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Senator Lankford Attends Two Finance Committee Hearings on President’s Budget

CLICK HERE to watch Lankford’s Q&A with Secretary Azar.

CLICK HERE to watch Lankford’s Q&A with Secretary Mnuchin.

WASHINGTON, DC – Senator James Lankford (R-OK) today attended two Senate Finance Committee hearings regarding President Trump’s recently released budget blueprint for fiscal year 2020. During the first hearing, Lankford questioned Secretary of Health and Human Services Alex Azar on issues concerning the rising cost of prescription drugs and the ongoing work to address those costs. During the second hearing, Lankford questioned Secretary of the Treasury Steven Mnuchin on a number of topics including whether the Internal Revenue Service is addressing the new employee benefit tax levied on non-profits and churches that Lankford has sought to address through the bipartisan, bicameral LIFT for Charities Act, which Lankford introduced with Senator Chris Coons (D-DE) on February 28, 2019.

Transcript of Lankford Q&A with Secretary Azar:

Lankford: Secretary, thank you for being here. Thanks for all the work that went into this. I need to ask a couple of questions. You and I have spoken multiple times about DIR fees and that retroactive claw-back process that’s been so painful for independent pharmacies around the country as they’re trying to be able to provide pharmaceuticals to people that need them, especially in rural areas. You have done a proposed rule, myself and several others have commented back to you on that one. Can you give us any update on that or where things are going with that rule?

The Honorable Alex Azar: That rulemaking of course is pending, I believe the comment period is closed, so we’re working on the final on that. What that would do in the proposal is ensure that the patient is getting the full benefit of whatever the lowest reimbursement level from a pharmacy benefit manager to the pharmacy would be. As a result, we think that would, and I’ve heard from pharmacists that think that would effectively change this retrospective DIR approach that is hurting so many community pharmacists.

Lankford: And the rebates are not getting to the patient at the end of the day and so that’s part of the challenge as well. Last year, you and I spoke at actually an Appropriations hearing, and I was on this same song at that point with you as well about DIR fees. You had mentioned that the Office of Inspector General, you were going to talk to them about doing a study on that one. Do you have any updates on that study or knowledge of the timeline?

Azar: Yep, so that study’s underway and I believe it’s close to being wrapped up and getting out.

Lankford: Okay, it’d be terrific. Let me shift subjects to you. In your budget, you mentioned about some reforms on 340B trying to be able to help get toward more targeted low-income patients, but there’s not a lot of details on it. Can you help fill in the banks for me a little bit about what you’re thinking on 340B  in that program? 

Azar: You bet. So first we have asked for plenary regulatory authority for her. So within the 340B program, we just aren’t able to actually regulate in that program right now and we need the ability to do that, to conduct appropriate oversite and ensure and demand transparency. We have asked for a user fee program from the beneficiaries of the hospitals and entities that can benefit from the 340B program to actually fund our work in providing that type of oversight. We also have asked that those entities that are taking advantage of the 340B program live up to their commitment to deliver charity care to individuals. By not sharing with them the savings from our drug pricing program, we have reduced the reimbursement and the spread that hospitals are getting in the drug program. We’ve reduced that and saved seniors $320 million a year, but we have to plow those savings back to all facilities, and we in the budget have proposed that those savings should only go to facilities that are dedicating one percent minimum to charity care.

Lankford: So one percent is an exceptionally low threshold. I’ve heard that number thrown around a lot. What percentage of providers do you think out there that could not meet the one percent threshold of charity care right now, that say they do charity care, but could meet a one percent threshold.

Azar: I don’t have that data. I fear that is not all of them, which is rather astounding.

Lankford: Right, well, that would be a concern obviously long-term if you’re saying you’re doing charity care and can’t hit a one percent number, then you’re not doing significant charity care and we need to be able to discuss that. Let me shift one more time to the biosimilar area, and I know that Senator Cornyn brought up some of these things, but I want to be able to drill down a little bit more on this. Between the biosimilar program and a recommendation that’s out there that your budget includes a $0 cost sharing on generics and biosimilars for low income beneficiaries and Medicare Part D. Would that make sense to actually expand in the Part B area as well?

Azar: I haven’t studied that question, but we want to incent the adoption of biosimilars. Figuring out whether it’s cost-sharing or is it around provider reimbursement on biosimilars in Part B. Happy to work with you on that. Whatever it takes, we want to ensure that we can create a viable, profitable biosimilar industry here that shift-share to it the way we’ve done with the generic industry.

Lankford: So there’s been some concerns that the incentives currently in place, especially in the Part B world, are not to use the biosimilars, to do the biologic, and that there’s a higher reimbursement amount and higher reimbursement percentage in Part B for the biologic. How does that get balanced out long-term? Where do you think that needs to go?

Azar: Yeah, so, right now with Part B, because you get paid ASP [average sales price] plus six percent if you have a higher price, which would be the branded product, you the physician get reimbursed more for using that drug, than if you use a lower-cost biosimilar. It is perverse. We need to solve that. That’s part of what we’re proposing with our foreign reference pricing, the international pricing index model. That’s part of what we changed in the reimbursement model that we did in Part B in this administration to actually make biosimilars more price competitive against the branded product, not the discriminated against.

Lankford: Right, there is some concerns, and Scott Gottlieb had mentioned, he had some concerns that there was just noise in the market place between biologics and biosimilars, saying biosimilars don’t live up to the standard. Now many companies have both, but that there was an intentional effort to try to make it noisier and think it’s not as safe on the biosimilars and such. Do you perceive that in the marketplace as well?

Azar: I perceived that although increasingly, the big pharma companies are actually getting into biosimilar competition and so I think that will get mitigated over time. 

Transcript of Lankford’s Q&A with Secretary Mnunchin:

Lankford: Secretary, thanks for being here and for the testimony today. Tell me how it’s going with OIRA [Office of Information and Regulatory Affairs]. There’s a new memorandum of understanding between IRS and OIRA trying to be able to work out any of the regulatory issues. Have you bumped into any barriers, slowed down in timing, anything that has caused an issue between OIRA and IRS and promulgating rules and regs?

The Honorable Steven Mnuchin: I think we’re pleased with the new memo and the change of it, and I think we’re working closely with OIRA. Obviously from our standpoint, we always want to get things out quicker, and from their standpoint, they have an obligation to look through them. So there’s always a natural we’d rather go faster, but I think it’s working.

Lankford: No major hiccups at this point—That’s helpful. There’s been an ongoing dialogue about tax gap and you and I have talked about that before. Tax gaps, one of those issues, we all talk about a number, but also realized the tax gap number is a decade old, so we really don’t know what the tax gap is anymore. Any progress on trying to determine what is our tax gap and what is unpaid at this point?

Mnuchin: Well, I think there is progress, but I would say more importantly, and this is why I’m determined that we need to modernize the IRS technology and we’ve substantially under invested in technology. We need to bring it into the modern age and the best way to shrink the tax gap is through technology—Is through being able to use the vast amounts of information that we have at the IRS, and automate it, so that we can use it for narrowing the tax gap.

Lankford: So you and I talked about this last year during FSGG conversations on appropriations, that for the past ten years IRS has listed a problem with legacy hardware and legacy software. There was additional investment that was put to IRS last  year, and there was the year before that, the year before that to be able to help with modernization. Do you have a number yet? What would it take to be able to move from, ‘We need additional investment’ to ‘We’re there”?’

Mnuchin: I think the total investment is approximately $2-2.5 billion as to what we think is necessary, and this will obviously be over a multi-year period.

Lankford: We talking five years, ten years? We talking three years? What do you think that is?

Mnuchin: I think it’s six years, and I think it’s like 2.2 to 2.6 is the range we’ve been using.

Lankford: Okay—Switching from tax gap to the other side for the improper payments side. The EITC [earned income tax credit] has been one of those things for a while. GAO has been on the high-risk list to say there’s a lot of improper payments there. Any progress in providing greater clarity to tax preparers and other folks on how to be able to close down that improper payment?

Mnuchin: There is, but again, this is something that I’d like to come in and brief you on, because I think as you know, we have the right to hold the payments for a certain period of time, but there are still issues with matching and everything else and potential fraud in this, and we’d be happy to come up and give you a briefing—It’s potentially a significant amount of money.

Lankford: Yeah, it is, and it’s one of those areas that has been on the GAO’s list for a very long time to resolve, and if there are ways that we can be helpful in that process out that we can be helpful in that process as well. Opportunity zones is if it’s not the first one of the first three things that people say to me, when I get back into the state, it’s in that top list somewhere. It’s been interesting the amount of buzz in conversation in different places around the state where they want to talk about opportunity zones. I know the regs are coming out on that frequently. Will the frequency increase or what do you think is a regular release on regs on that? When do you think is the next release? I know we just had one. When do you think is the next one?

Mnuchin: I think the next release will come within the next month, and it’s quite material. I think it will have a lot of issues and then again, as we get feedback and other issues, we’ll roll out additional regulation.

Lankford: Terrific. There’s a question that has come up from a couple of folks in my state that there is listed within the regs on what is called sin-businesses. Commercial golf courses, which I think a lot of people would be shocked to know the golf course, I guess, is on the sin-list. Country Club, massage parlor, hot tub facilities, suntan facility, racetrack, gambling facility, liquor store, is there an assumption within that, that anything that violates federal law should also be on that list? So for instance the multiple states that have legalized, decriminalized, or allowed medical distribution of marijuana—would those businesses and grow locations or dispensaries, because they violate federal law, would they also not be eligible for an opportunity zone credit, the same as these others?

Mnuchin: It’s not something I believe we’ve considered at the moment, but I’d be happy to review it internally.

Lankford: There’s been a question just in my state just to try to figure out if it violates federal law, if it is still eligible for a tax credit. And so trying to be able to figure out that balance on it would be helpful to folks. Can I flip to one more quick subject? The nonprofit parking piece that the reg came out, about 30 pages of it, is that done, or is there a new reg that’s coming out? Any updates on that one in the days ahead?

Mnuchin: The taxpayers should be able to rely upon the guidance that has come out, although it will go through a more formal process, but they should be able to rely upon that, and we hope we can hope that we’ve solved it as best as we can.

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