Supply Chain Relief by Way of Partial Lift of Steel and Aluminum Tariffs

The Fabricator - for the original article go HERE:

White House looks to ease supply chain troubles, crack down on Chinese imports from Europe

A key U.S. steel users group voiced mixed feelings about the new U.S.-European Union agreement partially lifting 25% import tariffs on steel and 10% import tariffs on imported aluminum from European countries. The agreement has a dual purpose: easing supply chain problems for a broad cross section of U.S. manufacturers who use steel and tamping down cheap Chinese steel slithering into the U.S. through Europe.

Additionally, follow-on tariff rate quota agreements appear to be in the works with the United Kingdom and Japan, based on two, parallel U.S Department of Commerce statements on Oct. 31. The statements said: “The United States and the [United Kingdom or Japan, depending on the statement] are consulting closely on bilateral and multilateral issues related to steel and aluminum, with a focus on the impacts of overcapacity on the global steel and aluminum markets; the need for like-minded countries to take collective action to address the root causes of the problem; and the climate impacts of the sectors.”

The Biden administration will eliminate tariffs on 3.3 million metric tons of imported European steel, which is the average of those imports between 2015 and 2017. Imports above that level will continue to be subject to duties of 25%. To be eligible for duty-free treatment under the quota, 54 product categories of steel imports must be “melted and poured” in the EU. Manufacturers that won exclusions to import duties in the past will have those exclusions extended to Dec. 31, 2023. Those totals will not be counted against the 3.3-million-ton ceiling.

Aluminum imports allowed in tariff-free amount to 18,000 metric tons for unwrought aluminum under two product categories and 366,000 metric tons for semifinished (wrought) aluminum under 14 product categories. Derivative articles of aluminum are exempt. The U.S. will maintain its aluminum product exclusion process.

The Coalition of American Metal Manufacturers and Users (CAMMU) called the agreement good news, but said, “It is disappointing that the agreement will not completely terminate these unnecessary trade restrictions on our allies. CAMMU is concerned that replacing the tariffs with a tariff rate quota will hurt its members because the threat of tariff reinstatement looms with the surge in steel and aluminum demand expected when the bipartisan infrastructure bill passes.”

The somewhat conflicted view of users parallels the hitches in the view of steel manufacturers expressed by the American Iron and Steel Institute (AISI). Kevin Dempsey, AISI president/CEO, appreciated the Biden administration’s “commitment to addressing the global steel overcapacity crisis and to combatting unfair trade practices in the global steel sector.” But he went on to stress the importance of proper enforcement of the agreement particularly with regard to preventing seepage of cheap Chinese steel into the U.S. through Europe and the need for “new trade approaches to address climate change, including through development of effective carbon border adjustment measures.”

U.S. steel production, which relies heavily on electric-arc furnaces, is regarded as having far lower carbon emissions than the coal-fueled blast furnaces prevalent in China.

Widespread Industry Support for Updated Mechanical Power Press Safety Standard

Industry is showing widespread support for the Occupational Safety and Health Administration (OSHA) to update its current mechanical power press standard with ANSI B11.1-2009 (R2020).

The agency issued a request for information on July 28. The OSHA standard includes requirements for inspecting, maintaining, and modifying mechanical power presses to ensure that they are operating safely as well as a special reporting requirement for injuries to employees operating mechanical power presses. The standard also includes requirements for safeguarding the point of operation.

The Precision Metalforming Association (PMA) told the OSHA the latest ANSI B11.1 standard, which is comprehensive and proven effective, also includes requirements for increasingly popular servo presses and requirements for the composite press production system, including automation.

That said, the Industrial Fasteners Institute wants the OSHA to grandfather older mechanical presses that comply with the 1971 standard. “Older machines may be perfectly safe and functioning properly, but since their wiring was done before the current ANSI standard was issued, then it would be unreasonable to expect a costly, unnecessary upgrade,” the organization said in a statement.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Approach to Bond Rating Under Scrutiny

Strategic Finance - for the original article go HERE:

Lawmakers in the United States are pushing to revamp the bond and credit rating industry and its “issuer pay” model. The U.S. House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing in July 2021 to examine the nationally recognized statistical rating organizations (NRSROs).

Chairman of the subcommittee, Rep. Brad Sherman (D.-Calif.), raised the issue of “unchecked conflicts of interest,” referring to a suspicion that when companies pay a rating agency to rate a corporate bond, the agency is pressured to give the bond a more favorable rating, fearing loss of business.

Sherman is sponsoring the Commercial Credit Rating Reform Act that would require the establishment of a credit rating agency assignment board within the jurisdiction of the U.S. Securities & Exchange Commission (SEC). The board would be responsible for assigning the NRSROs to provide ratings for corporate issuers and issuers of new asset-backed securities. Currently, there are nine rating agencies registered with the SEC as NRSROs. As of December 31, 2019, 95.1% of all credit ratings outstanding were published by the three largest NRSROs: S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings.

Not only is there support for eliminating the “issuer pay” model and diversifying the credit rating industry, but additional corporate disclosure could also be in the cards. The SEC’s Fixed Income Market Structure Advisory Committee (FIMSAC) made a number of recommendations in June 2020, which included requiring companies to make new disclosures regarding their choice of credit rating agencies. One recommendation stated, “We encourage the SEC to partner with appropriate trade groups to develop a set of best practices for choosing NRSROs and, once established, to require corporate issuers to disclose if/why they deviated from them in their annual reports.”

Amy McGarrity, chief investment officer of the Colorado Public Employees’ Retirement Association, agrees that a “conflict of interest lies at the heart of the discussion of improving credit rating quality.” McGarrity chaired the credit ratings subcommittee of the FIMSAC, which suggested the SEC should oversee a random assignment process for both structured products and corporate bond ratings, with at least two NRSROs being assigned to each issue, to provide diversity of views.

But some advocacy groups don’t support the proposed reforms. Michael Bright, CEO of the Structured Finance Association, said, “Over the long-term, our members are concerned a government-controlled assignment system will perversely reduce the incentive to compete on the quality of ratings.”

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Pipelines Sail into Political Winds in Washington in 2021

Pipeline & Gas Journal - for the original article go HERE.

With the ascension of President Joe Biden and environmentally friendly Democratic agency heads taking over U.S. regulatory and independent agencies, interstate gas pipelines face a host of newly emboldened, top-level appointees – many of them gas pipeline skeptics – who will make their political weight felt across federal permitting and safety requirements. 

In that regard, the biggest impact is likely to be at the Federal Energy Regulatory Commission (FERC), which is apt to give greater consideration to prospective emissions of greenhouse gases when considering applications for construction of new gas transmission pipelines.  

Biden will appoint one of the two current Democratic FERC commissioners as chairman. For pipelines, neither is a particularly appetizing choice. Richard Glick has repeatedly opposed approval of new pipelines because of their impact on greenhouse gas emissions and for other reasons. 

Allison Clements, a Democrat confirmed by the Senate in November, was previously in charge of the Sustainable FERC Project at the Natural Resources Defense Fund (NRDC). Clements’ successor at the NRDC FERC Project is Gillian Giannetti, who wrote a blog in November 2019 headlined “Reform Is Long Overdue for FERC’s Gas Pipeline Reviews.” 

FERC will continue to have a 3-2 Republican-to-Democrat advantage until July 2021 when Biden will have a chance to appoint a Democrat to a Republican seat, allowing Glick, who is likely to be appointed the chairman soon after Biden ascends, to take FERC pipeline approval policy in a potentially radical new direction.  

But the winds of change will probably blow before the FERC majority shifts to 3-2 Democratic. Gillian Giannetti thinks Glick or Clements will immediately begin to develop a climate test that FERC can use when considering applications for new pipeline construction. 

In the past, FERC has been unsure of the extent to which greenhouse gas emissions can be considered, in part because federal court case rulings had left a lot to be interpreted clearly.  

But Giannetti believes the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) make a clear case for FERC considering “direct” GHG emissions, those created by the construction of a project and emissions from operation of the pipeline.  

“Those are the lowest hanging fruits,” she said. Even though she admits those direct emissions are a small part – though not de minimus – of GHG emissions from a project, calculating those would be a good first step, she said.  

Giannetti thinks many in the pipeline industry would agree with factoring direct emissions into the FERC’s consideration of pipeline applications. “I would be shocked if Joan Dreskin disagreed with me,” she said, referring to the senior vice president, secretary and general counsel of the Interstate Natural Gas Association of America (INGAA).  

But Giannetti and other environmentalists believe that ultimately FERC needs to come up with an assessment tool that measures the lion’s share of GHG emissions created by new pipelines, those from upstream and downstream operations. 

Dreskin said FERC already considers direct emissions.  

“Pipeline project developers provide FERC with information regarding the direct GHG emissions from their proposed projects, which include emissions from pipeline construction and operation,” Dreskin responded. “FERC has historically analyzed and reported these emissions. Current NEPA regulations, however, no longer subdivide effects in this manner. We anticipate FERC will continue to consider what were previously referred to as ‘direct effects’ in its analysis.” 

The question is, however, how far does current law allow FERC to go to block new pipeline projects? 

“Were FERC to find that a project is not in the public interest because of GHG emissions, this in my view would be a seismic shift for the agency, and it would have difficulty surviving judicial review,” offered Emily Mallen, who closely follows FERC activities as a partner in Washington with the law firm Sidley Austin LLP. “That said, FERC could deny a pipeline project under the NGA if it found lack of public need, and Commissioner Glick’s dissents have also centered on whether a particular project is really needed.” 

Mallen believes FERC’s consideration of public necessity will become more onerous and affiliate agreements likely will be subject to greater scrutiny going forward. 

“That said, I can foresee no scenario in which FERC will stop allowing affiliate agreements to serve as a basis for project need,” she added. “But the project sponsors may need to put more data into the record to bolster that needs assessment.” 

Mallen points out one other presumably anti-pipeline factor that may rear its head under a Democratic-controlled FERC: environmental justice (EJ), which has the potential to affect a proposed project on communities of color.  

“When it comes to EJ concerns raised in pipeline and LNG certificate matters, FERC has applied its own methodology to the review that is based on the EPA’s Environmental Justice Mapping and Screening (EJSCREEN) tool,” Mallen explained. “If modifications are made to the EJSCREEN tool to strengthen it, this is certain to impact future FERC analyses. Moreover, we’ve seen dissents by Commissioner Glick on FERC’s approach to EJ review that suggests the agency’s approach could shift under a Democratic-led Commission.” 

Almost as certain as tougher reviews for pipelines at FERC is the likelihood that the Environmental Protection Agency (EPA) will withdraw the Trump final rule issued in September 2020, called Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review and referred to as the “Methane Repeal Rule.”  

It did two favorable things for interstate pipelines: 1) canceled the 2012 Obama rule that make transmission pipelines subject to Clean Air rules on volatile organic chemical emissions and 2) canceled a 2016 Obama rule that made transmission pipelines and all other sectors of the oil industry subject to methane restrictions on air emissions. 

Environmental groups such as NRDC, Environmental Defense Fund and Sierra Club are challenging that Trump final rule in federal court, said David Doniger, senior strategic director, climate and clean energy program at the NRDC who oversees the case. 

“In short, we are very confident the court will reject EPA’s methane rollbacks if the case is seen through to decision. The incoming Biden administration is near certain,” he said. “However, to reverse course administratively, reissue the rules and proceed to regulate existing equipment, the case may not actually proceed to decision.”  

What will also be affected by the incoming Biden administration are Trump administration proposed rules that were not finalized by the time Biden was inaugurated. If these were finalized prior to Biden taking office, the Senate with its Democratic majority could potentially cancel those rules via the Congressional Review Act, since they would have been finalized within 60 days of a new administration taking office.

This is being written prior to Biden’s inauguration, so it isn’t known whether two key proposed rules will be finalized or whether they won’t, leaving the Biden administration to make changes or simply cancel the rulemakings outright. 

The first one is the Army Corps of Engineers proposed revisions to nationwide permits that industries use when digging around wetlands with very little environmental damage. Gas pipelines use NWP12 to which the Corps proposed a number of changes, all of them opposed by the INGAA.  

Interestingly, environmental groups opposed the changes, too, though for different reasons. The Corps is likely to hold off issuing a final rule because of numerous controversies about many aspects of its proposal. However, the law says the Corps must reissue NWPs every five years, meaning in this case by 2022. Among changes environmental groups are seeking is one totally eliminating NWP12.  

Another “hanging chad” is the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) proposed rule giving pipelines a new alternative to replacing old pipe when the population density around that pipe increases from a Category 1 to a Category 3 location.  

Instead of having to replace old pipe, which the pipelines prefer not to do because of cost, the Trump PHMSA wants to allow pipelines to use integrity management procedures to assure the safety of that pipe in the now higher density area. This proposed rule has a somewhat lower visibility but still faces opposition from state safety officials represented by National Association of Pipeline Safety Representatives (NAPSR).  

That proposed rule will probably be carried over to the Biden administration. The fiscal 2021 appropriations bill passed by Congress at the end of December included the Protecting our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2020.  

That bill has minimal impact on gas transmission pipelines, but, more importantly, establishes new safety programs for both distribution pipelines and liquefied natural gas (LNG) facilities. So those two gas sectors will likely see the PHMSA begin to roll out new regulatory programs for them in 2021.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Army Corps on Hot Seat over Changes to Pipeline Approvals

Pipeline & Gas Journal - for the original article go HERE.

With the arrival of the Biden administration and the ascension of environmental concerns to provide a spike in political pressure, the Army Corps of Engineers (USACE) may have to rethink its proposed changes to the nationwide permits (NWPs) it issues for all sorts of dredge and fill construction activities around wetlands, including gas and water pipelines.   

The Corps’ proposal last September was in response to a Trump presidential directive requiring federal agencies to review existing regulations that potentially burden the development or use of domestically produced energy resources.  

The proposed changes have created an unusual political dynamic with both pipelines and environmental groups, usually on opposing sides in these matters, opposed to the changes. Only electric utilities support trifurcating NWP 12 into three parts, one for oil and gas pipelines, one for electric and telecommunications pipelines and another for water pipelines.   

But the broad opposition to the proposal may make it difficult for the Corps to issue a final rule prior to the Trump administration leaving town on Jan. 20. If it refuses to make significant changes, or even if it does, the new Congress has an option to delete any final rule within a certain timeframe after a new administration takes office. There is, too, always the option of a legal challenge to any final rule.  

“This is an invitation for litigation, as recently occurred with NWP 12, creating uncertainty and delays for the many industries that rely on the NWP program,” stated Holly C. Pearen, senior attorney, ecosystems, Environmental Defense Fund.  

One of the major changes the Corps proposed was to NWP 12, which pipelines use extensively when doing construction that causes minimal damage to the environment in and around wetlands.   

That construction ranges from large pipeline expansions, maintenance, inspection and repair activities to comply with pipeline integrity requirements and for modernization projects, such as replacing pipeline facilities with newer, more efficient facilities and installing alternative power sources to reduce greenhouse gas emissions from compressor stations.   

The Corps estimates that approximately 47,750 NWP 12 activities could be authorized over the next five years.  

Regarding NWP 12, the Corps proposes two changes. First, it would keep NWP 12 for oil and gas pipelines only and establish an NWP C and NWP D. The NWP C would be for electric utility lines and telecommunication lines, and NWP D for utility lines that convey water and other substances.   

In addition, preconstruction notification (PCN) requirements, which determine if an NWP 12 application for a Clean Water Act permit needs an extra level of review from the Corps district in which the project would take place, would be changed. Five current PCNs would be eliminated, two retained and, most importantly perhaps, a new one added for pipelines over 250 miles (402 km).  

There is a total of 52 NWPs, and they were last issued in 2017 and are in effect until 2022. The Corps wants to “trifurcate” NWP 12 because the overwhelming number of applications are for oil and gas pipeline projects.   

The Corps explained it was subdividing NWP 12 to “… address the differences in how different linear projects are constructed, the substances they convey, and the different standards and best management practices that help ensure those NWPs authorize only those activities that have no more than minimal adverse environmental effects.”  

While the Trump executive order theoretically dictated deregulatory changes, the Interstate Natural Gas Association of America (INGAA) and the American Petroleum Institute (API) both think the NWP 12 changes go in the opposite direction.  

Amy Emmert, senior policy advisor, API, complains, “Proposing three NWPs for the same types of utility line activities when one NWP has been sufficient is the antithesis of streamlining and the USACE’s rationale related to the “potential” need for industry-specific national terms rings hollow, especially when there are ample opportunities available for tailoring activities at regional or case-specific level.”   

With regard to the threat of “best management practices,” which the Corps hopes to impose on oil and gas NWP 12 applications, Steven Kramer, senior vice president, general counsel and corporate secretary, Association of Oil Pipelines (AOPL), argues, “There are no additional best management practices that could be practically or lawfully imposed via NWP 12. Indeed, creating and imposing any such requirements would risk conflict with or redundancy with the many other applicable conditions.”   

Joan Dreskin, senior vice president and general counsel at INGAA, argues pipeline, utility and water pipeline construction are very similar so there is really no reason to have separate and distinct NWP programs for each.   

In fact, the requirements that would be applicable to NWP 12, C and D “are nearly the same,” Dreskin said. “The record does not include, for example, a comparison of the dredge and fill impacts of constructing a 12-inch natural gas pipeline versus the dredge and fill impacts of constructing a 12-inch water pipeline,” she adds.   

Jim Murphy, legal advocacy director, the National Wildlife Federation (NWF), stated, “The use of NWP 12 to authorize massive oil and gas pipelines known to have significant adverse cumulative adverse impacts on aquatic resources violates … the CWA, and the Corps should eliminate NWP 12 authorizations and require individual permits for such pipelines.”  

Jimmy Hague, senior water policy advisor, The Nature Conservancy, argues that if the Corps establishes a mileage threshold in NWP 12, it should be no greater than 25 miles (40 km), not the 250 miles the Corps has proposed.   

The Corps would mandate three PCNs for NWP 12 in which (1) a Rivers and Harbors Act permit is required; (2) the discharge will result in the loss of greater than 1/10th acre of Waters of the United States (WOTUS); or (3) the proposed oil or natural gas pipeline activity is associated with an overall project that is greater than 250 miles in length and the project purpose is to install new pipeline along the majority of the distance of the overall project length.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Getting an Exclusion From Steel, Aluminum Tariffs Just Got Harder

The Fabricator - for the original article go HERE. 

President Joe Biden is unlikely to quickly eliminate steel and aluminum tariffs imposed by former President Donald Trump, particularly because the U.S. Department of Commerce has theoretically given the Biden administration new breathing room in the form of its latest changes to the exclusion process. Many manufacturers argue that they should not be subject to the tariffs because the steel or aluminum they need is not available from U.S. manufacturers, and they use this exclusion process as they seek relief.

U.S. metal manufacturers have complained loudly about that exclusion process since Trump imposed the 25% tariff on steel and the 10% tariff on aluminum in 2018. They cite the time it takes for the Commerce Department to either approve or disapprove an exclusion application and the favor that the agency has appeared to show U.S. steel manufacturers in objecting to those exclusion requests.

But metal manufacturing companies will view the mid-December interim final rule as mostly thin gruel. On the positive side, the Commerce Department established general approved exclusions (GAEs), categories of specific steel and aluminum products that had been reviewed as part of exclusion requests and did not receive any objections. As a result, products found within these GAEs are exempt from the import tariffs, and the product manufacturers do not need to apply for exclusion requests. This change is expected to result in an estimated immediate decrease of 5,000 exclusion requests annually. The Commerce Department reported the possibility of adding more GAEs in the future. Unlike individual exclusion requests, GAEs do not include quantity limits.

Two separate supplements exist for GAEs—one for steel and another for aluminum. The rule added 108 GAEs for steel articles and 15 GAEs for aluminum articles. The two new supplements specified that, to use a GAE, the importer must reference the GAE identifier in the Automated Commercial Environment system that corresponds to the steel or aluminum articles being imported. Agency officials said that the manufacturing community should expect no retroactive relief for GAEs.

The Commerce Department, in consultation with the other agencies referenced in the new supplements, will determine what steel or aluminum articles warrant being included in a GAE. The public will not be involved in requesting new or revised GAEs, but the Commerce Department will use the information provided in exclusion requests to inform its review process for what additional GAEs should be added or what revisions should be made to existing GAEs.

While the new GAEs are a positive development for steel product manufacturers, steel and aluminum producers have their own reasons to be excited about a couple of changes that accompany the new GAEs. In fact, these new developments far outweigh anything being done for the steel users.

The Commerce Department added a new certification requirement for exclusion volumes requested. In the past, applicants for exclusion only had to estimate the total quantity of metal that they needed. Because some administration officials had concerns that some applicants might have exaggerated their raw material requirements, manufacturers seeking relief from the tariffs now have to attest that they have a purchase order for the imported products or that they intend to process the imported metal within the next 12 months. The applicants also must attest that the imported metal is not being used solely as a hedge against current market prices. Without documentation to justify these assertions, a manufacturer will have its exclusion request deemed incomplete and rejected.

In addition, steel and aluminum producers are getting a bit of breathing room when supplying steel to manufacturers that otherwise would be relying on imported sources. In the past, if a company such as U.S. Steel, for example, argued against a particular exclusion request, it had to be able to supply the domestically produced steel “immediately,” which the Commerce Department defined as within six to eight weeks. But a foreign steel producer that objected had no time limit. Now the term “immediately” is retained, but language has been modified to apply the same time standard to U.S. objectors, giving them more “wiggle room.”

Paul Nathanson, executive director, Coalition of American Metal Manufacturers and Users, said the new certification requirement “will make it even more difficult for manufacturers seeking an exclusion for a steel product.” He pointed out that there is no parallel requirement for suppliers to certify they can make the product.

“The rule also sets users up for more denials of exclusions requests by removing the eight-week reasonable delivery time period domestic producers had to meet prior to this change,” he adds.

The Biden Commerce Department will probably issue future regulatory fixes to the exclusion process, but Nathanson argued, “No changes to the exclusion process can adequately address the steel shortages and price spikes that are hurting steel- and aluminum-using manufacturers who are already confronting severe economic challenges caused by the COVID pandemic. Instead of ‘fixing’ the exclusion process, the Biden Administration should terminate the Section 232 steel and aluminum tariffs as quickly possible because of the damage they are inflicting on U.S. manufacturers.”

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

What the COVID-19 Stimulus Packages Mean for Manufacturers

The Fabricator - for the original article go HERE.

Congress passed the Coronavirus Aid, Relief, and Economic Security Act to help private businesses during this economic slowdown. Perhaps the most anticipated part of the relief package is the $350 billion Paycheck Protection Program for small businesses with fewer than 500 employees.

The manufacturing community did not get everything it wanted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and is watching expectantly as Congress considers a follow-on stimulus bill. That next package may headline major infrastructure spending and additional tax concessions, but its passage, or even its development, by Congress is anything but certain.

The National Association of Manufacturers (NAM) had called for a $1.4 trillion COVID-19 Resiliency Fund. The CARES bill did not include such a fund but did provide $350 billion in the form of a Paycheck Protection Program, which is meant to help small businesses, and $454 billion in emergency lending to businesses, states, and cities through the U.S. Treasury’s Exchange Stabilization Fund. But that total is well short of the $1.4 trillion the NAM sought.

In accentuating the positive, NAM CEO Jay Timmons said, “The bill also takes key steps from the NAM plan by increasing the maximum amount of tax deductions for interest on business loans and by creating an incentive, through loan forgiveness, for small manufacturers to retain their employees during this crisis.”

In addition to the tax benefit on business loans, the CARES Act allows companies to take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. The NOL limit of 80% of taxable income is suspended, so firms may use NOLs they have to fully offset their taxable income. The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30% of earnings before interest, tax, depreciation, and amortization (EBITDA), has been expanded to 50% of EBITDA for 2019 and 2020.

However, the NAM wanted any bill to adopt a federal designation that deemed the manufacturing supply chain “essential.” That designation would be important with regard to state and federal laws allowing essential companies to remain open during the coronavirus emergency. The federal Department of Homeland Security (DHS) issued some guidance—which has no legal standing—on March 19, and it did include some manufacturers as part of its list of “essential critical infrastructure workers.”

The Precision Metalforming Association (PMA) said on March 20 that the guidance covers approximately 2,500 companies in its association and companies belonging to the National Tooling and Machining Association. The DHS guidance explicitly covers manufacturers making medical devices, food equipment, and packaging equipment, for example, but it makes no mention of metal fabricators that supply parts to industries such as automotive, appliances, railroads, energy, and many others.

The DHS later clarified in update guidance on March 29 that workers who support crucial supply chains and enable functions for critical infrastructure should be included in the grouping of essential personnel. “The industries they support represent, but are not limited to, medical and health care, telecommunications, information technology systems, defense, food and agriculture, transportation and logistics, energy, water and wastewater, law enforcement, and public works,” the guidance stated. But the 12 pages of detailed listings of “covered employees” in those industries included very few references to “manufacturers.”

Christie Carmigiano, PMA spokeswoman, argues the DHS guidance is by end product, not supplier. “PMA believes that focusing on the end product, while not a clear directive for the industry, does provide for maximum flexibility as governments cannot be expected to become experts in the manufacturing process as they will exclude critical industries, such as stampers who supply those critical products,” she said.

Many metalworking companies view the $350 billion Paycheck Protection Program for small businesses with fewer than 500 employees as the most important provision in the bill. The small-business loans, with a maturity of two years and a 1% interest rate, are available through any bank approved as a Small Business Administration lender. The loans can be as much as $10 million to cover payroll costs, mortgage, and rent payments and health care benefits for employees, including paid sick leave. In some cases, they also can cover interest on other debts.

The new loans apply to costs incurred retroactive to Feb. 15 through June 30. The CARES Act includes loan forgiveness for companies able to keep employees on payroll or continue paying bills throughout the coronavirus crisis. The amount of loan forgiveness will include payroll costs for individuals below $100,000 in annual income and mortgage and rent obligations, including interest and utility payments.

Both Democrats and Republicans in Congress have been talking about another stimulus package focusing on infrastructure, which manufacturing and construction companies have been clamoring for since President Donald Trump’s election in 2016. For example, the chair of the House Committee on Transportation and Infrastructure, Peter DeFazio, D-Ore., said the next step should be “a true stimulus that creates jobs and rebuilds our decaying infrastructure.”

Author Bio:
Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

House Dems to Approve Tough Pipeline Bill

Pipeline & Gas Journal - for the original article go HERE.

Democrats in the House are about to pass a new pipeline safety bill which is unlikely to attract any Republican support. The Pipeline Safety Act (H.R. 5120), passed by two House committees in November with no GOP votes in favor, also clashes with the bi-partisan bill passed last summer by the Senate Commerce, Science and Transportation Committee.

The House Democratic bill was praised by the Environmental Defense Fund (EDF), an environmental group, which has typically been at loggerheads with the Interstate Natural Gas Association of America (INGAA) with regard to how safety and environmental factors should affect pipeline permitting. The INGAA supported a rival bill proposed by Republicans in the House Transportation and Infrastructure Committee. That bill attracted support from one Democrat.

A few days before the Transportation and Commerce Committees voted to approve H.R. 5120 on November 19 and 20, a number of natural gas industry trade groups, including the INGAA and American Petroleum Institute, sent a letter to members of those committees expressing concern about the lack of bipartisan support for H.R. 5120. The letter stated: “Pipeline safety legislation historically has been enacted on a bipartisan basis, and bipartisanship will ultimately be essential to achieve the bicameral support needed in this Congress to reauthorize PHMSA.” The PHMSA is the Pipeline and Hazardous Materials Safety Administration. Its legislative authorization ceased at the end of September 2019 but the agency can continue to do its business nonetheless although new legislation is eventually needed, and sooner rather than later.

The INGAA letter ticked off a number of actions the industry would support in a new pipeline safety bill, including: enhancing PHMSA’s workforce, increasing funding for State pipeline safety regulators, reauthorizing emergency responder grant funding, promoting innovative technologies, and updating PHMSA regulations to address the intent of relevant National Transportation Safety Board recommendations.

Prior to the November 19 and 20 votes by both House committees, Democrats in the Energy & Commerce Committee supported a much milder version of H.R. 5120. But they ditched that bill and jumped on the more radical—from industry’s perspective—bill presented by the House Transportation and Infrastructure Committee.

Elizabeth Gore, Senior Vice President, EDF, lauded H.R. 5120 called the Safe, Accountable, Fair and Environmentally Responsible Pipelines Act of 2019. "By putting in place critical new public safety and climate protections, the SAFER Pipelines Act is a win-win for all American families. It's well past time to give PHMSA the tools and direction to contribute to our nation's efforts to prevent the worst impacts of climate change."

One of the provisions of the bill would essentially prohibit the Environmental Protection Agency from completing an ongoing rulemaking announced last September which would change current regulations imposed in 2012 and 2016 obligating pipelines to reduce methane leaks. The creation in those years of Clean Air Act new source performance standards (NSPS) subparts OOOO and OOOOa subjected pipelines to limits on emissions of volatile organic chemicals and methane from controllers and compressor stations. There were subsequent legal challenges in 2016 and 2017 which led to the EPA reconsidering a few provisions of the 2016 final rule, including those having to do with fugitive emissions. Then, last September, in a proposed rule, the Trump EPA essentially proposed cancelling the 2016 final rule which dealt primarily with methane.

At the end of November 2019, a week after the House committees acted, the INGAA submitted comments on the EPA’s September proposed rule. The group said it was particularly concerned about the provisions in the 2016 EPA final rule dealing with “certain repairs” but added: “Although INGAA’s participation in the legal challenge of NSPS OOOOa was limited to this particular technical issue, INGAA does support a broad review of these rules...”

The comments point out that the INGAA board of directors had formally committed to methane reductions in voluntary pledges issued on July 19, 2018. These included core principles such as minimizing emissions from interstate natural gas pipelines, pneumatic controllers and compressor stations. More specifically, members of INGAA said they will install air-driven, low-bleed, or intermittent pneumatic controllers when installing new pneumatic controllers, unless a different device is required for safe operations; minimize emissions during maintenance, repair and replacement of pipelines; replace rod packing on all transmission and storage reciprocating compressors; conduct leak surveys at all member-owned and operated transmission and transmission and storage compressor stations by 2022 and at all natural gas storage wells owned and operated by INGAA member companies by 2025; and transparently report methane emissions.

Those voluntary commitments obviously did not move House Democrats. H.R. 5120 goes beyond the Obama-era 2016 “methane release from pipelines regulation” by imposing a host of new federal requirements in the area of leak detection and elsewhere. Another provision would require comprehensive pipeline mapping for the first time. Automatic shutoff or remote-controlled valves would be required on existing, new and replaced pipelines. The maximum civil penalties that could be imposed by the PHMSA would be increased from $200,000 to $2 million per violation. It would be easier for the PHMSA to assess criminal penalties for operators who act recklessly. Operators would have to immediately repair major gas leaks.

Democrats in the House believe those far-reaching actions are necessary. “There are nearly 3 million miles of pipelines transporting hazardous liquid and natural gas just feet below countless communities across the U.S., yet federal efforts to ensure these pipelines are safe, reliable and environmentally-sound are woefully outdated,” Transportation Chair Peter DeFazio (D-OR) said, “Last year alone, there were 636 pipeline incidents that left eight people dead and injured another 90, including the horrific incident that killed one person, sent 21 others to the hospital, and damaged 131 structures in Merrimack Valley, Massachusetts. Moreover, it’s estimated that this industry is responsible for one-third of our country’s emissions of methane, a greenhouse gas that is 84 times more potent than carbon dioxide in the first few decades of its release and a major contributor to climate change.”

But those provisions go too far for the pipeline industry, and for Republicans in the House, and most likely, for GOPers in the Senate, where Republicans are in control. After the Transportation Committee vote on November 20, ranking member Sam Graves (R-MO), said, “The most disappointing fact about today’s partisan markup is that if Republicans had been offered the chance to work on these bills with our colleagues in the majority, we could have produced legislation that every member of the committee supported.” The GOP bill, which one Democrat supported, is called the Pipeline Safety Improvement Act of 2019. It includes a number of industry “asks” including prohibiting three overt actions that jeopardize safety: unauthorized turning of a valve; puncturing of a pipe, pump, or valve; and causing a defect to a pipe, pump, or valve. It also creates a safety-enhancing testing program for innovative technologies and operational practices.

Don Santa, President and Chief Executive Officer of the INGAA, said, “The Pipeline Safety Improvement Act of 2019 includes a number of provisions that enjoy wide support…and along with elements of the SAFER Pipeline Act of 2019 reflects the bipartisan approach that has characterized each renewal of this important law. We urge the committees to work together to reconcile these proposals into a legislative package that can be signed into law.”

The House Democratic bill is considerably different from the bill passed by the Senate Commerce Committee on July 31. That bill is milder than even the bill the House Energy and Commerce Committee passed, and then jettisoned on November 19 in favor of the tougher H.R. 5120. The Senate bill is the Protecting Our Infrastructure of Pipelines Enhancing Safety (PIPES) Act of 2019 (S. 2299).

Author Bio:
Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

House and Senate At Odds On Drug Pricing Legislation

P&T Journal - for the original article go HERE.

Neither bill will pass as is but there’s room for compromise.

Momentum in Congress to pass legislation aimed at slowing down prescription drug price increases seems to have slowed as Democrats and Republicans are at loggerheads over competing solutions. However, given the heated criticism of pricing by drug manufacturer from both parties, Congress is likely to do something, perhaps passing legislation forcing companies to provide transparency on costs of drug development and other pricing factors. Key committees in both houses of Congress have passed separate bills.

The Democratic House bill is called the Lower Drug Costs Now Act (H.R. 3). It passed three separate House committees with nary a Republican “yea.” It was expected to be approved by the House sometime before the end of 2019 and, again, probably along party lines. It won’t pass the Senate as is. The Senate bill, which was approve by the Senate Finance Committee, is called the Prescription Drug Pricing Reduction Act (S. 2543). The legislation represents the bipartisan work of the Republican chairman, Sen. Chuck Grassley of Iowan, and ranking Democrat, Sen. Ron Wyden of Oregon. The bill, which has not come to the Senate floor as P&T went to press, passed the committee by a vote of 19-9. Every Democrat voted for the bill, but most of the Republicans, with the exception of Grassley and a few others, voted against it.

Both the House and Senate bills have many provisions aimed at lowering drug prices for seniors, and, in some cases, all consumers. The bills would also reduce costs for the Medicare and Medicaid programs. But the key provisions in each attempt to limit drug price increases and introductory prices, but they do so in very different ways. That divergence is the main reason neither bill will pass Congress as is.

Republican support of the Senate bill is doubtful because many in the party see the provision in the bill that forces down manufacturers’ prices as federal price controls, a characterization that Grassley and Wyden refute. The provision they are arguing about would require prescription drug and biological manufacturers to pay a rebate to Medicare equal to the difference their price hikes for Medicare Part B or D drugs or biologicals and the inflation rate, as measured by the Consumer Price Index for All Urban Consumers (CPI-U).

Adding to the bill’s political tribulations is a threat by Wyden to withdraw Democratic support unless a vote is held on the Senate floor on cementing insurance protections for people with pre-existing conditions.

In the House, the partisan divide is clear and thorough: Democrats are solidly behind the bill and the Republicans just as solidly against it. The legislation, which was put together with strong input from House Speaker Nancy Pelosi, would allow the Health and Human Services secretary to directly negotiate prices of drugs that are determined to contribute the most to Medicare drug costs and are without generic competitors. As written, the legislation says that a minimum of 25 drugs can be on that list and a maximum of 250 drugs. Drug manufacturers who opt out of accepting the secretary’s negotiated rates would incur steep penalties, beginning at 65% of the drug manufacturer’s gross sales of the drug from the prior year. For every quarter the drug manufacturer elects not to participate, the penalty would increase by 10%, with a maximum penalty of 95% of a drug’s gross sales. Like the Senate bill, the House bill has less controversial other provisions, such as reducing out-of-pocket costs and creating discount programs for eligible Medicare beneficiaries.

The Pharmaceutical Research Manufacturers Association (PhRMA) opposes both the Senate and House bill. “If H.R. 3 becomes law, it is lights out for a lot of very small biotech companies that are pre-revenue and depend on attracting capital,” Steve Ubl, PhRMA CEO told reporters in October. A PhRMA blog criticizes the Senate bill this way: “Unfortunately, the Senate Finance Committee has pushed for changes that would upend Part D without any immediate and meaningful savings for most patients at the pharmacy counter.”

Some patient advocacy groups are concerned that the Pelosi bill will cause drug manufacturers to tap the brakes on drug development. But other groups, like AARP, support the legislation and the stated intent of reining in drug prices.

The near certainty that neither bill will pass as is doesn’t mean that there isn’t room for compromise. For example, the Senate bill has a provision that requires companies to report “documentation to justify price increases” in 2021 for drugs with price increases of 100% in the preceding 12 months or at least 150% in the preceding two years. The numbers change slightly in successive years. The House requires reporting on drug price increases of 10% in one year or 25% over three years. Compromise legislation might a middle ground between the two bills.

Stephanie Kennan, a senior vice president at McGuireWoods Consulting, a major lobbying firm who was health policy advisor to Sen. Wyden for about 10 years, says, “The House has passed bills that reflect some of the provisions in the Senate Finance Committee’s proposal. It would make sense that some form of the Senate Finance Committee’s bill becomes the base of a compromise.”

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

P&T Committees May Want to Alter Some Formulary Policies Because of New Medicare Part D Standards

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

Medicare’s proposed use of a new electronic prescribing (eRx) standard for prior authorization requests between physicians and Part D plans has been well received by the various players in the prescription drug delivery chain. That doesn’t mean, however, that it is problem free and without a number of concerns.

The new standard, which won’t be implemented prior to 2021, may force pharmacy and therapeutics committees to reconsider which tiers they put a couple of categories of drugs on. It may also prompt revision of step therapy policies.

The first thing to remember, though, is that there is no requirement that prescribers or plans implement eRx for seniors with Medicare outpatient drug coverage. But if they do, they must use standards sanctioned by the Centers for Medicare and Medicaid Services (CMS).

The current standard with regard to electronic prior authorization—the X12 278 standard designed to conduct batch transactions—was adopted mainly because it is compliant with HIPAA and was established mostly for durable medical equipment. So, understandably, the X12 standard is not really the right tool for the job. Important prescribing information can’t be inputted, and it doesn’t allow for “real-time” responses, or follow-up by physicians, health plans, or pharmacies.

For these and other reasons, CMS has proposed replacing the standards with National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard Version 2017071. CMS had already designated that SCRIPT standard for eRx prescriptions starting January 1, 2020. It would become mandatory for electronic prior authorization transactions one year later, if CMS finalizes its proposed rule.

Today under Medicare Part D, prior authorization requests and responses are transmitted mostly by fax and phone using the X12 standard. Prior authorization, both within and outside Medicare health plans, is a big deal these days as more plans use it for opioid prescriptions in response to overprescribing and the opioid epidemic.

Prior authorization requirements for oncology drugs are also an issue because the drugs are increasingly expensive. Howard Burris III, MD, the president of the American Society of Clinical Oncology, expressed reservations about streamlining prior authorization in his comments on the new standard. He urged the agency to “exercise caution in order to avoid unintended consequences of restricting or delaying care, resulting in harmful outcomes.”

CMS was required to designate a standard for electronic prior authorization by the 2018 SUPPORT for Patients and Communities Act. CMS had endorsed the SCRIPT standard for Medicare eRX standards prior to the SUPPORT Act, but it was constrained from extending the SCRIPT standard to electronic prior authorization transactions by the HIPAA issue. The SUPPORT Act eliminated that barrier by saying a new standard could be adopted “notwithstanding” any other provision of law, if such proposals were made in consultation with stakeholders and the NCPDP or other standard-setting organizations. As a result, HIPAA noncompliance is not a barrier to adoption of the SCRIPT standard by Medicare.

Health plans and pharmacists appear to be generally happy with the application of the SCRIPT standard to prior authorization requests and decisions, even though some health plans with both Medicare and commercial plans currently use non-SCRIPT standards.

Joel White, the executive director of the Opioid Safety Alliance pointed out in his comments to CMS that in considering only two sets of electronic prior authorization transaction standards (X12 and SCRIPT) CMS “seemingly ignores current industry use of HL7 FHIR standards or APIs [application programming interfaces].” Leaving these additional standards out of consideration “unnecessarily and prematurely” limits the scope of public consideration and comments, wrote White. The agency’s proposed solution also runs “contrary to other agency efforts, such as increased interoperability and prohibiting information blocking,” he stated.

The American Association of Family Physicians has a different concern: the “significant administrative burden and/or access issues” that general practitioners face in introducing relevant software into their practices. The AAFP wants a “safe harbor” for primary care physicians and, like the Opioid Safety Alliance, the freedom to use standards other than SCRIPT if both a prescriber and a health plan agree to that. One of the concerns about imposing SCRIPT is that physicians might be faced with having to use different standards for e-prescribing within the state Prescription Drug Monitoring Programs and the Part D programs.

When all is said and done, CMS is likely to give physicians, pharmacies, and Part D plans some leeway in a final rule for eletronic prior authorization. Even so, P&T commmitees in and out of Medicare will have to consider new factors when putting together their prior authorization policies and programs.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

NIH Establishes Early Version of Personalized Medicine Platform

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

Congress has been pumping money into the precision-medicine initiative at the National Institutes of Health (NIH). The first, early results of that spending were announced on May 7, when the All of Us research project went live with three types of aggregate health data on 142,000 individuals. It was the first wave of what is expected to amount to, or hoped to amount to, one million participants. All of Us grew out of the 21^st Century Cures Act and is a favored target for federal funding. President Trump has proposed a 12% cut in NIH funding for fiscal 2020 (starting on October 1, 2019), which Congress is likely to reverse, as it has done in the last few years when similar cuts were asked for by the White House. However, the President’s 2020 budget does contain $313 million for All of Us.

The program was kicked off one year ago in seven cities around the country, with a particular emphasis on convincing members of underrepresented and minority communities to come forward with their health data. The idea is eventually to be able to check genomic data against environmental experience with a view to finding clues on the origin of various health conditions, so as to better target prevention and treatment measures. So far, more than 206,000 people have begun the enrollment process, and more than 142,000 have completed all the steps in the protocol. Most participants (> 75%) are from communities that have been underrepresented in biomedical research. “Those people are often left behind,” said Francis Collins, Director of NIH. “We’re hoping to chip away at vexing health disparities.”

A number of universities around the country have received grants to pay for participant enlistment efforts, including the University of Alabama at Birmingham (UAB). Bruce Korf, MD, Chief Genomics Officer, UAB Medicine, says, “The All of Us research program is creating an unprecedented rich set of medical and biological data on one million participants who reflect the diversity of the United States. It will provide the foundation for the broad application of precision medicine for years to come, including the development of approaches to predict individuals at risk of disease and more precise and effective treatments.”

The NIH program is headed by Eric Dishman, former vice president of the Health and Life Sciences Group at Intel Corporation, where he was responsible for driving global strategy, research and development, product and platform development, and policy initiatives for health and life science solutions. Dishman––and Collins, among others––spoke at the one-year anniversary conference held at NIH on May 6. He explained that All of Us works with a consortium of 2,000 organizations and people from local communities to convince individuals to provide three types of data: electronic health records, responses to survey questions, and physical measurements. The data are available on the All of Us website (https://databrowser.researchallofus.org/.), where one can view, for example, the top 10 health conditions and then drill down in each category to get breakdowns, such as the age of those people affected and other measures.

Dishman was honest in his appraisal of the initial product. “Our tools are pretty crude,” he said. “Over time, the viewer experience will get better.” He noted that the early data can’t be sorted by ethnicity or race, which would seem like a pretty important goal considering that the project’s overarching objective is mining health statistics from the African American and Hispanic populations.

Gary Gibbons, MD, Director of the Heart, Lung and Blood Institute at NIH, posited the potential by explaining that further study of genomic variations among African Americans could help explain the root causes of sickle cell disease. He noted that individuals’ African roots may have caused variations in their hemoglobin genes via interaction with malaria vectors, and ultimately resulted in the sickle cell trait. An individual could have one genetic copy of that trait, or two, and that difference would have health implications. On one hand, the variations could have been protective, against malaria. On the other hand, that same sickle cell trait may predispose African Americans to chronic kidney disease, for which they are at higher risk.

Beyond sickle cell disease, Gibbons noted that genomic/environmental interaction could identify people who are at increased risk for heart disease, hypertension, coronary disease, and asthma. “We’re working toward a day when we can predict that you’ll have atrial fibrillation, which today may only become manifest when you come to an emergency room feeling dizzy and short of breath with a rapid heartbeat. But if we already know from your polygenic risk score that you are [susceptible to] atrial fibrillation, you may be wearing a watch that detects your heart rhythm, allowing us to detect the arrhythmia and provide an electric jolt to short-circuit it.”

Much of the promise of the All of Us initiative appears to rest on genomic exploration, and there are no genomic data available at present. Collins said that the data would be included in 2020 and that the program has a “bold timetable” for enrolling the 800,000 individuals who would complete the cohort of one million.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

House Democrats Push Competing Drug Price Transparency Bills

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

May Provide Useful Data, But Not Downward Pressure on Prices

It was undoubtedly a coincidence that Novartis subsidiary AveXis announced “innovative access” programs on May 24, 2019, for its new drug Zolgensma (the highest-priced ever) three days after the House Energy and Commerce health subcommittee was considering new bills to rein in costs of new and existing drugs. Zolgensma (onasemnogene abeparvovecxioi) is the latest entrant in the expensive gene-therapy category; the onetime treatment for a fatal early childhood disease is projected to cost somewhere around $2 million. This price is based on the fair-price analysis that the Institute for Clinical and Economic Review carried out, and which Avexis cited in its May announcement (although they didn’t include the dollar amount). Avexis argued that Zolgensma’s one-time cost will be 50% lower than the current 10-year cost of spinal muscular atrophy (SMA) therapy.

Novartis’ agreeing to some form of value-based pricing with several health insurers is unlikely to silence criticism of the $2 million pricetag, however. What’s more likely is that Zolgensma will become a topic of congressional rhetoric as Sovaldi and Firdapse did during the May 21 hearings. Those hearings featured two competing drug price “transparency” bills, which Democrats are pushing as part of their effort to reduce high prices.

One bill––Stopping the Pharmaceutical Industry from Keeping Drugs Expensive Act, aka the “SPIKE Act” (H.R. 2069)––has already passed the House Ways and Means Committee. The Energy and Commerce health subcommittee also considered the Fair Accountability and Innovative Research Drug Pricing Act or “FAIR Drug Pricing” Act (H.R. 2296).

The two bills are similar, as both require companies to notify the Department of Health and Human Services (HHS) when the price of an existing drug increases by a certain percentage, or when a new drug is introduced whose price exceeds some threshold (SPIKE Act only). That notification must include certain information, including total expenditures on R&D, as well as revenue and profit for the applicable drug. Neither bill limits price increases.

Mark Miller, until recently the executive director of the Medicare Payment Advisory Commission, said the bills might produce some useful information, “but in and of themselves [they] won’t be enough to affect the drug price issues you’re facing now.”

Fred Isasi, Executive Director of Families USA, was particularly critical of Sovaldi and Firdapse’s makers. Gilead ended up with Sovaldi after purchasing Pharmasett, which had undertaken substantial R&D in 2011. Isasi stated that Gilead asked someone on Wall Street how it should price Sovaldi, got an answer, and then quadrupled the recommended price. Sovaldi, used to treat hepatitis C, was originally priced around $84,000.

Raymond Schinazi, who is now a professor at Emory University and Co-Director of the HIV Cure Scientific Working Group within the Emory University Center for AIDS Research, was co-founder of Pharmasett and did some of the early research on Sovaldi. Schinazi says, “Gilead bought Pharmasset for $11.4 billion but made more than $15 billion selling Sovaldi in the next 12 to 14 months after launch. Pretty impressive! I wasn’t involved in any way in the pricing, but I do feel it was somewhat excessive [as] this isn’t an orphan disease... more than 71 million people are infected globally.”
He adds, “When Gilead bought Pharmasset, the drug wasn’t perfect [because] it had to be combined with something other than interferon and/or ribavirin. There was no guarantee the drug was going to be approved. Gilead did do a lot of R&D and sponsored many clinical trials that led to Sovaldi’s approval.”

Firdapse, which is used to treat a rare neuromuscular disease, was acquired last year by Catalyst Pharmaceuticals from Jacobus Pharmaceutical. Its cost increased to $375,000 per year, after having been free through the FDA’s compassionate-use program for people who needed it. Extraordinary price hikes for long-existing generic drugs such as insulin have also been the subject of previous congressional hearings.

The consulting firm KEI submitted a paper to the health subcommittee noting that many developed countries limit annual price increases for drugs. Canada limits increases to the consumer price index increase (CPI). “It should be noted that the United States is an outlier regarding the freedom to increase prices beyond the general rate of inflation,” KEI reported.

Representative Mark Pocan (D-WI) has introduced a bill that would limit price increases. The Stop Price Gouging Act (H.R. 1093) imposes an excise tax on companies selling prescription drugs that are subject to price spikes and that exceed the annual percentage increase in the Chained CPI.
Pocan’s bill wasn’t included in the May 21 hearing, and there was no response from his spokesman as to why.

Miller informed the health subcommittee about several options for Congress to rein in high drug prices, particularly regarding Medicare Parts B and D. He has endorsed a number of initiatives that the Trump administration has either proposed or accomplished via rulemaking. However, the bills that the House subcommittee considered on May 21 touched on very few items on Miller’s list, if any.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

EPA Ditches Spray Requirement for Two Key Metal Fabrication Sectors

The Fabricator - for the original article go HERE.

Agency won’t mandate the use of high-efficiency spray equipment for coatings application.  The Environmental Protection Agency’s (EPA) final rule on air contaminant limits for two metal manufacturing sectors involved in surface coating applications was notable for provisions the agency did not include.

The good news for those in the metal furniture and large-appliance manufacturing segments is that the agency, in the end, stepped back from some mandates it had been thinking of requiring. One mandated the use of high-efficiency application equipment for spray coatings. In its proposed rule, the EPA made a critical assumption that the four high-efficiency spray equipment technologies rulemaking (which covered high-volume, low-pressure; electrostatic application; airless; and air-assisted, airless spray equipment) would achieve at least 65 percent transfer efficiency when used in painting metal furniture and large appliances.

Those two fabricating sectors are under separate National Emission Standards for Hazardous Air Pollutants (NESHAP). The EPA is supposed to conduct a residual risk and technology review (RTR) every eight years after a NESHAP goes into effect. The idea is to see whether air contaminant limits in the NESHAP are still appropriate. But the agency said in the final RTR rule that new information led it to conclude that the transfer efficiency of the proposed high-efficiency spray application technologies may be less than 65 percent, as it is dependent on parameters such as part size, part shape, distance of the spray gun from the parts, atomizing air pressure, fluid pressure, painting technique, type of coating, viscosity of the coating, and other factors.

The EPA, after getting pushback from the American Coatings Association, admitted it did not have enough good data to make a new requirement stick. Besides that, the agency said a number of states already require high-efficiency spraying, and that companies already lean toward using it, required or not, because it reduces coatings consumption and lowers waste disposal costs.

As a result of this joint RTR, the EPA did not tighten air emission limits for either metal furniture or large-appliance manufacturers. However, the EPA did finalize a new requirement that companies in the two categories must submit electronic copies of certain required performance test reports through the agency’s Central Data Exchange website.

EPA also is requiring manufacturers to conduct control device performance testing in certain situations.

The good news for those in the metal furniture and large-appliance manufacturing segments is that the agency, in the end, stepped back from some mandates it had been thinking of requiring. One mandated the use of high-efficiency application equipment for spray coatings. In its proposed rule, the EPA made a critical assumption that the four high-efficiency spray equipment technologies rulemaking (which covered high-volume, low-pressure; electrostatic application; airless; and air-assisted, airless spray equipment) would achieve at least 65 percent transfer efficiency when used in painting metal furniture and large appliances.

Those two fabricating sectors are under separate National Emission Standards for Hazardous Air Pollutants (NESHAP). The EPA is supposed to conduct a residual risk and technology review (RTR) every eight years after a NESHAP goes into effect. The idea is to see whether air contaminant limits in the NESHAP are still appropriate. But the agency said in the final RTR rule that new information led it to conclude that the transfer efficiency of the proposed high-efficiency spray application technologies may be less than 65 percent, as it is dependent on parameters such as part size, part shape, distance of the spray gun from the parts, atomizing air pressure, fluid pressure, painting technique, type of coating, viscosity of the coating, and other factors.

The EPA, after getting pushback from the American Coatings Association, admitted it did not have enough good data to make a new requirement stick. Besides that, the agency said a number of states already require high-efficiency spraying, and that companies already lean toward using it, required or not, because it reduces coatings consumption and lowers waste disposal costs.

As a result of this joint RTR, the EPA did not tighten air emission limits for either metal furniture or large-appliance manufacturers. However, the EPA did finalize a new requirement that companies in the two categories must submit electronic copies of certain required performance test reports through the agency’s Central Data Exchange website.

EPA also is requiring manufacturers to conduct control device performance testing in certain situations.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Democratic Takeover of House Sparks Drug-Price Legislation Talks

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

But Strong Legislation Unlikely Given Patient and Industry Opposition

Representative Elijah Cummings (D–MD), chairman of the House Oversight and Reform Committee, was apoplectic. He was delivering his opening statement at the committee’s first hearing for 2019, titled Examining the Actions of Drug Companies in Raising Prescription Drug Prices. He was describing the devastation felt by his leading witness, Antoinette Worsham, whose diabetic daughter had died for lack of the insulin medicine she could not afford. “It would have cost $1,000 for three months of insulin!” Cummings thundered into the microphone in his opening statement. “She died.”

On the other side of Capitol Hill, that same day, Senator Ron Wyden (D–OR), was pounding his right hand on the dais during the Finance Committee’s first hearing of the year, probably not coincidentally titled (given the House committee’s hearing the same day) Drug Pricing in America: A Prescription for Change, Part 1. Wyden had just addressed Kathy Sego, another mother whose college-age son with stage 1 diabetes had resorted to rationing insulin because the cost per month, even with insurance, was $1,700. “Manufacturers are taking advantage of families like yours,” Wyden, the top Democrat on that important committee, said, his voice rising. Then pounding the tabletop in front of him, he added, “No one has been willing to take them on. That ends today.”

President Trump has been condemning high drug prices since the start of his term, and his Department of Health and Human Services (HHS) has issued a number of proposed regulations that would attack high prices on a number of fronts. In the last Congress, there was plenty of fire and brimstone aimed at drug companies, and from both parties, but no significant pricing-reform legislation advanced. That was in large part a result of legislative roadblocks in the Republican-controlled House.

With Democrats taking control of the House this year, the 116^th Congress looks to be in sync with Trump on drug prices and theoretically—theoretically being the key word—able to move forward with legislation clamping down on unreasonable drug prices. But although there is a lot of rhetorical thundering from Democrats in this new Congress, there are indications that actions may not speak louder than words. Already, key Democratic House committee chairmen have indicated opposition to some of the reforms pushed by the Trump administration, such as ending the current safe harbor for rebates paid to pharmacy benefit managers (PBMs) by drug manufacturers. The HHS proposed a rule in early February ending that safe harbor and proposing a new one that would cover rebates passed along to consumers at the pharmacy counter (see Prescription: Washington column on page xx). Numerous patient advocacy groups support the proposed rule.

However, key Democrats in the House are opposed to ending the current safe harbor for rebates in Medicare, putting them on the PBMs’ side and against consumers. Ways & Means Committee Chairman Richard Neal (D–MA) and Energy and Commerce Committee Chairman Frank Pallone, Jr. (D–NJ) issued a statement saying, “The Trump administration’s rebate proposal will increase government spending by nearly $200 billion and the majority of Medicare beneficiaries will see their premiums and total out-of-pocket costs increase if this proposal is finalized. While we agree that the cost of prescription drugs must be addressed, we are concerned that this is not the right approach.”

That pro-rebates position from Democrats surprised some patient advocacy groups, who are opposed to rebates and support HHS’ proposed rule. Carl Schmid, Deputy Executive Director of the AIDS Institute, says, “I was surprised they took that position. Maybe they didn’t have all the information; maybe it was a knee-jerk reaction because it came from the Trump administration.”

It is too early to tell whether Democrats will propose legislation to nix Trump’s proposed rule on rebates, and, if they do, whether they will gain any Republican support, which is crucial for passing any drug-pricing legislation on broader health care or otherwise. However, some bills that faltered in the last Congress because of Republican control of the House will undoubtedly advance in and probably be approved by this new Congress.

A key example is the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act, which would give generic companies more leverage to force brand-name companies to supply drug samples. That bill passed the Senate Judiciary Committee last year with bipartisan support but never came up in the House because of GOP leadership opposition. This year, Pallone replaces Representative Greg Walden (R–OR) as chairman of the House Energy & Commerce Committee. Walden opposed the CREATES Act; Pallone is an enthusiastic supporter. But Erik Komendant, Vice President of Federal Government Affairs at the Association for Accessible Medicines, the generic industry trade group, says, “Nothing is a done deal.” He points out that there are 90 new members in the House and 10 in the Senate. “Many of them campaigned on and heard from constituents about high drug prices,” he says. “And now is the time for Congress to pass CREATES and take meaningful action to lower the cost of prescription drugs for patients.”

However, CREATES does nothing to solve the more important brand-name- versus-generic conflict: brand-name extension of patents to block the entry of generics, as has been the case of the best-selling drug in the world, AbbVie’s Humira, whose main patent expired in 2016. But AbbVie has extended that drug’s patent to 2034 by gaining other, follow-on subsidiary patents. AbbVie has licensed Humira to seven companies that will be allowed to sell Humira in 2022 in Europe, but not in the U.S. Humira, an arthritis drug, has a list price that has increased from $19,000 to $38,000 a year over six years, according to Wyden.

But where Democrats and Republicans agree––either in substantial numbers as with the CREATES Act, or when a bipartisan team of leading members of an influential committee sponsor a bill––legislation will move. Wyden’s Right Rebate Act (S.205), which closes a loophole that allowed the EpiPen manufacturers to “rip off” consumers, according to Finance Committee Chairman and act co-sponsor Senator Chuck Grassley (R–IA), is an example of a bipartisan bill with a tailwind. At the hearings on February 26, Grassley also referred to Senator Amy Klobuchar’s (D–MN) Pay for Delay bill, of which he is an original co-sponsor. It would limit brand-name companies from paying generics companies to delay the introduction of generics, including biosimilars. Another example is legislation forcing drug companies to include list prices in television advertisements. Such a bill passed the Senate last year by a bipartisan vote but never came up in the House because of GOP committee chairmen opposition. The Trump administration has proposed a rule mandating the publication of list prices but the drug industry has threatened a lawsuit, so congressional passage of a bill would make any lawsuit null and void. There is also bipartisan support for a Grassley bill allowing the importation of lower-priced foreign drugs, a proposal that some patient groups, not to mention the drug manufacturers, oppose.

In fact, the Democrats who are now in control of the House will find Republican members freer—no longer having to buck leadership—to support drug-pricing legislation. Representative Bob Gibbs (R–OH) questioned Gerard Anderson, Professor of Health Policy and Management at Johns Hopkins University, at the Cummings hearings about a number of issues, including orphan drug pricing, the use of risk evaluation and mitigation strategies (REMS) by patented companies to thwart generic introduction, and PBMs. “There are lots of problems about how the PBMs are operating. If we address the orphan issue, the REMS, and the PBMs, we’ll make a lot of progress without over-regulating and disincentivizing, and let the market function,” Gibbs said.

These bipartisan drug-pricing bills will probably not pass Congress as separate legislation. Rather, they will be added to a larger health care bill. Senator Lamar Alexander (R–TN) began a hearing on February 5 in the Senate Health, Education, Labor and Pensions Committee, of which he is chairman, by referring to his request to health care groups to provide suggestions on what the federal government can do to lower the cost of health care for American families. “This year I am committed to passing legislation based on that input,” he stated. Alexander said that he and Senator Patty Murray (D–WA), the ranking Democrat on the committee, have met with Grassley and Wyden “to see if we can find one or two big things and several medium-sized things that will help reduce health care costs.” Alexander is retiring in 2020 so it is likely that the committee, on a bipartisan basis, will pass some health care legislation during this session of Congress to memorialize his tenure.

House Republicans Closely Aligned with Drug Industry

To get some idea as to why House GOP leaders may have been protective of the pharmaceutical industry and opposed legislation such as the CREATES Act, which drug manufacturers have also opposed, one only has to go to www.opensecrets.org. and view the top recipients of drug industry political action committee (PAC) contributions in the 2017–2018 congressional session (the category includes both pharmaceuticals and health care products). OpenSecrets is a database run by the Center for Responsive Politics. Of the top four senators and representatives receiving PAC contributions from the drug industry, three were House Republicans, and all were in leadership positions, especially regarding drug industry legislation. Representatives Greg Walden (R–OR), Kevin McCarthy (R–CA), and Kevin Brady (R–TX), who received contributions of between $315,000 and $460,000, were, respectively, chairman of the Energy & Commerce Committee, majority leader of the House, and chairman of the Ways & Means Committee.

The Pharmaceutical Research and Manufacturers Association (PhRMA) contributed $28 million in the 2017–2018 election cycle to candidates and party PACs. Its biggest contribution was to the Grand Old Party Political Action Committee (GOPAC), whose motto is Educating and Electing a New Generation of Republican Leaders. PhRMA’s $215,000 contribution was more than four times the amount of the next biggest contribution GOPAC received, and was a significant percentage of the PAC’s $747,900 total revenue. PhRMA’s millions went to numerous Washington lobbying firms, 10 of whom received more than $250,000 in 2018. Their contributions put PhRMA in the number four position among trade associations, behind the U.S. Chamber of Commerce, the National Association of Realtors, and the Open Society Policy Center.

Among drug industry companies, Pfizer and Amgen were number one and number two in regard to lobbying expenditures ($11.3 million and $10.9 million, respectively), with eight other companies spending over $6 million, including the Biotechnology Innovation Organization (BIO), the trade association for the biologics industry.

Where Debate Is Headed

The big question with regard to any legislation on drug prices is whether facts intercede with rhetoric and emotion. Drug prices in general declined over the past year, according to the Bureau of Labor Statistics, which says that the consumer price index (CPI) for the prescription drug category (all urban consumers) dropped 0.6% between the end of 2017 and the end of 2018. The increase in the CPI for all items was 1.9% over this period; medical care services as a whole were up 2.5%. However, regardless of whether prices are up or down, it is clear that prices for drugs in the U.S. are unquestionably higher than they are elsewhere in the world, often by substantial amounts.

Douglas Holtz-Eakin, president of the American Action Forum, says, “Fundamentally, there is no broad prescription- drug pricing crisis. Indeed, in most instances, things are working just fine. Rather, what we face are more nuanced challenges.” Those nuanced challenges concern new, expensive, and often sole-source specialty drugs. Some sole-source generics have also posted ridiculous price increases. There are some problems, too, with the extension of brand patents in ways that have drawn critics—AbbVie’s Humira being a prime example—as well as efforts to block the entry of generics, which, in Humira’s case, the CREATES Act attempts to alleviate.

Any anger over drug prices and medical costs more broadly will only translate into legislative action where there is bipartisan agreement, Democratic takeover of the House aside. Thus, legislation giving Medicare the authority to negotiate drug prices, which is the topic of one bill sponsored by Senator Klobuchar, a presidential aspirant supported by many Democrats, is going nowhere.

Congress is likely to focus on current costly federal programs that need reform. At the top of that list are the Medicare Part D outpatient drug program, the Part B physician office/outpatient facility-reimbursement program, and the Medicaid drug-rebate program. Outside groups such as the Medicare Payment Advisory Commission (MedPAC) and its Medicaid counterpart annually recommend the reform of all three programs.

Part D spending was over $100 billion in 2016; Part B spending was close to $30 billion. Mark Miller, executive vice president of health care at the Laura and John Arnold Foundation, and former executive director of MedPAC, told the Finance Committee at its January 29 hearings that the average Medicare household will use approximately 15% of their total expenditure on health care. In Medicaid, spending on drugs grew by almost 50% between 2011 and 2017. “The federal government and states spent about $30 billion on drugs in Medicaid in 2017, after rebates,” Miller explained.

Miller said new treatments are launching at increasingly unsustainable prices that are not justified by their research and development costs. He cited life-extending cystic fibrosis treatments that cost close to $300,000 per year. Chimeric antigen receptor T-cell (CAR-T) therapy can easily top $500,000, and several companies have discussed pricing gene therapies in the region of $2 million.

Aaron Kesselheim, MD, director of the Program On Regulation, Therapeutics, And Law at Harvard Medical School, says list prices for brand-name drugs have increased from about 8% to 16% per year over the last decade, well beyond the CPI general inflation rate of 1–3% per year. U.S. drug prices and spending far exceed those of other, similar industrialized countries around the world. For example, in countries like Canada, Germany, France, and Australia, all of which have excellent health care systems, per-capita expenditure for prescription drugs is $400 a year compared to $850 a year in the U.S. The main driver behind the U.S. figure is brand-name drugs, which account for 10% of prescriptions and 75% of outlays.

But legislation to trim federal and patient spending on Part D, Part B, and Medicaid is hardly a done deal, given the broad opposition from drug manufacturers, PBMs, and patient advocacy groups to many of the Trump administration’s regulatory initiatives meant to cut federal and patient costs by reining in prices of specialty drugs, which account for the lion’s share of federal (and commercial) drug spending.

The Medicare Part B program allows physicians and hospital outpatient clinics to bill Medicare and patients, where there is a deductible or co-payment or both based on the “average sales price” alone—that is, what the market can bear—with no consideration as to the value or cost-effectiveness of the drug. Again, these are typically the expensive oncology, hepatitis C, and arthritis drugs, often biologicals. Among the 75 drugs with the highest annual Part B expenditures in 2016 (accounting for about $20 billion, or 77% of Part B drug spending), prices for 65 of the 67 drugs with evaluable data (97%) were considerably higher than the median prices in other high-income countries (Japan, Germany, Switzerland, and the UK), and generally made and sold by the same manufacturers as in the U.S. In May 2018, drug prices were, on average, 46–60% lower in those countries than in the U.S.’s Medicare drug-benefit program.

Pressure on Congress from Interest Groups

Trump’s Centers for Medicare and Medicaid Services has already proposed a major reimbursement change for Part B drugs (see the March 2019 issue of P&T), basing drug prices on international prices and a competitive acquisition program where hospitals and physicians would have less incentive to buy the highest-priced drugs, which spikes their reimbursement. But importing international drug prices into Medicare has been panned by Express Scripts and other PBMs, who argue that it would destroy the PBMs’ incentive to participate because they would buy drugs from U.S. manufacturers at high prices and have to sell them at low foreign prices. There has been considerable opposition to that from interest groups and drug manufacturers, among others.

Democrats in Congress have endorsed an international pricing index, not just for Part B drugs but for all drugs, paid for by the federal government and private employers. Their Prescription Drug Price Relief Act would peg the price of prescription drugs in the U.S. to the median rate in Canada, the UK, France, Germany, and Japan. If pharmaceutical manufacturers refuse to lower drug prices below that level, the federal government would approve cheaper generic versions of those drugs, regardless of any patents or market exclusivities in place. It is unclear, however, whether that bill will gain any Republican support. Schmid of the AIDS Institute says his group opposes the bill.

The flip side of questionable Republican support for those pricing caps is the questionable Democratic support for Trump-proposed changes to Part D, including new power for pharmacy and therapeutics committees to limit access to drugs. Chief among those changes is a constriction of the current six “protected classes” by allowing the use of step therapy and prior authorization, neither of which can be used in those six categories at present. That initiative, like the Part B initiative, is aimed at the specialty drug category by, for example, forcing cancer patients to try less expensive alternatives before being prescribed the most expensive oncology drugs. The American Society of Clinical Oncologists calls the proposal “misguided.” The six classes are: (1) antidepressants; (2) antipsychotics; (3) anticonvulsants; (4) immunosuppressants for the treatment of transplant rejection; (5) antiretrovirals; and (6) antineoplastics, except in limited circumstances. The Trump administration argued that the protected classes do not allow normal price negotiations and that there is “a strong incentive for the promotion of overutilization, particularly off-label overutilization, of some of these drugs.”

The Obama administration also published a proposed rule in 2014 that would have relieved Part D plans from providing “all or substantially all” of the drugs in the six protected categories. But patient groups complained to Congress and bipartisan pressure forced the Obama administration to cease and desist. Now the Trump administration has picked up the cudgel against the six protected classes.

Patient and physician groups and drug companies are besieging Congress once again. In response, Senators Marco Rubio (R–FL) and Kyrsten Sinema (D–AZ) have circulated a letter to HHS Secretary Alex Azar decrying the changes. They wrote that although they applauded the administration’s commitment to lowering drug prices, “undermining the protected class status of medications could have much larger consequences in the long term.” Representatives Barbara Lee (D–CA) and Will Hurd (R–TX) are readying a similar letter from House members.

Anyone who thinks Democratic control of the House will lead to congressional passage of important drug-pricing legislation oughtn’t bet their 401(k) on that. Although drug companies, PBMs, physician groups, and patient advocacy organizations swear they want to do “something” about high drug prices, they are simultaneously opposing many of the proposals that would reduce those prices the most. One almost can’t blame Congress for being frozen in its tracks.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.