Washington Update FMMC 2017 Symposium

Clayton Hall, VP for Government Affairs

Medical Device Manufacturers Association

May 8, 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, and enjoy a strong partnership with FMMC

Agenda

• 2016 Election / State of Play

• ACA Repeal & Replace

• 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

Trump Approval at 100 Days

• Lags behind Obama (61%), Bush (56%), and Clinton (52%) • Still, only 2 percent of Trump Voters regret over vote

Fewer & Fewer “Swing” Seats

ACA Repeal & Replace

ACA Report Card

• Approx 22 million Americans now receive health insurance through the

Affordable Care Act (ACA)

• 15 million gained coverage through expansion of Medicaid & CHIP

• 8.8 million enrolled via healthcare.gov as of Jan 14th

• Uninsured rate dropped to 10.9% of U.S. adults 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 / Replace

Jan. 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

???June??? – Senate to consider when they have 51 votes

Feb. 24– Leaked House bill emerges

What’s Likely Repealed?

Enhanced federal match for Medicaid expansion, beginning in 2020

Exchange Subsidies, beginning in 2020

Individual mandate, effective Dec. 31, 2015

Employer mandate, effective Dec. 31, 2015

Public Health & Prevention Fund

Almost all tax increases

Pre-existing conditions (with select changes)

Community rating by age (with select changes)

Under-26 mandate

Prohibition on annual and lifetime limits

Medical loss ratio requirements

Insurance Exchanges

What Likely Stays the Same(ish)?

New Tax Credits in 2020

• Range of $2,000 (ages 30 and under) to $4,000 (ages 60 and above) per individual

• Fixed amounts do not vary with actual cost of insurance or geography

Age-based

• Like ACA, tax credits paid monthly throughout the year

• Refundable so even those not owing income tax may qualify

Advanceable & Refundable

• Phased out after $75,000 income level (individual; $150,000 for joint filers)

• Additive for a family & capped at $14,000

Partially Means-Tested

Incentive to Purchase Coverage

Premium penalties of up to 30 percent for one year unless “continuous coverage” is maintained

More than 63-day gap is not continuous coverage

Dependents aging off parents’ plan must enroll at first open enrollment

• Individual mandate would be repealed

• Pre-existing conditions would be covered, likely with caveats

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.

• Fully repealed in House passed AHCA package, but challenges remain in Senate.

• Can’t Depend on a Large Package for Success, but Opportunities Exist in Other ”Must Pass”

Bills (CHIP / Medicare extenders deal, Tax Extenders, & EOY Omnibus).

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.

• Legislation, being drafted now, will draw from the House “Better Way” framework to simplify the code and lower the rates for individuals and businesses.

• Top priority for the incoming Trump Administration and Congress but details are still being developed.

• Border Adjustment is controversial and has been criticized by Trump as overly complicated.

Tax Reform – Paul Ryan’s “A Better Way” • Changes to Business Income Tax:

—Reduces the corporate rate from 35% to 20%.

—Pass-through Businesses taxed at 25%.

—Full and immediate deduction of all capital investment costs.

—Eliminates the deductibility of net interest expenses.

—Restricts the deduction of net operating losses to 90% of taxable income, but can carry

forward indefinitely.

—Eliminates Section 199 (manufacturing deduction) and all other business credits except

R&D.

—Transitions to a territorial system exempting from tax all profits of foreign subsidiaries.

—One time “deemed” repatriation of foreign profits held overseas in cash / cash equivalents

at 8.75%.

—Implements a ”border adjustment” so that imports are taxed at the new corporate rate

while exports are sold tax free.

• Now reconciling with the vision White House outlined in April

MDUFA / FDA Reforms

Key Features of MDUFA IV Agreement

• 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

MDUFA IV Timeline / FDA Update

• MDUFA IV needs to be reauthorized by 9/30/17.

• Hill action heating up with votes expected in the Senate HELP on May 10th.

• Not uncommon for other FDA reforms to “ride along” with user fee

reauthorization.

• Scott Gottlieb expected to be confirmed by the full Senate this week.

• Hiring freeze has “thawed.”

• CDRH contemplating “progressive approval” for certain PMA devices to

develop more data and that meet the EU standard.

Reimbursement Reforms

Reimbursement Reform / Patient Access

• Ongoing concerns about the time gap between regulatory and

reimbursement decisions

—Pursue administrative and legislative solutions

—Increasing concerns about the lack of clarity by private payers around

coverage determinations

—Tufts study published in late 2016

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

• Patient access/impact will be critical to success!

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

• Between 1980 and 2000 life expectancies increased by 3.2 years (4%), and death

rates dropped by 16%.

• During the same time frame, the number of days spent in the hospital dropped

by 56%, and the number of people over age 65 with disabilities dropped by 25%.

Medical Devices & U.S. Health Spending • In 2011 medical device spending totaled $159.4 billion or 5.9 percent of total

national health expenditures ($2.7 trillion) (King, 2014).

Value of MedTech

• From 2007 to 2011, seven major categories of implantable

medical devices, seven substantial price declines:

• implantable defibrillators (24%), pacemakers

(26%), artificial hips (23%), drug-eluting stents

(34%), and more.

• Reduced complications and recovery times translate into

lower health care costs.

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.

• Huge 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 Hall

VP, Government Affairs

Medical Device Manufacturers Association

chall@medicaldevices.org

(202) 316-2270 (cell)

(202) 354-7175 (desk)