Shutdown Threat Clouds Start of Biden Drug-Pricing Negotiations

A potential government shutdown at the end of the month risks complicating the Biden administration’s top health priorities, just as drugmakers are supposed to report data for pricing negotiations and states are pushing people off Medicaid rolls.

Federal agencies will face a lapse in funding Oct. 1 should Congress fail to pass appropriations legislation or a short-term, stopgap measure. Lawmakers are divided over a spending plan for fiscal 2024.

A shutdown would bump up against an Oct. 2 deadline for some drugmakers to report a slew of data to Medicare as part of how the agency will eventually determine new prices for medicines selected for negotiation. These same pharmaceutical companies—Bristol-Myers Squibb Co. and Johnson & Johnson—are fighting the Biden administration in court to block these negotiations and protect the billions of dollars they stand to lose.

So far the Biden administration has been on time hitting deadlines created by the Inflation Reduction Act’s drug-pricing provisions. A shutdown’s impact on progress at the Centers for Medicare and Medicaid Services is an open question, said Anna Kaltenboeck, principal and head of prescription drug reimbursement practice at ATI Advisory.

“Yes, historically they have been on time,” Kaltenboeck, who was a senior health adviser for the Senate Finance Committee when the IRA was developed, said. “But we don’t know how far along in the process CMS and manufacturers are, nor how much more interaction between them is required to meet the deadline.”

Farxiga is made available to customers at the New City Halsted Pharmacy on Aug. 29, 2023 in Chicago. It’s one of 10 prescription drugs subject to Medicare price negotiations under the Inflation Reduction Act. The others include Xarelto, Entresto, Eliquis, Jardiance, Enbrel, Januvia, Imbruvica, Stelara and Fiasp.

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The drug pricing law’s sequencing is crucial: Medicare recently announced the first 10 drugs to face negotiation starting in 2026. Now the agency needs to determine a new price for those medicines.

Medicaid Eligibility

The Biden administration has also asked for $3.7 billion to boost CMS efforts to verify eligibility for Medicaid and insurance marketplace programs, both part of the White House push to keep the rate of uninsured people from rising dramatically this year.

A shutdown means those new funds aren’t coming, even as states continue their work determining who should or shouldn’t be covered by their Medicaid programs, for the first time since that was paused in 2020 as part of the respond to the Covid outbreak. It also raises questions about how much staff can be retained to oversee those determinations.

“It’s certainly possible staff providing oversight of the Medicaid renewal process could be furloughed,” Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, said. “The federal government has been ramping up their oversight of states wrongly dropping people from Medicaid, and a government shutdown could disrupt that.”

A Department of Health and Human Services spokesman referred questions about the agency’s shutdown plans to the Office of Management and Budget. An OMB spokesperson declined to respond on the record, referring Bloomberg Government to the agency’s posted contingency plans. Those plans are for fiscal 2023.

The IRA set aside $3 billion for the government to set up Medicare negotiations, money that’s still available during a shutdown.

HHS also plans to keep 60% of its staff working during a shutdown, its posted contingency plans say. Under that plan almost half of CMS’s staff are exempted from required furloughs during a shutdown.

Essential services, such as Medicare, that get mandatory funding—money that doesn’t need approval each year by Congress—will continue during a shutdown, according to the plans. Pandemic response plans are also considered essential and will continue to be staffed.