Washington UpdateMedmarc Webinar

Clayton Hall, VP for Government AffairsMedical Device Manufacturers Association

August 23, 2017

About MDMA

• Founded in 1992 by handful of smaller medical device executives seeking a voice in Washington

• Today MDMA represents nearly 300 member companies

• Leverage collective resources to provide top-tier advocacy and educational assistance to companies

• Track record of success

Agenda

• 2016 Election / State of Play• Health Care Reform• Device Tax Repeal• Tax Reform • MDUFA / FDA Reforms• Reimbursement• Cost of Care / Value of Technology

The 2016 Election&

State of Play

Another “Dewey Defeats Truman”

• Forecasts pegged Clinton’s chances of victory at 70-90%

• Trump polling at 42% was lowest since Bob Dole in 1996

• 12% undecided versus just 3% in 2012

Republicans Sweep Elections

• ACA Repeal & Replace • Comprehensive Tax

Reform• Regulatory Relief• Supreme Court

The Proposed Trump Agenda

• Immigration Reform• Border Security• Infrastructure • Energy• Trade

DAYS IN OFFICE15%

TERM LEFT85%

TODAY IS DAY 215

Still the Top of the Second Inning

Growing Threats to President’s Agenda

1)Controversy; ongoing investigations into Russian interference in election and fallout from Charlottesville comments

2)Low Approvals; polarizing but little erosion to his base so far

3)White House in Transition; the entire senior staff leadership has overturned

4)Escalating Tensions with Congress; weak relationship with Democrats and new attacks on key Republicans

Trump Approval at 200+ Days

• Trump hits record low job-approval of 34% last week• 79% GOP, 7% Dem & 29% Ind• Below 40% in MI, OH, PA & WI• Lags Obama (53%), Bush (65%), and Clinton (44%) at similar

points in Presidency

“Day One” Team is Gone

Photo taken January 28, 2017

Senate GOP Relationships Key to Legislative Success

Most Legislation Still Requires 60 Votes in Senate

Joe Manchin, West Virginia, Trump won by 42 percentage points

Heidi Heitkamp, North Dakota, Trump by 36

Jon Tester, Montana, Trump by 21

Joe Donnelly, Indiana, Trump by 19

Claire McCaskill, Missouri, Trump by 19

Sherrod Brown, Ohio, Trump by 9

Bill Nelson, Florida, Trump by 1

Bob Casey, Pennsylvania, Trump by 1

Tammy Baldwin, Wisconsin, Trump by 1

Debbie Stabenow, Michigan, Trump by 1

Amy Klobuchar, Minnesota, Clinton by 2

Angus King, independent who aligns with Democrats, Maine, Clinton by 3

Tim Kaine, Virginia, Clinton by 5

Congress Has a Full Plate this Fall

MUST PASS LIKELY ACTION POSSIBLE CONSIDERATIONDebt Limit (Sept. 29) ACA Market Stabilization FY18 BudgetSpending Bill / CR (Sept. 30) DSH Cuts (Sept. 31) Tax ReformCHIP Reauthorization (Sept. 30) Medicare Extenders (Sept. 30 / Dec. 31) InfrastructureFAA Funding (Sept. 30) Defense Authorization Dodd-Frank ReformFlood Insurance (Sept. 30) FISA (Dec. 31) Health Care Reform

• Legislative clock is ticking and lots of work left to complete

• Expect a large end-of-year spending package with policy riders

• GOP eager to move on from health care to taxes, but 2017 passage unlikely

• Discreet health care bills related to the opioid epidemic, “right-to-try,” lab-developed tests, cybersecurity, and off-label promotion could see action

Health Care Reform

Repeal vs. Replace vs. Repair

ACA Report Card• Approx 25 million Americans now receive health insurance through the Affordable

Care Act (ACA)

• 15 million gained coverage through expansion of Medicaid & CHIP

• 12.2 million signed up but only 10.3 million enrolled and paying subsidies via healthcare.gov as of June

• Uninsured rate dropped to 10.9% of U.S. adults in 2016 vs. a high of 16% in 2010.

• Exchange markets becoming increasingly unstable.• 1/3 of U.S. Counties only offer one plan under the marketplace• 20% average premium increases • Carriers are fleeing – Aetna only in two states

• Public support, hovering around 50%, at all time highs

Timeline for Repeal / ReplaceJan. 12-13–Senate, House approved budget resolution laying groundwork for ACA repeal

Jan. 27 –House and Senate Committees missed non-binding deadline to report out ACA repeal legislation

March 8 & 9–House E&C and W&M Committees to mark up ACA repeal & replace bill

March 24–House pulls bill

Jan. 20–President Trump inaugurated

May 4–House passes AHCA by vote of 217-213

July 28 – HCFA fails in Senate by vote of 49-51

Feb. 24–Leaked House bill emerges

July 27 –“Skinny” HCFA introduced in Senate

July 25 –Senate begins BCRA debate

July 17 –Senate pulls revised bill

June 22 –Senate Introduces BCRA

Sept ? – small stabilization package

• Impact of Medicaid reforms and concerns over CBO’s projections of significant coverage losses were too much to overcome.

Device Tax Repeal

Medical Device Tax – Repeal in Sight

• Two year suspension in 2016 & 2017 thanks to overwhelming bipartisan support.

• Unless Congress acts, the current two-year suspension expires at the end of 2017.

• Continue to remind policy makers of the benefits of the suspension, but 75% of MDMA members are holding off investing in R&D and expansion without the certainty of full repeal.

• Companies making budget decisions now assuming tax stays in place.

• Addressed in every major health care reform package including House passed AHCA package and temporarily suspended under the Senate bill which failed.

• Can’t Depend on a large package for success, but opportunities exist in other ”must pass” bills this year.

Tax Reform

Tax Reform Primed• In the past 30 years, the US tax code has become more complicated and

globally anti-competitive leading to a rash of corporate tax inversions and erosion of the tax base.

• U.S. corporations pay a combined top marginal rate of 39%; the third highest corporate rate in the world and highest in OECD.

• Legislation, being drafted now, will simplify the tax code and lower the rates for individuals and businesses.

• Stakes are higher for tax reform as GOP is scrambling to deliver a major legislative victory heading into the 2018 election following the failure of health care.

Big 6 Release GOP Principles

• Lower tax rate for small businesses (so they can compete with larger ones);• Lower tax rate for U.S. businesses (so they can compete with foreign ones);• Allow “unprecedented” capital expensing;• Lower tax rates as much as possible; • Create a system that encourages U.S. companies to bring jobs and profits back

from overseas; • Set aside the House Republican Blueprint “border adjustable tax”;• Priority on permanence; and • Proceeds through Congress via regular order.

Moving from Principles to Policy

• How low can they go?• Permanent, temporary or mix of both?• Partisan exercise?• Revenue neutral or deficit financed?• How to raise revenue without creating too many losers? • How to maximize middle class relief over the wealthy?

MDUFA / FDA Reforms

MDUFA IV Agreement Signed Into Law As Part of FDARA

• Reduce 510(k) and PMA avg total time goals• First time performance goals for presubs & De Novo• Improvements to deficiency letters • Quality Management Programs• Continuation of Independent Assessment / Auditing• Patient Engagement• NEST Pilots on RWE to support pre-market efficiencies and test post-market • Risk-based facility inspections• Risk-based classification of device accessories • Over-the-counter Hearing Aids

Reimbursement Reforms

Reimbursement Reform / Patient Access• Ongoing concerns about the time gap between regulatory and reimbursement

decisions. EXCITE proposal, as described, could help address.

• Increasing concerns about the lack of clarity by private payers around coverage determinations. Tufts study published in late 2016 shows lack of consistency and patient input.

• More transparency needed with CPT and RUC process

• Bundled payment programs need reforms to properly measure outcomes over proper time horizon. New CMS leadership re-examining.

Value of MedTech+

Cost of Care

Drug Pricing Catalyzing Public Interest in Cost of Care

• The President continues to highlight the issue, and noted his interest in his “Joint Address” to Congress in February.

• “bring down the artificially high price of drugs and bring them down immediately.”

• Comprehensive legislation unlikely, but pressure continues to build.

• 12 GOP Senators voted to allow drug imports from Canada in January.

• Educate Congress and Public about the value of medical technology or risk being drawn into this fight.

Value of MedTech

Medical Devices & U.S. Health SpendingIn 2013 medical device spending totaled $171.8 billion or 5.9 percent of total national health expenditures ($2.9 trillion) a trend that has been relatively constant over the twenty-five year period from 1989-2013 (King, 2014).

Value of MedTech

Prices for medical technologies have risen at rate far lower than CPI and Medical CPI.

Prices for implantable medical devices continue to drop over time as competition increases. For example, the original drug-eluting stents sold for $3,000 and now sell for $1,200.

Advances in medical technology are saving and extending lives, and saving the health care system money by getting patients out of the hospital and back on their feet more quickly.

Conclusion• Can the White House deliver on their ambitious agenda

with GOP divisions in the House, a narrow majority in the Senate, and over unified Democratic opposition?

• Bipartisan support for device tax repeal is highest its ever been, and prospects for relief are good but not guaranteed.

• Many opportunities at the FDA but serious challenges in reimbursement environment.

• We have a great story to tell and policy makers want to hear about how our technologies are improving the lives of patients!

Questions?

Clayton HallVP, Government Affairs

Medical Device Manufacturers Associationchall@medicaldevices.org

(202) 316-2270 (cell)(202) 354-7175 (desk)