National Legislative Update for January 2019

January 7, 2019

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The Legislative Update is brought to us by Liz Powell, Esq., MPH, Founder of G2G. Liz is an attorney with 20 years government experience, including as Legislative Director on Capitol Hill. She leads a team of bipartisan professionals that has raised over $159M, run advocacy campaigns and shaped CMS reimbursement for clients.

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2019 is off to an interesting start and here is the low-down of changes, priorities for the year and where we stand on the shutdown.

OVERVIEW

This week, Democrats took back the majority in the U.S. House of Representatives following the 2018 midterm elections. January 3 was a busy day on the hill with the swearing in of the 116th Congress. G2G attended many events and saw numerous Members of Congress and staff. Below is an update on the shutdown, new Congress and prescient issues that must be addressed by the new divided government.

116th CONGRESS CHANGES

On January 3, one of the first actions was electing Nancy Pelosi (D-CA) as Speaker of the House followed by passage of the House rules for the next two years. The rules include concessions for some Democrats made in the weeks leading up to the vote that Pelosi offered in order to garner sufficient votes. They require additional time (72 hours) for Members of Congress to read bills before voting on the House floor, ban members from serving on the boards of publicly traded companies, remove term limits for committee chairmen, restore the ability of delegates to vote on the House floor in some cases, allow intervention in cases challenging the Affordable Care Act, and create two new select committees on climate change to appease liberals and to modernize Congress (that received broad bipartisan support of 418-12, which is extremely rare as House rules are crafted by the majority party and rarely receive votes from the minority). The new rules also reinstated Pay-As-You-Go (PAYGO) that was last in place in 2010. PAYGO requires that both mandatory spending and tax cuts be offset to prevent increases in the national debt. House Republicans eliminated this when they took control of the House in 2011. Of note, nowhere in the rules package was there a mention of earmarks so we continue to track what new Appropriations Chairwoman Nita Lowey (D-NY) will do.

The Democrats then introduced HR 1, which will be the first major piece of legislation brought to the House floor this Congress. Nine different committees have jurisdiction but all have committed to moving their section of the legislation quickly. HR 1 would impose stricter ethics rules on Members, require disclosure of a decade’s worth of presidential tax returns, crack down “dark money” in political campaigns, and restore voting rights protections for all eligible voters. Next the House Democrats pushed to reopen government with passage of appropriations funding for the remainder of FY2019, but no similar action has occurred in the Senate. See Appropriations and Shutdown sections below.

SPEAKER PELOSI

After finishing FY2019 funding measures and reopening government, the next set of priorities for Democrats controlling the House is lowering health care and prescription drug costs, creating jobs, raising wages, and expanding economic growth policies. Speaker Pelosi has made replacing the individual mandate provision in the Affordable Care Act (ACA) eliminated as part of the Republican-backed tax policy overhaul in 2017, raising the income level for those who can receive insurance subsidies under the ACA, and supporting Medicaid expansion for states her starting point. She has also determined committee chairs but we don’t expect her to finalize full memberships of subcommittees until late January as one House seat remains in the air in North Carolina, which determines the ratio of seats for each party on all committees and subcommittees. Pelosi has also made it clear she is not supporting Trump’s Border Wall, the main issue preventing the government from re-opening. Finally, Speaker Pelosi said now is not the time for the new Democratic-led House to pursue impeachment of Trump and is awaiting Robert Mueller’s report on his investigation, despite the push within their party’s ranks for such action.

SWEARING-IN EVENTS

On January 3, G2G spent the day on the hill talking with several House Appropriators and those in Leadership and their staff as well as many of the delegations from the states of Ohio, Pennsylvania, Virginia, Maryland and the New England region. We saw Minority Leader Chuck Schumer (D-NY) racing to get to over a dozen different swearing-in events that day, which included that of Senator Sherrod Brown (D-OH). Brown and his staff were in good spirits with his comfortable victory in a state Trump won by 8 points in 2016 and his serious consideration about running for president in 2020. Senator Rob Portman (R-OH) visited his reception to show support for his Ohio colleague. We also had a great conversation with Senator Pat Casey (D-PA) who also just won re-election this fall in a state won by Trump in 2016. We talked with several public officials and staff on issues ranging from appropriations for DoD and HHS to protective armor to policies supporting high-tech innovation and hyperloop to the opioid crisis and bioscience business issues.

On the House side, we talked with former Chairman who is now Ranking on the Energy and Commerce Health Subcommittee, Rep. Michael Burgess, MD (R-TX), who was both entertaining and open about dreading coming to the floor to see the Democrats take the reins after almost a decade of control. House Appropriations HHS (Labor, Health and Human Services Appropriations Subcommittee Chairwoman Rosa DeLauro (D-CT) and her Chief of Staff were exuberant as were another senior Appropriator, Homeland Security Chairwoman Lucille Roybal-Allard and her senior advisor at one reception we attended. Both Members have championed some key health issues, including rare cancer and the opioid crisis, and stated their continued support in the 116th Congress. From Rep. Raul Ruiz, MD, MPH (D-CA) to Rep. Martha Roby (R-AL) to Rep. Henry Cuellar (D-TX), the focus on ending the shutdown and moving forward with FY2020 appropriations remains a top priority for many in Congress.

Among Ohio’s newest Members, Anthony Gonzales (R) is trying to get on Financial Services Committee (which is unlikely if both current Members Beatty and Stivers remain on it) and has carried over some staff from former senate candidate and Rep. Jim Renacci while Rep. Troy Balderson (R) hired former Senator Portman’s State Director as his Chief of Staff, who is based in the district instead of DC. G2G talked to Ohio Members and staff about all our Ohio clients and found Members like Democrats Joyce Beatty and Marcia Fudge were excited about the 116th Congress while others like Republicans Brad Wenstrup, Steve Stivers and Steve Chabot were more focused on strategizing on ways to work across the aisle to move legislation this year. With new district lines for the entire state due to court intervention, Pennsylvania has several new Members of the delegation, such as Reps. Guy Reschenthaler (R) and Chrissy Houlahan (D), both of which are still staffing up but G2G knows their Chiefs of Staff and is looking forward to working together this year. Virginia also has half a dozen new Members and we found Rep. Elaine Luria (D) both overwhelmed and enthusiastic about her surprise upset win against incumbent Scott Taylor (R). We specifically discussed organizing bioscience business tours in her district to which she responded with strong interest, esp when hearing the link to DoD health initiatives, as did Rep. Abigail Spanberger (D). Spanberger has hired one of the most experienced Chiefs of Staff who worked in both the House and Senate over the past two decades. She is also part of a new documentary on campaign finance reform and the shift to publicly financed political campaigns, in which both Liz and John may appear as we were filmed talking with her staff and had to sign release forms!

APPROPRIATIONS

G2G talked to the House Appropriations Committee and learned the 12 subcommittee memberships will not be finalized until the last week of January or first week of February.

House Democrats made their first move on ending the shutdown by passing legislation already passed with broad bipartisan support. The House will first consider the Financial Services and General Government appropriations bill, which funds the Department of the Treasury and IRS. The remaining bills will cover Agriculture, Rural Development, Food and Drug Administration, and Related Agencies; Interior, Environment, and Related Agencies; and Transportation, and Housing and Urban Development, and Related Agencies. These bills already passed the Senate on a 92-6 vote on August 1, 2018 and were included in HR 21, which passed the House with a bipartisan 241-190 vote on January 3, 2019. The only substantive change between those bills and the four bills released today is language to ensure that federal workers furloughed by the shutdown receive pay. Despite initial support for preventing a shutdown by President Trump, in the end, he decided to force the border wall issue and continues to refuse to sign any legislation to reopen government unless that funding is included. The funding levels are:

$23.24B Agriculture-FDA

$71.4B Commerce-Justice-Science

$23.7B Financial Services

$35.9B Interior-Environment

$54.4B State-Foreign Operations

$71.4B Transportation-HUD

SHUTDOWN, BORDER WALL AND ECONOMIC IMPACT

On December 22, 2018, a partial government shutdown began due to President Trump’s push to add $5 billion in border wall funding to legislation already passed by the House and Senate for FY2019. Democrats continue to make clear they support border security but oppose a concrete wall and want to reopen the government while negotiations continue. On January 3, a six-bill appropriations package passed the House 241-190 followed by the short-term Homeland Security spending bill that passed 239-192. A handful of Republicans broke ranks on each measure to vote ‘yes’ with the Democrats. But thus far, because of Trump’s opposition, Republicans in the Senate refuse to move any appropriations legislation passed by the House due to Trump’s veto threat.

As of the new year, Trump is threatening to invoke emergency powers to build a wall without congressional approval after failing to reach a deal with Democratic leaders. As of the weekend, Trump is now pushing for a steel barrier on the U.S. border with Mexico rather than a concrete wall but the fight over funding continues. Trump has characterized the current border crisis as a “dangerous horrible disaster” yet simultaneously stated that the shutdown could stretch for “months or years.” Meanwhile Democratic leaders, pressed by liberal groups and immigrant rights activists, have dug in their heels and accused the president of pursuing a xenophobic agenda.

IMMIGRATION

There are an estimated 10.7 million undocumented immigrants living in the United States today (3.3% of the total U.S. population and of which 7.8 million are tracked in the workforce). The illegal immigration rate dropped 31% in 2015 when Trump announced his wall idea – the lowest in 50 years. Six states account for 58% of unauthorized immigrants: California, Texas, Florida, New York, New Jersey and Illinois, and 66% have lived in the U.S. over 10 years. The real challenge is the migration of families seeking asylum which has reached about 2,000 unauthorized migrants per day who are being taken into federal custody – so many that authorities just do mass releases of families onto the streets of El Paso and other border cities. Not only did two children die in December, but U.S. agents bring dozens of migrants coughing and feverish to clinics and hospitals after being in jam-packed holding cells sleeping on concrete floors and huddled in plastic sheets for warmth on a daily basis. The courts face a backlog of nearly one million cases and with the shutdown that includes DHS, there is no end in sight to get through these cases any time soon and border patrol workers won’t be paid.

Current White House aides acknowledge privately that a wall will not adequately address the record surge of immigrant families at the border, most of whom surrender to authorities in hopes of winning asylum protections. Last year, the Trump administration opposed and helped defeat a bipartisan Senate plan that would have provided $25 billion for the wall in exchange for a path to citizenship for up to 1.7 million young undocumented immigrants. The president put his support behind a more conservative bill that would have amended loopholes in immigration law, allowing the detention of families for longer periods and speeding up of the huge backlog of asylum cases. But that plan, which also included massive cuts to legal immigration programs, was soundly defeated, as Democrats opposed rolling back protections for immigrant families.

ECONOMIC IMPACT

Meanwhile the shutdown is starting to impact more of the country beyond the DC-MD-VA area. While around 75% of the government is fully funded, the federal agencies that are shut down employ more than 800,000 people who work in all 50 states with total salaries of $1.4 billion per week. Also, specific government programs and services are inactive, such as:

  • Government contracting is halted. Federal contractors could be out more than $200 million a day in lost or delayed revenue from the partial government shutdown, based on data from previous years.
  • The IRS income verification operation goes dark this month impacting homebuyers and lenders, delaying mortgage approvals. The IRS has also said it is barred from processing paperwork without a deal, which can impact early tax filings as well as tax refunds. The average refund in 2017 and 2018 was just more than $2,000.
  • The FCC, which had been operating with leftover funds in December, has now suspended most operations, including its reviews of proposed mergers such as wireless provider T-Mobile’s $26.5b bid for Sprint.
  • The FDA isn’t accepting any new applications for approvals even though their fees provide some revenue, they are insufficient to support the entire agency.
  • The SEC isn’t opening fresh probes for new initial public offerings or applications from mutual fund companies to launch exchange-traded funds.
  • The Small Business Administration is shut down, which delays all SBA loans, such as (7(a), SBA Express, CAPLines, Small Loan Advantage, Community Advantage, International Trade, Export Working Capital, Export Express, 504, and Microloan loan programs.
  • About 1/3 of national parks are closed, affecting communities and businesses that rely on tourists, but in an unprecedented move, some parks will charge entrance fees in order to function – some critics said this could be illegal but keeping the national park system open to visitors is straining its capacity and potentially exposing public lands to long-term damage.
  • SNAP (Supplemental Nutrition Assistance Program) serves 40 million people and while the program will remain intact in January, by February it may have to reduce or stop programming.

While President Trump says he is prepared to keep part of the government shut down for more than a year if necessary to get his money for the wall, deadlines over the next seven weeks will increase pressure to cut a deal. Starting January 11, the end of the first pay period that fell entirely within the shutdown will hit, meaning furloughed employees at nine Cabinet departments and other agencies will miss a complete paycheck covering that pay period. If it stretches into February that would be two whole months without a paycheck for thousands of federal employees. In addition, federal court operations will be curtailed starting January 11 because they will run out of court fees and other revenue sources they were able to use since the shutdown. Then by the first Monday in February, President Trump is supposed to submit his budget proposal to Congress but if the shutdown continues, typical agency input won’t be available, stalling the FY2020 process. Also in February and March, states, which rely on federal funding for significant portions of their budgets, will see their budgets severely punctured as money for highways, community programs and other services are delayed. Finally, later in the year, the U.S. debt limit will need to be increased and sequestration (automatic cuts in spending) will occur unless Congress strikes a deal with Trump to reopen government and set new budget caps for FY2020.

DEFENSE

DOD UPHEAVAL

With General Jim Mattis pushed out of the Department of Defense, we have an Acting Secretary of Defense (Patrick Shanahan) with little power as he is viewed as a stand-in despite his years of experience. Also, Rear Admiral Kevin Sweeney, his Chief of Staff resigned on January 5. The remaining top three Pentagon positions are all temporary. Pentagon Comptroller David Norquist is performing the duties of the deputy secretary, leaving deputy comptroller Elaine McCusker to fill Norquist’s day-to-day job. Meanwhile, the No. 3 in the department is supposed to be the chief management officer, but that job has been empty since the November 9 resignation of Jay Gibson so Lisa Hershman is currently the acting CMO.

SASC CHANGES

Another DoD upheaval is with the Senate Armed Services Committee (SASC), which is changing eight seats (one-third of membership) in the 116th Congress – one of the largest turnovers in years. For instance, one of the five Republicans leaving the committee is Senator Lindsey Graham (R-SC), who is one of the Pentagon’s most vocal allies and one of the panel’s longest-serving members and will chair the Senate Judiciary Committee instead. Other Republicans leaving include Tim Scott (SC), Ted Cruz (TX), Ben Sasse (NE) and Jon Kyl (AZ). For Democrats, Senators Tammy Duckworth (IL), a combat-wounded Army veteran, Joe Manchin (WV) and Doug Jones (AL) will replace three departing Democratic lawmakers.

SYRIA

The president’s sudden and broadly unwelcomed declaration of victory against ISIS in Syria and decision to pull out troops a month ago was basically reversed by White House national security adviser John Bolton on Sunday. He laid out conditions for withdrawal during a visit to Israel. The Administration is still determining what to do about the tens of thousands of Syrian Kurdish fighters that U.S. forces have trained, armed and advised to carry out the ground war against the Islamic State. Both the House and Senate have made it clear they oppose withdrawing from Syria as well.

CYBER

One of 10 sections of the House Democrats’ legislation addressing government ethics, voting access and election security announced on January 3 is devoted to addressing voting machine vendor cybersecurity standards, paper ballot requirements, grants and a bug bounty program. Also, several committees are planning to address cyber issues this Congress, ranging from the Energy and Commerce Committee around health IT and HIPAA to the Defense and Homeland Security Departments oversight committees around cybersecurity systems. Moreover, Senators Mark Warner (D-VA) and Marco Rubio (R-FL) are introducing legislation to establish a new federal office called the White House Office of Critical Technologies and Security to coordinate efforts across federal agencies, develop a national strategy to combat state-sponsored technology theft, and reduce risks to supply chains. The office would also work to raise awareness of threats to the American public and the private sector posed by reliance on foreign products, like those manufactured by Chinese telecom companies ZTE and Huawei. Finally, some are concerned the government shutdown is beginning to influence cyber policy. Symptoms are emerging at NIST, where industry is unclear on making public comments on pending agency action, and DHS, which only recently got congressional approval to reorganize its main cybersecurity wing. The DHS Cybersecurity and Infrastructure Security Agency (CISA) under legislation signed into law late last year, is struggling to get set up and implement the law due to the shutdown.

HEALTH

EMERGENCY HEALTH

Lawmakers are trying again to reauthorize pandemic and other health emergency response programs, which total $7 billion and expired on December 31, 2018. A new bill, which also would modify the regulatory framework for nonprescription drugs and establish user fees for drugmakers, is nearly identical to one the House passed 367-9 in December in the last Congress. If both chambers can pass the bill, it would break an impasse that has kept the provisions from reaching Trump’s desk. The impasse was due to Senator Richard Burr (R-NC) blocking Senator Johnny Isakson’s (R-GA) drug bill because of frustration about the FDA’s proposed regulation to ban most electronic cigarette flavors, and Isakson blocking Burr’s pandemic bill in response. However, Rep. Susan Brooks (R-IN) introduced a bill combining both measures last fall that House and Senate leaders agreed to support. Both bills passed in the House—the pandemic reauthorization legislation in September and the over-the-counter drug bill in July.

PRESCRIPTION DRUGS

Meanwhile prescription drug pricing resurfaced as a top issue due to rising prices yet again despite some pharmaceutical companies discussing possible halts to annual drug price increases and lowering the price on some treatments. Starting January 1, many pharmaceutical companies returned to the practice of regular price hikes on hundreds of drugs with an average increase of 6.7%. This set off both Democrats in Congress and President Trump, who took to Twitter to complain. Also, some data indicates the increases are smaller and fewer than that went into effect January 1, 2018.

Except for the two “gag clause” bills passed by Congress in nearly unanimous votes then signed into law in October 2018, no action on drug pricing occurred in 2017 or 2018. When the cash price for a prescription is less than what one would pay using one’s own insurance plan (whether Medicare or private insurance), pharmacists no longer have to keep that a secret due to these bills that ban “gag order” clauses in contracts between pharmacies and insurance companies or pharmacy benefit managers. Democrats controlling the House and Committee Leadership have indicated meaningful action on drug pricing is a top priority in 2019. And they are not alone as the Trump Administration led by Health and Human Services (HHS) Secretary Alex Azar released the “drug pricing blueprint” in May and since then has rolled out policy proposals, such as the controversial idea of adopting an international reference pricing system in Medicare Part B. Also this year, Congress may actually pass the bipartisan CREATES Act (Creating and Restoring Equal Access to Equivalent Samples Act) that would prevent branded drugmakers from guarding their medications so other drug and biologics companies and other legislation that would prohibit “pay-for-delay” deals in which drugmakers pay producers of generic medicines to delay introduction of cheaper versions of them because both have garnered strong support.

FDA

In 2018, FDA Commissioner Scott Gottlieb continued to implement changes for the drug approval process with little controversy and is expected to continue on this path in 2019. The agency oversaw its first approval of a generic drug under the Competitive Generic Therapy designation, established in the 2017 FDA Reauthorization Act. The FDA also advanced a Biosimilars Action Plan to promote more competition and unveiled more policies and guidance documents resulting from the 21st Century Cures Act of 2016. Most recently, the agency put forth a strategic framework regarding its use of real-world evidence in the approval of secondary indications for existing drugs. This was one of the most controversial topics in the 21st Century Cures Act, but was a non-issue once unveiled by HHS. Finally, the FDA will continue to update the list of generic products facing limited competition, ensuring potential competitors know about their opportunities for expedited review of those products.

ACA

The Texas v. Azar lawsuit brought by a number of Republican Attorneys General seeking to declare the entire ACA (Affordable Care Act) unconstitutional because Congress zeroed out the tax penalty from the individual mandate in the 2017 tax bill received surprising support from the U.S. District Judge Reed O’Connor when he declared the entire act unconstitutional. However, most agree this ruling will not be upheld on appeal. Regardless of outcome, several portions of the ACA affect the approval and pricing of prescription drugs, entirely unrelated to the individual market insurance reforms. For example, the Biologics Price Competition and Innovation Act, which provided innovator biologic companies with 12 years of data exclusivity for their products and follow-on biosimilar companies with a simpler path to approval, is part of the ACA. The ACA also closed the Medicare donut hole, providing financial assistance to millions of Americans enrolled in Part D plans. It created the Center for Medicare and Medicaid Innovation (CMMI), which funds health innovation initiatives and enables Secretary Azar to implement radical drug pricing reforms, such as the international reference pricing proposal. In addition, the ACA prohibited insurers from imposing lifetime caps on coverage, which were often about $1 million, which is vital for some patients as a single drug might now cost that much. Therefore, a permanent ruling to strike down ACA would have broad impact on most Americans beyond the pre-existing conditions and other aspects of the law most commonly referenced in the public discourse.

Stay connected for more updates here on our blog, at G2G’s website and on twitter – @G2GConsulting and @BioOhio

G2G (Government to Growth Consulting), LLC is a consulting firm specializing in assisting businesses and non-profit organizations. G2G provides comprehensive consultation in the fields of government affairs, economic development, grant writing, public relations, and event planning. G2G also has extensive experience in the areas of lobbying, advocacy, fundraising and grassroots organizing.