Proposals for State Health-Care Block Grants Gaining Traction

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By Sara Hansard

Proposals to give patients and states more power over health care are “getting some traction,” Sen. Bill Cassidy (R-La.) said July 20.

“I came away very encouraged last night,” after meeting with President Donald Trump over Senate efforts to change the Affordable Care Act, Cassidy said at a forum on the prescription drug delivery system. “The president very much wants a replace with repeal,” Cassidy said, “but he wants something done. And it’s clear that they are willing to do more to achieve something.”

Cassidy made his comments as the Senate grapples with crafting legislation acceptable to both moderates and conservatives after an earlier plan was put on hold. Providing states with block grants to be used for health-care spending, which would allow states to fund health savings accounts for people to buy insurance of their choice, “would be a way to give the power back to the patient, to the state, increasing competition among insurance companies, and getting the federal government out of micro-managing someone’s insurance,” Cassidy said. Cassidy and Sen. Lindsey Graham (R-S.C.) are working on an amendment that would accomplish that, Ty Bofferding, Cassidy’s spokesman, told Bloomberg BNA July 20.

Congressional Action Stalled

There is bipartisan agreement on trying to find ways to get prescription drug prices down, but until Congress finishes work on legislation to repeal and replace the ACA, “it will be difficult to have a kind of cooperative, formal committee hearing in which we explore” that issue, Cassidy said.

A lack of transparency concerning drug price practices contributes to higher prices, Cassidy said. Until patients have met their health insurance deductibles, they don’t benefit from discounts negotiated through their health insurance policies, but patients typically aren’t aware of the discounts, he said.

“It may be that Congress has to mandate that those patients get point-of-sale rebates,” Cassidy said. When patients pay more than the contracted price, it pushes them more rapidly into the portion of Medicare Part D covered by the government, so not only is the patient paying more than the contractual price, “but the taxpayer’s paying” as well, pushing up Part D costs, he said.

FDA Head: Focus on Increasing Competition

The regulatory system needs to be changed to encourage competition, Food and Drug Administration Commissioner Scott Gottlieb said. “There are places in the pharmaceutical market right now where we’re not seeing the competition that Congress intended,” he said. “That’s what we’re focused on at FDA.”

There are market failures “particularly on the generic drug side,” because companies are taking advantage of some regulations in ways that weren’t intended, or because FDA regulations aren’t working as intended to create competition, Gottlieb said.

He cited instances in which complex drugs “have monopolies in perpetuity largely because we don’t have a good framework for demonstrating sameness,” Gottlieb said. The traditional method for approving generic drugs doesn’t work well in some cases because they can’t be measured easily in blood or they act locally on tissues, he said.

“This is a high priority because this is a whole class of drugs that should be subject to generic competition under the rules that Congress established but aren’t, only because of the complexity of trying to demonstrate sameness for those drugs,” Gottlieb said. Such drugs include metered dose inhalers and some oral drugs, he said.

Rules Being ‘Gamed’

In other cases, FDA rules are being “gamed in certain ways to forestall generic entry to branded drugs,” Gottlieb said. Branded companies in some cases use risk management plans the FDA puts in place to ensure the safe use of drugs to deny generic drug companies samples they need to do bioequivalent studies to make generic copies, he said.

The FDA is likely to publicly release about 150 letters it has sent to brand-name companies informing them that there is no legal reason for them to deny selling their drugs to generic companies, Gottlieb said. “That will provide public transparency,” he said.

In addition, the FDA may step in to cut off protracted negotiations between brand-name companies and generic companies over risk management plans that must be used, which would “allow the generic companies to go their own way on their own separate REMS [risk evaluation and mitigation strategy],” Gottlieb said.

Biggest Impediment to Competition

Probably the biggest impediment to competition are some contracts brand-name companies have with distributors, Gottlieb said. They include language that prevents the intermediaries from selling to generic drug companies. “That again makes it hard for the generic companies to get access to the physical samples they need to do the bioequivalent studies,” he said. This is an area “where we can do something on the FDA side.”

The FDA has committed to approving generics in eight to 10 months, reducing multiple reviews that aren’t necessary, Gottlieb said. That will end the process of “regulatory arbitrage,” Gottlieb said. Speculators buy drugs with little competition and “jack up the price a lot, and know that it’s going to take the FDA up to four years to get another generic competitor into the market.”

The FDA is publishing a list of drugs with few generic competitors, and the agency is on track to eliminate its backlog of drug applications by the end of 2018, Gottlieb said.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

For More Information

Information on the Prescription Drug Delivery System: Tackling Costs, Ensuring Access is at

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