On December 23, the House and Senate passed legislation to fund the government – H.R. 2617, the Consolidated Appropriations Act of 2023 (link) – providing $1.7 trillion in discretionary resources for fiscal year 2023.

• Notably, the legislation includes provisions to:
  • Partially relieve the physician payment cuts set to take effect January 1, 2023
  • Waive the statutory PAYGO 4% Medicare sequester for two years
  • Enact the PIE Act, reform the FDA accelerated approval process, focus on rare diseases and promote clinical trial diversity
  • De-link the end of the COVID-19 National Public Health Emergency and the Medicaid continuous enrollment policy
  • Extend telehealth flexibilities through 2024
• While several other notable policies were discussed for potential inclusion, the legislation ultimately did not include the VALID Act, the Improving Seniors Timely Access to Care Act or an increase to the debt ceiling.
• Funding highlights:
  • Includes $800 billion in non-defense funding, a 9.3% increase over last year, and $858 billion in defense funding. Investments in healthcare and research include $47.5 billion for the National Institutes of Health, $9.2 billion for the Centers for Disease Control and Prevention, $1.5 billion for Advanced Research Projects Agency for Health (ARPA-H), and $950 million for the Biomedical Advanced Research and Development Authority (BARDA)

Food and Drug Administration (FDA)

• Reauthorizations (Sections 3101 – 3109)
  • Reauthorizes several notable programs including the Best Pharmaceuticals for Children Program, Humanitarian Device Exemption Incentive, Pediatric Device Consortia Program, Orphan Drug Grants and reporting requirements for the FDA on certain abbreviated new drug applications subject to priority review.
• Drugs and Biologics (Sections 3201-3213)
  • Accelerated Approval
    • Requires that the conditions for post-approval studies be specified no later than the date of accelerated approval.
    • Requires sponsors of accelerated approval drugs to submit progress reports every six months on required post-approval studies.
    • Requires the Secretary to establish an Accelerated Approval Council, comprised of 10+ Directors of various offices within FDA, to ensure consistent and appropriate use of the accelerated approval process
    • Establishes procedures FDA must take prior to the withdrawal of accelerated approval (e.g., allow opportunity for appeal, public comment)
    • The HHS Secretary will issue draft guidance on accelerated approval topics within 18 months, followed by final guidance.
  • Prompt reports of marketing status by holders of approved applications for biological products
    • Adds biologics to the requirements surrounding prompt reports of marketing status. Biologic manufacturers must submit a one-time report, and going forward, a biologic product’s marketing status (e.g., discontinued, not available for sale) will be published in Purple Book.
  • Rare diseases
    • Improving the treatment of rare diseases and conditions
      • Establishes several requirements relating to improving the treatment of rare diseases and conditions, including: the submission of a report on the orphan drug program to Congress, publication of final guidance related to common issues in rare disease drug development, a study of EU rare disease drug reviews, public meetings to improve engagement with the rare disease community, consultation with external experts on the science of small population studies, and a GAO report on the FDA’s work related to rare diseases.
    • Rare disease endpoint advancement pilot program
      • The legislative text indicates that the Secretary shall establish a pilot program to advance the development of efficacy endpoints, including surrogate and intermediate endpoints, for rare diseases. ADVI notes that the FDA announced the establishment of the RDEA Pilot Program in an October 27 notice in the Federal Register.
  • Emerging technology program.
    • The legislative text indicates that the Secretary shall establish a program to support the adoption, and improve the development, of innovative approaches to drug design and manufacturing. ADVI notes that an FDA Emerging Technology Program has operated within CDER’s Office of Pharmaceutical Quality since 2014.
  • National Centers of Excellence in Advanced and Continuous Pharmaceutical Manufacturing
    • Allows the HHS Secretary to designate up to five institutions (or consortia of institutions) of higher education as National Centers of Excellence in Advanced and Continuous Pharmaceutical Manufacturing and award grants to support the advancement, development, and implementation of advanced and continuous pharmaceutical manufacturing
  • Public Workshop on Cell Therapies
    • Requires the HHS Secretary and FDA Commissioner to convene a public workshop on best practices on generating scientific data necessary to further facilitate the development of cell therapies
  • Clarifications to exclusivity provisions for first interchangeable biosimilar biological products
    • Defines the ‘first interchangeable biosimilar biological product’ to mean any interchangeable biosimilar biological product approved on the first day such a product is approved as interchangeable with the reference product, allowing for the possibility of shared exclusivity
  • Advancing qualified infectious disease product innovation.
    • Expands the definition of Qualified Infectious Disease Products and their priority review to include biologics.
• Medical Devices (Sections 3301-3309)
  • Allows certain devices authorized for emergency use that also require laboratory testing to submit a single request that includes CLIA certification, requires a GAO report on the third-party review program, requires manufacturers of certain devices to submit information to FDA regarding medical device cybersecurity as part of premarket approval or clearance.
• Cross Cutting Provisions (Sections 3601-3631)
  • Diversity Action Plans for Clinical Studies
    • Requires a diversity action plan be submitted for a new drug in a Phase 3 study, or another pivotal study of a new drug. The diversity action plan will include the following:
      • The sponsor’s goals for enrollment in the clinical study
      • The sponsor’s rationale for the goals
      • An explanation of how the sponsor intends to meet those goals
    • The plan, in the form of guidance, must be submitted on or before the date that the protocol for the Phase 3 study is submitted
    • A waiver can be requested but will be accepted or denied at the discretion of the HHS Secretary
    • The same process is required for devices
  • Other Clinical Trial Diversity Policies
    • The HHS Secretary will issue guidance on the content of diversity plans, convene one or more public workshops to solicit stakeholder input on enhancing clinical trial diversity, and publish a report summarizing current progress on diversity in clinical studies
  • Public Meeting on Clinical Study Flexibilities Initiated in Response to COVID-19 Pandemic
    • Requires that the HHS Secretary convene a public meeting to discuss recommendations provided by the FDA during the COVID-19 PHE to mitigate disruption of clinical studies. The meeting would occur no later than 180 days after the date on which the COVID-19 PHE ends
  • Decentralized Clinical Studies
    • Requires that guidance be issued, or current guidance revised, that advances the use of decentralized clinical studies to support the development of drugs and devices. The guidance would be issued no later than 1 year after the date of enactment of this Act
  • Modernizing Clinical Studies
    • Requires that draft guidance be issued on the appropriate use of digital health technologies in clinical trials
  • FDA Inspections
    • Improving Food and Drug Administration Inspections
      • Includes provisions on the surveillance of foreign and domestic FDA facilities.
      • The HHS Secretary will submit to the House E&C Committee and the Senate HELP committee a report on the findings of their review of foreign facilities
    • GAO Report on Inspections of Foreign Establishments Manufacturing Drugs
      • No later than 18 months after enactment of this act, the Comptroller General of the United States will submit to the House E&C Committee and Senate HELP Committee a report on the inspections of foreign facilities
    • Unannounced Foreign Facility Inspections Pilot Program
      • The HHS Secretary will conduct a pilot program where they will increase the number of unannounced surveillance inspections of foreign human drug establishments and evaluate the differences between domestic and foreign human drug establishments
    • Enhancing Coordination and Transparency on Inspections
      • The HHS Secretary will ensure timely and effective coordination and alignment among the field investigators of the FDA and the staff of the Center for Drug Evaluation and Research’s Office of Compliance and Drug Shortage Program
    • Enhancing Transparency of Drug Facility Inspection Timelines
      • No later than 120 days at the end of each fiscal year, the HHS Secretary will post an annual report on the inspection of facilities on the FDA website
  • Regulation of Certain Products as Drugs
    • Clarifies that any contrast agent, radioactive drug, or OTC monograph drug will be considered a drug and not a device
  • Facilitating the Use of Real-World Evidence
    • Requires that the HHS Secretary issue or revise existing guidance on the considerations for the use of real world data and real-world evidence to support regulatory decision making; guidance would be issued within one year
  • Facilitating Exchange of Product Information Prior to Approval
    • Creates standards for labeling and disclosing information on drugs and devices currently labeled as investigational.

Medicare

• Medicare Extenders (Sections 4101-4103, 4111-4114)
  • Extends funding for increased inpatient hospital payment adjustment for certain low-volume hospitals and the Medicare-dependent hospital program.
  • Extending Incentive Payments for Participation in Eligible Alternative Payment Models
    • Extends until 2025 an incentive payment for physicians participating in APMs. Reduces the payment amount to 3.5%.
  • Extension of Support for Physicians and Other Professionals in Adjusting to Medicare Payment Changes
    • Background:
      • For 2023, CMS finalized a 4.5% decrease in the PFS conversion factor due to budget neutrality adjustments.
      • The 4% Medicare Statutory Pay-As-You-Go (PAYGO) cuts were scheduled to take effect January 1, 2023.
      • Combined, providers were facing cuts of more than 10% to Medicare payments starting on January 1, 2023 (link). After advocacy by physician groups, Congress is providing some payment relief for 2023 and 2024.
    • Policy:
      • Provides partial payment relief of 2.5% in 2023 and 1.25% in 2024. Physicians will therefore see a 2% cut for 2023, and 3.25% cut for 2024 (Sec. 4112).
      • Waives the statutory PAYGO 4% Medicare sequester cut for two years (Sec. 1001).
      • Extends the Medicare sequestration cuts an additional 6-months through March 2032.  The extended cuts will be set at 2%. (Sec. 4163).
  • Advancing Telehealth Beyond COVID-19
    • Extends telehealth flexibilities implemented during the COVID-19 PHE for 2 additional years, through December 31. 2024.
    • Requires the Secretary to conduct a study on program integrity related to telehealth services
  • Revised Phase-In of Medicare Clinical Laboratory Test Payment Changes
    • Further delays the PAMA payment reductions for clinical laboratory tests through 2023.
    • Further delays the PAMA reporting period for one year to January 1, 2024, through March 31, 2024
• Other Medicare Provisions (Sections 4131 – 4143)
  • Temporary Inclusion of Authorized Oral Antiviral Drugs as Covered Part D Drugs
    • Allows Medicare Part D plans to cover COVID-19 products through 2024 that have been authorized for emergency use but not approved.
  • Restoration of CBO access to certain Part D payment data
    • Authorizes CBO to access to Part D payment data (including rebate and direct and indirect remuneration (DIR)) that is currently shared with MedPAC.
  • Access to non-opioid treatments for pain relief
    • Creates a 3-year separate payment for certain non-opioid treatments for pain relief that are currently packaged into the Outpatient Prospective Payment System
  • Extending Acute Hospital Care at Home waivers and flexibilities
    • Extends until the end of 2024 the Acute Hospital Care at Home Program which allows hospitals to treat certain patients from emergency departments or inpatient hospital beds at home.
  • Extension of pass-through status under the Medicare program for certain devices impacted by COVID–19.
    • Provides an additional year of pass-through status for devices with pass-through status expiring on December 31, 2022.
• Health Care Tax Provisions (Section 4151)
  • Extension of Safe Harbor for Absence of Deductible for Telehealth
    • Extends the temporary safe harbor, created by the CARES Act, that allows employers and health plans to provide pre-deductible coverage of telehealth services for individuals with a high deductible health plan coupled with a health savings account (HDHP-HSA)
• Offsets
  • Medicare Direct Spending Reductions
    • Extends the Medicare sequestration cuts, currently set to expire September 30, 2031, to March 30, 2032. The extended sequester cuts will be set at 2.0%.

Medicaid and CHIP  

• Territories
  • Medicaid Adjustments For Territories (Sec. 5101)
    • Revises the allotment amounts for Puerto Rico, extends increased FMAPs through September 30, 2027, and makes Medicaid Data systems improvement payments to eligible territories (American Samoa, Guam, the Northern Mariana Islands, and the Virgin Islands)
• Medicaid and CHIP Coverage
  • Funding Extension and Continuous Eligibility of the Children’s Health Insurance Program and Related Provisions (Sec. 5111)
    • Extends CHIP funding for an additional two years through fiscal year 2029, requires children to be provided with 12 months of continuous coverage in Medicaid and CHIP effective January 1, 2024, and makes permanent a state option to allow states to continue to provide 12 months of continuous coverage during the postpartum period in Medicaid or CHIP.
• Medicaid and CHIP Mental Health
  • Requiring Accurate, Updated, and Searchable Provider Directories (Sec. 5123)
    • Requires that each managed care organization, prepaid inpatient health plan, prepaid ambulatory health plan, and when appropriate, primary case management entity with a contract with a State to enroll individuals who are eligible for medical assistance under the State plan will publish a searchable directory of network providers which will include physicians, hospitals, pharmacies, mental health providers, providers of substance use disorders services, providers of long-term services. This would go into effect on July 1, 2025
• FMAP Transition
  • Transitioning From Medicaid FMAP Increase Requirements (Sec. 5131)
    • Background:
      • The March 2020 Families First Coronavirus Response Act provided states with an additional 6.2% federal match if they kept their Medicaid eligibility rules in place and kept people covered for the duration of the PHE (known as the continuous enrollment provision). There was no specific end date on how long the additional resources would be available but instead, were tied to the end of the PHE.
      • CMS has given states up to 12 months after the PHE ends to complete eligibility redeterminations, however the additional match will end at the end of the quarter that the PHE ends, leaving states without additional funds to cover additional people.
      • State Medicaid Directors and others have recently sought certainty around resuming normal Medicaid eligibility rules.
    • Policy:
      • Beginning April 1, 2023:
        • States will be allowed to start the process of Medicaid redeterminations, even if the PHE is still in effect, if they comply with federal requirements.
        • The 6.2% federal match will gradually phase out through December 31, 2023.

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