without replacement, a repeal and replacement, a “tweaking,” or a defunding, if you run a business you need to seek advice. As a business, there will be a shift in all of the requirements, tax credits, and penalties surrounding your provision  of health insurance to employees. There are also other operational requirements that may or may not affect your business (e.g., PPACA Section 4207 requiring companies of more than 49 employees to provide for up to one year post-partum a private place other than the bathroom for nursing mothers).

The potential general business impacts are far outside our focus, which herein will be on the sections whose repeal or defunding will likely affect clinical trials oper- ations and business planning. Also beyond the scope of this article is the impact on the repeal or defunding of the sections pertaining to general healthcare operations, such as the Hospital Value-Based Purchasing Program described in PPACA Section 3001, the development of Accountable Care Organizations as described in PPACA Section 3022, and other sections. Each organization will determine how it may restructure to meet any new paradigm, and how clinical trial operations fit in.

What we will focus on are the sections that will have the most direct impact on the clinical research industry, what would likely happen in the event of a repeal or defunding of the PPACA, and what you may be able to do about it if you choose. Each section of the PPACA (or the HCERA if relevant) is provided to you for your reference to read and make your own determinations.

Multiple Sections Affecting Insurance Coverage

Likely most of what you know about the PPACA overall relates to how individuals obtain private insurance. Repealing the PPACA will undoubtedly cause insurance migration and benefit restructur- ing for those affected by a hodgepodge of provisions such as i) eliminating the required provision of “adult child” coverage until the age of 26 (PPACA Section 10201); ii) elimination of pre-existing condition limitation clauses (PPACA Section 1101); iii) elimination of annual and lifetime coverage limits (PPACA Section 10101); iv) elimination of the “individual mandate” to have health insurance coverage or pay a tax (PPACA Section 1501); and v) elimination of the “Cadillac Plan” tax (the 40% tax on the provisions of an insurance plan determined “excessive” by the federal government) (PPACA Section 9001).

About 32 states expanded their Medicaid programs to individuals earning up to 133% poverty level income via PPACA Section 1331. Under this program, the increased cost to the state was covered under PPACA by the federal government until 2016, after which the states would have to pick up the increase on their own. As state Medicaid programs have a federal matching component, repeal or defunding of the PPACA jeopardizes that matching funding of the expanded Medicaid, thus signifi- cantly increasing the state’s financial obligation to where it may not be affordable. Thus it would appear that, to the extent that the Expanded Medicaid com- ponent is not sustainable without the federal match, the states would revert back to traditional Medicaid. This would disenroll anyone on Expanded Medicaid so that they would have to obtain health insurance on their own (e.g., through their employer).

One of the hallmarks of the PPACA, spread across multiple sections, was the establishment of health insurance exchanges so that individuals could have a state marketplace to purchase an indi- vidual health insurance policy and obtain federal subsidies for its cost. Unlike the Expanded Medicaid program that a majority of states opted into, most states did not opt into running their own exchange, thus the burden fell on the federal government to run (or assist in running) many of the exchanges. With the repeal or defunding of the PPACA, this hallmark component of the act will arguably go away, as there will be no method of operating it and/or no federal subsidies for the individuals. The result will be that those individuals purchasing their insurance coverage through an exchange will have to obtain insurance via another mechanism (i.e., Medicaid, employer-based insurance, etc.).

To summarize the impact of the three para- graphs above, the repeal and/or defunding of the PPACA will likely cause insurance migration among tens of millions of Americans. Given the fact that enrollment and retention in many clinical trials is affected directly or indirectly by an individual’s insurance status, it challenges research site leaders to think about their patient population, how they will shift, and how this shift will affect recruitment and retention for the kinds of trials that they do. Figure1 shows some potential reason individuals migrate toward or away from clinical trials, based on their insurance status either initially or midway through the trial.

Reasons Why Individuals Migrate Toward or Away from Trials

PPACA SEC. 6002: Transparency Reports and Reporting of Physician Ownership or Investment Interests

Many people do not realize that the language that was once known as “The Physician Payment Sun- shine Act” actually passed congress as part of the PPACA. The Sunshine Act failed to pass Congress twice as stand-alone legislation, and  eventually

made it through as a bolt-on section of the PPACA. Although it is often called the “Sunshine Act” in the vernacular, it is officially called “Open Payments” by the Centers for Medicare and Medicaid Services (CMS), its administering body, as its requirements go beyond just physicians and just  payments.

Thus, being hardwired in the PPACA, if there is a complete repeal of the PPACA or even a defunding of CMS’s ability to coordinate the Open Payments program (i.e., the website, collection of data, etc.), the Sunshine Act requirements go away.

Supposing it goes away, unless renewed as part of a replacement for the PPACA or via a third try as stand-alone legislation; the stakeholders will be left without all the positives and negatives this effort has brought. This is not to say that a private effort could not take place to do this on a national level, nor is it to say that states will not create or expand their own version of the law for state reporting (and certainly both could be done as well). Needless to say that if you believe there is merit to gathering  and posting this information, you have a great opportunity to revamp this entire process in the event of a repeal of the PPACA.

PPACA SEC. 6301: Patient-Centered Outcomes Research

This section amends the Social Security Act by adding a section to create and fund the private/ public partnership known as the Patient Centered Outcomes Research Institute (PCORI). While many clinical research institutions are familiar with PCORI, more can be learned at www.pcori.org.

The agency and its funding mechanism (Patient Centered Outcome Research Trust Fund) was created by the PPACA. Since its inception, PCORI has created its board, hired staff, and funded many studies (you can see the reports on its website). The trust fund gets funded from a combination of federal dollars (~$150 million/year from the U.S. Treasury plus ~$85 million from the Federal Hospital Insur- ance and Federal Supplementary Medical Insur- ance) and private dollars via a required contribution from private insurers (the Patient Centered Out- come Research Fee) of $2 per year per covered life in 2013 and increased annually for inflation, which is bringing in approximately $220 million/year.

There is no immediate cash flow danger, as the FY2014 report stated PCORI had approximately $626 million cash on the bank for operations and study funding. Nevertheless, even if the above esti- mated numbers are a little off, a complete repeal or defunding of the legislation that created and provides the funding mechanisms could affect the financial health and/or the sustainability of this organization. If you desire to maintain or change anything about PCORI or its funding, please contact  your legislators.

PPACA SEC. 7002: Approval Pathway for Biosimilar Biological Products

The repeal or defunding of this section (also called “Biologics Price Competition and Innovation Act of 2009”) presents some strange questions. Through this section of the PPACA (again at the risk of over- simplifying the issue, as there are lots of caveats in this section), Congress formalized the creation of a biosimilar approval pathway for the U.S. Food and Drug Administration (FDA). Although FDA was kind-of-sort-of doing this already, amending federal law in this manner gives the agency the legal backing to do what it does—essentially the legislative branch of government (both the House of Representatives and the Senate) backing and providing additional structure for the executive branch’s (i.e., FDA’s) efforts here.

Many clinical trial sites have conducted bio- similar approval studies. This section of the PPACA gave the legislative authority for FDA to create the approval pathway, as well as to provide the exclu- sivity incentives (similar to that of drugs) necessary for the innovators. In this case, the exclusivity periods for biosimilars are essentially 12 years for the innovator product, an optional six-month pediatric extension, and then one year for the first biosimilar competitor product. A complete repeal of the PPACA would eliminate this provision, and the legislative backing for the FDA. Therefore, it challenges the system on if, when, and how we continue to do biosimilar studies. It’s possible that FDA can continue as it did as long as it remains unchallenged; however, regulatory experts will have to sort this out.

PPACA SEC. 9008: Imposition of  Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers and HCERA SEC. 1405: Excise Tax on Medical Device Manufacturers

To the extent that increased taxes on pharmaceutical and device manufacturers have negative impacts on research and development (R&D) funding, the corollary is (hopefully) true—that if you reduce taxes on these organizations, they would have more money for R&D. Setting aside prognostication on what will happen with business taxes through changes to the Internal Revenue Service code, in the event of a repeal of both the PPACA and the corollary HCERA, two taxes will certainly go away.

The PPACA (originally and as amended by HCERA) sets a tax on pharmaceutical manufac- turers based on a percentage of sales of branded prescription drugs (excluding orphan drugs) to specified government programs (i.e., Medicare, Medicaid, Veterans Affairs, Tricare, etc.). At the risk of oversimplifying the formula and eliminating the description of a sliding scale for companies with less than $400 million in revenue, the tax levied on manufacturers is that they pay their percentage (of their sales to specified government programs) of the amount the government wants per year (a base rate of $4 billion in 2017, $4.1 billion in 2018, and $2.8 bil- lion in 2019 and thereafter). For example (and again oversimplifying a bit), if a sponsor has 2% of the government’s pharmaceutical purchases, it would owe $80 million in 2017 (2% of the base rate). The HCERA bill also slightly amended this section by adding what is essentially a joint and several liability clause to this section, so that if a company goes out of business that year, everyone else essentially has  to pitch in to cover the lost percentage.

For device manufacturers, the PPACA originally had a similar tax calculation model (a percent of sales multiplied by a base amount), but the HCERA bill completely overhauled that section and replaced it with a simple flat tax of 2.3% of the price of all taxable medical devices sold (a “taxable device” as defined in section 201(h) of the Federal Food, Drug, and Cosmetic Act, except items such as eyeglasses, contact lenses, hearing aids; and other devices to be determined by the secretary of the U.S. Department of Health and Human Services using the criteria of “generally purchased by general public at retail for individual use”).

Most major pharmaceutical and device manu- facturers stated the impact of these taxes on their annual reports to be in the tens to hundreds of millions of dollars. To the extent that these dollars, or at least a percent of them, are reinvested in R&D, it would mean resources for clinical trials and related investments. Of course, as is the case with removing any collected tax, addressing where the money is spent (in this tax case, it’s to help pay for Medicare Part B), there are no easy answers. There are always trade offs.

PPACA SEC. 10103: Coverage for Individuals Participating in Approved Clinical Trials

While Medicare has been required to cover the routine care costs of qualified clinical trials since 2001, there was no such federal  requirement for private insurers to do so until the PPACA.

While many states required similar coverage for cancer-related clinical trials, the addition of this section in the PPACA created a federal floor for the mandated insurance coverage of routine care costs of qualifying trials.

Essentially, with some grandfathering and some exclusions, an insurer could not deny, limit, or impose additional conditions on coverage for the routine patient costs for items and services furnished in connection with a qualifying trial  (for cancer or other life-threatening diseases), nor could they discriminate on the basis of an individ- ual’s participation in a trial. While the caveats of this provision include details on handling in-net- work versus out-of-network coverage as well as out of state coverage, it would all be moot in the event of a repeal (noting that defunding alone would not have an impact here). In the event of a repeal of the PPACA, unless replaced this federal floor goes away, and thus any requirements imposed on the private insurance carriers for covering the routine care costs would revert back to the individual states. Approximately 39 states have laws requiring coverage (mostly for cancer clinical trials) and the others have no such requirement, leaving it up to the free market to decide.

A related additional item to think about here is that one of President-elect Trump’s campaign positions to help lower healthcare insurance costs was to eliminate the state-line boundaries of health insurance to increase national competition. While there are challenges in accomplishing this, should it occur it will require the sorting out of how to amal- gamate the varying state laws when these tradi- tional boundaries are eliminated. Granted there will be many other items in this vortex, nevertheless this is one that is deeply important to those conducting oncology studies and others that blend routine and conventional care into the research protocols.

Conclusion

There will undoubtedly be changes to come, but the dealings with the PPACA legislation will be high on everybody’s watch list. We have an unprecedented opportunity to help guide this wind of change in our favor. Be sure to tell your federal representatives now, rather than later, what you liked about the PPACA, what you wish would go away completely, and how you would make it better. One thing is certain…what does not change is our need to effi- ciently provide quality data on time and at low cost while protecting the rights and well-being of the research volunteers. Always focus on that, despite where any of these winds of change take you.

Lastly, always remember to be stubborn on your vision but flexible with the journey.

Guest Author: David M. Vulcano, LCSW, MBA, CIP, RAC, AVP and the Responsible Executive for Clinical Research at Hospital Corporation of America in Nashville, Tenn.

 

Learn More at ACRP 2017

Vulcano will present a session exploring more potential implications of a Trump presidency, as well as how U.S. healthcare regulatory changes might impact clinical trials, at the ACRP 2017 Meeting & Expo in Seattle, WA, April 28 – May 2.

Innovation. Implementation. Collaboration. See the future of clinical research at the ACRP Meeting & Expo. Learn from the influencers, innovators, and regulators driving change in clinical trial operations. You and your team will gain practical strategies to manage change, streamline operations, and minimize risk. Position yourself for success at the premier education and networking event for clinical research professionals.

View Preliminary Program