    [Senate Hearing 115-727]
    [From the U.S. Government Publishing Office]

                                                          S. Hrg. 115-727

                        PRESCRIPTION DRUG AFFORDABILITY
                           AND INNOVATION: ADDRESSING
                          CHALLENGES IN TODAY'S MARKET

    =======================================================================

                                     HEARING

                                   BEFORE THE

                              COMMITTEE ON FINANCE
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JUNE 26, 2018

                                   __________

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Printed for the use of the Committee on Finance

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    38-796-PDF                  WASHINGTON : 2019

    --------------------------------------------------------------------------------------

                              COMMITTEE ON FINANCE

                         ORRIN G. HATCH, Utah, Chairman

    CHUCK GRASSLEY, Iowa                 RON WYDEN, Oregon
    MIKE CRAPO, Idaho                    DEBBIE STABENOW, Michigan
    PAT ROBERTS, Kansas                  MARIA CANTWELL, Washington
    MICHAEL B. ENZI, Wyoming             BILL NELSON, Florida
    JOHN CORNYN, Texas                   ROBERT MENENDEZ, New Jersey
    JOHN THUNE, South Dakota             THOMAS R. CARPER, Delaware
    RICHARD BURR, North Carolina         BENJAMIN L. CARDIN, Maryland
    JOHNNY ISAKSON, Georgia              SHERROD BROWN, Ohio
    ROB PORTMAN, Ohio                    MICHAEL F. BENNET, Colorado
    PATRICK J. TOOMEY, Pennsylvania      ROBERT P. CASEY, Jr., Pennsylvania
    DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
    TIM SCOTT, South Carolina            CLAIRE McCASKILL, Missouri
    BILL CASSIDY, Louisiana              SHELDON WHITEHOUSE, Rhode Island

                         A. Jay Khosla, Staff Director

                  Joshua Sheinkman, Democratic Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Hatch, Hon. Orrin G., a U.S. Senator from Utah, chairman,
      Committee on Finance...........................................     1
    Wyden, Hon. Ron, a U.S. Senator from Oregon......................     4

                             ADMINISTRATION WITNESS

    Azar, Hon. Alex M., II, Secretary, Department of Health and Human
      Services, Washington, DC.......................................     6

                   ALPHABETICAL LISTING AND APPENDIX MATERIAL

    Azar, Hon. Alex M., II:
        Testimony....................................................     6
        Prepared statement...........................................    45
        Responses to questions from committee members................    46
    Hatch, Hon. Orrin G.:
        Opening statement............................................     1
        Prepared statement...........................................    80
    McCaskill, Hon. Claire:
        ``Agent Eligibility and Underwriting Guide,'' HumanaOne
          Health and Life Products...................................    82
    Whitehouse, Hon. Sheldon:
        Letters submitted for the record.............................   166
    Wyden, Hon. Ron:
        Opening statement............................................     4
        Prepared statement...........................................   169

                                 Communications

    America's Health Insurance Plans (AHIP)..........................   171
    American Hospital Association....................................   177
    Association of American Physicians and Surgeons..................   201
    Campaign for Sustainable Rx Pricing (CSRxP)......................   202
    Center for Fiscal Equity.........................................   209
    National Community Pharmacists Association (NCPA)................   209

                                     (iii)

                        PRESCRIPTION DRUG AFFORDABILITY
                           AND INNOVATION: ADDRESSING
                          CHALLENGES IN TODAY'S MARKET

                                  ----------

                             TUESDAY, JUNE 26, 2018

                                           U.S. Senate,
                                          Committee on Finance,
                                                        Washington, DC.
        The hearing was convened, pursuant to notice, at 9:25 a.m.,
    in room SD-215, Dirksen Senate Office Building, Hon. Orrin G.
    Hatch (chairman of the committee) presiding.
        Present: Senators Cornyn, Thune, Isakson, Portman, Toomey,
    Heller, Scott, Cassidy, Wyden, Stabenow, Cantwell, Nelson,
    Menendez, Carper, Cardin, Brown, Bennet, Casey, Warner,
    McCaskill, and Whitehouse.
        Also present: Republican staff: Brett Baker, Health Policy
    Advisor; Jennifer Kuskowski, Chief Health Policy Advisor; Ryan
    Martin, Senior Human Services Advisor; Stuart Portman, Health
    Policy Advisor; and Jeffrey Wrase, Deputy Staff Director and
    Chief Economist. Democratic staff: Laura Berntsen, Senior
    Advisor for Health and Human Services; Michael Evans, General
    Counsel; Elizabeth Jurinka, Chief Health Advisor; Matt Kazan,
    Health Policy Advisor; Joshua Sheinkman, Staff Director; and
    Beth Vrable, Senior Health Counsel.

     OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
                  UTAH, CHAIRMAN, COMMITTEE ON FINANCE

        The Chairman. I would like to welcome everyone to today's
    hearing on prescription drug affordability and innovation.
        We are pleased to have our Secretary here, Secretary Azar--
    who I think is doing a great job--before the committee today,
    and I know members on both sides of the aisle are eager to hear
    from him on the Trump administration's plan to lower
    prescription drug costs.
        I was in the Rose Garden when the President announced his
    plan to put patients first by lowering prescription drug and
    out-of-pocket costs to consumers. And I commend the President
    and the Secretary for their focus in this area and for
    releasing this comprehensive blueprint.
        I also appreciate that HHS is seeking feedback from the
    public on the policy ideas in the blueprint. The administration
    is prudent to work through options by properly consulting those
    affected by these policies first. As we continue to develop
    policy options, it is imperative to understand the impact on
    patient access, affordability, and innovation before taking any
    specific action.
        To that end, today, in my opinion, is a golden opportunity
    for members to discuss policy proposals and ideas in the
    blueprint, which contemplates many weighty issues that would
    seriously change the current way of doing things. And on that
    note, I believe that those who have criticized the blueprint as
    insufficient are either responding from a lack of knowledge or
    purely for political gain.
        Now, I bring to the table decades of experience of working
    on drug pricing. That is why we have titled today's hearing in
    a way that clearly explains the heart of these issues, quote:
    ``Prescription Drug Affordability and Innovation.'' This
    hearing title references a concept that has been very important
    to me throughout my time in the Senate. After all, the goal is
    to help consumers, and the best way to do that is to balance
    both affordability and innovation.
        Over 3 decades ago, I championed the Drug Price Competition
    and Patent Term Restoration Act, which has since become known
    as Hatch-Waxman. As I noted in an editorial that ran in Roll
    Call yesterday, the Hatch-Waxman law established a system for
    regulating drugs that rewards new products while encouraging
    generic competitors.
        Around that same time, I sponsored the Orphan Drug Act. And
    I am proud to say that law has resulted in new treatment
    options that have enhanced care and dramatically improved the
    quality of life for hundreds of thousands, if not millions, of
    people who live with rare diseases. At the time, we thought we
    were just taking care of some rare diseases, but it has become
    a very important law.
        Those two bills are just the tip of the iceberg, though. I
    have since spearheaded numerous other legislative initiatives
    to address shortcomings in the system and to capitalize on
    opportunities for improvement. I brokered the agreement that
    allowed physician-
    administered biologics to flourish, providing effective
    treatment for many cancers and other serious medical
    conditions. More recently, I have successfully advocated
    policies that promote development of biosimilars as a way to
    foster competition and lower costs.
        Now, I do not bring up this history to boast, but to point
    out that the pursuit of the balance of affordability and
    innovation has served us well. Now, nearly 90 percent of
    prescription drugs dispensed to patients are generics, yet we
    also have realized life-
    altering breakthroughs in treatment. Maintaining this balance
    must be a part of the conversation here today. And, as we move
    forward, I want to keep it that way. And any lasting solution
    must continue to be market-driven.
        The Medicare Part D prescription drug program is built on a
    system of private entities competing on price and service. This
    private-sector approach is engrained in the design of the Part
    D program, which wisely forbids the government from interfering
    with the negotiations between these private entities. For Part
    B drugs and biologics, Medicare pays based on the average price
    that the manufacturer charges to other payers. This effectively
    represents a rate negotiated in the private sector.
        Now, do not take this to mean the way Medicare pays for
    prescription drugs is perfect. There is certainly room for
    improvement. But the fact that the United States continues to
    be a pharmaceutical research and development powerhouse is in
    large part because we have long preserved the market-based
    approach. It is vastly superior to the alternative of direct
    government involvement and price-setting. After all, the
    private sector has proven time and again that it is far better
    suited to identifying challenges and turning them into
    opportunities.
        One persistent challenge is that certain key drugs and
    items are in such short supply that hospitals and other
    providers simply cannot even purchase them in sufficient
    quantity. These drug shortages, which include generic
    medications, threaten patient care and demonstrate a weakness
    in our system.
        Now, I am pleased to say that my home State of Utah is
    taking a leadership role by creating a market-based response.
    Utah-based Intermountain Healthcare has joined with other like-
    minded systems across the country to form a generic drug
    company. This new venture will fill a market need by producing
    and distributing drugs that are in short supply. This new
    company will also provide more competition that will improve
    prices and opportunities for consumers.
        There are others too, like some commercial health plans,
    that have responded to market demand by offering prescription
    drug coverage options that pass along the negotiated discounts
    and rebates to their enrollees at the point of sale, rather
    than only through lower premiums.
        Turning back to the President's blueprint, it contains
    policy ideas related to Medicare and Medicaid that merit
    serious consideration. For example, the idea of paying for a
    drug based on its success in achieving the intended patient
    benefit holds promise, especially for novel, breakthrough
    therapies that do not yet have competition. We should explore
    how these value-based arrangements can work within our Federal
    health programs.
        We should also assess how we can modernize the popular Part
    D program, because it is now more than 10 years old. And a
    review of the Part D program should involve action to mitigate
    the change in the bipartisan budget deal enacted earlier this
    year that increased the discount that manufacturers are
    required to provide on drugs in the coverage gap. This
    misguided change has only dampened some of the competitive
    forces that have made the program so successful.
        We will soon hear from Secretary Azar on the policy ideas
    in the blueprint. It will be important to understand how the
    policies in the blueprint would impact not only the list price,
    but patient access, beneficiary premiums, and other cost-
    sharing, as well as innovation. As the vast majority of the
    blueprint's policies are in the jurisdiction of the Finance
    Committee, this engagement with the Secretary will inform how
    we move forward.
        Now, before I conclude my opening remarks, I must say that
    I suspect that some of my colleagues may want to talk about
    other pressing issues that touch on HHS's jurisdiction. To head
    off just one such issue, I have made my position on the
    situation at our southern border known: we must keep families
    together as we work to avoid illegal border crossings. We also
    need to ensure that children who have been separated from their
    parents are reunited, and I know the Secretary is working
    aggressively to do so.
        However, my experience tells me that our time at this
    hearing will be best spent discussing the issues we all have
    prepared for weeks to talk about with Secretary Azar. After
    all, the cost, innovation, and availability of prescription
    drugs is a deeply important and often life-or-death issue for
    millions of our constituents each day. My hope is that we can
    all take advantage of the opportunity before us today and stay
    focused on the agreed-upon subject matter of this hearing.
        With that, I am going to turn to our ranking member, my
    good friend and partner, Senator Wyden, for his opening
    statement.
        [The prepared statement of Chairman Hatch appears in the
    appendix.]

                 OPENING STATEMENT OF HON. RON WYDEN,
                       A U.S. SENATOR FROM OREGON

        Senator Wyden. Thank you very much, Mr. Chairman. And, Mr.
    Chairman, thank you for holding this hearing.
        I am going to get to rescuing Americans who are getting
    mugged by their prescription drug bills, as well as the
    administration gutting safeguards for those with preexisting
    conditions.
        First, the American people are owed an answer about what is
    going to be done to protect the thousands of children the Trump
    administration separated from their mothers and fathers and put
    in the custody of today's witness.
        As of this morning, Health and Human Services, Homeland
    Security, and the Justice Department seem to be doing more to
    add to the bedlam and deflect blame than they are doing to tell
    parents where their kids are. According to news reports, the
    government is ransoming these children by telling their parents
    they can have their kids back if they agree to leave the
    country.
        The President tweeted that the U.S. should forget about due
    process rights for immigrants, essentially an endorsement of
    judging people by the color of their skin.
        The White House Chief of Staff floated this family-
    shredding policy in the press more than a year ago. It was not
    conjured out of thin air this spring. But with news reports
    that the Department is scrambling to collect resumes of
    individuals with experience in child care, it is clear that the
    Department was woefully unprepared.
        This committee has oversight of the child welfare system.
    Members here have worked hard on bipartisan child welfare
    policies that keep families together whenever it is safe. That
    is because unnecessarily ripping children away from their
    families and putting them in institutions is harmful to them.
    It is harmful to their health. It is scarring to their
    emotional well-being. It is detrimental to their growth. That
    is a fact, and the Department of Health and Human Services
    knows it.
        Secretary Azar, you are certainly going to get questions
    about this today. An administration that has traumatized
    thousands of child refugees, dehumanized these kids and their
    parents, and tried to normalize this behavior through
    deception, has a lot to answer for.
        Now I am going to shift to discuss Americans getting hit
    with those enormous bills when they walk up to the pharmacy
    window.
        When the President said in early 2017 that drug companies
    were ``getting away with murder,'' he offered his diagnosis of
    the prescription drug cost problem. A year and a half later, it
    sure looks like he has decided not to treat the problem.
        The President made prescription drug costs a key part of
    his pitch to the American people on health care. But the party
    in power has not done any legislating on it. They have put out
    a so-called blueprint, essentially a collection of the same
    questions that have been asked on these issues for a decade or
    more.
        To me, this so-called administration blueprint looks less
    like a blueprint than it does like blue smoke and mirrors. And
    a lot of what the President and his team have said is just
    head-scratching.
        For example, the administration says that European
    countries are ``freeloaders.'' He said that if drugs got more
    expensive overseas, in effect fattening the wallets of the
    pharmaceutical companies, prices fall at home. That is just
    fantasy land.
        I do not know what magic wand the administration plans on
    using to hike drug prices in other countries, and I do not know
    if that power today exists.
        Second, even if drug companies did come into a windfall
    from overseas, it is laughable to expect that they would take
    that as a reason to slash prices in America. Look at the Trump
    tax law. Huge amounts of cash were showered on these
    multinational drug companies. What did they do with it? They
    put it into stock buybacks that benefit shareholders, not
    consumers.
        One other trip to pharmaceutical fantasy land: on May 30th,
    the President said that in 2 weeks, drug companies would be
    announcing, and I quote here, ``voluntary massive drops in
    prices.'' Two weeks went by, 3 weeks went by. It has been
    nearly a month. No massive drops in prescription drug bills,
    folks. As long as Americans are getting mugged at pharmacy
    counters from sea to shining sea, this issue demands serious,
    bipartisan action.
        To begin that effort in a serious bipartisan way this
    morning, I am releasing a comprehensive report that looks at
    exactly what makes this industry complicated and why those
    policies do so much to make sure that prices just go up and up
    and up.
        And it is not just a look at the drug manufacturers. There
    are a lot of pieces to the puzzle: middlemen, distributors,
    misplaced incentives, and broken, out-of-date policies on the
    law books. So the report is a comprehensive look under the hood
    of the entire pharmaceutical industry for the first time.
        Otherwise, what Americans get from the Trump
    administration, and the President in particular, when you look
    at the record, is talk. The fact is, their blueprint has raised
    issues that have been raised for quite some time.
        The administration needs to stop pretending that asking the
    same questions that have already been asked is the equivalent
    to getting results. The fact is there is a big gap between the
    triumphant headlines the Trump administration tries to grab on
    prescription drugs and the lack of serious proposals put
    forward.
        So today, I hope we will see that gap getting closed.
        One last issue. The Trump administration said recently it
    was going to get out of the business of defending protections
    for Americans who have preexisting health conditions. These
    protections, as millions of Americans know--because they let
    them sleep more soundly at night--are the law of the land.
        And it is not a narrow policy that applies to only a
    handful of people. There are more than 150 million Americans
    who get insurance through their employers, and I would bet they
    are going to be very surprised to learn this Trump decision can
    hurt them too.
        If you do not have a preexisting condition, I guarantee you
    know somebody who does. And the Trump administration decided it
    just is not interested in protecting them.
        So we have a lot to do this morning, Mr. Chairman. And as
    always, as we have done so often in the past, I look forward to
    working with you in a bipartisan way.
        The Chairman. Well, thank you. Thank you very much.
        [The prepared statement of Senator Wyden appears in the
    appendix.]
        The Chairman. Once again, I would like to thank Secretary
    Azar for coming here today. We appreciate you, sir.
        Secretary Azar was sworn in as Secretary of Health and
    Human Services on January 29, 2018. And because there is a lot
    of ground to cover--we all have come to know Secretary Azar
    quite well--I would like to move right along. As such,
    Secretary Azar, please proceed with your opening statement.

      STATEMENT OF HON. ALEX M. AZAR II, SECRETARY, DEPARTMENT OF
               HEALTH AND HUMAN SERVICES, WASHINGTON, DC

        Secretary Azar. Thank you, Mr. Chairman, Ranking Member
    Wyden, and members of the committee. I appreciate the
    opportunity to appear before you today to discuss an important
    issue: why American prescription drug prices are too high and
    what we are doing about it.
        Drug pricing was one of the very first topics that I
    mentioned before this committee during my confirmation process
    earlier this year. I know members of this committee are serious
    about taking on this challenge, and I appreciate your efforts
    in this area.
        From day one of his administration, President Trump has
    directed HHS to make drug pricing a top priority. Earlier this
    year, the President's 2019 budget laid out a range of proposals
    on the issue, including reforms to Medicare and Medicaid,
    topics that I testified about when presenting the President's
    budget earlier this year before this committee.
        In May, building on the budget, the President released a
    blueprint to put American patients first. This blueprint is a
    plan for bringing down drug prices while keeping our country
    the world's leader in biopharmaceutical innovation and access.
    It lays out dozens of possible ways that HHS and Congress,
    working together, can address this vital issue.
        We face four significant problems in the pharmaceutical
    market: high list prices set by manufacturers, seniors and
    government programs overpaying for drugs due to the lack of the
    latest negotiation tools, rising out-of-pocket costs, and
    foreign governments free-riding off of American investment.
        The President's blueprint lays out four strategies for
    tackling these problems, and we have begun acting on each of
    them already.
        First, we need to create the right incentives for list
    prices. Everybody in today's system makes money as a percentage
    of list prices, including pharmacy benefit managers, who are
    supposed to keep prices down. Everybody wins when list prices
    rise except for the patient, whose out-of-pocket cost is
    typically calculated based on that price.
        One of HHS's initial actions is working to require drug
    companies to include their list price in advertisements. For
    example, Americans deserve to know the price of a wonderful new
    drug that they hear about on TV, before going to ask their
    doctor about a product they may find unaffordable.
        More fundamentally, we may need to move to a system without
    rebates, where PBMs and drug companies negotiate fixed-price
    contracts. Such a system's incentives, detached from artificial
    list prices, would likely serve patients far better.
        Second, we need better negotiation for drugs within
    Medicare. That is what President Trump has promised, and it is
    what we are going to deliver.
        In Medicare Part D, HHS will work to give private plans the
    market-based tools that they need to negotiate better deals
    with drug companies. Part D is a tremendously successful
    program, but it has not kept pace with innovations in the
    private marketplace. For instance, well-intended patient
    protections may be preventing plans from appropriately managing
    utilization. While everybody agrees on the importance of the
    drugs that are in the protected classes, manufacturers often
    use that list as a protection from paying rebates.
        We also want to bring negotiation to Medicare Part B
    physician-administered drugs. Right now, HHS just gets the bill
    and we pay it. The system may actually be driving doctors to
    prescribe more expensive drugs, while potentially tempting
    manufacturers to develop drugs that fit into Part B rather than
    D.
        We are going to look at ways to merge Part B drugs into
    Part D and leverage existing private-sector options within Part
    B.
        Third, we need a more competitive pharmaceutical
    marketplace. Thanks to the reforms that Congress passed in the
    1980s, America has the strongest generic drug market in the
    world. But there are many ways that manufacturers still
    unfairly block competition.
        Since the rollout of the President's blueprint, FDA has
    publicized the names of companies that may be abusing safety
    programs to block competition and has issued new guidance to
    help lessen the effects these actions may have on generic
    access.
        Finally, we need to bring down out-of-pocket costs for
    American patients. Since the blueprint rollout, CMS has
    reminded Medicare Part D plans that it is unacceptable to have
    gag clauses barring pharmacists from working with patients to
    identify lower-cost options.
        More broadly, we are going to work to ensure patients know
    how much a drug costs, how much it is going to cost them, and
    whether there are cheaper options, long before they get to the
    pharmacy counter.
        These are just some of the elements of an aggressive, long-
    term plan to solve this problem we all care deeply about.
        Thank you again for having me here today. And I look
    forward to taking your questions and discussing how together we
    can help American patients.
        The Chairman. Well, thank you, Mr. Secretary.
        [The prepared statement of Secretary Azar appears in the
    appendix.]
        The Chairman. One of the ideas, both mentioned in the
    blueprint and that you have discussed publicly since its
    release, is doing away with rebates in Medicare Part D through
    changes to anti-kickback statute safe harbors. You have stated
    that rebates could be replaced with something called a, quote,
    ``fixed price discount,'' unquote. Now, the terms ``fix'' and
    ``price'' in the same phrase do make me a little bit nervous.
        I am sure it does not mean setting a price, but can you
    explain what that term means, how it would be different from a
    rebate, and how it would limit list price increases from year
    to year or over a longer period of time?
        Secretary Azar. Absolutely, Mr. Chairman. Right now, the
    problem is that the pharmacy benefit managers make their money
    often on getting a high list price, negotiating a big rebate
    off of that, and then keeping a percent of that rebate that
    they do not necessarily pass to the patient or to the insurance
    companies that they work for. And that is just the business
    model. It is not saying that they are doing anything wrong; it
    is just the business model.
        What we are thinking about proposing--and have been asking
    for comment on with the request for information that we have--
    is moving to a system where, instead of encouraging a very high
    list price with a rebate that gets administered after the fact,
    what if our contracts that the PBMs have instead just say, here
    is the price, here is what we will pay. You have market power
    as a pharmacy benefit manager, you control the formulary and
    you are going to get this level of discount, here is the price.
    And that actually gets administered at the point of sale.
        So you take list price out of the equation. The pharmacy
    benefit manager has no incentive for a higher list price; it is
    just administered right there. It is an actual discount, the
    money flows with it, and we just take list price off the table.
        The Chairman. States continue to evaluate the concept of a
    closed formulary in Medicaid. With the recent examples of
    Massachusetts and Arizona and other States, with a bipartisan
    mix of Governors considering the idea, there is growing
    interest in exploring the outcomes of imposing a closed
    formulary in Medicaid through a demonstration project.
        How would the Medicaid Drug Rebate Program interact with
    such a proposal? And do you envision carve-in protections for
    certain drugs or classes of drugs, or required coverage of
    medically necessary treatments for which there is no
    alternative?
        Secretary Azar. So, as you mentioned, Mr. Chairman, the
    President's 2019 budget does propose having five States have
    the opportunity to see if they can do better than the Medicaid
    statutory rebate program in negotiating.
        So right now, the system we have is that all drugs are
    available in Medicaid, but in return for that, there is a
    statutory rebate that the drug manufacturers have to pay. Some
    have suggested that the States, if they could run their
    formulary the way Medicare Part D runs its formulary, or the
    way any of us with our commercial insurance have a formulary
    managed, could get a better deal. We would like to give them
    that chance to try to see if they can in fact do so.
        Now, there would still be patient protections, there would
    still be medical appeals, clinical necessity. Everything you
    mentioned, Mr. Chairman, would be there, just as it is for your
    insurance, my insurance, anybody else's insurance, to protect
    you from unreasonable or non-clinically based formulary
    utilization management. Absolutely, Mr. Chairman.
        The Chairman. Well, thank you. I am pleased that this
    administration reversed an Obama-era payment policy that sent
    the wrong signal to the nascent biosimilars market. Underpaying
    biosimilars, which studies estimate will cost 20 to 40 percent
    less than the biologics with which they compete, is not a
    recipe for a development of new biosimilars.
        What else can be done to increase the use of biosimilars as
    a way to increase competition and lower spending?
        Secretary Azar. So, Mr. Chairman, we want to do for the
    biosimilars market exactly what you did for the generics
    market, which is create a very robust, highly competitive
    sector here that competes against branded products. And that is
    why that payment change was made: to ensure that there is
    adequate incentive for biosimilars to come in.
        Since we made that change, we actually saw a biosimilar
    enter the market at significantly below what analysts thought
    the pricing would be--we think, in part, because of our rule
    change.
        We believe at the FDA that we can get rid of these abuses
    by drug companies that are preventing access to their products
    for the biosimilar companies to be able to do the clinical
    trials needed to bring products to market. We also are going to
    keep building the scientific and evidence space for genuinely
    interchangeable biosimilars that would really allow the
    development of that generic market, as you did under Hatch-
    Waxman.
        The Chairman. Well, thank you so much.
        Senator Wyden?
        Senator Wyden. Mr. Secretary, your agency plays a crucial
    role in child safety, so I have a few questions that I think
    are pretty brief, and I want to see if you can give me some
    specific answers.
        How many kids who were in your custody because of the zero
    tolerance policy have been reunified with a parent or a
    relative?
        Secretary Azar. So I believe we have had a high of over
    2,300 children who were separated from their parents as a
    result of the enforcement policy. We now have 2,047----
        Senator Wyden. How many have been reunified?
        Secretary Azar. So they would be unified with either
    parents or other relatives under our policy. So, of course, if
    the parent remains in detention, unfortunately, under rules
    that are set by Congress and the courts, they cannot be
    reunified while they are in detention.
        Senator Wyden. So is the answer zero? I mean, you have----
        Secretary Azar. No, no. No. We have had hundreds of
    children who had been separated who are now with--for instance,
    if there was another parent who is here in the country----
        Senator Wyden. I want to know about the children in your
    department's custody. How many of them have been reunified?
        Secretary Azar. Well, that is exactly what I am saying.
    They have been placed with a parent or other relative who is
    here in the United States.
        Senator Wyden. How many? How many?
        Secretary Azar. Several hundred. Now, of the----
        Senator Wyden. Of the----
        Secretary Azar. Of the 2,300-plus that came into our care--
    --
        Senator Wyden. Okay.
        Secretary Azar [continuing]. We probably have 2,047.
        Senator Wyden. How many parents have been told where their
    kids are?
        Secretary Azar. Every parent has access to know where their
    child is. We want to ensure that the process is more efficient.
        Senator Wyden. That is the 800 number.
        Secretary Azar. Well, that is not--that is, actually the
    800 number would be the backup on that. But that should be the
    failsafe. Every parent should know where their--we have
    actually deployed a Public Health Service officer for every
    one.
        Senator Wyden. But how many parents----
        The Chairman. Let him answer the question.
        Senator Wyden. Mr. Chairman, the time is short and----
        The Chairman. Well, I will give you more time.
        Senator Wyden. The American people have been getting lots
    of deception, lots of rosy answers, not many facts.
        So how many parents--not have access--how many parents have
    been told where their kids are?
        Secretary Azar. Well, they all--that information is
    available for every parent. And we have actually deployed
    Public Health Service officers to work with the ICE case
    managers to meet with all of those parents. We are progressing
    through them, to help them fill out the reunification paperwork
    that they need for their background check and to confirm
    parentage, as well as to ensure that they make contact, they
    know where their child is, they make contact, get them on the
    phone, get them on Skype if that is available.
        We want to have every child and every parent connected and
    in regular communication. And we are making that happen.
        Senator Wyden. I asked twice, how many parents were
    actually told where their kids are? You said they have access.
        And this is just, in my view, part of the rosy responses
    the American people have been getting. And it sure does not
    line up with the firsthand accounts of parents that I hear from
    who desperately want to know where their kids are.
        We will hold the----
        Secretary Azar. There is no reason why any parent would not
    know where their child is located. I could--I have sat on the
    ORR portal--with just basic keystrokes, within seconds, find
    any child in our care for any parent. It is available right
    now.
        Senator Wyden. And, Mr. Secretary, suffice it to say
    portals are not part of the daily existence of these people.
        Secretary Azar. That is why we have case managers and the
    800 number for their lawyers or them to use.
        Senator Wyden. I would like to hold the record open so you
    can tell me specifically as of today how many parents were told
    where their kids are.
        Now, on drug prices, not less than 14 days after the
    President's speech on prescription drugs, Bayer announced the
    price of two of its cancer drugs was going up a thousand
    dollars per month. That was the second price hike in 6 months.
    So it sure does not look like the drug makers are taking your
    blueprint particularly seriously.
        We have 42 million Americans who get their drugs through
    Part D of Medicare. They are getting price hikes every day.
        After a year and a half in office, I do not see any
    evidence of this administration taking real action until
    possibly January 1, 2020, a thousand days after the President
    said drug companies were getting away with murder.
        So are there any policies in your so-called blueprint that
    have actually taken effect and will hold drug prices down?
        Secretary Azar. So patients have already saved $8.8 billion
    from added generics. They have saved $320 million a year from
    the change to Part B Medicare reimbursement.
        We have already listed the 150 branded companies that are
    hiding behind the REMS program to prevent access to their
    product for generic or biosimilar testing. We have put a
    dashboard out that shows the price increases. We have already
    told the Part D plans that we find the gag clauses
    unacceptable.
        And I am disappointed by those price increases. And I want
    to put the drug companies on notice. You know, we are hitting
    July 1st. That is a traditional time for drug price increases.
    And I hope they will exercise restraint as we come across this
    period.
        We have seen fewer increases than we historically do, lower
    increases than we historically do as a result of the
    President's----
        Senator Wyden. My time is up. You did not answer the
    question. I asked about Part D changes. And we have not seen,
    for those 42 million Americans who get their drugs through Part
    D, we have not seen any change.
        I will hold the record open for this, as well as the other
    matters that you did not respond to. And tell us specifically
    what Medicare Part D changes are being made--and when they are
    going to be made--that are going to help those 42 million
    people.
        The Chairman. Senator Stabenow?
        Senator Stabenow. Thank you, Mr. Chairman.
        Let me first speak to the issue of the children who have
    been separated at the border--and I talked to you privately
    about this. This is obviously appalling what has happened. It
    is an American tragedy. It is a tragedy for these parents and
    these children.
        And I want to start by calling on you to make sure the over
    2,000 children in your custody at HHS are able to get back to
    their parents as quickly as possible and that you make this a
    priority.
        As I indicated to you, we have over 60 children in Michigan
    right now. They are in loving, safe foster homes, but that is
    not the point. As of my last contact with the agencies, they
    did not know, they were not given any information up to this
    point about where the parents are. And there was not
    communication going on in terms of what is happening for these
    children.
        So every single day in a child's life--you know, the kids
    keep growing up no matter what we do or how long we take, how
    bureaucratic we are. Whatever is happening with this
    administration, however long you take, every day these children
    are growing and changing and experiencing trauma and pain.
        And so I just want to go on record as saying that this
    needs to get fixed and needs to be the top priority for what
    you are focused on in terms of children and families right now.
        This is on your watch, and we will hold you accountable.
        So let me go on to the question, the topic of the day, and
    speak specifically about what is happening with the outrageous
    prices of naloxone.
        We have an opioid crisis. We have talked about this before.
    And let me just speak again about the history of pricing on
    naloxone, which is an overdose-reversal drug that has saved
    countless lives, as you know.
        The drug was first approved by the FDA in 1971--long off
    patent. Generic versions have been available since 1985.
        As of 2005, a generic vial of naloxone was available for
    about a dollar--about a dollar in 2005. But by 2013, now that
    we have a crisis, the generic companies are selling the drug
    for 15 times as much. And Evzio, a naloxone autoinjector, now
    sells for more than $4,000--$4,000--for a two-pack. It was a
    dollar in 2005, now a two-pack for the autoinjector is over
    $4,000. And as you know, Narcan, the nasal spray version, is
    sold for about $150 for a two-pack.
        So at your confirmation hearing, I raised this issue, and I
    raised the fact that the President's commission on the crisis,
    the opioid crisis, recommended negotiating the best price. And
    at the time, you said, quote, ``I want to look at that, learn
    more about the situation, but if the government is the
    purchaser--so let us say, for instance, if we are going to be
    buying that as part of the opioid crisis program and are
    directly buying that and supplying it to States and first
    responders, which is what we are doing, there is absolutely
    nothing wrong with the government negotiating that.''
        I followed up with a letter with colleagues. You sent a
    response that did not even include the word ``negotiation.''
        So is naloxone price negotiation in the drug pricing
    blueprint?
        Secretary Azar. So the blueprint does not address any
    specific drug price. Narcan is the nasal formulation of
    naloxone, which tends to be a preferred formulation for opioid
    overdose first responders. That is actually available--I looked
    into this--under the Federal Supply Schedule for acquisition at
    $78 a package. And our other first responders, State and
    locals, have, through group purchasing, access to that same
    kind of pricing there.
        We are also working at FDA to bring over-the-counter
    naloxone to the market and also to increase even more generic
    competition. There, of course, are different formulations,
    different administration devices----
        Senator Stabenow. I understand. And in the interest of
    time, Mr. Secretary, so the answer is ``no,'' negotiation is
    not part of what you will be doing.
        Secretary Azar. Well, the supply schedule is at $78.
        Senator Stabenow. Seventy-eight dollars. It was a dollar,
    now $78. Such a deal.
        Secretary Azar. Well, it was not nasal. I do not know if it
    was nasal at a dollar, to correct you.
        Senator Stabenow. Okay. All right. So it was something
    slightly different with a naloxone----
        Secretary Azar. Nasal is a preferred first responder
    vehicle.
        Senator Stabenow. It was administered in a different way.
    Naloxone itself was a dollar, now with this particular way of
    administering, it is $78.
        And I just want to share with you that Southwest Michigan
    Behavioral Health is planning to spend $366,100 next year on
    this particular discounted price that you are talking about--
    $366,100 that they could be spending on treatment for people in
    Michigan who have an opioid addiction. And instead, they are
    paying, even at this discounted rate, 78 times more than what
    was available in 2005.
        I just have to say, Mr. Chairman, if we want to talk about
    rigged systems, there is not a more rigged system than the way
    prescription drugs are priced.
        The Chairman. Thank you, Senator.
        Senator Cornyn?
        Senator Cornyn. Thank you, Mr. Chairman.
        Mr. Azar, I appreciate your service. I cannot think of
    anybody better qualified to serve in the position you are
    serving in, so I appreciate the expertise and experience you
    bring to this role.
        I wanted to just raise the issue because, in addition to
    the blueprint that you rolled out to try to control
    prescription drug costs, there are other cost drivers that we
    see in the health-care system that the administration has tried
    to address.
        One is, the Department of Labor has now issued regulations
    to make it possible for more people to get access to
    association health-care plans so they can take advantage, not
    of the individual market, but of the employer-provided
    insurance market and find their premiums substantially lower.
        I would note that people in the individual market, the 9
    million people in the individual market, do not have any
    subsidies, and they have seen their costs rise by 105 percent
    since 2013, which is unaffordable by any measure.
        The second thing I just wanted to raise with you--and I am
    sure you are aware of--is the good work being done by Senator
    Collins and Senator Alexander, Representative Walden, and
    Representative Costello, to try to make sure people 250 percent
    and below get access to lower premiums for their health-care
    coverage. Again, the problem is the unaffordable Obamacare
    model, which has all the mandates and provides spotty
    subsidies, particularly to people below 250 percent of poverty.
    That would result--if embraced by Congress, the Alexander-
    Collins-Walden-Costello bill would lower premiums for people in
    the individual market by 40 percent and make it much more
    affordable.
        The tragedy is, unfortunately, the resistance, the never-
    Trump approach to the work here in the Congress and in
    Washington, has resulted in what used to be a bipartisan bill
    basically being abandoned by our Democratic colleagues who
    refuse to even work with Senator Alexander and Senator Collins
    to come up with a solution for these skyrocketing premiums
    under Obamacare.
        So in addition to the good work that you are doing on
    prescription drugs, which I applaud and encourage you to
    continue, these are two other areas that I just wanted to
    highlight: one, an initiative by the administration through the
    Department of Labor, and the other legislative, but which has
    been rejected pending the outcome of the midterm elections by
    our Democratic colleagues.
        But since I was in Brownsville on Friday--and our
    colleagues across the aisle want to talk about this issue and
    not prescription drug costs so much--I had the chance to visit
    two facilities in Brownsville and was enormously impressed with
    the quality of care being provided to these young people who
    have been brought across the border without their parents and
    some with their parents.
        Isn't it true that 83 percent of the individual children in
    care were brought or were sent without a parent? Does that
    figure sound about right to you?
        Secretary Azar. It is true, Senator. Yes. Most of the kids
    in our care came here unaccompanied, sent by their parents, or
    came here on their own and then they found themselves in our
    custody. Yes.
        Senator Cornyn. And I have not heard a word from any of our
    Democratic colleagues about the 83 percent of the children who
    were sent here by their parents, voluntarily separated by their
    parents, because of the conditions in the country in which they
    live and the hope for a better life here in the United States,
    which certainly we all understand.
        But it seems to me that what is being advocated here is not
    zero tolerance when it comes to violating immigration laws, but
    zero enforcement. Indeed, our friend the Senator from
    California, Senator Feinstein, whom I have worked with on a
    number of occasions, has persuaded all the Democrats in the
    Congress, in the Senate I should say, to sign on to a bill that
    basically provides a no-enforcement zone for a violation of
    immigration laws within 100 miles of the border. And indeed,
    you have probably seen where some Democrats in the House have
    introduced bills that would literally abolish Immigration and
    Customs Enforcement. If you go on Twitter or any of the social
    media sites, you will find a hashtag #abolishICE, which
    essentially wants to do away with any enforcement of our
    immigration laws.
        We can all agree that these children ought to be treated
    humanely and compassionately and joined together with their
    parents where possible. And indeed, there is legislation that
    would do that. I hope we can pass that this week.
        The Chairman. Senator your time is up.
        We will go to Senator Nelson.
        Senator Nelson. Thank you, Mr. Chairman.
        Mr. Secretary, I would like to seek some answers,
    respectfully--to have a civil discourse. You are a friend of a
    close friend of mine. And I respect that.
        On Saturday, I was not allowed in the detention facility in
    Homestead, FL to speak with the 70 children whom I was told
    were there who had been separated from their parents.
        Do you know what has changed since Saturday with those 70?
        Secretary Azar. So, Senator, we are very happy to arrange
    visits for Senators and members of Congress to these
    facilities. We do need to do so in a way that is orderly,
    because they are trying. First and foremost priority is the
    safety and well-being of these children whom we and our
    grantees care deeply about.
        And you should have been and would have been able to
    interact with them, but not, of course, interview them. These
    are minor children. They are not there to be deposed or
    interviewed. So I do want to be careful about that. That is
    just simply not acceptable.
        We have to protect these children. They are in care. They
    are in shelter. This is a difficult situation for all of them.
    And we all--I am sure you share that desire that we are doing
    our best and our utmost to be respectful of those children.
        Senator Nelson. Mr. Secretary, I did not ask that. I asked
    what has happened since Saturday to those 70 children.
        Secretary Azar. Well, I do not know which 70 children you
    met with. I can tell you----
        Senator Nelson. No, no. No, no. I did not meet with any of
    them. I was not allowed to, as you just stated.
        Secretary Azar. You are allowed to be in their presence,
    but you cannot depose them. And that is quite clear.
        Senator Nelson. I understand. So my question--please, I am
    trying to be respectful----
        Secretary Azar. Yes.
        Senator Nelson. My question is, the 70 children who I was
    told were in that facility, who had been separated from their
    parents, what has happened to them?
        Secretary Azar. So they would either continue to be in our
    care or, if they have reached a point where a sponsor who is in
    the United States who is a parent or a relative has been vetted
    and has been approved for sponsorship, they would have been
    released as expeditiously as possible to those sponsors.
        Senator Nelson. How many of those children have been able
    to be in contact by telephone with their parents from whom they
    were separated?
        Secretary Azar. So for any of them who have been separated
    from their parent at the time of the parent's detention by the
    Customs and Border Patrol, within 24 hours of arriving at an
    ORR shelter, we endeavor to put them in touch, get on the phone
    with their parent. Sometimes that cannot happen if, for
    instance, if the parent has been located for criminal
    prosecution and placed by the Bureau of Prisons, say, with a
    county jail. It may be harder to arrange that communication.
        We are actually sending, deploying Public Health Service
    officers out there to facilitate that. We want every child and
    every parent to be in communication at least twice a week so
    that they are talking by Skype or by phone if available. We
    want this to happen.
        And so I cannot say as to those 70, but all should have
    been, within 24 hours of arriving, made in touch, if at all
    possible, with the parent, if the parent was accessible where
    the parent was being kept.
        Senator Nelson. Okay. Now, I asked that question of the
    lady who is overseeing the facility of getting the children in
    touch and she said that a handful of the children had not been
    able to be on the telephone. So I said, well, what is your plan
    for reuniting these children? And she said there is a lady
    named Barbara Flotus who, since I was there on Saturday--she
    does not work except on the weekdays--and I said, well, I will
    try to reach Barbara Flotus to tell me what is the plan.
        I was prevented from speaking with Barbara Flotus
    yesterday, Monday. Can you help arrange that so that I can know
    what the plan is to reunite the children?
        Secretary Azar. So we will be happy to work with you to
    arrange through the grantee--of course, she is not an employee
    of my department; she works for a grantee.
        Senator Nelson. Through the grantee.
        Secretary Azar. So, of course, it would be their decision
    if they want to make her available to you. But we will continue
    to work with your staff to facilitate, if you wish to speak
    with her.
        Senator Nelson. You will not hinder me talking----
        Secretary Azar. No, of course not. Of course not.
        Senator Nelson. Well, yesterday that occurred. So what is
    the plan to reunite 2,300 children?
        Secretary Azar. Absolutely. So the first thing we need to
    do is, for any of the parents, we have to confirm parentage. So
    that is part of the process with any child in our care, we have
    to ensure--there are traffickers, there are smugglers, there
    are frankly just some bad people occasionally. We have to
    ensure that the parentage is confirmed.
        We have to vet those parents to ensure there is no
    criminality or violent history on them. That is part of the
    regular process for any placement with an individual. At that
    point, they will be ready to be reconnected to their parents.
    This is where our very broken immigration laws come into play.
    We are not allowed to have a child be with the parent who is in
    custody of the Department of Homeland Security for more than 20
    days. And so until we can get Congress to change that law--the
    forcible separation there of the parent or the family units--we
    will hold them or place them with another family relative in
    the United States.
        But we are working to get all these kids ready to be placed
    back with their parents, get that all cleared up as soon as
    Congress passes a change or if those parents complete their
    immigration proceedings; we can then reunify.
        So we want to be ready. The President shares this. We do
    not want any children separated from their parents any longer
    than absolutely necessary under the law. And we want to
    effectuate that and make that happen, Senator.
        The Chairman. Senator, your time is up.
        Senator Thune?
        Senator Thune. Thank you, Mr. Chairman.
        Mr. Secretary, back to the subject at hand. You have talked
    at length about the goal of lowering list prices, drug prices,
    as part of the administration's plan. If manufacturers were to
    announce a reduction in list prices, has the administration
    considered what that would mean throughout the supply chain in
    the Part D program? And particularly, if an announcement came
    midyear, how would such a change impact plans and PBMs?
        And then I would like to ask, if you can hold that thought,
    what then would the beneficiary experience be in the way of
    changes in premiums and copays at the pharmacy counter?
        Secretary Azar. So I will answer the second first, which
    is, if list prices go down, the patient benefits. They pay less
    at the pharmacy. That is why list prices matter. Most patients,
    whether in Part B, Part D, or just in commercial plans, pay
    less at the pharmacy when the list price is lower.
        Now your first question. We have heard from many major drug
    companies with major products that want to make substantial and
    material price decreases. This has shown just how broken our
    system of drug pricing and drug distribution is in the United
    States, because the pharmacy benefit managers and the
    wholesalers are all dependent on getting a percent of list
    price.
        And the reaction to some has been, if you were to decrease
    your price, you will actually be harmed in terms of formulary
    status and patient access versus your competitor who has a
    higher price.
        I would encourage the Senate and Congress to inquire of
    pharmacy benefit managers as to whether they have received
    suggestions or approaches from drug companies for lower list
    prices and what has the reaction been.
        I believe still that this will be solved. These are adults.
    This is so absurd, it has to be, it will be fixed. But this is
    what is keeping the individual companies, so far, from moving.
        I do not want to excuse them. The prices are their prices.
    Okay? They set their prices; they are accountable for that. But
    the channel is definitely not making it easier.
        Senator Thune. Okay. Well--and I just think that the
    concern in all of this is, does it get passed on in the form of
    savings to the ultimate consumer, to the beneficiary?
        And then a follow-up question would be, how could that
    reduction in list prices be sustained over time?
        Secretary Azar. So we are, of course, not counting on just
    voluntary reductions in price. It would be nice if that
    happens, based on them seeing this is the northbound train,
    this is where it is going: we are going to lower list prices,
    better negotiations, lower net prices in this country. Get on
    the train, get a competitive advantage by moving their first.
    That is the idea.
        But our plan will be reversing the incentives to ever-
    increasing list prices. I mentioned to Chairman Hatch that
    means getting after this whole rebate system based on list
    prices. It means asking Congress to overturn the Obamacare gift
    to the pharma companies of capping rebates in the Medicaid
    program at 100 percent.
        As they increased their list price, it used to be your
    rebate would keep going up. Obamacare capped that at 100
    percent. That would bring in billions of dollars and create a
    major financial disincentive to higher list prices and would
    sustain any lower prices that we would see.
        Senator Thune. Okay. Let me ask you something, just
    switching gears for just a minute. And you know, because I have
    shared with you, how important the 340B program is in my State
    to our hospitals. And I think that is probably a view shared by
    a number of folks on this panel and all across the Congress.
        But could you talk a little bit about what you foresee
    happening in terms of proposed changes to the drug rebate
    program and how it might impact the 340B program and, perhaps
    even more broadly, what you see happening in terms of the 340B
    program, realizing there is litigation and regulatory action
    underway at the moment?
        Secretary Azar. So, as we have seen the 340B program
    expand, it has, in some respects, perhaps gotten untethered
    from its purpose of helping those hospitals and those uninsured
    individuals who have trouble affording access to their
    medicines. And I think we want to keep working with Congress to
    ensure the 340B program is delivering on that promise and is
    not being used for abuse and expanding beyond anything
    resembling its actual intent.
        Because as it expands, as now more and more drugs go
    through that and as the flow of money comes out of that, it can
    lead to a cross-subsidization problem. That is what we mention
    in our blueprint, where, if it is abused, more money might get
    paid elsewhere in the system for people in Medicare, Medicaid,
    commercial plans. It might actually be an incentive towards
    higher list prices.
        So we want to work with you to ensure 340B is there, it is
    healthy, it has integrity, and it is tied to its purpose of
    helping these hospitals and these patients.
        Senator Thune. And we want to make sure there is integrity
    in the program too. But most of the players in the field that I
    work with and I am familiar with in my State are folks who
    operate those programs with great integrity. And it is
    important to their bottom lines, which is why I think you hear
    us raise this issue so often to you and other members of your
    team.
        So we will continue to do that, and I hope that you will
    continue to work with us and be responsive and try to work with
    the affected hospitals to come up with a good path forward.
        Thank you, Mr. Secretary.
        The Chairman. Your time is up.
        Senator Menendez?
        Senator Menendez. Thank you, Mr. Chairman.
        Mr. Secretary, thank you for coming today.
        Before I start my questions, I want to urge your staff at
    CMS to carefully consider the requests of the entire bipartisan
    New Jersey delegation to extend the imputed rural floor. This
    is critical to New Jersey hospitals. Both Democratic and
    Republican administrations have extended it. And I hope that
    you will have your staff pay some critical attention to it.
        CMS predicts prescription drug price growth in 2018 will be
    double what it was in 2017, contrary to the President's
    pronouncement that there would be a, quote, ``voluntary,
    massive'' drop in prices in early June.
        And one of the reasons that we are not seeing reduced
    prescription drug prices is because some bad actors continue to
    game the system to prevent cheaper drugs from coming to market.
    In fact, the FDA recently named and shamed some of the worst
    actors who were deliberately blocking the development of
    cheaper generic drugs.
        Congress is working to pass the CREATES Act, which is a
    bipartisan bill that would go after the abuse of some companies
    that are preventing cheaper drugs from coming to market.
        Does the administration support the CREATES Act?
        Secretary Azar. So, Senator, we do not have the formal
    administration's support on it, but, obviously, what is in the
    CREATES Act resonates completely with what we have been saying
    and what FDA has been doing to prevent the very abuses that you
    have correctly laid out there.
        Senator Menendez. Well, I hope that the administration can
    come to a formal position.
        Secretary Azar. Thank you.
        Senator Menendez. This is bipartisan legislation.
        Secretary Azar. Thank you.
        Senator Menendez. It does exactly what the President's
    blueprint said he sought to do by ending bad actors in the
    pharma world.
        And so let me ask you, after the FDA named and shamed on
    May 17th, have there been any behavioral changes by these
    companies?
        Secretary Azar. I do not know if there has been any change.
    Let me check with Commissioner Gottlieb on that and get back to
    you, if that is okay.
        We have put out two guidances as a follow-up to that also,
    making clear that they should not be able to hide behind our
    regulatory processes to protect safety. That was part of the
    follow-on to that.
        But if I can get back to you to see if we have seen any
    greater access----
        Senator Menendez. Okay; I would appreciate that.
        Would you commit to working with me and my colleagues in a
    bipartisan way to ensure customers see generics come quickly
    and as safely to the market as possible?
        Secretary Azar. Absolutely. In fact, I would love to hear
    from you as you learn of abuses in the system or entities that
    are manipulating patent processes. Please consider me an open
    door for any input or pointing us to those. Absolutely.
        Senator Menendez. I appreciate that.
        Are you familiar with the Reducing Drug Waste Act of 2017,
    also bipartisan legislation?
        Secretary Azar. I am not, Senator. I would be happy----
        Senator Menendez. Okay. I would like to call it to your
    attention. This is including members of this committee who have
    joined together because the HHS Office of Inspector General
    found millions of dollars in waste due to drug packaging. And
    so----
        Secretary Azar. Yes, yes. I am sorry. You did mention this
    to me in the confirmation. I am sorry, but I have not yet
    learned enough of the detail on that. I am sorry. Yes.
        Senator Menendez. Okay. Well, this is bipartisan
    legislation. The Senator from Iowa and Senator Klobuchar and
    many others, on a bipartisan basis, are looking at this as a
    way to stop the, basically, waste of drugs as a result of drug
    packaging.
        So I ask you to look at that as well.
        Let me just turn to the question of the children who are
    being stripped away from their parents at the border.
        I have to differ with you. The reason we have a crisis is
    that the administration has decided that even those who come to
    a border crossing, present themselves, and ask for asylum, are
    turned away at a legitimate border crossing.
        They come back the second day; they are turned away again.
    They come back a third day; they are turned away again. And
    after traveling thousands of miles, obviously fleeing horrific
    violence, they are not about to not have an opportunity for
    asylum.
        And so the administration criminally prosecutes them, and
    in doing so separates children, who have been sent thousands of
    miles. I was looking at a map of where these children are.
    Primarily, it seems to be in blue States--and we are happy to
    house them--but we do not want to really have them stripped
    away from their parents.
        So I heard your response to Senator Nelson. Let me ask you
    this. Will those parents who have been deported and whose
    children are here--are they going to be reunified? And if so,
    how?
        And secondly, my understanding is there are still 2,000
    minors who are separated from their parents who have not been
    reunited. What is the time frame?
        I heard what you said is going to take place. What is the
    time frame that you estimate when that will take place?
        Secretary Azar. So, as to any parent who is deported, of
    course, the child has independent rights. We often do find that
    when a parent is deported, they ask the child to remain
    separated and remain in this country. That happens in normal
    proceedings. I do not know in the last couple of months----
        Senator Menendez. But a child who is a minor cannot make
    that case for themselves.
        Secretary Azar. They have counsel, and sometimes they
    actually decide to remain or the parent actually asks that we
    have them remain in the country. We keep them in touch, though.
    As long as the child is in our care, we keep them in touch,
    even if the parent is outside the country.
        So in terms of timing, again, we are working rapidly to
    confirm parentage and do the vetting and proper criminal
    background checks, et cetera on any parents who are in custody
    so that we are ready to go as soon as either the parent's
    immigration proceedings are complete and we can reunify at the
    time, say, of deportation, or, if asylum were granted, if they
    were entered into the country, we could connect them then.
        Or we, of course, have alternatives, if there are other
    relatives, a parent who is already in the country, we would put
    them with that parent or with other relatives here in the
    country. We have to expeditiously get children out of care and
    custody.
        Senator Menendez. But you do not have a time frame?
        Secretary Azar. Well, it is very much dependent--right now,
    I would gladly put these children back with their parents in
    the custody of ICE or Customs and Border Patrol, but I legally
    cannot, because at the 20-day mark they have to be sent back.
    We need Congress to change this 20-day limit on parent
    unification.
        Senator Menendez. Or we need to stop criminally prosecuting
    them and allow them to alternatively----
        The Chairman. Senator, your time is up.
        Senator Portman?
        Senator Portman. Thank you, Mr. Chairman.
        I look forward to talking about drug pricing in a second.
    But let me just comment briefly on this.
        As you know, we spent a couple of years studying the issue
    of unaccompanied kids, UACs. And HHS has, in my view, a very
    difficult job to do, which is to help with regard to kids who
    come without their parents. These are unaccompanied kids.
        Now we have added to that with the separation of kids from
    families, which I think was a bad idea. And I commend the
    President for the executive order which changes that approach.
    We now have to deal with the kids who are already in the
    system.
        But even though you have a very tough job to do, as you may
    know, in the Obama administration and in the Trump
    administration, I have not felt as though HHS has done a very
    good job in a very tough situation, because they have not come
    up with this agreement between the Department of Homeland
    Security and HHS. There is a memorandum of understanding and a
    commitment to come up with an operating agreement so we can
    understand how the handoff occurs, who is in charge.
        But as recently as April of this year, we had a hearing on
    this. And HHS said that they were willing to take a fresh look
    at the question of who has responsibility for these kids once
    they leave an HHS detention facility or are placed with a
    sponsor.
        My concern is that nobody is responsible. And you know, I
    got involved in this initially because of these eight children
    who ended up coming from Guatemala, ended up at an egg farm in
    Ohio because they were given to their traffickers--in the Obama
    administration--rather than to a family that was going to take
    care of them.
        So my question to you today is--and again, I will get to
    drug pricing in a second, which is next in my questions--but
    one, you are taking a fresh look at this, as I understand it.
    You have a July deadline to come up with this operations
    agreement.
        I do not know if you have followed this closely, but are
    you on track on the operations agreement with DHS? And who is
    going to be accountable or responsible for these children once
    they leave a Federal Government agency's custody and go off
    with a sponsor?
        Secretary Azar. So we have a memorandum of agreement with
    the Department of Homeland Security to ensure adequate and full
    vetting of any potential sponsor. These are relatives. They are
    either parents or aunts, uncles, adult relatives.
        Senator Portman. Well, again, in the case of the egg farm,
    they were traffickers.
        Secretary Azar. Well, and that was--obviously, there was a
    mistake; something happened. And so we have to have vetting,
    including fingerprinting.
        Senator Portman. Right. This is how we got into it, right?
    So better screening, that is a good thing.
        Secretary Azar. Screening, exactly.
        Senator Portman. Yes.
        Secretary Azar. Once they are placed with a sponsor, they
    are no longer subject to our jurisdiction. We cannot sort of
    pull a child back from a relative. We do not have the legal
    authority. They are then under the State and local child
    welfare laws, as well as, of course, they are subject to any
    immigration proceedings that they may have.
        But we do not have any authority to go out and pull a child
    back from a sponsor once they are in that sponsor's custody.
    That would be local child welfare authorities that would, at
    that point, be accountable. Obviously, if we learn about it, we
    would let the authorities know.
        Senator Portman. And again, I want to get on to drug
    pricing for a second here, but one of the concerns obviously is
    that we were not even--and this goes back to the Obama
    administration again, and the first part of the Trump
    administration--not even telling the States that the kid was in
    their jurisdiction. So, kind of hard for child welfare to step
    in.
        And again, there is an issue of getting these kids to their
    hearing. I mean, that is the idea. More than half of them, we
    think, are not showing up for the hearing, which is the whole
    idea: to get them with a family pending their hearing on their
    immigration status. So we have some work to do still.
        I know you are aware of that. I just want to make sure you
    knew that we are going back and forth with your team, and we
    expect to have this operations agreement in place by July. It
    was also committed to during our April hearing.
        On drug pricing for a second, I know Senator Stabenow
    talked about one of the issues that is a big deal to me, which
    is how you deal with the opioid crisis and the people who need
    naloxone, which is this miracle drug that reverses the effects
    of an overdose. And specifically, the Evzio cost increases: 575
    bucks for a naloxone autoinjector in 2014, just 4 years ago;
    today over $4,000 for one of these things.
        And so you go on your dashboard--which I applaud you for.
    You have a dashboard now where you can see drug pricing
    information more transparently, but it is very confusing
    because it shows Part D spending per unit--this is for
    Medicare, obviously--increased from 739 bucks to $4,500, and
    the list price was actually below both of these. And when we
    push on this, we are told, well, this does not include some
    other information like the manufacturers' rebates or other
    price concessions, which seem to run the other way.
        But anyway, we have been pushing on this and trying to get
    HHS to give us an answer. Why can't all that information be on
    the dashboard? If consumers are really going to have the
    transparency that you want and we want, why can't we also
    include what is going on with regard to the rebates or other
    prices concessions?
        Secretary Azar. Well, taking it beyond the naloxone and
    that particular drug instance, disclosing publicly negotiated
    rebate rates is disclosing highly confidential information. Let
    us say we took just any other regular drug and we started
    publicly disclosing negotiated discounts. There could be very
    serious anticompetitive issues with that, as there would be if
    Walmart were forced to disclose their Tide discounts. Their
    competitors would love to have that information more than
    anything. So we have to be careful here.
        We are happy to get you whatever information we have, but
    that is just an initial reaction on that issue of disclosing
    whatever the discounted rate would be on a particular product.
    It would be a concern.
        Senator Portman. I would think, you know----
        The Chairman. Senator, your time is up.
        Senator Portman. Well, these drugs are bought by the
    taxpayer, not Tide. Tide is bought by some taxpayers, but it is
    a different issue. So, one, with regard to us and consumers
    getting the transparency on Medicare and Medicaid, I would
    think we are going to end up there. We have to figure out a way
    to provide that information.
        The Chairman. Senator Bennet?
        Senator Bennet. Thank you, Mr. Chairman.
        Thank you, Mr. Secretary, for coming back to the hearing.
    And thank you for your service.
        Just along the lines of--slightly along the lines of
    Senator Portman's original questions--did HHS have a role in
    participating in the design of the administration's zero
    tolerance policy at the border?
        Secretary Azar. We deal with the children once they are
    given to us, if they are unaccompanied. So we are not the
    experts on immigration.
        Senator Bennet. But you were not involved in planning
    meetings on implementing----
        Secretary Azar. It would not be appropriate for me to
    discuss interactions within the administration. Our role is on
    receiving the children, though, not on setting immigration
    policy or the border.
        Senator Bennet. To that end, Mr. Secretary, is the process
    you described today a special process for reuniting the 2,300
    kids with their families, or is this the existing process that
    ORR uses for unaccompanied minors?
        Secretary Azar. This would be the process we use for any
    child in our care to ensure safe placement. Because, again,
    unfortunately, it may seem like, oh, their parents, they came
    across the border with them, they were separated, oh, just
    reunite them automatically.
        Unfortunately, these children are often being captured by
    traffickers, gangs, cartels. That journey through Mexico is a
    horrific journey of rape and violence and deprivation. And
    often, the--not often, but we do see traffickers and very evil
    people sometimes claiming to be the parent of children. So the
    same protections we have for any unaccompanied children are
    vitally important here in terms of confirming parentage and
    vetting.
        Senator Bennet. So I can appreciate why you cannot answer
    precisely when every single child will be reunited with their
    parents, but could you give the committee a sense of whether
    you are talking about days or weeks or months? What is your--
    what direction have you given HHS employees or contractors who
    do the work that I am sure you feel as urgently about as we do?
        Secretary Azar. So, yes, I and the President share the goal
    of doing all the work, getting the children reunited. I cannot
    reunite them, though, while the parents are in custody because
    of the court order that does not allow the kids to be with
    their parents for more than 20 days. I find it hard to imagine,
    but we need Congress to fix that.
        What I have ordered our team to do--I want the kids ready,
    I want the parents confirmed and vetted so that we can place
    them as soon as either Congress changes the law or the parents
    are through their immigration proceedings and ready to be
    deported or released, so that we are ready to reconnect them.
        Now, in the interim, I have a separate legal obligation to
    keep working to expedite if there are other sponsors in the
    country--a different parent or other relatives whom I can place
    them with--because I cannot have them with us any longer than
    necessary.
        Senator Bennet. So do you imagine that we will be having
    this conversation weeks from now, or do you think this will be
    resolved weeks from now?
        Secretary Azar. If Congress does not change the 20-day
    limit on family unification, then it depends on the process for
    any individual parent going through their immigration
    proceedings. As long as they are in detention, they cannot be
    together for more than 20 days--absurdly, but it is the case.
        Senator Bennet. What is the age of the youngest child who
    is in HHS's care?
        Secretary Azar. We have infants in our care. Senator, as
    shocking as it sounds, we have always had infants in our care,
    even just straight unaccompanied children just left on the
    border as infants.
        Senator Bennet. What is the youngest? What is the youngest?
        Secretary Azar. It is zero. I mean, infants.
        Senator Bennet. Infants.
        Secretary Azar. We have infants. We always have, from
    parents or smugglers or traffickers who leave or have lost a
    child at the border and they are placed in our care. So we have
    always, the program has always had, as devastatingly tragic as
    that sounds----
        Senator Bennet. And what happens, Mr. Secretary, if a
    child's parent has already completed expedited removal
    proceedings and has been deported? How is the child notified
    and how long does a child have to wait to be reunified under
    those circumstances?
        Secretary Azar. So if the parent wishes to have the child
    reunified, we will work, of course--because we have to confirm
    the parentage and the vetting to ensure, even in a foreign
    country, that the parent does not have any information, that we
    do not have any information suggesting that we are placing the
    child in jeopardy.
        We work then, of course, with the home country for the
    transfer of the child there if that is the parent's wish for
    the child to be reunified. There are instances, however, where
    a child may assert their own right to pursue asylum or other
    claims that they have independent of their parents and may seek
    to remain in the country and remain in our care because of
    their or their lawyer's assertions.
        Senator Bennet. And are children, Mr. Secretary, from
    certain countries treated differently from children from other
    countries? Or is everybody treated the same?
        Secretary Azar. Everybody is treated the same within our
    care. Immigration laws, as you know, are different, especially
    with regard to contiguous countries, Mexico and Canada. There
    are provisions that the Department of Homeland Security would
    be expert in that are different on immigration laws and the
    processes there around deportation that I am not the expert in.
        But children in our care--we treat all of these children
    the same and attempt to reconnect them, get them to sponsorship
    as quickly as possible. And of course, it might be dependent on
    cooperation with home countries getting us birth certificates
    or other confirmation information.
        Senator Bennet. Thank you, Mr. Secretary. Thank you, Mr.
    Chairman.
        The Chairman. Thank you.
        Who is next now? Senator Carper?
        Senator Carper. Thanks. Thanks so much.
        Mr. Secretary, welcome. It is good to see you. Thank you
    for your being here today and responding to our questions.
        I want to just follow up just briefly on the issue of
    children at our borders and families on our borders.
        We are paying a lot of attention to the symptoms of the
    problems, and we should. It is serious, and it needs to be
    dealt with. It is not an easy issue to deal with.
        I spent part of yesterday in New York City, and I was with
    Jeh Johnson, who was the previous Secretary of Homeland
    Security, talking about these very same issues from his
    perspective as a Secretary of Homeland Security.
        And one of the things that we discussed was how important
    it is to get right what is going on on the border. And in the
    spirit of Matthew 25--``When I was a stranger in your land, did
    you welcome me?''--I think it is important for us to focus on
    that and treat these kids the way we would want our kids to be
    treated.
        The other thing is, it is important for us to focus on the
    root cause for why these kids and these families are coming to
    our border. And I would remind my colleagues that about 20
    years ago in Colombia, a bunch of gunmen rounded up the
    Colombian Supreme Court members, took them into a room and shot
    them to death. Shot them to death. And you had the drug lords,
    you had the FARC, the leftist guerillas, almost working in
    concert to bring down, weaken and bring down the government of
    Colombia at a very desperate time.
        Some leaders of that country stood up and said, ``We are
    not going to let this happen to Colombia.'' And those leaders
    were supported by Bill Clinton, President, Joe Biden, the
    chairman of the Foreign Relations Committee, Dick Lugar, who
    was the senior Republican on Foreign Relations, to come up with
    something called Plan Colombia--Plan Colombia--which was, you
    can do it, we can help in terms of stabilizing your country,
    security for your country, economic opportunity in your
    country. They had to do the heavy lifting, but we helped.
        We have a similar approach. It is not called Plan Colombia
    for Honduras, Guatemala, El Salvador. I call it--it is a Plan
    Colombia for those countries, and it does many of the same
    things that Plan Colombia has done.
        We are in our third year on this program, and we need to
    continue to fund it; we need to continue to do oversight on
    that.
        And the reason why these people are coming to our country
    is because they live horrific lives. They are lives of
    desperation--dangerous, high homicide rates, lack of economic
    opportunity. We are complicit in their misery. That is why we
    have a moral obligation to help them, and we are trying to do
    that. So I would just leave that at your feet and my
    colleagues' feet really.
        I want to talk a little bit about value-based pricing. We
    have talked about this before. I like to say, ``Everything I
    do, I know I can do better.'' And I think that is true of all
    of us, and that is true about the delivery of health care, and
    a big piece of that is pharmaceuticals.
        And as we have discussed before, transitioning to value-
    based reimbursements for drugs is top priority to not just
    reduce drug prices for seniors who might be in Medicare, but
    also for our government, for our taxpayers, and for just
    regular, ordinary people.
        What are stakeholders and your policy experts telling you
    about value-based contracting of prescription drugs and how
    this policy could improve affordability for consumers and our
    government programs and, ultimately, for taxpayers?
        Secretary Azar. Well, Senator, thank you for your
    leadership in the area of value-based payment. We are already
    moving forward on that. Commissioner Gottlieb has just
    recently, a couple of weeks ago, put guidance out to create a
    better pathway for sharing of information and discussions
    between pharmaceutical manufacturers and insurers around health
    economic information and to plan on new product launches so
    that they can actually collaborate and build those value-based
    arrangements as quickly as possible.
        We are working on guidance around government price
    reporting and anti-kickback statute rules that can, again,
    create a greater pathway around how private actors, and we, can
    set up these value-based arrangements there. We all believe, as
    you said, it is the future of how we need to pay for drugs, pay
    for outcomes, pay for health care.
        Frankly, I would love to see it if they could be more
    incorporated into the overall holistic health of the patient,
    more of a bundled notion. I think that is probably, long-term,
    the future of value-based health care, more than just the
    payment on the drug itself.
        Senator Carper. What action do you need from us on this
    side of the dais to enable you to implement value-based pricing
    and to ensure that the spending for health-care services and
    products is aligned to lower overall health-care costs? What do
    we need to do?
        Secretary Azar. So I believe we have the authority to
    create these pathways around value-based reimbursement models
    directly through the anti-kickback statute and government price
    reporting.
        If I find that our regulatory authority is limited, I will
    come back to you and ask you for that authority, because it is
    so critical.
        The Chairman. Senator, your time is up.
        Senator Carper. Mr. Chairman, I just want to commend you
    and the ranking member for holding this hearing. I think this
    is terrific.
        The proposal from the administration is a broad proposal. I
    just think it is like a baseball team that hits a lot of
    singles and doubles. I do not know that there are any home runs
    in their proposal, but a lot of singles and doubles.
        And my hope is that we can work together and score some
    points on the board for taxpayers and for citizens. It is great
    that we are here doing this. And I appreciate the Secretary
    being here.
        The Chairman. That sounds like a triple to me, Senator.
    [Laughter.]
        Senator Cassidy?
        Senator Cassidy. Secretary Azar, thank you for being here.
        Let me start off with a specific drug, and then we will
    build from that into a line of questioning.
        You and I in the past have spoken of Gleevec, a drug which
    was released in 2001, which used to be probably a couple
    thousand dollars a year. Now I am told that it costs $8,800 a
    year in Canada, and it costs $144,000 here in the United
    States.
        Now, as you and I both know, the way that the catastrophic
    coverage works is that once somebody moves into the
    catastrophic portion, the beneficiary is responsible for 5
    percent of the list price, not the net price. And so I have a
    former patient--only ``former'' because I am no longer
    practicing. She is paying 5 percent of $144,000 for a drug
    which has been released since 2001.
        Now, my staff tells me that the company that has Gleevec
    has extended the ability, the patent protection if you will,
    with an agreement with the generic competition.
        Now, Senator Stabenow asked, ``What do we do about this?''
    And you responded, ``We need competition.'' I would say, what
    do we do about Gleevec? Available since 2001, Canadians spend
    less than $9,000; we spend $144,000. That is egregious, and my
    patient can't afford 5 percent of the list price.
        What do we do about that?
        Secretary Azar. So, Senator, I may be misinformed here, and
    I want to get back to you on this, but I do believe that
    generic Gleevec is actually available.
        Senator Cassidy. So then let us say that we are back in
    2015 or 2016 in which this would apply and which, again, a drug
    15 years after release is $144,000 a year. Because there will
    be another Gleevec; if now there is a generic, there will be
    another Gleevec.
        How do we address that?
        Secretary Azar. So one of the items in terms of
    affordability that we have is in the President's budget--which
    I would love the chance to work with the Congress and this
    committee on--which would be to reform the Part D drug benefit
    to actually create several changes, one of which would be a
    genuine, for the first time ever--and I think Ranking Member
    Wyden has a separate piece of legislation to this effect--a
    genuine, out-of-pocket catastrophic----
        Senator Cassidy. So let me pause on that. So one of the, as
    we both know, but just for context, one of the pernicious
    effects of the rebate system which we have is, it moves people
    more quickly into the catastrophic. But even if the patient is
    protected, the taxpayer is on the hook.
        So I am looking here at a CMS report which says that the
    Federal taxpayer outlays to PBMs had increased from roughly $11
    billion in 2010 to $33 billion in 2015. And so the taxpayer is
    getting hosed because of this. So even if we protect the
    patient with our 5 percent, how do we protect the taxpayer?
        Secretary Azar. And you are absolutely correct, and I am
    really glad you raised that, because that is one of the five-
    point changes to Part D that we have proposed in our budget to
    actually reverse that incentive structure and the catastrophic
    benefit to ensure that the pharmacy benefit manager is bearing
    80 percent of the cost, taxpayers only 20 percent, so that the
    PBMs have more skin in the game to get that list price
    controlled, because we are going to be on the hook for that.
        Senator Cassidy. So would we change so that it is only the
    net price that counts in moving the patient to the catastrophic
    as opposed to the list price?
        Secretary Azar. It would be total expenditure, but that
    would be because the list would do that. The PBMs would
    actually have more incentive to get that list price controlled,
    not just the net, because they are going to be bearing 80
    percent of that in the catastrophic.
        Senator Cassidy. Okay. And then I also see that one of the
    proposals is that currently, or maybe one proposal is to get
    rid of the rebate structure altogether, but another proposal is
    that a third, at least a third, of the rebate would be returned
    to the patient at point of sale. Why not 100 percent? Why
    should the patient be forfeiting two-thirds of that rebate
    amount?
        Secretary Azar. I think as we get after the issue of
    whether rebates should be allowed at all, that may be where we
    end up in terms of fixed-price discounting pulled forward at
    the point of sale completely.
        In the budget proposal, we proposed a third. There
    obviously is significant debate about the issue of pulling
    forward rebates. We think it is the right thing that patients
    should get the benefit of these rebates----
        Senator Cassidy. So let me--because I only have 20
    seconds----
        Secretary Azar. It is not set in stone.
        Senator Cassidy. I do not mean to cut you off. I am sorry.
    Just in the interest of time--one more thing. If Part B does
    not come into D, let us imagine another Gleevec within the Part
    B space in which we are paying that, the U.S. taxpayer is
    paying this, we are basically a price-taker, as you said, but
    overseas they are paying far less. Why not reference pricing?
        Why not say, okay, let us take our five biggest developed
    countries--Germany, Japan, Australia, Canada, Britain, France,
    you name them, pick five or six of those--and we are going to
    have a price which is some multiple. It might be 1.6, it might
    be 1.2, but it will not be 14 times, such as was the case with
    Gleevec.
        And so just imagining, again, within the Part B space, why
    not reference pricing?
        Secretary Azar. It is something we could look at. I would
    rather use the tools of the competitive marketplace than price
    fixing at the national level to keep patient choice and
    patient----
        Senator Cassidy. I will point out, that did not work with
    Gleevec.
        The Chairman. Senator, your time is up.
        Senator Cantwell?
        Senator Cantwell. Thank you, Mr. Chairman.
        I am sorry I had to step out for a while, but I did hear
    your opening statement. And I wanted to, because you mentioned
    four things: list price, negotiating tools, cost share, and the
    foreign outlook.
        On plans for negotiating, one of the best negotiating tools
    I think that is out there is the provision of the basic health
    plan or essential plan that is now operating in a few States,
    where families can have affordable--basically, the State ends
    up negotiating. The State negotiates on behalf of a large group
    of individuals, those who may not belong to a large employer or
    an employer that does not have insurance.
        So those can see as little as a $6 copay for generic drugs,
    $15 copay for brand drug formularies, or a $3 copay for brand
    drugs off the formulary. So in my mind, that is a great model.
    Why? Because it is a negotiating tool by creating market
    leverage by a large group of individuals who would not have
    market power.
        You know, I call it the Costco model. If you buy in bulk,
    you should get a discount. So that State, in this case New York
    or Minnesota, buying in bulk is getting a discount. Why
    shouldn't we continue to look at that as a model?
        Secretary Azar. So I want to learn more about how the basic
    health plans are doing that. And as long as it is done in a
    competitive framework of competitive insurance, as opposed to
    with any preferential thumb on the scale that hinders any other
    private insurance actors and choice in the system, I mean, any
    kind of those collective aggregations that allow you to
    negotiate is exactly what we do in Part D with the negotiating.
    That is why we get such good deals in Part D through our
    private plans.
        Senator Cantwell. Well, I think you will find that in New
    York, I think there are 13 different insurers that are bidding
    into that market. What they like is that they know they are
    bidding on 650,000 people, so they are willing to give a
    discount.
        Secretary Azar. Sure.
        Senator Cantwell. So I am looking for market power for
    individuals who are not finding it in other ways.
        Secretary Azar. I am happy to look at that with you.
        Senator Cantwell. Great; great.
        Secretary Azar. Yes.
        Senator Cantwell. I am sure a more thorny question--I have
    in our State a woman, Ms. Guzman Colindres, who is being held
    in Washington State. She was from Honduras and was seeking
    asylum and now is separated from her child.
        So I want to know--I know you have had a bunch of questions
    here already--but what, beyond confirming the relationship
    between child and parent and the criminal check, the
    background, what else needs to happen for her to be processed?
        Secretary Azar. Okay. So in terms of reunifying her with
    her child?
        Senator Cantwell. Yes.
        Secretary Azar. Okay. First off, I want to ensure that she
    knows where her child is. I want to make sure she is in touch
    and they are able to communicate. If that is not happening,
    please offline let me know, and we will, as with all of the
    children and parents, want to make sure that is happening.
        Senator Cantwell. She has not been able to talk to her
    child, so I want to make sure that that happens.
        Secretary Azar. We want to make sure that happens. We are
    working--every parent and child, we want them in regular touch,
    regular communication. So please, let me know offline; we will
    get on that and make sure that that is happening.
        In terms of reunification, once she is cleared, you know,
    from a background check perspective, at that point it is really
    if she completes her immigration proceedings, if she is granted
    asylum into the United States, then she can be reunified.
        If she ends up having a deportation order, we reunify at
    that point.
        The only thing that I cannot do is send the child back to
    be with her while she is in a detention facility, because of a
    court order allowing a max of 20 days. Congress could change
    that; we hope they will so we could get these kids reunified.
        Senator Cantwell. No, no. Mr. Azar, I think what you need
    to hear is that this problem in her case, Ms. Guzman's case,
    did not exist prior to this administration changing the law. In
    that case, Ms. Guzman seeking asylum would have come to our
    border, asked for asylum, and would have been processed in a
    way that she was able to stay in the community with her child
    and not be seen as a threat.
        This administration is turning her into a threat. We want
    due process. We want people to be understood. But people
    seeking asylum should not be treated the same way as some
    criminal that the President is now talking about incessantly.
        We want people with criminal backgrounds to be stopped
    before they even get into the United States, but we want those
    who are seeking asylum not to end up in a detention center
    never to be heard from again or have to be brought up at a
    hearing as a way to get attention to their case.
        Secretary Azar. And if they--I do not want to speak about
    her case because I do not know it--but if they present at a
    lawful border crossing as opposed to coming illegally into the
    country, they will not be separated, they will not be arrested,
    they are not violating the law.
        So the challenge here is, she came in the country
    illegally, and we have laws, and we are enforcing the laws.
        Senator Cantwell. And I will want to find out, besides
    doing that background check and the parentage, how long is it
    going to take her to have that process? What are the other
    steps that she will have to take?
        Secretary Azar. Those would be the steps we would have to
    take, but she has to be able to receive the child. And if she
    is in custody, I cannot legally, because of the 20-day limit,
    reunite her with her child.
        Senator Cantwell. I am asking you how long it is going to
    take you to do both of those things. So we are going to get
    back to you on both.
        Secretary Azar. Yes. We cannot--there is no deadline on it,
    but as quickly as possible.
        Senator Cantwell. I think that is what we want.
        Secretary Azar. Well, the problem is, one has to confirm
    parentage. If she is from Honduras, I have to get a birth
    certificate from Honduras perhaps.
        Senator Cantwell. I am going to talk to you about that too,
    because I think there is technology that can help speed up this
    process.
        Thank you.
        Secretary Azar. We would be happy to. Anything that will
    speed it up.
        Senator Cantwell. Thank you, Mr. Chairman.
        The Chairman. Thank you.
        Senator Casey?
        Senator Casey. Thank you, Mr. Chairman.
        And, Mr. Secretary, thank you for being here.
        I wanted to ask you about the issue of preexisting
    conditions. We are told this affects 130 million Americans, so
    a lot of people are affected by it.
        I know that when you were here last or, I am sorry, when
    you were at the HELP Committee, Senator Hassan asked you a
    question about it, and you said, regarding the issue of
    preexisting conditions and the Attorney General's legal
    position, you said, quote, ``We share the view of working to
    ensure that individuals with preexisting conditions can have
    access to affordable health insurance,'' unquote, and that you
    also look forward to working with Congress, quote, ``under all
    circumstances,'' unquote, to achieve that shared goal.
        Because it does affect that many tens of millions of
    Americans, to say there is an uncertainty with regard to this
    because of what the administration said in a legal proceeding,
    in a case, and what you have said here as Secretary--there is a
    lot of uncertainty.
        And if there is one aspect of our health-care policy that
    needs absolute certainty, it is that both parties, both houses,
    with the administration, are going to guarantee that no one who
    has coverage now that has a preexisting condition will lose it
    and no one in the future will have that uncertainty.
        So I guess one of the first questions I have for you is,
    what have been your recommendations to the President regarding
    how you and the administration generally are going to maintain
    those protections for people with preexisting conditions?
        Secretary Azar. So, of course, my discussions with the
    President are not something I am at liberty to discuss. But the
    administration's position is we support, of course, Graham-
    Cassidy, the proposal that is in the budget, the 2019 budget.
    And as part of that, it would provide for States to have
    alternative mechanisms to, say, an individual mandate as a
    means of protecting preexisting conditions.
        In terms of litigation, the litigation in Texas versus Azar
    that you are referring to, in that litigation, that is a legal
    position first, a constitutional matter regarding the impact of
    the removal of the tax provision and then the impact on the
    mandate and then, following the Obama administration's views of
    construction there, that the other provisions must fall if that
    provision falls.
        We are operating the 2019 program under existing authority,
    existing interpretations, as if everything is remaining as it
    is. So we are doing everything to keep stability in the program
    and operate the program as it is there.
        Senator Casey. Yes. Mr. Secretary, why not take the
    uncertainty off the table, just say we will support this policy
    no matter what? You are not forced as a legal matter to take a
    position. The administration has chosen to take that position.
    There is no mandate that you take that position in a court of
    law or otherwise.
        Why not just say, we are going to make sure, by way of
    policy, by way of any other action the administration takes,
    that everyone who has a preexisting condition will have
    coverage and treatment no matter what? Why not just make that
    the position of the administration?
        You do not have to tell me what you told the President, but
    it ought to be clear to the American people what the
    administration's policy is on preexisting conditions.
        One hundred thirty million people--why not make it very
    clear that that is, in essence, a broad statement of the
    administration's policy or whatever the hell we call it these
    days?
        Just be clear about it and say that there is no question
    that this administration, HHS, the White House, the Department
    of Justice, no one, no institution, no entity in this
    administration has a position other than we will guarantee--not
    have access to coverage, guarantee--because that is what the
    law provides today.
        Why not say, we are just going to uphold existing law? You
    can have your debates with us about a lot of other issues. But,
    my God, why is this--why is there any uncertainty at all?
        Secretary Azar. Well, of course we are upholding existing
    law. And the position of the Attorney General is the position
    as to what the existing law is in the statute and before the
    courts.
        But the policy position of the administration is that, in
    whatever framework we have around the individual markets, we
    support solutions to ensure people with preexisting conditions
    have access to affordable insurance.
        And we will work with Congress. If the Affordable Care Act,
    if those provisions are found to be invalid, we will work with
    Congress to continue the efforts to find alternative ways to
    provide affordable insurance for people, including for those
    with preexisting conditions.
        Senator Casey. But, Mr. Secretary, that sounds like a lot
    of legal mumbo-jumbo to people. Why not just make it clear that
    the policy----
        Secretary Azar. We are a country of laws, so we follow the
    law, whatever the law happens to be.
        Senator Casey. But this is not found in law, this is----
        Secretary Azar. My policy preference does not become law.
        Senator Casey. You can get to the same policy outcome by
    saying we will ensure that people will have this protection.
        The Chairman. Your time is up.
        Senator McCaskill?
        Senator McCaskill. Thank you.
        I am going to follow up with the same topic Senator Casey
    was on.
        On Saturday, the President of the United States said at a
    very public rally--he was being critical of Senator McCain who
    voted ``no'' on the Republican plan to repeal and replace the
    ACA. And then he said, I am quoting, ``It is all right, because
    we have essentially gutted it anyway.''
        Do you agree with the President's statement?
        Secretary Azar. What the President I believe was referring
    to----
        Senator McCaskill. It is a simple ``yes'' or ``no.''
        Secretary Azar [continuing]. Is that fact that without----
        Senator McCaskill. Either you agree with the President----
        Secretary Azar. Without the individual mandate, individuals
    now are free, they are liberated from having to pay a tax to
    buy insurance they do not want and cannot afford. And that is,
    I believe, what the President was referring to.
        Senator McCaskill. And have there not been other steps that
    have also been taken that have gutted it, that are resulting in
    much higher premiums on the individual markets this year?
        Secretary Azar. No, the steps that we are taking are to try
    to provide affordable options to individuals, the forgotten men
    and women, the 28 million who have been locked out of this
    unaffordable insurance in the individual market. We continue to
    try to find affordable options for them in the system.
        We have tried to work on a bipartisan basis to get Congress
    to appropriate CSRs to stabilize that market there for this
    year. Congress would not do that.
        Senator McCaskill. So do you support CSRs being paid and
    stabilized?
        Secretary Azar. We did support what was at the time
    bipartisan legislation to fund CSRs and create reinsurance.
    There was not, at the end of the day, bipartisan support on the
    Alexander-Collins-Nelson package that was at play.
        Senator McCaskill. I think there is bipartisan support.
        Secretary Azar. If there were, it would have passed, but it
    did not.
        Senator McCaskill. Well, I will just tell you, no, it has
    not----
        Secretary Azar. The President personally pushed for its
    passage.
        Senator McCaskill. Mr. Secretary, that bill has not even
    been brought to the floor. Mitch McConnell has decided we are
    not allowed to vote on that bill.
        You all are in charge of health care. You control the White
    House, you control Congress. And this bipartisan bill you speak
    of, first of all, the President went back and forth as to
    whether CSRs would ever be paid. You know that.
        So, yes, we got together in a bipartisan way. And I think
    the chairman will not argue with me about this. Those bills are
    sitting there, and I think they've got 60 votes.
        Inexplicably to me, the Republican Party--I have not seen
    the President at a rally saying, ``Let us pass the CSRs.'' I
    have not heard him at a rally saying. ``Let us stabilize with
    reinsurance.''
        I have heard him say, ``We have gutted it.''
        So to just sit there----
        The Chairman. Well, if I could interrupt for a second.
        I have to say that Senator McConnell, the leader, would
    have included this in the omni, but the Democrats objected to
    that.
        Senator McCaskill. Mr. Chairman, I will guarantee you this.
    If Mitch McConnell will put on the floor the bipartisan pieces
    of legislation that have been negotiated to stabilize the
    markets, you will pass that by--I cannot imagine there is any
    Democrat who would vote against that.
        I do not know what the negotiations are in these magic
    rooms that none of us gets to see. The same place the tax bill
    was done, the same place appropriations bills are done--we do
    not get to see what is going on. I do not know what is going on
    in those rooms.
        The Chairman. That is what happened.
        Senator McCaskill. Well, I am not sure what happened, Mr.
    Chairman, because we are not allowed to be----
        The Chairman. I am.
        Senator McCaskill [continuing]. Told or we do not see.
        But I know this, that the President is proud that they have
    gutted this.
        And I want to offer into the record a very important
    document, which is a document that was received, and it has not
    been made public before, back in 2010 when the House was
    investigating the way preexisting conditions were handled
    before the ACA protections.
        Mr. Chairman, I would ask unanimous consent to enter into
    the record the ``Humana Agent Eligibility and Underwriting
    Guide.''
        The Chairman. Without objection.
        [The document appears in the appendix on p. 82.]
        Senator McCaskill. This document goes through--and by the
    way, all the companies have this. I want people to remember
    what it was like, because the administration has gone to court
    to do away with preexisting conditions.
        The Attorney General in my State has gone to court to do
    away with preexisting conditions protections in the United
    States.
        There were 400 things listed, including high blood
    pressure. And what it says in this document is, ``Below
    conditions are permanent declines unless otherwise indicated,''
    everything from autism to diabetes to pregnancy to high blood
    pressure. Denying air traffic controllers and miners and
    steelworkers the ability to get insurance--they were told they
    were not supposed to write insurance for them.
        It is stunning to me that we find ourselves in this place,
    that this administration--and what they do is more important
    than what they say, and what they are doing right now is going
    to court and saying, do away with all of the consumer
    protections that were put in the ACA to prevent millions of
    people who have the 400 different conditions that said, do not
    write insurance for these people, we do not want them.
        So I understand that you can say that somehow it is our
    fault that this legislation is not getting passed, but I think
    the American people are going to make an independent judgment
    on that.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator.
        Senator Brown?
        Senator Brown. Thanks, Mr. Chairman.
        Chairman Hatch mentioned during his opening remarks that
    over a month ago, President Trump hosted many of my colleagues
    in the Rose Garden to tout his drug pricing blueprint,
    promising, quote--this is our chairman quoting our President--
    ``massive cuts'' to drug prices. Weeks later, as the ranking
    member pointed out, he doubled down on his commitment to the
    American people.
        I would like to point out that now a month later, we are
    still waiting for these, quote, unquote, ``massive cuts'' that
    the President promised. My guess is we will see dozens more
    prices increase before we see any massive cuts.
        So, Mr. Secretary, if you would answer this ``yes'' or
    ``no.'' Do you agree there are scenarios where pharmaceutical
    companies increase the list price of their product and price
    gouge consumers for no reason other than to increase their
    profit margin?
        Secretary Azar. Of course. We have seen examples of that.
    Yes.
        Senator Brown. Okay. Thank you. The fact that there is
    absolutely no repercussion for a company that engages in this
    type of predatory behavior is a problem surely that contributes
    to our broken drug pricing system.
        Do not take my word for it. Let me read briefly from a
    letter I received from an Ohioan whose husband has Parkinson's
    disease. She wrote, ``My husband takes numerous medications,
    some of which are expensive, but one in particular gets my
    attention. I noticed last year when I was preparing our tax
    return, the retail price of this generic drug fluctuated
    between $1,000 and $3,000 for a 90-day supply.'' She said, ``I
    thought this was exorbitant, started asking why the price was
    so high, though I did not get a satisfactory answer. So I was
    doubly shocked when we last refilled our prescription, again,
    for a 90-day supply. The price: over $6,000.''
        It is getting so generic brands of drugs are costing more
    than those that have not gone off patent yet. ``Because
    Medicare cannot negotiate drug prices, it seems,'' her words
    again, ``some unscrupulous companies see that as an open door
    to gouge the government and to gouge all the rest of us too,''
    unquote.
        The incentives included in the administration's drug
    pricing blueprint to lower prices or shift costs along the
    supply chain are not enough to fix this broken system. There is
    nothing in your proposal that will prohibit or penalize the
    actions that are gouging Ohioans.
        The government needs tools to prevent these companies from
    jacking up the price of lifesaving drugs, like EpiPen or
    naloxone, to jack them up overnight and make millions off the
    backs of hardworking Americans whose lives--literally, lives in
    these cases--depend on these medicines.
        My Stop Price Gouging Act would give the government the
    tools it needs to hold these bad actors accountable by imposing
    penalties on corporations proportionate to the severity of
    their price gouging--proportionate to the severity of their
    price gouging.
        It would hold bad actors accountable, something we rarely
    do around here.
        My question, Mr. Secretary, is, will you commit to
    reviewing this legislation, which I introduced last year? And
    will you commit to working with me on finding a way to prevent
    pharmaceutical companies from price-gouging consumers, as you
    acknowledge they sometimes do?
        Secretary Azar. Absolutely--happy to work with you on that.
    We agree, the price-gouging by sole-source generics--and our
    plan actually does address that. We want to give Part D plans
    the ability even midyear, if there is any price increase on a
    sole-source generic, to allow the formulary to be reopened
    immediately rather than waiting for the end of the year.
        We also want to open up Medicaid rebates for those drugs so
    that there would be uncapped liability based on that kind of a
    price increase. And if there is a Part B drug, we have as part
    of our budget proposal an inflation penalty there for any drug
    increased above the rate of medical inflation, as you have
    suggested also.
        Senator Brown. Okay. I mean, that is just Part D, not
    everyone. That is not everyone we need to protect, so work with
    us on that.
        Last thing, Mr. Chairman, in my last minute or so.
        I know that many of my colleagues have already raised our
    collective concern over the administration's actions to
    separate children from their parents, something that is
    shameful and embarrasses all of us as members of this
    government.
        While I understand policies at DHS and ORR remain in flux,
    the situation continues, of course, to be extremely troubling
    to anyone paying attention.
        Last week, in response to reports that facilities under
    your purview were preventing children from comforting one
    another, I sent a letter to you and Secretary Nielsen
    concerning the care provided for traumatized children at HHS
    facilities.
        Regardless of the topic, I have had trouble getting written
    answers to my letters in this administration. So in the
    interest of getting a timely response, I would like to ask you
    to please commit to getting me a response to that letter by the
    end of this week.
        Secretary Azar. I have not seen that particular letter. I
    will get you a response. I just responded this morning to--and
    it may have been including your questions in the letter.
        I can tell you, in terms of comforting, there are no ORR
    restrictions on comforting of tender-age children or any other
    provision other than, of course, State child protection laws
    around that.
        There was some media story. I have no idea. I have asked
    about this. There is no basis for what that individual
    reported. These are normal child care facilities subject to
    State law.
        These grantees, these charities, I cannot tell you how
    seriously they take their mission to care for these children.
    It is actually inspiring to see their work.
        Senator Brown. I wish the administration, of which you are
    a part, took equal care in caring for our children.
        Thanks.
        The Chairman. Senator, your time is up.
        Senator Whitehouse?
        Senator Whitehouse. Thank you, Mr. Chairman.
        Secretary Azar, welcome.
        I want to begin by echoing Senator Menendez's comments
    about the imputed rural floor problem. Unless that is
    corrected, you will be creating a market-shifting reimbursement
    cliff around Rhode Island, differentiating it from
    Massachusetts and from Connecticut.
        We are not a very big State, so it really does not make any
    sense to undo what has been the status quo for years. And we
    will continue to work to try to make sure that we do not create
    that anomaly.
        I think we have had this conversation before. But as you
    know, I think one can generally divide the pharmaceutical
    market into three categories. One category is where there is a
    functioning competitive marketplace. The other category is
    where there is a legally approved monopoly protected under
    patent law, for instance. And the third is where a company
    enjoys a de facto monopoly, because there is not real
    competition. And it is in that third sector of the
    pharmaceutical industry that I think we have seen the worst
    misbehavior.
        And my concern is that you get these companies that come in
    that buy up a drug manufacturer, add no value, invest in no
    research, but simply crank up the price for speculative
    purposes.
        First of all, do you agree with me that these de facto
    monopolies do exist in the prescription drug market?
        Secretary Azar. I do. We have seen that with some of these
    sole-source generics that Senator Brown and I were just talking
    about.
        Senator Whitehouse. Or even not a generic; just a
    pharmaceutical that is outside of its patent could still have a
    monopoly.
        Secretary Azar. You could, if you see a branded company
    abusing the patent system, the REMS programs, or other things
    that we want to get after----
        Senator Whitehouse. Or after the expiration of their
    patent.
        Secretary Azar. Exactly, anything that----
        Senator Whitehouse. They could continue to have a de facto
    monopoly.
        Secretary Azar [continuing]. Prevents entry of a generic.
    Right.
        Senator Whitehouse. So the concern that I have is that we
    are not seemingly addressing that problem. I know that you have
    proposed reopening a formulary, but if you have a situation in
    which a drug manufacturer has a de facto monopoly, they were
    able to succeed at the original low price that the speculator
    then came in, bought the company, and bid up, it is always
    going to be within their capability, should a competitor
    emerge, to drop back to their original price and price out the
    competitor. So you can play the market in that way.
        And the threat that somebody might reopen a formulary is
    not very helpful in that case, because a wise speculator will
    happily bet that nobody will come into that marketplace because
    they can drop their price back again and price them back out.
        It seems to me that we have tools that go back to the age
    of grain silos and railroads and Ma Bell for dealing with
    monopolistic behavior. Why not just use those time-tested tools
    once a particular entity has been determined to have a de facto
    monopoly and, in many cases, is not even a member of the
    pharmaceutical industry, just a speculator trying to squeeze
    money out of the system?
        Secretary Azar. I think, Senator, that is a fair question,
    to look at antitrust policies and competition law there in
    those circumstances to see if monopoly power is being abused.
        I do not purport to be an expert in DOJ or FTC antitrust
    policies, but I think that is a fair question. I will follow up
    on that. I think that is a fair thing to look into.
        We do need to increase competition, though. I do think
    still----
        Senator Whitehouse. I think we all agree on that.
        Secretary Azar. One of the things we asked about in the
    blueprint was whether we are actually, in this country,
    underpaying for and under-reimbursing for generics. We need a
    strong, robust generic market.
        We may be driving those prices so low that we are creating
    manufacturing anomalies that lead to sole-source products there
    with others exiting. We need to look at that and be open-minded
    about whether we have actually made it too low even.
        Senator Whitehouse. I think in the area of de facto
    monopoly, it would be hard to identify an agency of government
    that actually has responsibility in that area. And I do not see
    DOJ showing any signs of life. So I think that is part of the
    problem right there.
        I will ask you a question for the record related to what I
    am hearing are very significant problems getting drugs in
    emergency rooms. And so just to flag that between us now so
    that, when you see the QFR, you know that this was a question
    that I was concerned about.
        Mr. Chairman, thank you.
        The Chairman. Senator Warner?
        Senator Warner. Thank you, Mr. Chairman.
        Mr. Secretary, it is good to see you again.
        And I know this is a hearing about drug pricing today--and
    I will come back to that--but I, like a number of my
    colleagues, have some questions about the ongoing crisis of the
    children at the border.
        The Department of Health and Human Services has contracted
    facilities to house thousands of unaccompanied minors,
    including one in my State in the Shenandoah Valley, the
    juvenile center near Stanton, VA, where there have been very
    disturbing reports of abuse and lawsuits filed as a result of
    those accusations.
        I sent the administration multiple letters on the need for
    us to get information back--Senator Kaine and I have. And my
    hope would be that we can get those responses. And I would be
    anxious to know if you would be able or willing to comment on
    any of the accusations made about the center in Stanton.
        Secretary Azar. Sure. So without regard to the particular
    individuals involved, it is important to know that when we get
    these children into our care, they are immediately evaluated
    with a mental health and behavioral evaluation. As there are
    with any children, with 12,000 children in our care, 60,000 per
    year, there are going to be some children who need extra care,
    some of which is mental health or may present a risk to
    themselves or others.
        We have contracted with some facilities, including the one
    you mention, that specialize in juvenile care of a special need
    for those who may be a risk to themselves or others. Our
    children are kept separate from the rest of the juvenile
    population. It is a separate grant provision. They are required
    to fully comply with all State licensure, State laws around
    medication, et cetera.
        We oversee that. The State licensing authorities oversee
    that. Obviously, we take any allegations very seriously here.
    We want proper and appropriate care for these children, so any
    allegations are quite disturbing.
        I have seen nothing to confirm the nature of those
    allegations, but we will certainly respond to and work with you
    on that.
        Senator Warner. My hope would be--the reports have come up
    of minors being kept in solitary confinement for 23 to 24
    hours, to being strapped to a chair, to being strapped to a
    chair without any clothing, to having bags put over their head,
    all practices that both seem inhumane and worthy of a great
    deal of review.
        Now, I just wonder--understanding you may not be able to
    speak to the specifics of what happened in Stanton--what level
    of training does the ORR provide for guards in these type of
    facilities? If in fact these actions took place, I would hope
    that we would put training regimes in place that would not
    sanction such behavior.
        Secretary Azar. So again, without in any way being able to
    confirm the validity of any of those types of allegations, this
    would be subject to State requirements and licensure around the
    care of children in any kind of custodial arrangement, and so
    whatever the commonwealth of Virginia's licensure requirements
    are and oversight there, in addition to ORR oversight.
        I do not know that we have separate training in addition to
    State licensure requirements around the care in those juvenile
    detention facilities. I will be happy to get back to you on
    that, because I do not know the answer to that question.
        Senator Warner. We have sent a couple of letters. The
    sooner you can get me a response on those, the better.
        Secretary Azar. Thank you.
        Senator Warner. Let me move for a moment to an area that
    Senator Whitehouse was already talking about, and that is
    around the pricing of generic drugs.
        We saw a great deal of relief 15 years ago. But as you have
    indicated, generics were priced right below the price point or
    sometimes margins were so thin that companies would not
    continue to produce, particularly, older patented drugs. And
    the ability to keep competition in the generic marketplace has
    dramatically declined. In many areas, we may only have one
    generic.
        What tools has the administration proposed or can you or
    CMMI use to try to increase more generic competition and
    actually build enough of a market here where there might
    actually be, in addition to the brand, three or four generics
    to provide the kind of price competition that we need to bring
    drug prices down?
        Secretary Azar. I absolutely agree with you. And certainly,
    if you have any suggestions, I would welcome them.
        We are working, the FDA Commissioner is working, to ensure
    that as we have any product approaching sole-source status as a
    generic that we are making clear to the other manufacturers
    that that is a market opportunity. We will make expedited
    pathways for generic approval, streamlining any processes we
    have to get products to market there to compete and bring them
    in.
        We need to look on the reimbursement side. That is where
    the request for information has asked for insight there.
        Again, any help you can provide, ideas--open door, please.
        Senator Warner. I would love to sit down with you on that,
    because I do think with pricing transparency and, again, more
    knowledge within the marketplace of possible opportunities, we
    can actually see whether the market will perform or not or
    whether we need, as Senator Whitehouse and I tend to agree,
    other things to kind of spur this type of competition.
        Thank you, Mr. Chairman.
        The Chairman. Thank you, Senator.
        My partner would like to ask a question or two.
        Senator Wyden. Thank you, Mr. Chairman.
        I have one last pharmaceutical question and then a matter
    that we have to clear up. And I will do that as part of my
    closing remarks.
        Now, Mr. Secretary, earlier I asked you what you were doing
    to help the 42 million seniors on Medicare Part D with their
    skyrocketing prescription drug bills. You deflected the
    question by talking about other matters.
        And after asking you again what you were going to do to
    help the seniors on Part D--and I have your exact quote here--
    you said this morning you hope that the big drug companies will
    exercise pricing restraint.
        As we begin to wrap this up, Mr. Secretary, I just have to
    tell you, to get real pricing relief for those millions of
    seniors I have been asking about on Part D, it is going to take
    a whole lot more than your hopes that your former CEO pharmacy
    colleagues are just going to step in and help those seniors.
        So my last pharmaceutical question is going to deal with
    another matter that will determine whether we are actually
    going to get some results here or just continue to make these
    vague promises.
        Press reports indicate you and your office are negotiating
    directly with drug makers to lower the price of drugs like
    insulin for patients who pay cash for their drugs. Is that
    correct?
        Secretary Azar. That story was a mystery to everybody I
    have spoken to at my department. We have no idea what that was
    in reference to.
        Senator Wyden. So it is not correct.
        Secretary Azar. I am not aware of negotiating that CMS is
    doing around cash payment on any product.
        We are having discussions, of course, with drug companies
    that are thinking about decreasing their list prices to see if
    we can help clear barriers, do anything in the channel--as I
    have mentioned to you privately--working to see how that can be
    facilitated to drive prices down.
        But that story was a mystery to everyone I asked about it.
        Senator Wyden. Then let us make sure we understand what
    these conversations are all about. You do not see them as
    negotiating about anything.
        Secretary Azar. No. No. If companies are seeking to lower
    their prices and they are facing barriers from wholesalers or
    pharmacy benefit managers, we are attempting to see if we can
    clear any barriers that we have--regulatory, political, or
    otherwise--around that to help facilitate that.
        Also, you know, anything that we do, Senator--you made a
    statement about my previous answer, and I think you sort of
    cabined it as if it did not relate to Part D. Anything that we
    do to lower list prices will help our patients in Part D
    because of their cost sharing. Our five-point plan that is in
    our President's budget would decrease patient out-of-pocket
    cost sharing by tens of billions of dollars if only Congress
    will pass the five-point plan that we have.
        We want to fix the Stars system and protected-class system
    to allow genuine negotiation against the drug companies in Part
    D, where now they are not paying commercial-level rebates in
    Part D. We would empower greater competition there.
        Senator Wyden. Mr. Secretary, you are a smart fellow and
    good at this, but that is not what you said. You said----
        Secretary Azar. Well, I have said it now.
        Senator Wyden. Well, great. But you earlier said you hope--
    I am just reading it to you--you hope they will exercise
    restraint.
        Secretary Azar. That is one we can all--listen, I would
    love it if drug companies cut their drug prices just on their
    own now. It would be great also if there were no price
    increases. That is not our plan.
        Our plan is that we create the regulatory and financial
    incentives--competition, negotiation, out-of-pocket payment
    incentives--to lower list price. That is our plan. Those would
    simply be ancillary benefits.
        Our plan is to get that to happen by our actions. That is
    what I meant.
        Senator Wyden. Well, Mr. Secretary, I just want to wrap up
    with one other very disturbing aspect of the hearing.
        You told me a little bit ago that the Department has 2,047
    kids in its custody, so----
        Secretary Azar. That are separated. We have about 12,000
    unaccompanied minors in our program.
        Senator Wyden. So a little bit after you made that
    statement, you said the Department has 2,053 kids. And that was
    the same number that was reported 6 days ago.
        Secretary Azar. Actually, that was the number in a press
    release yesterday. By the evening, it was down to 2,047. It is
    obviously a fluid situation, but by evening--it is just the
    press release shows the 2,053. But as of last night, the last
    information is 2,047. We have them, they are in the system. It
    is not like there is a mystery here. It is just--as we outplace
    these kids to parents or to their relatives, that number will
    change.
        Senator Wyden. Mr. Secretary, the point is, in both of
    these areas that we have talked about today, and with respect
    to prescription drugs, I do not think you are going to fix the
    problem of skyrocketing prescription drug bills if your former
    industry colleagues get off the hook by your signaling at a
    hearing like this that you hope that something might happen.
        And I do not think we are going to solve this calamity of
    kids being separated from their parents at this kind of pace. I
    mean, no matter whether we are talking about 2,053 or 2,047, it
    is going to take you months and months and months to bring
    these kids back to their parents and back to safety.
        So on both counts, I sure hope--and you are a smart guy,
    there is no question about that--I sure hope we are going to
    see action rather than this continued effort to offer us rosy
    projections and happy thoughts that, for seniors, are not going
    to help them when they get mugged at the pharmacy window and,
    for the kids, are not going to help them get to safety anytime
    soon.
        Thank you, Mr. Chairman.
        The Chairman. Okay.
        Senator Whitehouse. Mr. Chairman, may I ask unanimous
    consent before we conclude?
        The Chairman. You want to ask a unanimous consent? Go
    ahead.
        Senator Whitehouse. I would like to, related to the imputed
    rural floor issue.
        The Chairman. Sure.
        Senator Whitehouse. I have a letter from the Hospital
    Association of Rhode Island expressing its concern about the
    boundary effects that this will create. Also, a letter from our
    Governor, Governor Raimondo, expressing her concern. And also,
    a delegation letter from the entire Rhode Island delegation to
    Administrator Verma.
        Mr. Chairman, this is important to us. It is not like----
        The Chairman. We will make those part of the record.
        [The letters appear in the appendix beginning on p. 166.]
        Senator Whitehouse. Thank you.
        The Chairman. Okay. Thank you.
        Senator Casey. Mr. Chairman?
        The Chairman. Yes?
        Senator Casey. I know we went to a second round, may I
    ask----
        The Chairman. No, we are not going to a second round. I
    think we have to respect--what?
        Senator Wyden. Can Senator Casey ask one question, like I
    did?
        The Chairman. Sure, you can ask one question, but I am not
    going to a second round.
        Senator Casey. Okay.
        The Chairman. I think the Secretary has been more than
    gracious. He has answered every question, and he has answered
    them well, as far as I am concerned.
        Go ahead.
        Senator Casey. Mr. Chairman, thank you.
        I know the Secretary has been here a while.
        Just very briefly. This issue of children at the border and
    the separation policy--I have said it is a policy straight from
    the pit of hell. I think most people agree with that.
        I know the executive order is in place. The problem,
    though, is zero tolerance led to the problem of separation.
    Zero tolerance will continue to separate children, unless you
    change and have alternatives to that policy.
        But here is my question. You have read, I know, Mr.
    Secretary, all of the statements made by medical professionals
    all across the country. This is one from The Washington Post,
    Dr. Charles Nelson, pediatrics professor at Harvard Medical
    School, quote: ``The effect on children'' would be, quote,
    ``catastrophic.''
        You heard from the Academy of Pediatrics. We have all read
    those statements about the adverse and long-term, permanent
    damage it does to children, some of those damages being
    inflicted as well even if they are with the parent in
    detention.
        So the one question I have for you is, what, if any, of
    these organizations that live their lives to give us
    information about the effect of policy like this on children,
    whether it is the Academy of Pediatrics, the American
    Psychiatric Association, for folks with children and
    individuals with disabilities, the Association of University
    Centers on Disabilities--did HHS in the lead-up to this policy
    or once the Attorney General announced zero tolerance, did you
    or anyone at HHS--and if you are aware, did anyone at the
    Justice Department--ever consult with the American Academy of
    Pediatrics?
        Secretary Azar. So first, I want to share your concern.
    None of us--none of us--wants impacts on these children, none
    of us wants the separation. We do everything we can to mitigate
    any impact on these children with mental health care, medical
    care, dental, vision, education, activities, athletics.
        We try to ensure as happy, as safe, as good an environment
    for these children through people who exercise real compassion
    on them.
        I am not aware of engagement with any of those particular
    groups. I believe Dr. Ellie McCance-Katz, our administrator for
    SAMHSA, has been working with ORR with her expertise, her
    psychiatric expertise. I believe that is the case.
        Certainly, our grantees are trained in and are expert in
    clinician care. Every child goes through mental health
    evaluation and mental health care when they are there. But it
    is not a desirable situation to have children separated from
    their parents.
        Listen, at the up-front, if the parents did not bring them
    across illegally, this would never happen. We are where we are
    in terms of--once they are separated, we want to reunite them.
    If Congress will get rid of the 20-day ban on family
    unification, we will act so quickly to get those kids back
    together with their parents. But as long as I have a court
    order not allowing that integration with the family, it blocks
    me.
        We want that to happen. We want the reunification. We want
    these kids well cared for.
        Senator Casey. Well, I know we have to go.
        But, Mr. Secretary, I will submit to you some questions in
    writing for you to answer as part of the record with regard to
    kids with a disability, kids with Down syndrome, how they are
    being cared for, how many kids you have under your care. So I
    will be submitting those for the record.
        Mr. Chairman, thank you for the extra time.
        The Chairman. Thank you, Senator.
        And I just want to say, you know, I have been here 42
    years. And I have seen a lot of witnesses in my time, and
    certainly a lot of them on health care, and a lot of witnesses
    who have been in your position. I have never seen a better
    witness than you. You are clearly very competent. You are
    clearly doing a really good job. You clearly have been saddled
    with some really, really tough problems. And I have confidence
    that you will handle them expeditiously and well.
        So I am really, really proud of you, to be honest with you.
    And I think everybody in America ought to be proud of you and
    ought to be glad that you are in this position.
        Finally, to add further clarity to what occurred on the
    Alexander-Collins stability package, I want to note that when
    Senator Collins asked for a unanimous consent agreement to call
    up and pass the amendment, Senator Murray objected. The
    Democrats seem to have no interest in working with us to
    stabilize the individual market. So it is nice to pretend
    otherwise, but that is really what happened. And it was pretty
    disturbing to me.
        Mr. Azar, I have been around a lot of Secretaries in my day
    and have chaired three major committees. You have had some of
    the worst problems I have seen in the history of my 42 years.
        And I want to personally extend my congratulations and
    compliment you for the efforts that you have put forth, for the
    work that you have done, for the care that you have exhibited,
    and for the kindness that I have seen.
        Keep it up. These are tough times; these are tough issues.
    These families are all suffering. These kids are in danger. And
    I am just glad you are there. And I think people ought to be
    thanking you rather than criticizing you.
        Well, I would like to thank everybody for their attendance
    here and participation today in this particular hearing. And
    again, thank you, Secretary Azar, for your excellent testimony.
        I ask that any member who wishes to submit questions for
    the record do so by the close of business on Tuesday, July
    10th.
        And with that then, this hearing is adjourned.
        [Whereupon, at 11:50 a.m., the hearing was concluded.]

                                A P P E N D I X

                  Additional Material Submitted for the Record

                                  ----------

            Prepared Statement of Hon. Alex M. Azar II, Secretary,
                    Department of Health and Human Services
        Mr. Chairman, Ranking Member Wyden, and members of the committee,
    thank you for the opportunity to appear before you to discuss an
    important issue: why prescription drug prices are too high, and what we
    are doing about it. I know members of this committee are serious about
    taking on this challenge.

        Drug pricing was one of the very first topics I mentioned when I
    appeared before this committee during my confirmation process earlier
    this year, and I appreciate the Finance Committee's efforts in this
    area.

        From Day One of his administration, President Trump has directed
    HHS to make drug pricing a top priority. Too many of our family
    members, neighbors, and friends have worked hard their entire lives
    only to see their savings wiped out just to afford drugs they need to
    live.

        Earlier this year, the President's 2019 Budget laid out a range of
    proposals for lowering drug prices, including through reforms to
    Medicare and Medicaid.

        In May, building on the budget, the President released a blueprint
    to put American patients first by lowering drug prices and reducing
    out-of-pocket costs. This blueprint is a plan of action for how to
    bring prices down while keeping our country the world's leader in
    biopharmaceutical innovation, and lays out dozens of possible ways HHS
    and Congress can address this vital issue. Some of these proposals came
    out of Congress, and we look forward to working with you as we take
    action.

        Over the last decade, four significant problems have arisen in the
    pharmaceutical market: high list prices set by pharmaceutical
    manufacturers; seniors and government programs overpaying for drugs due
    to lack of the latest negotiation tools; rising out-of-pocket costs;
    and foreign governments free-riding off of American investment in
    innovation.

        The President's blueprint lays out four strategies for tackling
    these problems, and we have begun to take action on each of them
    already.

        First, we need to create the right incentives for list prices. I
    know firsthand the serious problems with today's complex system of drug
    pricing. Right now, everyone in the system makes their money off of a
    percentage of list prices: both drug companies and pharmacy benefit
    managers, who are supposed to keep prices down. Everybody wins when
    list prices rise--except for the patient, whose out-of-pocket cost is
    typically calculated based on that price.

        One of HHS's initial actions is working to require drug companies
    to include their list price on their television commercials. For
    example, Americans deserve to know the price of a wonderful new drug
    they hear about on TV--before going to ask their doctor about a product
    they may find unaffordable. But more fundamentally, we may need to move
    toward a system without rebates, where PBMs and drug companies just
    negotiate fixed-price contracts. Such a system's incentives, detached
    from artificial list prices, would likely serve patients far better.

        Second, we need better negotiation for drugs within Medicare--that
    is what President Trump has promised, and it's what we're going to
    deliver.

        In Medicare Part D, HHS will work to give private plans the market-
    based tools they need to negotiate better deals with drug companies.
    Part D is a tremendously successful program, but it has just not kept
    pace with innovations in the private marketplace, leading seniors and
    taxpayers to lose out. Well-intended patient protections may be
    preventing prescription drug programs from appropriately managing
    utilization, even in accordance with the formulary created by doctors
    and pharmacists and approved by CMS. While everyone agrees in the
    importance of the drugs in Part D's protected classes list,
    manufacturers often use that list as protection from paying rebates.

        We also want to bring negotiation to Medicare Part B, physician-
    administered drugs. Right now, HHS just gets the bill, and we pay it.
    This system may actually be driving doctors to prescribe more expensive
    drugs, while potentially tempting drug companies to develop drugs that
    fit into Part B rather than D. We are going to look at ways to merge
    Part B drugs into Part D, to create competition where savings can be
    safely obtained, and leverage existing private-sector options within
    Part B.

        Third, we need a more competitive pharmaceutical marketplace.
    Thanks to the reforms Congress passed in the 1980s, America has the
    strongest generic drug market of any country in the world.

        But there are still too many ways that drug companies are unfairly
    blocking competition. Since the rollout of the Trump administration
    blueprint, FDA has publicized the names of companies who may be using
    safety programs to block competition, and issued two new guidances to
    help lessen the effects these actions may have on generic approvals.
    This work follows many FDA accomplishments under Commissioner Scott
    Gottlieb, including record-setting generic drug approvals in 2017 and
    measures to build on Congress's work to build a market for biosimilars.

        Finally, we need to bring down out-of-pocket costs for American
    patients. Patients should not be dropping their drug regimen because of
    high costs. Since the blueprint rollout, CMS has reminded Medicare Part
    D plans of its existing policy which requires plan sponsors to ensure
    enrollees pay the lesser of the Part D negotiated price or copay, or be
    subject to CMS compliance actions making it unacceptable to bar
    pharmacists from working with patients to identify lower cost options.
    More broadly, you ought to know how much a drug costs, how much it's
    going to cost you, and whether there are any cheaper options, long
    before you get to the pharmacy counter. We look forward to working with
    Congress and stakeholders to understand how best to deliver this level
    of transparency.

        Thank you again for having me here today. What I have laid out are
    just some elements of an aggressive, long-term plan to solve the
    problem we all care deeply about. I look forward to taking your
    questions and discussing ways we can work together to bring down
    prescription drug prices and help American patients.

                                     ______

           Questions Submitted for the Record to Hon. Alex M. Azar II
                   Question Submitted by Hon. Orrin G. Hatch
        Question. One of the world's most pressing public health problems
    is the emergence of bacterial infections that are resistant to
    antibiotics. According to the Centers for Disease Control and
    Prevention (CDC), at least 2 million Americans fall sick every year
    with antibiotic-resistant infections--and of that number, sadly,
    approximately 23,000 people die.

        Federally mandated infection control and stewardship programs,
    combined with clinical best practices, encourage limiting antibiotic
    use to appropriate cases. While reducing the inappropriate and
    unnecessary use of antibiotics can slow how quickly bacteria become
    resistant to current therapies, this alone will not solve the problem.

        Manufacturers must develop new or improved antimicrobials. But when
    used appropriately, antibiotic therapies designed to treat high-
    priority infections are generally going to be low-revenue, low-volume
    products. As a result, drug development in the antimicrobial space is
    expensive and risky. The financial reward to bring priority antibiotics
    to market is low. One study estimates that there have been sixteen new,
    brand name antibiotics approved for use since 2000. Only 5 generated
    annual sales of more than $100 million. Poor return on manufacturer
    investment as well as gaps in scientific research pose significant
    barriers to develop new and novel antibiotic therapies.

        At today's hearing we are examining ways to encourage greater
    prescription drug innovation, competition, and affordability. Part of
    that plan should include appropriately incentivizing drug manufacturers
    to create new antibiotics. Over the years, Congress has implemented a
    number of new policies to respond to this crisis. Specifically, in
    2012, legislation I authored called the Generating Antibiotic
    Incentives Now (GAIN) Act was signed into law. This law gave companies
    enhanced tools that encouraged development of new antibiotics and
    allowed an expedited FDA approval process for antibiotics that treat
    life-threatening infections.

        Mr. Secretary, I would like you to provide me specific and detailed
    recommendations outlining how you believe Congress and the
    administration--this time working together on solutions--can refine the
    Medicare inpatient prospective payment system to help hospitals cover
    the cost of new antimicrobial drugs that are designed to be used only
    as a last line of defense to treat resistant infections. Just last
    month FDA Commissioner Scott Gottlieb announced he has talked to CMS
    Administrator Verma about the feasibility of designing a new
    demonstration program focused on a license-based reimbursement model.
    While the specific details of this policy have not been publicly
    unveiled, I ask for your personal commitment to regularly provide me,
    and the other members of the Senate Finance Committee, updated
    information about the administration's work on this cross-agency
    initiative. It is critical that you share any research, data, and
    recommendations that identify ways Congress can improve current law in
    order to spur innovation in the antibiotic class.

        Answer. The increase in serious antimicrobial drug resistant
    infections is a critical public health concern and a growing threat to
    patients. Developing new drugs is a costly endeavor. If product
    developers know that they will not be able to recoup their investments,
    there may be reduced incentive to invest the significant money needed
    to discover and develop such a drug.

        We are currently discussing ideas as part of the FDA's broader
    policy work in this area. We plan to release more information soon and
    look forward to working with Congress as we further our thinking.

                                     ______

                   Questions Submitted by Hon. Chuck Grassley
                                      udi
        Question. Secretary Azar, Senator Warren and I have long supported
    the inclusion of medical device identifiers on the Medicare claim form
    \1\ and have urged both CMS and FDA to work together to implement this
    recommendation supported by HHS OIG \2\ and MedPAC.\3\
    ---------------------------------------------------------------------------
        \1\ Letter from Senator Elizabeth Warren and Senator Chuck Grassley
    to Marilyn Tavenner, Administrator, Centers for Medicare and Medicaid
    Services (December 22, 2014); letter from Senator Elizabeth Warren and
    Senator Chuck Grassley to Daniel Levinson, Inspector General,
    Department of Health and Human Services, August 12, 2015, https://
    www.grassley.senate.gov/sites/default/files/news/upload/
    2015.08.06%20UDI%20Letter%20to%20OIG.pdf; letter from Senator Elizabeth
    Warren and Senator Chuck Grassley to Sylvia Matthews Burwell,
    Secretary, Department of Health and Human Services, March 8, 2016,
    https://www.grassley.senate.gov/sites/default/files/news/upload/
    2016_03_09%20CEG%20to%20HHS%20regarding%20UDI.
    PDF; letter from Senator Elizabeth Warren and Senator Chuck Grassley to
    Gary Beatty, Chair, Accredited Standards Committee X12, August 29,
    2016, https://www.warren.senate.gov/files/documents/2016-8-
    29_UDI_letter_to_ASC_X12.pdf; ``Senators Warren and Grassley Comment on
    HHS Report on Medicare Savings From Inclusion of Medical Device
    Identifiers on Claim Forms,'' October 4, 2016, https://
    www.warren.senate.gov/?p=press_release&id=1270; letter from Senators
    Elizabeth Warren and Chuck Grassley to Seema Verma, Administrator,
    Centers for Medicare and Medicaid Services, November 8, 2017, https://
    www.warren.senate.gov/files/documents/
    2017_11_08_Letter_to_CMS_re_UDI_and_claims.pdf; letter from Senators
    Elizabeth Warren and Chuck Grassley to Scott Gottlieb, Commissioner,
    Food and Drug Administration, June 12, 2018, https://
    www.warren.senate.gov/imo/media/doc/2018.06.12%20Letter%20to%20
    Gottlieb%20on%20UDI%20and%20claims.pdf; letter from Senators Elizabeth
    Warren and Chuck Grassley to Seema Verma, Administrator, Centers for
    Medicare and Medicaid Services, November 8, 2017, https://
    www.warren.senate.gov/files/documents/2017_11_08_Letter_to_CMS
    _re_UDI_and_claims.pdf; letter from Seema Verma, Administrator, Centers
    for Medicare and Medicaid Services, to Senators Warren and Grassley,
    January 8, 2018; letter from Senators Elizabeth Warren and Chuck
    Grassley to Scott Gottlieb, Commissioner, Food and Drug Administration
    June 12, 2018, https://www.warren.senate.gov/imo/media/doc/
    2018.06.12%20Letter%20
    to%20Gottlieb%20on%20UDI%20and%20claims.pdf.
        \2\ Department of Health and Human Services Office of Inspector
    General, ``Shortcomings of Device Claims Data Complicate and
    Potentially Increase Medicare Costs for Recalled and Prematurely Failed
    Devices,'' September 2017, https://oig.hhs.gov/oas/reports/region1/
    11500504.
    pdf.
        \3\ Medicare Payment Advisory Commission, ``Report to the Congress:
    Medicare and the Health Care Delivery System,'' June 2017, p. 234,
    http://medpac.gov/docs/default-source/reports/
    jun17_reporttocongress_sec.pdf.

        Do you agree with HHS OIG and MedPAC that including device
    identifier information in the Medicare claim form could improve
    identification and tracking of medical devices and strengthen post-
    ---------------------------------------------------------------------------
    marketing safety efforts at the FDA?

        In addition, do you feel the addition of device identifier
    information to the Medicare claim form could be a crucial addition to
    the program integrity of Medicare?

        Answer. It is CMS's understanding that the Accredited Standards
    Committee X12 (ASC X12) proposed package for the next version of the
    claims form will include the device identifier (DI) portion of the
    unique device identifier (UDI) for high-risk implantable devices
    between willing trading partners. After ASC X12 moves forward the
    package for the next version of the claims form, the process continues
    with consideration by the National Committee on Vital and Health
    Statistics (NCVHS). NCVHS may hold hearings and obtain input from
    stakeholders in preparation for development of its recommendations to
    HHS. CMS looks forward to receiving recommendations from NCVHS and the
    completion of the standards development process. CMS would then
    consider whether to proceed with notice and comment rulemaking, which
    would be necessary to adopt the standards.
                             liver transplants/unos
        Question. On June 27, 2018 a bipartisan Iowa delegation wrote your
    office regarding the Organ Procurement and Transplantation Network/
    United Network for Organ Sharing (OPTN/UNOS) and a proposal published
    in August of 2016 titled Redesigning Liver Distribution.

        The delegation expressed grave concerns about this proposal as the
    University of Iowa estimates it would reduce by 15 percent the number
    of liver transplants performed annual at UI (the only liver transplant
    center in Iowa).

        The letter went on to say that a compromise was reached by the OPTN
    board in December 2017. Our letter was written to draw this important
    topic to your attention.

        Will you work with my office and the offices of the State of Iowa
    to ensure that the distribution of livers for transplantation remains
    fair and unbiased?

        Answer. The Health Resources and Services Administration (HRSA) is
    committed to ensuring fairness and equity in organ allocation policies
    consistent with the statutory and regulatory requirements. HRSA
    continues to rely on the independent expertise of the Organ Procurement
    and Transplantation Network (OPTN) and its members, which includes
    stakeholders that are part of the transplant community and other
    interested members of the public, to consider and address the
    requirements of the OPTN final rule as organ allocation policies are
    developed and revised. This approach ensures that transplant
    professionals who directly engage in patient care as well as transplant
    patients, donors, and donor family members have the opportunity to
    bring their experiences and public comments directly to the process of
    developing organ allocation policies.

        HRSA encouraged all stakeholders and members of the public with an
    interest in liver allocation policy to share their views with the OPTN
    as part of the public comment process. The OPTN will continue to
    evaluate any proposed liver allocation policy in light of all of the
    requirements of the OPTN Final Rule, public comments received, and any
    relevant data.
                         dir fees and pbm transparency
        Question. Recently, you stated that you will direct HHS' OIG to
    study PBM practices specifically as they impact community pharmacies.
    Given the lack of transparency surrounding PBM practices, how will this
    study or other efforts by the administration bring increased
    transparency to PBMs keeping ``spread'' profits that effectively
    increase patients' out-of-pocket costs?

        Will a study address retroactive DIR fees that also effectively
    increase patients' out-of-pocket costs?

        Answer. The Department believes addressing the role of PBM
    practices under the Part D program is an important component to
    addressing high drug prices for American consumers. As pointed out in
    the President's blueprint to lower drug prices, because health plans,
    pharmacy benefit managers (PBMs), and wholesalers receive higher
    rebates and fees when list prices increase, there is little incentive
    to control list prices. Consumers, however, pay higher copayments,
    coinsurance, or pre-deductible out-of-pocket costs when list prices
    rise. The President's blueprint recognizes the major role played by
    PBMs in using new utilization management tools to widen the gap between
    list prices and net prices. Such recognition is a starting point for
    debating and considering potential policy alternatives to ameliorate
    these misaligned incentives in the Part D program.

        In releasing the blueprint, the Department also issued a Request
    for Information (RFI) on issues raised by the blueprint, including
    comment from stakeholders on possible changes to the Part D benefit
    structure. Further, CMS issued a RFI as part of the 2019 proposed Parts
    C and D rule (CMS-4182-P) which sought feedback from stakeholders
    regarding issues relating to Part D drug prices in which PBMs play a
    major role. The Part C/D Drug Pricing rule recently proposed by CMS
    describes action it is considering in future benefit years to address
    retrospective pharmacy DIR.

        Additionally, the President's FY 2019 budget contains several
    policies to modernize the Part D drug benefit to improve plans' ability
    to deliver affordable drug coverage for seniors and reduce their costs
    at the pharmacy counter, including efforts to address the misaligned
    incentives of the Part D drug benefit structure, such as requiring
    Medicare Part D plans to apply a substantial portion of rebates at the
    point of sale.
                          drug prices and competition
        Question. In the President's blueprint to lower drug prices, the
    need to increase competition is highlighted. In addition, the blueprint
    focuses on the need to end the gaming of the regulatory processes that
    keep drug prices high or that hinder generic competition. I could not
    agree more.

        S. 974, CREATES, is a bill that targets abuses that undermine free-
    market competition and the integrity of the Hatch-Waxman Act process.
    The CREATES Act will actually send more parties to the bargaining table
    instead of the courtroom by improving and streamlining existing
    litigation options. CBO estimates that the CREATES Act would save
    Federal programs approximately $3.8 billion by increasing generic drug
    competition and associated cost savings.

        Will the administration offer its support for CREATES?

        Answer. The administration supports the goal of preventing the
    delay or deterrence of generic drug and biosimilar development by
    ensuring that interested developers have access to the reference listed
    drug (RLD) or reference product supplies they need to support generic
    and biosimilar applications.
                                   lymphedema
        Question. One and one-half million Medicare beneficiaries suffer
    from a medical condition called lymphedema. According to a 2001 CMS
    decision memo (CAG 00016N), Medicare beneficiaries with lymphedema were
    advised to use compression garments in between pneumatic pump sessions
    (and occupational and physical therapy sessions) to prevent re-
    accumulation of fluid and worsening of the condition. One year later, a
    National Coverage Determination policy (# 280.6) stated that
    compression garments must be included as part of a conservative
    treatment regimen for this condition.

        In 2004, CMS determined that for an item to be covered by Medicare
    it must fall under at least one statutorily defined benefit category.
    CMS has determined the lack of coverage in these situations was because
    compression garments did not fall under one of these categories.
    However, FEHBP (BC/BS), Tricare, VA, and many State Medicaid programs
    recognize and cover compression garments as DME.

        Would you please review the CMS regarding whether compression
    garments for the treatment of lymphedema should be considered DME for
    Medicare purposes as well? This would seem to be consistent with
    previous CMS decision memos and NCDs.

        Answer. In order for compression garments to be covered by
    Medicare, they would have to meet the definition of a Medicare-covered
    benefit category. CMS has carefully considered Part B coverage of
    compression garments and found that these items do not qualify. CMS is
    happy to provide you and your staff with technical assistance as you
    consider legislation on this subject.
                                      340b
        Question. With so many different terms used to talk about hospital
    ``charity''--uncompensated care, charity care, community benefit--it is
    imperative that the metric used most accurately reflects direct benefit
    to the most vulnerable patient populations.

        In the President's FY 2019 Budget, the administration proposed
    restructuring the 340B program by redistributing hospital 340B program
    savings to hospitals providing a minimum level of charity care, set at
    uncompensated care levels of 1 percent of patient costs. What data did
    you utilize to support setting a charity care level of 1 percent as a
    requirement for hospitals to receive redistributed 340B savings? Is
    there additional data that you do not currently have that you need? HHS
    has asked for additional transparency surrounding charity care in the
    proposed IPPS payment rule. What insights is HHS hoping to gain? What
    other data points or metrics are needed here? Does HHS have the
    appropriate authority to gather this data?

        Answer. The President's FY 2019 Budget would modify hospital
    payment for drugs acquired through the 340B drug discount program by
    rewarding hospitals that provide charity care and reducing Medicare
    payments for 340B drugs to hospitals that provide little to no charity
    care. Under a regulation that went into effect in calendar year 2018,
    certain Medicare Part B payments for 340B drugs have been reduced to
    better reflect the minimum average discount 340B hospitals receive.
    Current law requires the savings to be redistributed within the payment
    system in a budget neutral manner. Under the FY 2019 budget proposal,
    the savings from hospitals that provide uncompensated care equaling at
    least one percent of their patient care costs would be redistributed
    based on their share of aggregate uncompensated care. Hospitals not
    meeting that threshold would not be eligible for the redistribution and
    the savings from their payment reduction will be returned to the
    Medicare Trust Funds.

        CMS currently distributes a prospectively determined amount to
    Medicare disproportionate share hospitals based on their relative share
    of uncompensated care nationally. In the fiscal year 2019, Hospital
    Inpatient Prospective Payment System final rule, CMS requires Medicare
    disproportionate share-eligible hospitals to submit a detailed listing
    of its charity care and uninsured discounts corresponding to the amount
    claimed in the hospital's cost report. Currently, charity care, as well
    as discounts given to uninsured patients who qualify under the
    hospital's charity care or financial assistance policy, are included in
    a hospital's total uncompensated care. With this additional information
    on a hospital's charity care and uninsured discounts, CMS will be
    better able to ensure the accuracy of payments for uncompensated care
    under section 1886(r) of the Social Security Act.

                                     ______

                    Questions Submitted by Hon. John Cornyn
                              medicaid best price
        Question. Secretary Azar, pharmaceutical manufacturers that
    voluntarily participate in Medicaid are required to pay rebates to
    States on covered outpatient drugs, which help Medicaid receive
    manufacturers' lowest or best price. The administration's blueprint
    asks, ``Does the best price reporting program pose a barrier to price
    negotiation and certain value-based agreements in other markets, or
    otherwise shift costs to other markets?''

        Is the administration considering safe harbors or other mechanisms
    to allow for value-based agreements? Would you need additional
    authorities from Congress in order to take those steps?

        How would changes to best price affect other payers?

        Answer. As the President's blueprint to lower drug prices notes,
    the Department is considering further use of value-based purchasing in
    Federal programs, including indication-based pricing and long-term
    financing. For example, the Department is reviewing comments solicited
    in the blueprint on the relationship between such programs as Medicaid
    Best Price requirements on efforts to promote value-based arrangements
    in the States.

        Additionally, under current Federal law, drug manufacturers must
    provide Medicaid programs the best prices for prescription drugs that
    they offer to any wholesaler, retailer, provider, HMO, nonprofit
    entity, or governmental entity within the United States. The
    President's FY 2019 budget proposes a new statutory demonstration
    authority that will allow up to five States to test a closed formulary
    under which they negotiate prices directly with manufacturers, rather
    than participating in the Medicaid Drug Rebate Program. Prices
    negotiated under this demonstration will also be exempted from Best
    Price reporting. I am happy to work with Congress regarding this
    proposal.
                                  biosimilars
        Question. Biologics are a rapidly growing class of drugs that treat
    complex diseases like cancer, rheumatoid arthritis, and Crohn's
    disease. While we have seen a robust generic market with small molecule
    drugs (over 1,000 generic approvals in 2017), we have not seen the same
    development of biosimilars to increase competition and provide more
    choices to patients. For instance there are currently 10 FDA-
    approved biosimilars yet only three are currently being marketed.

        What payment policies has the administration implemented to date to
    support the uptake of biosimilars? Are there instances in Federal
    programs, for example under the new 340B payment rate, where
    biosimilars could be disadvantaged?

        I understand that FDA has developed educational materials to better
    inform physicians about biosimilars, and had launched an educations
    campaign in late 2017 to help providers gain a better understanding of
    these products. Has CMS considered disseminating those materials to
    providers to increase their utilization?

        Answer. CMS is committed to providing physicians with the resources
    and information they need to provide high quality care to their
    patients. Through the CMS website, we offer numerous resources for
    providers, including the ability to subscribe to the MLN (Medicare
    Learning Network) Connects Provider eNews weekly electronic
    publication with the latest Medicare program information. CMS has sent
    several MLN Connects newsletters with information on biosimilars,
    along with a newsletter \4\ about payment for biosimilar products. CMS
    has also published several informational materials to inform providers
    about important payment policy changes as they relate to biosimilars.
    ---------------------------------------------------------------------------
        \4\ https://www.cms.gov/Outreach-and-Education/Medicare-Learning-
    Network-MLN/MLNMat
    tersArticles/Downloads/SE1509.pdf.

        In the calendar year 2018 Medicare Physician Fee Schedule final
    rule, CMS changed the Part B biosimilar payment policy to provide for
    the separate coding and payment for products approved under each
    individual abbreviated application, rather than grouping all
    biosimilars with a common reference product into codes. We believe that
    this policy change will encourage greater manufacturer participation in
    the marketplace and the introduction of more biosimilar products, thus
    creating a stable and robust market, driving competition and decreasing
    ---------------------------------------------------------------------------
    uncertainty about access and payment.

        In addition, in the calendar year 2019 Hospital Outpatient
    Prospective Payment System rule, we changed to our Medicare Part B drug
    payment methodology for biosimilars acquired under the 340B Program.
    Specifically, we will pay biosimilars not on pass-through payment
    status acquired under the 340B program at ASP minus 22.5 percent of the
    biosimilar's Average Sales Price (ASP) instead of the biosimilar's ASP
    minus 22.5 percent of the reference product's ASP. We agreed with
    concerns that stakeholders raised about the current payment policy that
    it could unfairly lower the price of biosimilars without pass-through
    payment status that are acquired under the 340B program. We stated that
    we believe that these changes would better reflect the resources and
    production costs that biosimilar manufacturers incur and that this
    approach is more consistent with the payment methodology for 340B-
    acquired drugs and biologicals, for which the 22.5 percent reduction is
    calculated based on the drug or biological's ASP, rather than the ASP
    of another product.

        Question. Additionally, the blueprint asks, ``Are government
    programs causing underpricing of generic drugs, and thereby reducing
    long-term generic competition?'' Is the administration also looking at
    whether Federal program pricing is also reducing long-term biosimilar
    competition?

        Answer. The administration is taking a holistic look at the issue
    of prescription drug pricing, including effects of Federal program
    pricing in the marketplace.

        Question. FDA is in the process of developing a Biosimilar Action
    Plan that is supposed to be geared toward promoting biosimilar entry
    into the market. Can you share when the plan is expected to be released
    and if the plan may include revisions to how the agency treats
    manufacturing issues for reference biologics?

        Answer. In July, FDA released a Biosimilars Action Plan. This plan
    is an important piece of the administration's bold Blueprint to Lower
    Drug Prices and demonstrates the progress being made against the
    deliverables the President laid out.

        The plan is aimed at promoting competition and affordability across
    the market for biologics and biosimilar products. Our Biosimilars
    Action Plan applies many of the lessons learned from our experience
    with generic drugs to accelerate biosimilar competition with four key
    strategies.

        First, improving the efficiency of the biosimilar and
    interchangeable product development and approval process. Second,
    maximizing scientific and regulatory clarity for the biosimilar product
    development community. Third, developing effective communications to
    improve understanding of biosimilars among patients, providers, and
    payors. And fourth, supporting market competition by reducing gaming of
    FDA requirements or other attempts to unfairly delay market competition
    to follow-on products.
                           rebates and anti-kickback
        Question. The administration's blueprint suggests that the OIG
    could remove the anti-kickback statutes safe harbor for drug
    manufacturer rebates and you've talked about moving to fixed-price
    discounts. But as we understand a 22-year-old class-action lawsuit
    settlement, manufacturers may be reticent to move to up-front volume
    discounts for payers to replace rebates.

        How would the fixed-price discounts you've talked about work? Would
    they require a change to antitrust law for manufacturers to be willing
    to provide them?

        Answer. This proposal aims to change the incentives in our system
    that reward list price increases. Removing the anti-kickback safe
    harbor for rebates and replacing it with a safe-harbor for up front
    discounts would encourage the drug industry to shift toward a system
    that offers true discounts to the patient at the point of sale.

        Drug companies pay rebates and other payments to PBMs, but these
    payments are not reflected in patient out-of-pocket drug costs. The
    average difference between the list price of a drug and the net price
    after a rebate is 26 to 30 percent. These rebates, negotiated in
    Medicare Part D and private plans, are typically not used to reduce
    patients' cost sharing for a particular drug.

        By removing the safe harbor for rebates and creating one for point-
    of-sale discounts, drug manufacturers will be encouraged to offer
    discounts that may drive volume for their product, because patients who
    have out-of-pocket costs based on the discounted price will save. This
    includes patients who are spending through a deductible, using a drug
    not covered by their insurance, or who pay co-insurance on the price at
    point of sale. It would also better align patients and plans'
    incentives to prefer drugs with larger up-front discounts, which would
    encourage plans to offer preferential formulary position for drugs with
    greater discounts.
                            indication-based pricing
        Question. The administration's blueprint includes actions HHS may
    take to increase competition. One of those actions would be to evaluate
    options to allow high-cost drugs to be priced or covered differently
    based on their indication. Currently, Part D plans must cover and pay
    the same price for a drug regardless of the indication for which it is
    prescribed.

        How would you operationalize indication-based pricing in Part D?
    What authorities would you need to do so?

        Answer. On August 29, 2018, CMS announced additional flexibilities
    in the Medicare Part D program to allow for innovative formulary design
    as a valuable approach to expand drug choices and address the challenge
    of high drug costs for seniors and government programs. This includes
    giving Part D plan sponsors the choice of implementing indication-based
    formulary design beginning in CY 2020.

                                     ______

                     Question Submitted by Hon. John Thune
        Question. As we continue to drive toward quality and outcomes-based
    reimbursement, I am interested in the inclusion of value-based
    arrangements in the President's blueprint. I understand that FDA issued
    guidance intended to help in facilitating these arrangements a couple
    of weeks ago with respect to manufacturer communication with payors. Do
    you expect that CMS will issue guidance on this topic as well? How much
    will the administration be able to pursue through regulatory action and
    what would be needed from Congress to apply this idea in the Medicare
    and Medicaid space?

        Answer. If you talk to any patient about what they want from health
    care, it is outcomes, not process. The outcome that we want is that
    when a relative leaves that rehab hospital, he'll be walking out the
    door, rather than leaving in a wheelchair. But when the model involves
    paying for outcomes, we expect to see some real results. This should be
    no surprise: Incentives work. People respond to bonuses, but they
    really respond to penalties.

        So we are especially interested in ways that we can expand outcome-
    based payment and sharing of risk to as many sectors of the healthcare
    system as possible. A broken drug pricing system, always under threat
    of price controls or national formularies, is not going to support the
    next generation of cures. We need a real market for drugs, one that
    encourages competition and serves the consumer. We are open to ideas
    about how to get there.

                     Questions Submitted by Hon. Ron Wyden
                         part d noninterference clause
        Question. Under current law, the ``noninterference'' clause
    stipulates that the Secretary of the Department of Health and Human
    Services (HHS) ``may not interfere with the negotiations between drug
    manufacturers and pharmacies and PDP sponsors''--this explicitly
    prohibits the Secretary from negotiating directly with drug
    manufacturers on behalf of Medicare Part D enrollees.

        During the hearing, you stated that your office has been ``having
    discussions . . . with drug companies that are thinking about
    decreasing their list prices to see if we can help clear barriers.''
    One barrier you identified in the hearing was pharmaceutical benefit
    managers (PBMs), many of whom offer Part D prescription drug plans
    (PDPs).

        Since the hearing, despite your ``hopes'' that drug manufactures
    would practice restraint, news reports are riddled with examples of
    manufacturers increasing their prices since the administration
    announced its Blueprint. It is obvious your discussions have not
    worked.

        Describe the activities and discussions you have had with
    individual drug manufacturers in an effort to ``clear barriers'' and
    how do those discussions differ from what is prohibited under the non-
    interference clause?

        Answer. President Trump and I have committed to the American people
    that we will work to lower the list prices of prescription drugs. We
    are delivering on that commitment. However, there is no single silver
    bullet that solves the problem of high drug prices. That is why I
    testified before your committee that Congress has a role to play as
    well, and I stand ready to meet with you on how we can accomplish this
    goal together.

        Question. If some of the barriers you have identified are practices
    by PBMs or PDP sponsors, have you engaged in similar conversations with
    PBMs or PDP sponsors in an effort to have those practices changed? If
    so, how do those discussions differ from what is prohibited under the
    non-interference clause?

        Answer. Yes. Our proposed rule to change the system of rebates
    under the anti-kickback safe harbor aims to address these barriers.
    Major drug companies have told us that they have at times tried to make
    substantial and material price decreases, but the current system made
    it difficult to do so, showing just how broken our system of drug
    prices and drug distribution is in the United States. I would encourage
    the Congress to ask pharmacy benefit managers whether they have been
    approached by drug companies about lowering their list prices and what
    has the reaction been. Manufacturers set their prices, but the current
    distribution system is not necessarily making it easier to lower them.

        HHS is not counting on voluntary price reductions from drug
    companies. We are instead focusing on reversing the incentives that
    keep list prices high.

        Question. Please provide an update on President Trump's promise 6
    weeks ago that drug manufacturers would be lowering their prices
    voluntarily? How many manufacturers have announced plans to lower
    prices? For which drugs? And by how much?

        Answer. The industry and Congress can and should take specific
    action to lower list prices of drugs. For example, the industry could
    move further to a fixed price discount system at the point of sale.
    There's nothing stopping them. There's nothing stopping pharmacy
    benefit managers from changing the contracts they have with their plans
    or their employers to enable discount pricing or to move to net pricing
    regimes and away from guaranteed rebate structures that lock in
    existing incentives toward ever higher list prices.

        Americans are already seeing real results thanks to President
    Trump's efforts. In the 100 days following the release of the
    President's sweeping blueprint to lower drug costs, there were 60
    percent fewer brand-drug price increases and 54 percent more generic
    and brand-drug price decreases, compared to the same time period in
    2017.

        More than a dozen drug companies reduced their list prices, rolled
    back planned price increases, or froze their prices for the rest of the
    year.

        Congress can and should evaluate the Obamacare giveaway to drug
    manufacturers that caps rebates in the Medicaid program, which benefits
    actors who increase list prices faster than the rate of inflation, and
    Congress can and should act to get rid of the abuse of the 180-day
    generic exclusivity window currently being abused by generic and
    branded pharmaceutical companies to delay entry of competitive generic
    products.
         requiring foreign governments to pay more for pharmaceuticals
        Question. The blueprint indicates that HHS will support better
    negotiation of drug prices by working with the Department of Commerce,
    the U.S. Trade Representative (USTR), and the U.S. Intellectual
    Property Enforcement Coordinator to develop the knowledge base needed
    to ``address the unfair disparity between drug prices in America and
    other developed countries.'' The blueprint additionally suggests that
    the administration will make regulatory changes and request legislative
    reforms in connection with this initiative.

        What specific policies is the administration considering to
    increase the amount foreign countries pay for their drugs?

        Answer. The administration recently released an advanced notice of
    proposed rulemaking to seek feedback on a potential payment and service
    delivery model for Medicare Part B drugs known as the ``International
    Pricing Index model.'' This model would test the success of an
    international referencing pricing index that encourages manufacturers
    to either lower the prices of the drugs they sell to Americans under
    Medicare Part B to be more in line with the prices that patients in
    other developed countries pay, or to increase the prices paid by those
    countries.

        Question. How will the administration ensure that raising prices in
    other countries will result in drug makers voluntarily lowering their
    prices here in the U.S. to decrease costs for American patients?

        Answer. Pursuant to the President's blueprint to lower drug prices,
    the administration is updating a number of historical studies to
    analyze drug prices paid in countries that are a part of the
    Organisation for Economic Co-operation and Development (OECD).
            shifting drugs from medicare part b to medicare part d:
                  impact on beneficiaries' out-of-pocket costs
        Question. Similar to a policy included in the President's FY 2019
    Budget, the Blueprint directs HHS to identify instances in which moving
    a drug from Medicare Part B to Medicare Part D would be appropriate.
    Stakeholders have raised concerns that shifting drugs from Part B to
    Part D could result in higher out-of-pocket costs for some Medicare
    beneficiaries and negatively impact beneficiaries' access to needed
    medications, particularly for those beneficiaries who do not currently
    have Part D coverage. A recent analysis by Avalere found that in 2016
    average out-of-pocket costs for Medicare beneficiaries were about 33
    percent higher for Part D-covered new cancer therapies than for those
    covered in Part B.

        As HHS Secretary, will you guarantee that no Medicare beneficiary
    will be faced with higher out-of-pocket costs under the proposal to
    shift drugs from Part B to Part D described in the President's FY 2019
    budget and the blueprint?

        What are the specific mechanisms that would prevent increased out-
    of-pocket costs for Medicare beneficiaries as a result of shifting
    drugs from Part B to Part D, including those beneficiaries who do not
    currently have Part D coverage?

        Please describe in detail the criteria that HHS will use to
    determine which drugs would be appropriate to move from Part B to Part
    D. How will HHS evaluate and weigh the impact on beneficiaries' out-of-
    pocket costs in the context of that determination?

        What is the anticipated timeline for HHS to identify drugs that
    would be appropriate to move from Part B to Part D as required by the
    blueprint?

        Will that information be made publicly available? If so, how and
    when?

        Answer. I look forward to working with Congress to explore ways
    that we can bring the negotiation strategies that are currently working
    in Medicare Part D, where we receive deals like the commercial
    marketplace, into Part B, where prices are modestly negotiated by
    providers though Medicare does not have a role in these negotiations. I
    hope to work with you and your colleagues to develop legislation that
    will provide us with the authority to re-classify Part B drugs into
    Part D when appropriate, while taking into consideration the projected
    impacts on beneficiary access and cost-sharing, as well as costs to the
    Medicare program.
        competitive acquisition program for part b drugs and biologicals
        Question. The blueprint indicates that HHS may use the existing
    authority for the Competitive Acquisition Program (CAP) for Part B
    Drugs & Biologicals to provide physicians a choice between obtaining
    Part B drugs and biologicals from vendors selected through a
    competitive bidding process or continuing to purchase these drugs as
    they do today.

        Please describe in detail how HHS plans to structure and implement
    the CAP described in the blueprint under the existing authority.

        The CAP that was in place from mid-2006 through 2008 faced
    challenges due to low physician enrollment and the vendor's limited
    ability to negotiate discounts. How will the CAP described in the
    blueprint differ from the CAP that was in place from mid-2006 through
    2008?

        Under the CAP described in the blueprint, what specific tools would
    vendors have to negotiate discounts?

        How would payments to vendors and providers be structured?

        How would any savings achieved be distributed among providers,
    beneficiaries, vendors, and the Medicare program?

        Does HHS plan to monitor and evaluate the effect of the CAP on
    Medicare beneficiaries' access to Part B drugs and biologicals and the
    quality of care provided to beneficiaries? If so, please describe in
    detail how HHS will monitor and evaluate access and quality of care.

        What is the anticipated timeline for HHS to implement the CAP
    described in the blueprint?

        Answer. Currently, Medicare payment for separately payable
    outpatient drugs in physician offices, hospital outpatient departments,
    and certain other settings is generally based on drug manufacturers'
    average sales prices in the United States plus a six percent add-on
    payment (ASP +6 percent), and is subject to the sequestration, which
    effectively reduces the add-on to +4.3 percent. The dollar amount of
    the add-on is larger as drug prices increase, which may encourage
    physicians to prescribe higher-cost drugs, and raise beneficiary and
    program spending.

        The Competitive Acquisition Program (CAP) for Part B drugs and
    biologicals, in section 1847B of the Social Security Act (the Act), is
    an alternative to the ASP methodology that is used to pay for the
    majority of separately payable Part B drugs. Under the CAP, which
    operated for a limited time (July 1, 2006, until December 31, 2008),
    instead of buying drugs for their offices, physicians who chose to
    participate in the CAP placed a patient-specific drug order with an
    approved CAP vendor, and the vendor provided the drug to the office and
    then billed Medicare and collected cost-sharing amounts from the
    patient.

        Recently, we have heard from stakeholders, including physician and
    hospital groups, manufacturers, distributors, and beneficiary
    advocates, that a CAP-like approach with substantial improvements,
    particularly in regards to onsite availability of drugs, could
    potentially address concerns about the financial burdens associated
    with furnishing Part B drugs and their rising costs. CMS sought input
    on all of these considerations in the CY 2019 OPPS/ASC proposed rule
    and its recent ANPRM for an International Pricing Index (IPI) Model for
    Medicare Part B Drugs.

        CMS intends to utilize a number of private-sector vendors that
    would supply physicians, hospital outpatient departments, and other
    included providers and suppliers with the drugs and biologicals that
    CMS decides to include in the model. Similar to the CAP, the model
    vendors, rather than the health care providers, would take on the
    financial risk of acquiring the drugs and would also bill for the
    drugs. Instead of paying the model vendors based on bid amounts, as
    section 1847B of the Act prescribes, under the IPI model, Medicare
    would pay the vendor for the included drugs based on the target price
    driven by the international pricing index, which would lower both the
    amount Medicare pays for included drugs and beneficiary cost-sharing.

        The model vendors would have flexibility to offer innovative
    delivery mechanisms to encourage physicians and hospitals to obtain
    drugs through the vendor's distribution arrangements, such as
    electronic ordering, frequent delivery, onsite stock replacement
    programs, and other technologies. We plan to provide physicians and
    hospitals in the model test areas with an opportunity to select the
    vendors that best provide customer service and support beneficiary
    choice of treatments. Physicians and hospitals would be able to
    contract with multiple vendors for different drugs and to change
    vendors. Vendors would not operate formularies. CMS seeks comment in
    the IPI Model ANPRM on whether group purchasing organizations,
    wholesalers, distributors, specialty pharmacies, Part D sponsors, and
    potentially individual or groups of physicians and hospitals and/or
    manufacturers could perform the role of model vendor.
                               medicaid expansion
        Question. Nearly 12 million low-income Americans gained access to
    quality, affordable health care under the Medicaid expansion. As a
    result, millions of previously uninsured Americans now have access to
    affordable prescription drug coverage for essential medications like
    insulin for diabetes, oncology drugs for cancer, and medication-
    assisted treatment to help tackle substance use disorders. Yet, the
    President's FY 2019 budget request proposes slashing Medicaid by $1.4
    trillion and eliminating the Medicaid expansion. These severe funding
    cuts could force States to eliminate optional benefits, such as
    coverage for prescription drugs.

        Please explain how gutting Medicaid and repealing the Medicaid
    expansion supports State efforts to help millions of Americans to
    access and afford vital prescription drugs?

        Answer. The FY 2019 budget establishes a block grant or per capita
    cap for the traditional Medicaid populations and repeals the ACA
    Medicaid expansion. States would have the option to cover the former
    Medicaid expansion population through the new Market-Based Health Care
    Grants included in the Graham-Cassidy-Heller-Johnson legislation. These
    new financing mechanisms will harmonize the treatment of States over
    time and allow States to better target resources to their most needy
    citizens. To that end, we need reforms to provide States flexibility to
    design their Medicaid programs to meet the spectrum of diverse needs of
    their Medicaid populations. Currently, outdated Federal rules and
    requirements prevent States from pioneering delivery system reforms and
    from prioritizing Federal resources to their most vulnerable
    populations, which hurts access and health outcomes. Reforms like block
    grants, when paired with additional authority and flexibility, can
    incentivize and empower States to develop innovative solutions to
    challenges like high drug costs and fraud, waste, and abuse. We must
    make health care more tailored to what individuals want and need in
    their care. The President's FY 2019 budget takes a significant step in
    that direction by putting the Medicaid program on a sustainable course
    and returning local healthcare decisions back to where they should be
    made.
                            epipen misclassification
        Question. Since the fourth quarter of 1997, EpiPen, now owned by
    Mylan Pharmaceutical, appears to have been incorrectly reported as a
    generic drug. As a result, Medicaid grossly overpaid for EpiPen by not
    getting its full due in rebates. After my letters to your predecessor
    and public outcry on this issue, Mylan agreed to settle with the
    Department of Justice in August 2017 and pay $465 million to resolve
    claims that they knowingly misclassified EpiPen as a generic drug to
    avoid paying rebates owed to Medicaid. However, the reality is that
    they paid less to settle than what they should have paid in rebates in
    the first place. An analysis by the U.S. Department of Health and Human
    Services' Office of Inspector General released this past year found the
    U.S. government may have in essence overpaid EpiPens by as much as
    $1.27 billion between 2006 and 2016.

        What actions do you think Congress should take to ensure companies
    like Mylan cannot get away with short shrifting taxpayers and the
    Medicaid program as they have done with the EpiPen?

        Answer. The President's FY 2019 budget contained a legislative
    proposal to remove ambiguity regarding how drugs should be reported
    under the Medicaid Drug Rebate Program so that manufacturers pay their
    fair share in rebates. As indicated in the blueprint, HHS is also
    manually reviewing each new drug that has been reported in the Medicaid
    rebate system on a quarterly basis to make sure classifications are
    correct.
                             preexisting conditions
        Question. The Trump administration has decided to argue against the
    constitutionality of the Affordable Care Act's important provision that
    protects people with preexisting conditions. If the administration is
    successful, once again insurance companies will be able to discriminate
    against people with preexisting conditions by denying them coverage or
    charging them unaffordable premiums. The American people do not want to
    go back to the days when health care was reserved for the healthy and
    wealthy. At the June 26th hearing before the Senate Finance Committee,
    you reiterated that the administration's refusal to defend the law is a
    ``legal position.'' Later, you affirmed that the ``policy position of
    the administration is . . . to ensure people with preexisting
    conditions have access to affordable insurance.'' You are named as a
    defendant in this law suit.

        Do you believe insurers should be able to deny coverage or charge
    more for Americans with preexisting conditions?

        Answer. The Trump administration stands ready to work with Congress
    on policy solutions that will deliver more insurance choices, better
    healthcare, and lower costs while continuing to protect individuals
    with preexisting conditions. The Affordable Care Act (ACA) statutory
    requirements here are very strict and burdensome. While this may help
    some consumers, it also prevents States from developing innovative
    solutions that are tailored to their populations. I believe that when
    States are not permitted to innovate, everyone is worse off.
    Affordability, accessibility, benefit options, and procedural
    safeguards are all valuable, but our current top-down, Federally-driven
    approach is not working well for Americans. I will work with States to
    allow innovation within the confines of the ACA.

        Question. What did you and your General Counsel advise Attorney
    General Sessions and the Department of Justice regarding the
    administration's legal approach to the case and the policy implications
    of the administration's legal position on individuals with preexisting
    conditions?

        Answer. The Trump administration remains committed to ensuring more
    Americans have access to affordable health coverage and has supported
    legislation to protect Americans with preexisting conditions. The
    administration's legal position is that the individual mandate is
    unconstitutional and that the guaranteed issue and community rating
    provisions of Obamacare are not severable from the individual mandate.
                               family separation
        Question. During the hearing on June 26, 2018, you said there were
    2,047 children who had been separated from their parents due to the
    zero tolerance policy. On July 5, 2018, you shared an updated figure of
    under 3,000 and said this figure includes data from prior to the start
    of the ``zero tolerance'' policy in May.

        What is the exact number of separated children? Please disaggregate
    this data by age and country of origin.

        Answer. HHS identified a total of 2,816 possible children of
    potential Ms. L class members. There were 107 minors under the age of 5
    (as of February 20, 2019) and 2,713 between the ages of 5 and 17. The
    breakdown of these 2,816 minors by country of origin is as follows:

    ------------------------------------------------------------------------
                                                            Total by Country
    ------------------------------------------------------------------------
    Angola                                                                 1
    ------------------------------------------------------------------------
    Belize                                                                 1
    ------------------------------------------------------------------------
    Brazil                                                                48
    ------------------------------------------------------------------------
    Columbia                                                               1
    ------------------------------------------------------------------------
    Congo                                                                  4
    ------------------------------------------------------------------------
    Ecuador                                                                3
    ------------------------------------------------------------------------
    El Salvador                                                          208
    ------------------------------------------------------------------------
    Guatemala                                                          1,543
    ------------------------------------------------------------------------
    Honduras                                                             937
    ------------------------------------------------------------------------
    India                                                                  4
    ------------------------------------------------------------------------
    Kyrgyzstan                                                             1
    ------------------------------------------------------------------------
    Mexico                                                                44
    ------------------------------------------------------------------------
    Nicaragua                                                              2
    ------------------------------------------------------------------------
    Peru                                                                   2
    ------------------------------------------------------------------------
    Romania                                                               16
    ------------------------------------------------------------------------
    United Kingdom                                                         1
    ------------------------------------------------------------------------
        Total                                                          2,816
    ------------------------------------------------------------------------

        Question. How many children have been separated from their parents
    specifically as a result of the ``zero tolerance'' policy? Please
    disaggregate this data by age and country of origin.

        Answer. HHS does not distinguish between minors who were separated
    from parents or legal guardians as a result of the ``zero tolerance''
    policy from other causes of separation. Additionally, the Ms. L court
    decision does not distinguish separated minors by whether they were
    separated due to the ``zero tolerance'' policy or due to separation by
    the Department of Homeland Security (DHS) prior to the announcement of
    the ``zero tolerance'' policy. HHS identified a total of 2,816 children
    who were potentially separated from their parents or legal guardians
    and whose parents were potentially Ms. L class members. DHS
    subsequently determined that 79 had not been separated from parents by
    DHS.
                           child placement facilities
        Question. Some children's facilities including Casa Padre and the
    Shenandoah Valley Juvenile Center have documented health violations,
    allegations of abuse, or other failures to adhere to child welfare
    standards.

        What resources is HHS providing to ensure that children receive
    appropriate mental health services, as required by ORR policy?

        Answer. The Office of Refugee Resettlement (ORR) provides routine
    and emergency medical and mental health care for all UAC in its care,
    including an initial medical examination and follow-up care, as needed.
    Under the Flores Settlement Agreement, UAC in licensed care provider
    facilities, in particular, must receive at least weekly individual and
    two weekly group clinical counseling sessions to address their mental
    health needs.

        Care provider facilities develop their own (ORR-approved) policies
    and procedures for their individual clinical programs, including
    standards on licensing and education for staff, according to staff role
    or discipline. For example, at one facility, mental health clinicians
    must have earned an advanced university degree and maintain licensure
    through continuing education requirements, while case managers must
    have earned a university degree.

        Across the national UAC program, ORR works to ensure that care
    provider staff are trained in techniques for child-friendly and trauma-
    informed techniques in interviewing, assessment, and observation, as
    well as on identifying children who have been smuggled (i.e.,
    transported illegally over a national border) and/or trafficked while
    in the United States. Care providers must deliver services in a manner
    that is sensitive to the age, culture, native language, and needs of
    each child.

        ORR also places children in one of two residential treatment
    centers (RTC) for those who have severe diagnosed mental health needs,
    per the DSM-5 (Diagnostic and Statistical Manual of Mental Disorders,
    Fifth Edition). These UAC have psychiatric and/or psychological
    disorders that are not treatable in an outpatient setting and who pose
    a danger to themselves or others, as determined by a licensed
    psychologist or psychiatrist. While at an RTC, children and youth
    receive a combination of intensive therapeutic treatments by an
    interdisciplinary team of mental health clinicians. (Please see the ORR
    Policy Guide, Section 1.4.6 Residential Treatment Center Placements for
    more information.)

        Question. How does HHS ensure that, in accordance with ORR policy,
    children in custody are aware that certain disclosures to staff are not
    confidential and may be shared with other government agencies such as
    ICE?

        Answer. ORR provides orientations to newly arrived UAC within 48
    hours of placement. In these orientations, minors are taught about
    their rights and responsibilities, which include general legal-related
    information and notification regarding self-disclosures made while in
    ORR custody. (Please see the ORR Policy Guide, Section 3.2.2
    Orientation for more information).

        In preparing and managing case files and documentation, care
    providers must ensure compliance with all requirements imposed by
    Federal statutes concerning the collection and maintenance of data that
    includes personal identifying information. Care providers must ensure
    that all records are maintained and protected so that confidential
    information and data are secure and not accessed, used, or disclosed to
    unauthorized parties or improperly altered. There must be established
    administrative and physical controls to prevent unauthorized access to
    both electronic and paper records.

        There are certain situations in which ORR will communicate a
    minor's personal information with other Federal agencies.

        When a UAC is referred to ORR's care from another Federal agency,
    ORR will request background information to assess whether the minor is
    a danger to self or others, whether there are any known medical and/or
    mental health issues, and whether other special concerns or needs are
    known. ORR uses this information to determine an appropriate placement
    for the child or youth in the least restrictive setting.

        In situations where a minor is a material witness to a crime and
    has information relevant to a criminal proceeding, is a victim of a
    crime, or has been charged with a serious criminal offense, ORR will
    collaborate with law enforcement on the placement of these minors.
    (Please see ORR Policy Guide, Section 1.2.3 Safety Issues.)

        If a care provider suspects that a child has been trafficked at any
    point in the child's life, the care provider must refer the child's
    case to the HHS's Office on Trafficking in Persons (OTIP) for further
    assessment. In addition, ORR must refer any trafficking concerns to the
    ICE Homeland Security Investigations (HSI) and the Human Smuggling and
    Trafficking Center (HSTC), at the Department of Homeland Security.
    Referrals to OTIP, HSI, and HSTC may include supporting documents
    relevant to investigative purposes. ORR may also request assistance
    from other Federal agencies (e.g., Department of Labor) in assessing a
    child's case for potential trafficking concerns. (Please refer to the
    ORR Policy Guide, Section 3.3.3 Screening for Child Trafficking and
    Services for Victims for more information.)

        If a care provider suspects that a UAC has been sexually abused
    while in ORR's custody, whether by another minor or staff, they must
    immediately report the allegation within 4 hours to HHS's Office of the
    Inspector General, the Federal Bureau of Investigation, Child
    Protective Services and/or State Licensing, local law enforcement, and,
    in some cases, the Federal Protective Service at DHS. The same
    reporting procedure applies in circumstances where a UAC has allegedly
    perpetrated sexual abuse on another minor while in ORR's custody.
                              family communication
        Question. You noted the speed and accuracy with which you could
    locate children who have been separated from their parents, saying that
    you could find any child ``within seconds'' through an ORR portal.
    However, ORR has only provided family members with a 1-800 number and
    email address, and parents and lawyers have reported challenges in
    accessing information with these tools--for example, busy signals or
    long wait times. Moreover, many of these parents are detained
    themselves without easy access to phones or the Internet.

        What steps is HHS taking to ensure timely and prompt communication
    between separated parents and children?

        Answer. Within 24 hours of arriving at a UAC care facility, UAC are
    given the opportunity to communicate with a verified parent, legal
    guardian, or relative (when contact information is available), whether
    they reside in the United States or abroad. If a minor's parents are in
    Federal custody, the child's case manager will engage with the parents'
    case managers and Federal law enforcement officials to verify their
    relationship, so that they may communicate.

        UAC are allowed a minimum of two telephone calls per week to family
    members or sponsors, in a private setting. Some care providers
    facilitate video calls between minors and their families, especially
    for tender age and non-verbal children. UAC are also allowed unlimited
    telephone access to their legal representatives. A minor may also speak
    with her or his consulate official, case coordinator, and child
    advocate.

        Care providers also ensure that all mail, letters, packages,
    baggage, or any other items delivered to the care provider and
    addressed to the minor are promptly delivered and that UAC can send
    letters to family members, sponsors, legal representatives, and others.

        Question. How is HHS ensuring communication between non-verbal
    children and their parents?

        Answer. As previously noted, some care providers facilitate video
    calls between tender age and non-verbal children and their families, so
    that they may see one another. Also, a child's case manager or
    clinician may act as an intermediary for communication between a non-
    verbal child in care and her or his parent or legal guardian.

        Question. How is HHS coordinating with DHS in instances where
    adequate documentation was not collected at the time of separation, or
    in instances where family identification numbers were not preserved?

        Answer. An interagency team of data analysts, consisting of staff
    from various HHS operating divisions (the Administration for Children
    and Families' Office of Refugee Resettlement and the Assistant
    Secretary for Preparedness and Response, among others), U.S. Customs
    and Border Protection (CBP), and U.S. Immigration and Customs
    Enforcement (ICE), identified separated children who are in care and
    matched them to the parent or legal guardian from whom they were
    separated.

        This matching effort was conducted during the summer of 2018,
    identifying the separated parent for all separated minors in ORR care.
    ORR care provider programs facilitated contact between all separated
    children and their parents.
                              family reunification
        Question. You emphasized your desire to ``expeditiously'' reunify
    families and you have reportedly asked for volunteers to help with
    these efforts. I share this goal of getting children and parents back
    together as quickly and safely as possible. As you know, family
    separation has traumatic and harmful effects on children's health and
    well-being.

        Has HHS engaged with international aid organizations, such as the
    International Committee of the Red Cross, that have experience
    reuniting families that have been separated? Please describe your
    Department's efforts to engage entities with expertise in this arena.

        Answer. HHS is actively coordinating with the governments of El
    Salvador, Honduras, Guatemala, and Mexico on family reunification
    efforts, consistent with the plan developed by the Federal Government
    for the reunification of children with parents outside the United
    States and approved by Judge Dana Sabraw of the U.S. District Court for
    the Southern District of California in the Ms. L case.

        HHS is also coordinating its family reunification mission with the
    American Civil Liberties Union on the safe reunification of children in
    their home countries. This effort includes other non-governmental
    organizations such as Kids in Need of Defense and Justice in Motion.

        Question. How many separated children have been reunified with
    their parents? Please disaggregate this data by age and country of
    origin.

        Answer. As of February 20, 2019, there are 2,155 minors who have
    been reunified with the parent from whom they were separated. These
    minors are further disaggregated below by age and country of origin:

    ------------------------------------------------------------------------
             Country             Ages 0-4      Ages 5-17    Total by Country
    ------------------------------------------------------------------------
    Belize                                             1                  1
    ------------------------------------------------------------------------
    Brazil                                            41                 41
    ------------------------------------------------------------------------
    Colombia                                           1                  1
    ------------------------------------------------------------------------
    Ecuador                                            3                  3
    ------------------------------------------------------------------------
    El Salvador                          9           163                172
    ------------------------------------------------------------------------
    Guatemala                           32         1,110              1,142
    ------------------------------------------------------------------------
    Honduras                            36           721                757
    ------------------------------------------------------------------------
    India                                              3                  3
    ------------------------------------------------------------------------
    Kyrgyzstan                                         1                  1
    ------------------------------------------------------------------------
    Mexico                               3            16                 19
    ------------------------------------------------------------------------
    Nicaragua                                          1                  1
    ------------------------------------------------------------------------
    Peru                                               2                  2
    ------------------------------------------------------------------------
    Romania                              2            10                 12
    ------------------------------------------------------------------------
        Total                           82         2,073              2,155
    ------------------------------------------------------------------------

        Question. What are the circumstances of these reunifications (in
    the community, as part of deportation processes, etc.)?

        Answer. Consistent with plans developed by the Federal Government
    and approved by the U.S. District Court for the Southern District of
    California, minors in ORR's care have been reunified with their parents
    in a variety of settings. HHS has reunified children with parents in
    ICE detention at designated ICE reunification sites. Then, using its
    administrative authority, ICE has either released the reunited family
    unit to the interior of the United States or has detained the family
    unit together in ICE Family Residential Centers. HHS has also reunified
    children with parents released to the interior of the United States by
    physically bringing children to the parent. For parents who have since
    left the United States, HHS and ICE have transported children to their
    home country for reunification at reception centers operated under the
    authority of the home country government.

        Question. For separated children who have been released to
    sponsors, please provide data on how many have been released to each of
    the four categories of sponsors, in accordance with section 2.2.1 of
    the ORR policy manual.

        Answer. The table below shows the breakdown of separated minors
    released through the TVPRA process not through the court ordered
    process, as of February 20, 2019 joint status filing. Please note that
    there are three Categories of sponsors (Categories 1-3).

                                Reunified Minors
    ------------------------------------------------------------------------
                        Sponsor Category                       # of minors
    ------------------------------------------------------------------------
    Category 1                                                          106
    ------------------------------------------------------------------------
    Category 2                                                          281
    ------------------------------------------------------------------------
    Category 3                                                           90
    ------------------------------------------------------------------------
        Grand Total                                                     477
    ------------------------------------------------------------------------

        Question. In order to complete the reunification process, HHS is
    collecting DNA samples to match parents and children as quickly as
    possible.

        How is this information being stored and protected?

        Which government agencies have access to this information and under
    what conditions?

        What happens to this information once the family has been
    reunified?

        Answer. All DNA data, samples, and results were ordered destroyed
    pursuant to the order of Judge Dana Sabraw in Ms. L, and they have been
    certified destroyed by the DNA laboratory. No government agencies have
    access to DNA data, samples, or results. The information was allowed to
    be used only for the specific matching of a child with a parent, and
    for no other purpose.

        Question. HHS officials told congressional staffers during a
    briefing on June 29, 2018 that there were 42 Federal Field Specialists
    helping with the reunification process and making reunification
    decisions, but that there were plans to increase this capacity.

        What are the roles of staff assisting with the reunification
    process?

        Answer. The Secretary of HHS tasked the Assistant Secretary for
    Preparedness and Response (ASPR) with the reunification mission on
    behalf of HHS. ASPR designated a Federal Health Coordinating Official
    (FHCO) to lead the HHS reunification mission (the FHCO is also the
    ``HHS operational lead'' as identified in Ms. L court filings). The
    FHCO leads the Incident Management Team (IMT), which conducts HHS
    reunification operations.

        The IMT has included ASPR field and headquarters personnel, ORR
    field and headquarters personnel, including Federal Field Specialists,
    and deployed assets from the U.S. Public Health Service Commissioned
    Corps, National Disaster Medical System Disaster Medical Assistance
    Teams (NDMS DMAT), and contracted case management and logistics
    personnel.

        Question. As of July 10, 2018 how many Federal Field Specialists
    are assisting with the reunification process?

        Answer. As of July 10, 2018, the HHS Incident Management Team (IMT)
    included 177 HHS personnel, including 41 at HHS headquarters and 136 in
    the field. These included Federal Field Specialists as well as other
    ACF personnel, ASPR personnel, USPHS Officers, NDMS DMAT team members,
    and contractors.

        Question. DOJ reported that 19 young children in HHS custody could
    not be reunified with their parents because the parents had already
    been deported.

        What steps is HHS taking to communicate with DOJ and prevent any
    additional deportations prior to reunification?

        Answer. Judge Dana Sabraw of the U.S. District Court for the
    Southern District of California stayed removals in Ms. L.

        Question. How many parents accepted voluntary departures as a means
    of family reunification?

        Answer. HHS defers to the Department of Homeland Security (DHS)
    regarding questions on the legal decisions of the parents in DHS
    custody.

        Question. Some news outlets are reporting instances of parental or
    sponsor responsibility to cover the cost of the child's
    transportation--for example, a case where a father was asked for pay
    $1,250 for his daughter's flight in order to be reunified.

        What is HHS's current policy with regard to covering the cost of
    transportation to achieve reunification?

        If a family is responsible for arranging transportation, how does
    HHS address financial barriers, especially if impeding reunification or
    sponsor placement?

        Answer. HHS pays for the transportation costs of separated minors
    to be reunified with parents from appropriated funds from ORR's UAC
    Program.
                    information sharing between hhs and dhs
        Question. HHS and DHS recently entered into a Memorandum of
    Agreement to share information between the two agencies.

        How does HHS ensure that sponsors and adult household members have
    provided informed consent related to sharing their information with law
    enforcement?

        Answer. Sponsors and adult household members are provided and sign
    an Authorization for Release of Information, which notifies them that
    their information will be shared with law enforcement.

        Question. What steps is HHS taking to verify DHS allegations of
    youth gang activity, particularly given past inaccuracies?

        Answer. Allegations of youth criminal activity are verified through
    a review of multiple sources of information, including: (1)
    attestations from law enforcement, and/or criminal history
    documentation (police records, arrest records, court records, probation
    records, etc.); (2) non-law enforcement records pertaining to
    dangerousness (e.g., school records, child welfare agency records, or
    other government institutions); (3) interviews with the child's family
    or other caregivers; (4) Significant Incident Reports indicative of
    dangerousness or flight risk; and (5) information that indicates that
    the child may not be a danger (i.e., reports from school or counselor).
                            newly migrated families
        Question. Your repeated references to the Flores settlement and
    related court order present a false choice of family separation or
    family detention. As you know, Flores does not require family
    separation and does not prevent families from being released into the
    community while their case is processed.

        For families who have migrated since the executive order on June
    20, 2018, how is HHS facilitating the release of families into the
    community and providing referrals to any necessary supports and
    services?

        Answer. The UAC Program is not responsible for the release of
    families from ICE custody into the community. However, for UAC who are
    released from ORR care to a sponsor in the community, ORR may provide
    discharged UAC and their sponsors with referrals for support and
    services including behavioral health supports in the sponsor's
    community.

                                     ______

                    Questions Submitted by Hon. Bill Nelson
        Question. On June 19th, your department informed me that 174
    children had been separated from their families between May 6, 2018 and
    June 17, 2018 and held in Office of Refugee Resettlement (ORR) shelters
    in Florida, including 94 at Homestead.

        During my June 23rd visit to Homestead, I was told that the number
    had decreased from 94 to approximately 70. I was also told that just 62
    of those 70 had been in contact with their parents and that the
    remaining eight had not yet been in contact because of difficulties
    locating their parents.

        Since President Trump signed an executive order on June 20th
    intended to end the policy of systematically separating children from
    their parents, I have only received one update indicating that, as of
    June 25th, the number of children held in Florida had actually
    increased to 179. Additional efforts by my colleagues and me to obtain
    information and statistics related to separated children have been
    repeatedly rebuffed.

        How many children separated from their parents since May 6, 2018,
    have been held at ORR or ORR-sponsored facilities in Florida?

        Answer. As of the February 20th joint status filing, there had been
    a total of 264 separated minors who are children of Ms. L class members
    who are either currently in a Florida ORR facility or were at any time
    during their time in ORR care previously in a Florida ORR facility and
    discharged from that facility.

        Question. How many total children separated since May 6, 2018, are
    currently being held at facilities in Florida and how many are being
    held at each ORR or ORR-sponsored facility in Florida?

        Answer. As of November 15th, there were 28 minors still in care who
    were included in the minors originally identified as potentially
    separated. Most of these children are on a pathway to standard
    sponsorship discharge, based on a parental decision to waive
    reunification.

        Question. How many of the total number of children separated from
    their families have been reunited with their parents or legal guardians
    since President Trump signed his June 20th executive order?

        Answer. Of the 2,816 minors identified as potentially separated in
    the Ms. L vs. ICE class, as of December 12, 2018, 2,149 have been
    reunified with the parent from whom they were separated. An additional
    508 have been discharged under other appropriate circumstances--most
    through discharge to family member sponsors based on parents' waiving
    reunification. There are 79 children who were subsequently determined
    not to have been separated from a parent by the government. There were
    123 children who were separated from parents and were still in care who
    were on a pathway to standard sponsorship because their parents had
    waived reunification or a final determination had been made that they
    could not safely be reunified with their parent. As of December 12th,
    there were 8 children remaining to be reunified with parents.

        Question. How many children separated from their families and held
    at ORR or ORR-sponsored facilities in Florida have been reunited with
    their parents or legal guardians since President Trump signed his June
    20th executive order?

        Answer. Because children move in and out of shelters during their
    admission, this information is not readily reportable.

        Question. How many children separated from their families and
    currently held at ORR or ORR-sponsored facilities in Florida have made
    contact with their parents or legal guardians?

        Answer. All separated children in ORR care in all States have made
    contact with their parents or legal guardians.

        Question. Have any parents of children held at ORR or ORR-sponsored
    facilities in Florida been deported? If so, how many and what is HHS
    doing to make contact with these parents?

        Answer. The Report to Congress on Separated Children provides data
    on the number of children in ORR custody who parents were deported,
    disaggregated by status as of November 6th.\5\ There are no separated
    minors in ORR care for whom HHS or the child's grantee shelter program
    has not made contact with the parent. Children are routinely in contact
    with parents.
    ---------------------------------------------------------------------------
        \5\ https://www.hhs.gov/programs/social-services/unaccompanied-
    alien-children/report-to-congress-on-separated-children/index.html.

        Question. On June 26th, I sent a letter opposing this
    administration's decision to support a dangerous lawsuit filed by
    Republican Attorneys General--including in Florida--that would destroy
    our health-care system and hurt as many as 7.8 million Floridians with
    ---------------------------------------------------------------------------
    preexisting conditions.

        If this administration and these Attorneys General prevail, health
    insurers across the country will once again be able to charge unlimited
    premiums for older adults, and discriminate against people with
    preexisting conditions by denying them coverage or charging higher
    premiums simply because of their past medical history. A preexisting
    condition includes cancer, acne, Alzheimer's or simply being a woman.

        In making this decision, your administration is turning its back on
    133 million Americans with preexisting conditions, including 17 million
    children and 7.8 million Floridians.

        Do you believe that people with preexisting conditions should be
    guaranteed access to health coverage?

        Answer. The Trump administration remains committed to ensuring more
    Americans have access to affordable health coverage, and has supported
    legislation to protect Americans with preexisting conditions. The
    administration's legal position is that the individual mandate is
    unconstitutional and that the guaranteed issue and community rating
    provisions of Obamacare are not severable from the individual mandate.

        Question. Do you support allowing insurers to discriminate against
    folks with substance use disorders, like opioid addiction, thereby
    denying them adequate access to treatment?

        Answer. Discussed in response to next question below.

        Question. Should these individuals be forced to pay more for their
    health insurance?

        Answer. HHS, along with the Departments of Labor (DOL) and
    Treasury, are committed to enforcing the Mental Health Parity and
    Addiction Equity Act (MHPAEA), promoting compliance, providing
    guidance, assisting consumers, and conducting investigations of non-
    compliance. In July 2017, the Departments, together with other Federal
    and State partners convened a meeting to develop an Action Plan for
    improved Federal and State coordination of enforcement of the Mental
    Health Parity and Addiction Equity Act (MHPAEA). As part of that
    process, the Departments also accepted written comments from
    stakeholders. More information about this process can be found here:
    https://www.hhs.gov/programs/topic-sites/mental-health-parity/
    achieving-parity/cures-act-parity-listening-session/index.html.

        On April 23, 2018, HHS released the Mental Health and Substance Use
    Disorder Parity Action Plan. In addition, the Departments have
    finalized the parity compliance program guidance document required by
    section 13001(a) of the 21st Century Cures Act. The compliance program
    guidance document, referred to as the 2018 MHPAEA Self-Compliance Tool,
    can be found on the dedicated mental health and substance use disorder
    webpage of DOL's Employee Benefits Security Administration (EBSA),
    https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/mental-
    health-and-substance-use-disorder-parity. This compliance tool is
    designed to assist plans and issuers in advancing MHPAEA compliance and
    is largely informed by the audit tool that is used by EBSA
    investigators and is made available to HHS and State regulators. It
    includes comprehensive guidance regarding non-quantitative treatment
    limitations (NQTLs) and required disclosures. The compliance tool
    includes both examples of potential parity violations as well as
    compliant practices, and is based on EBSA's experience with enforcing
    mental health parity. As required by section 13001(a) of Cures, this
    document was developed in consultation with respective Inspector
    General of each Department. Accordingly, this document satisfies the
    requirements of section 13001(a), and will be updated every 2 years.
    HHS, along with the Departments of Labor and Treasury, also proposed
    additional guidance on NQTLs and disclosure, as well as issued a draft
    model disclosure template to assist consumers in obtaining the
    information they need to effectuate their rights under the law.

        Finally, in December 2017, HHS posted a Mental Health Parity and
    Addiction Equity Act Enforcement Report. That report is available here:
    https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/
    Downloads/HHS-2008-MH
    PAEA-Enforcement-Period.pdf. DOL issued its own enforcement fact sheet
    in April 2018, which is available here: https://www.dol.gov/sites/
    default/files/ebsa/about-ebsa/our-activities/resource-center/fact-
    sheets/mhpaea-enforcement-2017.pdf.

        Question. If successful, this lawsuit would break the President's
    promise to protect guaranteed health coverage for individuals with
    preexisting conditions. You would put insurance companies back in
    charge and give them free rein to deny care to those who need it most.
    Are you comfortable with the DOJ arguing insurers should be able to do
    just that in your name? How do you plan to uphold the President's
    promise to protect these children, women, seniors and the millions of
    other Americans with preexisting conditions?

        Answer. The Trump administration remains committed to ensuring more
    Americans have access to affordable health coverage, and has supported
    legislation to protect Americans with preexisting conditions. The
    administration's legal position is that the individual mandate is
    unconstitutional and that the guaranteed issue and community rating
    provisions of Obamacare are not severable from the individual mandate.

        Question. The President's budget and the blueprint suggest moving
    some of the drugs paid for under Medicare Part B, which covers drugs
    administered in the hospital outpatient department or the doctor's
    office, into Medicare Part D to facilitate price negotiations.

        How would this change assure access to Part B drugs for the
    millions of seniors on Medicare who are not enrolled in Part D?

        Answer. I look forward to working with Congress to explore ways
    that we can bring the negotiation strategies that are currently working
    in Medicare Part D into Part B, where prices are modestly negotiated by
    providers though Medicare does not have a role in these negotiations. I
    hope to work with you and your colleagues to develop legislation that
    will provide us with the authority to re-classify Part B drugs into
    Part D, when appropriate, while taking into consideration the projected
    impacts on beneficiary access and cost-sharing, as well as costs to the
    Medicare program.

        Question. During your testimony before the HELP Committee, you said
    that moving Medicare Part B drugs into Part D would result in billions
    of dollars in savings and that these savings would be more than enough
    to take care of Medicare beneficiaries who are not enrolled in Part D
    or who suddenly face higher cost sharing.

        Does HHS have data to support this claim? If so, please share it
    with this committee.

        Answer. Under the President's FY 2019 Budget that describes this
    proposal, the Secretary will exercise this authority only when there
    are savings to be gained from price competition. However, a budget
    impact will not be available until specific categories or classes of
    drugs are chosen. The President's blueprint includes a Request for
    Information (RFI) seeking comment on which drugs or classes of drugs
    would be good candidates for moving from Part B to Part D.

                                     ______

                  Questions Submitted by Hon. Robert Menendez
        Question. In the President's drug price plan, American Patients
    First, one of the accomplishments is creating incentives to lower list
    prices.

        Given recent announcements by several pharmaceutical companies that
    they were increasing list prices, would you consider existing
    incentives to lower prices failures?

        Will there be follow up measures taken to refine the incentives to
    ensure that list prices decrease?

        How will savings from lower list prices trickle down to consumers?

        Answer. Among efforts by the administration to address high list
    prices, one is addressing the role of PBM practices under the Part D
    program. As pointed out in the President's blueprint to lower drug
    prices, because health plans, pharmacy benefit managers (PBMs), and
    wholesalers receive higher rebates and fees when list prices increase,
    there is little incentive to control list prices. Consumers, however,
    pay higher copayments, coinsurance, or pre-deductible out-of-pocket
    costs when list prices rise.

        The President's blueprint recognizes the major role played by PBMs
    to widen the gap between list prices and net prices. Such recognition
    is a starting point for debating and considering potential policy
    alternatives to ameliorate these misaligned incentives in the Part D
    program. In releasing the blueprint, the Department issued a Request
    for Information (RFI) on issues raised by the blueprint, including
    comment from stakeholders on possible changes to the Part D benefit
    structure.

        Further, CMS issued a RFI as part of the 2019 Parts C and D rule
    (CMS-4182-P) which sought feedback from stakeholders regarding issues
    relating to Part D drug prices in which PBMs play a major role.
    Comments received in response to the RFI will be used for possible
    consideration in future rulemaking. Additionally, the President's FY
    2019 budget contains several policies to modernize the Part D drug
    benefit to improve plans' ability to deliver affordable drug coverage
    for seniors and reduce their costs at the pharmacy counter, including
    efforts to address the misaligned incentives of the Part D drug benefit
    structure, such as requiring Medicare Part D plans to apply a
    substantial portion of rebates at the point of sale.

        Question. The President's plan calls for Part D plan sponsors to
    provide information about drug price increases and lower-cost
    alternatives in the Explanation of Benefits they send to their
    beneficiaries. What protections can be included to ensure beneficiaries
    aren't steered toward alternatives that may be unsuitable for their
    particular medical needs in an effort to save money by the plan?

        Answer. As indicated by the blueprint, the Department sought
    comment from stakeholders in the recently proposed Part C and D rule
    (CMS-4182-P) on ways to improve the usefulness of the Part D
    Explanation of Benefits by including information about drug price
    increases and lower cost alternatives. Additionally, as we designed
    these proposed changes to Medicare Advantage (MA) and Part D, foremost
    in our minds was the impact on beneficiaries and ensuring affordability
    and access to medications. The changes we are proposing bring tools to
    Medicare that are widely used in private plans. However, it's important
    to remember that if seniors don't like a plan that takes advantage of
    these new flexibilities, they are in the driver's seat. They have the
    option to choose a different plan that better meets their needs. These
    new tools will only become as common as beneficiaries want them to be.
    Further, CMS reviews plan formularies to guard against discriminatory
    practices, and the agency has in place an expedited appeals process for
    cases in which a physician recommends an exception to prior
    authorization or other forms of management. There are also additional
    requirements for plans to cover at least two drugs per class, including
    in the protected classes. Ultimately, the changes we are proposing
    would reduce costs for protected class medicines and therefore expand
    access to these important medicines.

        Question. The President's plan calls for shifting some drugs from
    Medicare Part B to Part D.

        What will the impact be for consumers in what their out-of-pocket
    costs will be for their medications if all medicines are moved over?

        Do you anticipate an increase in Medicare Part D premiums due to
    the shift of drugs from Part B to Part D?

        Do you have concerns about rising list prices impacting out-of-
    pocket costs for beneficiaries?

        Answer. I look forward to working with Congress to explore ways
    that we can bring the negotiation strategies that are currently working
    in Medicare Part D, into Part B, where prices are modestly negotiated.
    I hope to work with you and your colleagues to develop legislation that
    will provide us with the authority to re-classify Part B drugs into
    Part D, when appropriate, while taking into consideration the projected
    impacts on beneficiary access and cost-sharing, as well as costs to the
    Medicare program.

        Question. Some older generic drugs have increased in price, what
    proposals are possible to incentivize companies to keep older generics
    in production to prevent monopoly suppliers who are then able to
    increase costs without the fear of market share loss?

        Answer. I understand the importance of having multiple generic
    applications approved, including for older generics, to help provide
    American consumers with lower cost medicines. Under the FDA
    Commissioner's Drug Competition Action Plan (DCAP), FDA has taken
    substantial steps to facilitate increased competition through the
    approval of lower-cost generic medicines. In the coming months, FDA
    will continue to take actions to enhance the efficiency of the generic
    drug review process, to maximize scientific and regulatory clarity with
    respect to generic drugs, and to reduce ``gaming tactics'' by brand
    name drug companies that delay the generic competition Congress
    intended when it enacted the Hatch-Waxman Amendments. All these actions
    are intended to help ensure consumers can get the medicines they need
    at affordable prices.

        FDA cannot determine the precise amount of funding that will go
    toward older generics, as it does not ultimately control for which
    drugs the generics industry chooses to submit marketing applications,
    but the actions it is taking should help encourage industry to invest
    in the development of older generics that have minimal competition.
                              family reunification
        Question. On July 6, 2018, the Department of Health and Human
    Services (HHS) sent a press release entitled ``HHS is executing on its
    mission with care and compassion.'' \6\ In particular, HHS states there
    are under 3,000 children who are currently in ORR care where HHS has
    evidence that they could possibly have been separated from a parent,
    with approximately 100 of those children under the age of 5. The
    Department of Justice attorneys provided additional information during
    a recent court proceedings regarding the children under age 5: 83 kids
    have been linked to 86 parents; 16 kids have not yet been linked with
    parents; 46 of those parents remain in the custody of ICE; and 19 of
    those parents having been deported from the United States.\7\
    ---------------------------------------------------------------------------
        \6\ https://www.hhs.gov/about/news/2018/07/06/hhs-executing-its-
    mission-care-and-compassion.html.
        \7\ http://m.cnn.com/en/article/h_a05a00c0075bb46ed2c485af560667c3.

        Do the statistics provided by the Department of Justice include
    children who have been reunified with a sponsor who is not the parent
    from whom they were separated? If so, how many of those children have
    ---------------------------------------------------------------------------
    been reunified with a close relative, legal guardian, or other sponsor?

        Answer. Yes, statistics provided to the Department of Justice
    included children who were reunified to sponsors other than their
    separated parents. Based on February 20, 2019 joint filing report,
    there were 580 children reunified with sponsors who were not their
    separated parents.

        Question. If not, what are the number of children who have been
    identified to have close relatives, legal guardians, or other sponsors
    instead of parents--as DOJ asserts that 16 kids have not yet been
    linked to parents?

        Answer. All children in the Ms. L class are linked to the parent
    from whom they were separated.

        Question. For the parents who have been deported, what actions is
    HHS taking to ensure that the child will be reunited with his or her
    parent? Are there plans for the parent to return to the United States
    and be reunified with his or her child? Please outline in detail the
    plan for reunifying deported parents whose children remain in the
    United States.

        Answer. The court-approved Federal interagency plan for
    reunification of minors with parents who are no longer in the United
    States provides information responsive to this question and was
    submitted to the Court in a filing dated August 16, 2018.

        Question. Have the parents who have been deported been notified of
    their child's whereabouts/condition/status? Have the parents who have
    been deported had any communication with his or her child since their
    deportation?

        Answer. There are no separated minors in ORR care for whom HHS or
    the child's grantee shelter program has not made contact with the
    parent. Children are routinely in contact with parents.
                                  dna testing
        Question. HHS notes that it is using DNA testing to expedite
    verification of parentage. HHS also notes that a DNA test will only be
    done when there is a specific parent-child relationship that needs to
    be validated.

        What is the criteria that is required for HHS to conclude that a
    specific parent-child relationship needs validation?

        Answer. Initially, HHS attempted to meet the parent-child
    relationship verification standard for sponsorship by a parent under
    the TVPRA-governed process for safe and timely discharge to a sponsor.
    This standard would require birth certificates validated by the
    consular authorities of the issuing country, or, if such documents
    could not be obtained, DNA biological maternity or paternity
    validation. Subsequently, Judge Sabraw ordered that HHS should assume
    the putative parentage established at apprehension was accurate unless
    there was specific reason to doubt parentage, and that DNA would only
    be permitted to be used if required in circumstances where there were
    such specific doubts about parentage.

        Question. What actions are you taking to ensure that these
    requirements are met--and that all other avenues for parent-child
    relationship validation are exhausted--before DNA testing is used?

        Answer. As of November 2018, all outstanding questions about
    parentage are resolved, and there are no separated minors in ORR care
    with red flags for doubts about parentage.

        Question. Once the DNA tests and the reunification of the family is
    complete, is HHS destroying the DNA record?

        Answer. All DNA data, samples, and results were ordered destroyed
    by the judge in Ms. L, and they have been certified destroyed by the
    DNA laboratory.

        Question. If so, how long does HHS wait to destroy the DNA record,
    and is the information shared with other agencies?

        Answer. The information was allowed to be used only for matching of
    a child with a parent, and for no other purpose. It was not shared with
    any other agencies. All data, samples, and results were ordered
    destroyed within 7 days.

        Question. If the DNA record is not destroyed, where is it stored
    and who has access to it?

        Answer. All DNA data, samples, and results were destroyed.
                               unmatched children
        Question. The information regarding the number of children who have
    not been linked to his or her parent is concerning. How is HHS working
    with DHS to determine the parentage of unmatched children? How many
    total children under the age of 5 years old and above the age of five
    remain unmatched to his or her parent?

        Answer. There are no separated minors in ORR care who are not
    matched to a separated parent.

                                     ______

                  Questions Submitted by Hon. Thomas R. Carper
        Question. The HHS OIG recently issued a troubling report on drug
    prices in Medicare Part D in the period from 2011 to 2015. In
    particular, the OIG's findings that the number of seniors paying $2,000
    or more almost doubled, and that the 20 drugs with the highest cost
    increases have almost no alternatives. Have you reviewed this HHS OIG
    report? How will your proposals to introduce value-based pricing to
    Medicare Part D bring down these costs for patients?

        Answer. As the President's blueprint to lower prescription drug
    costs notes, the Department is considering use of value-based
    purchasing in Federal programs. For example, the Department is
    reviewing comments solicited in the blueprint on the relationship
    between programs such as the Medicaid Best Price requirement and
    efforts to promote value-based arrangements in the States.

        Question. Physician and patient groups have expressed great
    concerns with your proposal to shift drugs from Medicare Part B to Part
    D. They are especially concerned that this shift could increase
    beneficiary cost-sharing and out-of-pocket costs, such as for patients
    suffering from cancer. Beneficiaries with supplemental coverage for
    Part B but no Part D coverage might pay much higher out-of-pocket costs
    under this change. On recent Avalere study found that Medicare
    patients' out-of-pocket costs for new cancer drugs were about 33
    percent higher for Part D-covered new cancer therapies than for cancer
    therapies covered in Part B. Do you agree that any policy change that
    moves covered drugs from Medicare Part B to Part D should be
    accompanied by reforms to reduce patients' out-of-pocket costs and co-
    payments in Medicare Part D?

        Answer. I look forward to working with Congress to explore ways
    that we can bring the negotiation strategies that are currently working
    in Medicare Part D into Part B, which modestly negotiates prices by
    providers though Medicare does not have a role in these negotiations. I
    hope to work with you and your colleagues to develop legislation that
    will provide us with the authority to re-classify Part B drugs into
    Part D when appropriate, while taking into consideration the projected
    impacts on beneficiary access and cost-sharing, as well as costs to the
    Medicare program.

        Question. Like most of my colleagues, I was deeply troubled by the
    administration's policies that led to separating children from their
    parents at the U.S. southern border. On June 20, 2018, the president
    signed an executive order that would end his own policy. However, the
    solution he seeks to put in place is costly and flawed. I believe that
    without addressing the root causes of migration to the U.S. southern
    border, we will continue to see this problem. The Department of Health
    and Human Services is charged with housing and care of unaccompanied
    migrant children after they arrive at the border. As you are aware, HHS
    already had difficulty keeping track of the children it was charged
    with before the administration put its zero tolerance policy in place,
    which added hundreds of additional children in to ORR's care. What
    steps is HHS taking to improve its oversight of these facilities?

        Answer. ORR conducts oversight visits at least monthly to ensure
    that care providers meet minimum standards for the care and timely
    release of unaccompanied alien children, and that they abide by all
    Federal and State laws and regulations, licensing and accreditation
    standards, ORR policies and procedures, settlement agreements, and
    child welfare standards. ORR increases the frequency of monitoring if
    it is warranted by issues identified at a facility. In addition, if ORR
    monitoring finds a care provider to be out of compliance with
    requirements, ORR issues corrective action findings and requires the
    care provider to resolve the issue within a specified time frame. ORR
    also provides technical assistance, as needed, to ensure that
    deficiencies are addressed.

        These ORR monitoring and compliance activities are divided among
    various Federal ORR teams. The teams work collaboratively, but also
    independently in order to provide a higher level of scrutiny and
    focused attention on various tasks. HHS updates and improves the
    monitoring tools, processes, and resources regularly to meet changing
    procedures and regulations.

        Question. It's my understanding that the Joint Concept of
    Operations between the Office of Refugee Resettlement (ORR), and the
    Department of Homeland Security is supposed to be completed soon. This
    Joint Concept of Operations would outline how the agencies keep track
    of children transferred into HHS custody from DHS. Are you on track to
    meet that deadline? What have your communications been like with Scott
    Lloyd, the Director of the Office of Refugee Resettlement? Do you
    believe his office is prepared to meet the deadline? If not, what needs
    to be changed?

        Answer. The Joint Concept of Operations (JOC) was finalized on July
    31, 2018, and addresses intersecting responsibilities between HHS's ORR
    and DHS as it relates to transporting, processing, and caring for UAC,
    including during an influx.

        Question. Recent reporting by The New Yorker indicated that the
    Office of Refugee Resettlement, a part of the Department of Health and
    Human Services, did not have adequate plans in place to reunite parents
    with children who are being held at the border. Nonprofit agencies,
    such as Kids in Need of Defense, have stepped up to fill the void,
    making phone calls to ICE and HHS to try to find out the location of
    parents and children in order to make sure they can keep track of each
    other. Over the weekend of June 23-24, Customs and Border Protection
    stated that it had reunited 538 children in its custody with their
    parents, and that it had halted referring all border crossers to the
    Department of Justice. How many children has HHS reunited with their
    families? When do you expect this process to be completed?

        Answer. Of the 2,816 minors identified as potentially separated
    from parents in the Ms. L vs. ICE class, as of December 12, 2018, 2,149
    have been reunified with the parent from whom they were separated. An
    additional 508 have been discharged under other appropriate
    circumstances--most through discharge to family member sponsors based
    on parents' waiving reunification. There are 79 children who were
    subsequently determined not to have been separated from a parent by the
    government. There were 123 children who were separated from parents and
    were still in care who were on a pathway to standard sponsorship
    because their parents had waived reunification or a final determination
    had been made that they could not safely be reunified with their
    parent. As of December 12, there were 8 children remaining to be
    reunified with parents. HHS anticipates prompt completion of the
    reunification of children with parents from whom they were separated.

                                     ______

                 Questions Submitted by Hon. Benjamin L. Cardin
                                  drug pricing
        Question. While the administration has come up with a number of
    proposals to address the cost of drugs, in reality none of these
    policies address the core problem which is that the prices for
    prescription drugs continue to sky rocket. Particularly, drug
    manufacturers continue to increase the prices of their drugs despite
    President Trump's promise that the opposite would occur. Under your
    blueprint, I see nothing that changes the status quo or discourages
    drug manufacturers from exponentially increasing prices. For example,
    what consequences would a drug maker face if they raise their price of
    a Part D drug under the administration's blueprint?

        Answer. The President's blueprint to lower prices acknowledges that
    a growing number of complex high-cost drugs account for a growing
    percentage of health-care spending, and that the pharmaceutical
    industry has shifted its attention to high-cost drugs that face little
    to no competition, because they offer the freedom to set high launch
    prices and increase them over time. In an effort to address the problem
    of high-cost drugs, the Trump administration believes it is time to
    realign the system in four ways, outlined in the President's blueprint
    to lower drug prices: increasing competition, improving government
    negotiation tools, creating incentives for lower list prices, and
    bringing down out-of-pocket costs for consumers. The Department has
    solicited, and is currently reviewing, comments on these ideas for
    consideration in actions to address high drug prices.
                                 drug shortages
        Question. Drug shortages pose a threat to an individual's access to
    care. These shortages can occur due to range of issues from problems in
    drug quality, to unforeseen events such as natural disasters. For
    instance, Hurricane Maria impacted Puerto Rican drug manufacturing
    facilities, which worsened shortages of IV fluids. Drug shortages lead
    to delays in or rationing of care, difficulties finding alternative
    drugs, risk associated with medication errors, higher costs, reduced
    time for patient care, and hoarding or stockpiling of drugs in
    shortage.

        I have been contacted by providers in Maryland regarding the
    dangers and prevalence of these shortages, and believe we must do
    everything possible to assist them, so they have the resources to care
    for their patients. I was disappointed to see that the Trump
    administration's drug pricing blueprint did not address drug shortages.

        Does the Trump administration have a plan to tackle the issue of
    drug shortages? If so, what actions can Congress take in order to
    assist in that plan?

        Answer. In July 2018, FDA announced the formation of a new Drug
    Shortages Task Force charged with delving more deeply into the reasons
    behind some of the more persistent shortages and looking for solutions
    to address these ongoing challenges. While FDA is directed to convene
    the group, we are working with our partners across the administration
    and seeking input from industry and other members of the public to
    evaluate the current authorities to consider how we might better help
    prevent and mitigate shortages. The new task force includes Federal
    partners on the shortage issues, including the Centers for Medicare and
    Medicaid Services, the Department of Defense, the Department of
    Veterans Affairs, the Office of the Assistant Secretary for
    Preparedness and Response, and the Federal Trade Commission.

        The task force expands upon the work of a group that was created by
    FDASIA, which gave the FDA new authorities to help address drug
    shortages. This includes creating the requirements that manufacturers
    of certain drugs that are life-supporting, life-sustaining, or intended
    for use in the prevention or treatment of a debilitating disease or
    condition notify us of a permanent discontinuation or temporary
    interruption in manufacturing that is likely to lead to a meaningful
    disruption in the supply of such drugs in the United States.
                              naloxone negotiation
        Question. An effective way to save those who are suffering from an
    opioid overdose is to provide them with naloxone, which can quickly
    restore normal respiration to a person whose breathing has slowed or
    stopped as a result of overdosing with opioids. The city of Baltimore
    has been aggressive in combatting the opioid crisis.

        Since 2015, everyday Baltimore residents have saved more than 1,800
    lives with naloxone. Baltimore first responders have saved more than
    10,000 lives over the same time period. However, the city cannot afford
    all the naloxone needed, so it is having to ration its supply,
    prioritizing distribution to individuals at highest risk of overdose.

        No police officer, no firefighter, no public health provider, and
    no person should be unable to save a life because of the high price. By
    bringing down the cost of naloxone, we can get this life-saving drug in
    the hands of more people. Doing so will save countless lives. One way
    to help bring down the cost is to allow CMS to negotiate lower prices
    for naloxone under Medicare Part D.

        Do you support allowing CMS to negotiate lower prices for naloxone
    under Medicare Part D?

        Answer. The administration's drug pricing strategy is intended to
    address the price of all prescription drugs, including naloxone.

        Question. Additionally, the Federal Government has the authority
    under 28 U.S.C. Sec. 1498, to make or purchase a patented invention,
    including medication, without the permission of the patent holder in
    exchange for reasonable compensation. The government could then either
    produce or contract with generic producers to make naloxone, which
    would drastically reduce its price. This would allow localities and
    first responders the ability to have enough access to the medication to
    save more lives.

        What is the Trump administration's position on using its
    ``government use authority'' to help drive down the cost of naloxone?

        Answer. The administration's drug pricing strategy is intended to
    address the price of all prescription drugs, including naloxone.
                        children separated at the border
        Question. President Trump purposely chose to use children as
    leverage to try to keep parents from crossing the border. He
    underestimated the universal opposition to such a callous and inhumane
    policy. Signing an executive order that changes policy from keeping
    toddlers in jails and cages to keep families in jail, is not a
    solution. The damage he has done to our country, to these children, and
    to America's standing in the world is incalculable.

        Our Maryland Attorney General, Brian Frosh, has written to you and
    asked for data on the children being held at Maryland facilities that
    are under the custody of the Office of Refugee Resettlement, under the
    Administration for Children and Families, which you oversee.

        Can you provide me now with the number of children and their ages
    separated from their parents that are placed in Maryland under ORR
    custody, the number of locations being used in Maryland, and the
    timeline for reunification of these children with their parents?

        Answer. There are at least 21 UAC that were possible children of
    potential class members that were placed in the State of Maryland. Out
    of 21 children, 18 were 5 years and older and 3 were below 5. There are
    two programs in Maryland namely Bethany Christian Services Maryland and
    Board of Child Care Shelter. The 21 UAC have all been discharged.

        Question. Are parents provided with information on the status of
    their children?

        Answer. Yes. All parents of separated children have been contacted
    by the case manager working with the child.

        Question. Why shouldn't the State be told about the number of
    children within ORR custody in their State?

        Answer. This information is routinely available to the State. State
    licensure authorities license ORR shelter facilities to provide
    residential care to children, and can inspect the sites at will.
                       teen pregnancy prevention program
        Question. I'd like to ask you about the future of the evidence-
    based Teen Pregnancy Prevention (TPP) Program. As you may know, this
    program has been recognized by independent experts as a stellar example
    of how to implement evidence-based policymaking--something that should
    be expanded, not cut short. Last fall, the bipartisan Commission on
    Evidence-Based Policymaking, established by House Speaker Paul Ryan,
    highlighted the TPP Program as an example of a Federal program
    ``developing increasingly rigorous portfolios of evidence.''

        Baltimore City's teen pregnancy rate is three times as high as the
    national average. Last summer, your agency terminated the existing TPPP
    grants. There were three Maryland entities that stood to lose funding:
    the Baltimore City Health Department, Health Teen Network, Inc., and
    Johns Hopkins University's Center for American Indian Health. Maryland
    grantees were set to lose over $6.7 million in funding.

        This spring HHS released two new funding opportunity announcements
    for the TPP Program that prioritize ideology over evidence. Thankfully,
    five Federal courts, including a class action, have ruled in favor of
    the health and well-being of American teens, parents, and families--
    stating that the Trump-Pence administration's early termination of Teen
    Pregnancy Prevention Program (TPPP) grants is unlawful.

        These important programs have a growing body of evidence-based
    approaches that meet the diverse needs of young people. Moving forward,
    will HHS rely on the agency's own high quality research on evidence-
    based programs?

        In making decisions about TPPP in FY18, please share what body of
    evidence did HHS rely on to justify the shift toward funding to
    emphasize risk reduction or returning to abstinence-only regardless of
    the actual needs of young people?

        Answer. HHS relied on findings from the rigorous evaluation of 37
    TPP-funded studies for a 2016 longitudinal study of TPP Program
    Grantees (FY 2010-2014). Overall, 73 percent of the evaluated projects
    either had no impact or had a negative impact on teen behavior. Though
    there were some positive effects on teens' knowledge, attitudes, and
    intentions, changes in attitude are of limited value in measuring the
    success of a program that seeks to change behavior. Moving forward, HHS
    will continue to comply with the applicable appropriations statute(s).
    Decisions by the Department are being guided by science and a firm
    commitment to giving all youth the information and skills they need to
    improve their prospects for optimal health outcomes.

                                     ______

                   Questions Submitted by Hon. Sherrod Brown
                                  transparency
        Question. As part of your written testimony, you mentioned that one
    of HHS's initial actions to address drug pricing is ``working to
    require drug companies to include their list price on their television
    commercials.''

        Why is this one of your first priorities?

        How will this effort lower the cost of lifesaving prescription
    drugs?

        Answer. We aim to reduce the price to consumers of prescription
    drugs and biological products. HHS has proposed a rule which would
    require direct-to-consumer (DTC) television advertisements for
    prescription drug and biological products for which payment is
    available, directly or indirectly, through or under Medicare or
    Medicaid to include the list price of that product. We are proposing
    this regulation to improve the efficient administration of the Medicare
    and Medicaid programs by ensuring that beneficiaries are provided with
    relevant information about the costs of prescription drugs and
    biological products so they can make informed decisions that minimize
    not only their out-of-pocket costs, but also unreasonable expenditures
    borne by Medicare and Medicaid, both of which are significant problems.

        Markets operate more efficiently and competitively when consumers
    have relevant information about a product, including its price, as well
    as alternative products and their prices, before making an informed
    decision whether to buy that product or, instead, a competing one.
    Consumers price shop when looking to purchase a new car, a new house,
    or even a new coffee maker. Price shopping is the mark of rational
    economic behavior. To facilitate price shopping, sellers invariably
    provide potential buyers with the prices of their products; consumers
    gauge the reasonableness of these prices against alternatives. Even
    automobile dealerships, as result of Federal law, post the retail or
    ``sticker'' price on the side window of each new car offered for sale.

        That has not been the case with prescription drugs or biological
    products, where consumers often need to make decisions without
    information about a product's price. Price transparency is a necessary
    element of an efficient market that allows consumers to make informed
    decisions when presented with relevant information, but for consumers
    of prescription drugs, including those whose drugs are covered through
    Medicare or Medicaid, both the list price and actual price to the
    consumer remain hard to find.
                                drug importation
        Question. Following your confirmation hearing, I submitted a
    question for the record (QFR) on drug importation and whether or not
    you would support the safe importation of prescription drugs from
    countries with rigorous safety standards, like Canada.

        More than 25,000 Ohioans currently rely on Canadian pharmacies for
    more affordable prescription drugs.

        In response to my question, you answered: ``If confirmed, I commit
    to exploring whether any pilots or demonstrations might be utilized to
    see if a system could be set up in a way such that public health
    officials would support a determination of no additional risk to the
    public's health and safety and of a significant reduction in costs for
    American consumers, when appropriately scaled up to represent the
    likely level of importation.''

        Have you explored any pilots or demonstrations to test safe
    importation as described in your answer to my QFR?

        Do you have plans to do so prior to the end of the year?

        Answer. One thing that President Trump and I have been clear about
    on drug pricing is that we consider this a serious issue, in need of
    serious solutions. The Congressional Budget Office has assessed full-
    scale reimportation multiple times and has said it would have no
    meaningful effect.

        One of the main reasons is that Canada's drug market is simply too
    small to bring down prices here. Canada simply doesn't have enough
    drugs to sell them to us for less money, and drug companies won't sell
    to Canada or Europe more just to have them imported here.

        On top of that, the last four FDA Commissioners have said there is
    no effective way to ensure drugs coming from Canada really are coming
    from Canada, rather than being routed from, say, a counterfeit factory
    in China. The United States has the safest regulatory system in the
    world. Opening our borders to potentially unsafe drugs in search of
    savings is too great a risk.

        We know, however, that for certain critical medicines, where there
    are no blocking patents or exclusivities associated with the drugs, and
    where there is only a single manufacturer (sole-source), conditions may
    develop that create significant barriers to, and ultimately threaten,
    patient access.

        The FDA is presently examining whether--for certain critical
    medicines, where there are no blocking patents or exclusivities
    associated with the drugs, but where there is only a single
    manufacturer (sole-source)--sudden, significant price increases have
    created significant barriers to, and ultimately threaten, patient
    access. To pursue these considerations, FDA has formed a work group to
    explore various policy frameworks that, through the exercise of
    enforcement discretion or otherwise, would involve the importation of
    drugs under circumstances that meet these criteria and that would be
    suitable substitutes for the FDA-approved version of the medically-
    necessary drugs. We will consider whether and how the foreign versions
    of these medicines can be imported with adequate assurances of safety
    and effectiveness.

                                     ______

                Questions Submitted by Hon. Robert P. Casey, Jr.
                    on delivery system reform in rural areas
        Question. You have identified value-based care are one of your four
    priorities. As you know, rural providers face unique challenges in
    undertaking value-based payment models. What specific options are you
    exploring and steps are you taking to help rural providers pursue
    delivery system reform?

        Answer. We are committed to bringing a rural health-care focus to
    health-care delivery and payment reform initiatives. This includes
    engaging stakeholders and rural health-care providers on delivery
    system reform and innovation opportunities. One example of our focus on
    rural health care is CMS's Pennsylvania Rural Health Model, which seeks
    to increase rural Pennsylvanians' access to high-quality care and
    improve their health, while also reducing the growth of hospital
    expenditures across payers, including Medicare, and increasing the
    financial viability of rural Pennsylvania hospitals to ensure continued
    access to care.
                                on drug pricing
        Question. I have heard concerns that your proposal to move drugs
    from Medicare Part B into Medicare Part D could result in increased
    out-of-pocket costs for Medicare beneficiaries. Have you done any
    analysis on the direct impact this change will have on patients with
    cancer and other serious illnesses? What are you doing to protect these
    beneficiaries?

        Answer. I look forward to working with Congress to explore ways
    that we can bring the negotiation strategies that are currently working
    in Medicare Part D into Part B, where prices are modestly negotiated,
    by providers though Medicare does not have a role in these
    negotiations. I hope to work with you and your colleagues to develop
    legislation that will provide us with the authority to re-classify Part
    B drugs into Part D, when appropriate, while taking into consideration
    the projected impacts on beneficiary access and cost-sharing, as well
    as costs to the Medicare program.
                     on family separation and reunification
        Question. Secretary Azar, during your testimony you said several
    times that Congress or the courts should change the requirement that
    children not be kept in detention facilities for more than 20 days
    under most circumstance. You said that the 20-day requirement impedes
    the ability of the administration to re-unify families and keep
    families together, and so it was really a problem for the Courts and
    Congress. Are you suggesting that HHS should have the ability to
    indefinitely keep children in detention? Do you disagree with the
    American Academy of Pediatrics that ``even brief detention can cause
    psychological trauma and induce long-term mental health risks for
    children'' and that the government should ``[e]liminate exposure to
    conditions or settings that may retraumatize children, such as those
    that currently exist in detention, or detention itself,'' http://
    pediatrics.aappublications.org/content/early/2017/03/09/peds.2017-0483.
    Do you believe that keeping children and families in immigrant
    detention facilities, which are a prison-like environment, is in the
    best interest of children?

        Answer. HHS defers to ICE to respond to questions about conditions
    in ICE Family Residential Centers. Family Residential Centers are not
    the same as adult detention facilities.

        Question. What efforts were made by the Trump administration to
    ensure that children who were forcibly separated from their parents
    were able to remain together with their siblings in detention?

        Answer. In accordance with ORR Policy Guide, Section 1.2.7, ORR
    routinely keeps sibling groups together, except in highly unusual
    circumstances. UAC are placed in the least restrictive setting that is
    in the child's best interest in accordance with the law. Generally, the
    vast majority of UAC are placed in non-secure State-licensed
    residential child care facilities or transitional foster care homes or
    group homes.

        Question. Are there cases in which a parent had more than one of
    their children forcibly separated from them and the children were sent
    to different detention centers? If this occurred, are children being
    held in detention facilities able to regularly contact their sibling(s)
    who is being held in a different detention center(s)? Please provide
    the total number of siblings who were separated from their families,
    the number of siblings who remained together in detention, and the
    number who were separated. Please break these numbers down by age
    group.

        Answer. In accordance with ORR Policy Guide, Section 1.2.7, ORR
    routinely keeps sibling groups together, except in highly unusual
    circumstances. From the 2,816 possible children of potential Ms. L
    class members, there are 328 with siblings. Out of 328 children, 316
    children were placed together and 12 children were placed in a
    different program.

        Question. The American Academy of Pediatrics recently released a
    statement opposing the detention of immigrant children, saying that:
    ``In 2017, the AAP published a policy statement that immigrant children
    seeking safe haven in the United States should never be placed in
    detention facilities. Studies of detained immigrants have shown that
    children and parents may suffer negative physical and emotional
    symptoms from detention, including anxiety, depression and
    posttraumatic stress disorder. Conditions in U.S. detention facilities,
    which include forcing children to sleep on cement floors, open toilets,
    constant light exposure, insufficient food and water, no bathing
    facilities, and extremely cold temperatures, are traumatizing for
    children. No child should ever have to endure these conditions.'' Are
    you aware that the American Academy of Pediatrics released this
    statement opposing the detention of immigrant children? Do you disagree
    with the American Academy of Pediatrics statement? Were statements like
    this from medical experts taken into consideration before the Trump
    administration's policy of ``zero tolerance,'' and thus de facto family
    separation, was implemented? If yes, please state which medical experts
    or organization were consulted.

        Answer. All UAC receive a high standard of medical care while in
    the government's custody. UAC receive an initial screening for visible
    and obvious health issues when they first arrive at U.S. Border Patrol
    facilities. Children must be considered ``fit to travel'' before they
    are moved from a border patrol station to an HHS-funded care provider.
    UAC are medically screened and receive initial vaccinations within 48
    hours of arriving at a HHS-funded care provider. The initial screening
    includes a general health assessment, including a mental health
    screening and a review of vaccination history. If a vaccination record
    is not located or a child is not up-to-date, the child receives all
    vaccinations recommended by the Centers for Disease Control and
    Prevention (CDC). Some health conditions may manifest after the UAC is
    transferred to an influx care facility. If a health issue arises, the
    UAC will receive prompt attention and medical care is provided.

        Question. Has HHS, DHS, or DOJ consulted with medical experts and
    child welfare experts when implementing their policies pertaining to
    the forced separation, detention, and care of children? If yes, which
    groups were consulted and what issues were discussed? Did the groups
    support the administration proposal?

        Answer. Care of children in ORR custody is informed by child
    welfare and medical expertise, including that of social workers and
    physicians on the ORR staff. When ORR receives a child that another
    Federal agency has referred to its care, ORR performs several different
    clinical assessments. These include:

              The UAC Assessment, which covers biographic, family, legal/
            migration, medical, substance abuse, and mental health history.
              A trafficking assessment, which is part of the UAC
            Assessment and identifies whether a child has been trafficked.
              An educational assessment, which determines academic level.
              A medical assessment, which occurs within 48 hours of
            arrival in the ORR care provider facility.
              The Assessment for Risk, which occurs within 72 hours of
            admission and every 30 days thereafter to reduce the risk that
            a child is sexually abused or abuses someone else in ORR care.
              The UAC Case Review, which updates the child's file
            initially on the child's 30th day in care and subsequently
            every 30 days (or 90 days for children in long-term foster
            care).

        Question. Do HHS, DHS, or DOJ have plans to consult with medical
    experts and child welfare experts now and in the future regarding the
    detention of children and the care that is provided for these children?
    If yes, which experts will be consulted and how?

        Answer. HHS provision of care to children in the Unaccompanied
    Alien Children program is routinely informed by evidence and practice
    models in child welfare.

        Question. What policies and resources do you have in place to
    provide long-term services and supports for children who will suffer
    ongoing trauma and possible mental health issues as a result of being
    forcibly separated from their parents?

        Answer. All children in ORR care receive mental health services
    while in care. Every child in care has a mental health clinician. ORR
    is not appropriated or authorized to provide long-term mental health or
    other medical services to minors who are discharged from ORR care, but
    referrals and resource connections to available services are provided
    at discharge.

        Question. Do you know, does HHS know, where all of the children
    separated from their parent(s) since the implementation of this zero
    tolerance policy are, including their names and locations and the names
    and locations of their parent(s)?

        Answer. HHS is continuously aware of the locations of all children
    in ORR care, including those minors who were separated. HHS identified
    2,816 children who are or were in ORR care who were potentially
    separated, and all of these children have been linked to a parent. HHS
    or the ORR shelter program case manager has established contact with
    all parents of separated children.

        Question. Can you, with 100-percent accuracy, link a child held in
    a facility to the location of his or her parent(s)?

        Answer. HHS is continuously aware of the locations of all children
    in ORR care, including those minors who were separated. HHS identified
    2,816 children who are or were in ORR care who were potentially
    separated, and all of these children have been linked to a parent. HHS
    or the ORR shelter program case manager has established contact with
    all parents of separated children. For parents who are outside the
    United States, the government provides the ACLU with contact
    information for the parents, and the wishes of parents are conveyed to
    the government by the ACLU Steering Committee.

        Question. How many unaccompanied immigrant minors are currently
    residing in Pennsylvania? Where are these children currently residing?

        Answer. As of November 19, 2018, there were 164 unaccompanied alien
    children in ORR care in Pennsylvania.

        Question. In addition, please provide a list of all Office of
    Refugee Resettlement contracted facilities with unaccompanied children
    (UACs) in Pennsylvania, as well as a description of the vetting and
    oversight conducted by your department over these facilities.

        Answer. There are three Pennsylvania-based ORR residences for
    unaccompanied children: (1) Holy Family Institute, (2) KidsPeace
    Shelter, and (3) KidPeace Long Term Foster Care. All ORR residences in
    Pennsylvania must to comply with Pennsylvania licensing requirements
    and the ORR Policy Guide located at https://www.acf.hhs.gov/orr/
    resource/children-entering-the-united-states-unaccompanied. Their
    compliance is monitored by periodic on and off site review by ORR
    monitors, program officers, and Federal field staff.

        Question. What efforts have you made to comply with the court order
    requiring that all children under 5 be reunited with their parent or
    guardian by 2 weeks from the order and that all additional children be
    reunited within the month of the order? Will you comply with the order?
    When will you have reunited all of the children with their families?

        Answer. As of December 12, 2018, there were 103 children under the
    age of 5 identified as potentially separated in the Ms. L case. Of
    these, 99 were discharged from ORR care, 80 of them through
    reunification with the parent from whom they were separated. Two
    children under the age of 5 remain in care who were subsequently
    determined not to have been separated, and two children remain in care
    who cannot be reunified with the parent due to a final determination by
    the government that reunification with the parent would pose a risk to
    child safety and well-being. The efforts of the government to reunify
    the children with their parents, consistent with the safety needs of
    the child, has elicited positive comments from Judge Sabraw.

        Question. The Attorney General made the zero tolerance policy
    (i.e., defacto child separation policy) announcement on May 7th. When
    did you know you would be responsible for the care of these children?
    When were you told you would need to provide the physical, emotional,
    and other necessary support for these children?

        Answer. Though HHS has been involved in interagency discussions
    related to a myriad of options for responding to increasing migration
    numbers, HHS was informed of the zero tolerance policy when it was
    announced by the Attorney General. HHS has a strong history of
    providing excellent care to all UAC referred from DHS.

        Question. I understand that HHS contracts with private residential
    facilities to care for Unaccompanied Alien Children (UACs). Please
    provide a list of entities that have been contracted for these
    services. In addition, provide documentation of the requirements for
    each of these facilities, including the background and training
    requirements for those providing care.

        Answer. An accompanying document lists the residential facilities
    in the UAC Care Provider Network. Each facility must comply with the
    licensing requirements for the State in which it is located, as well as
    the guidelines set forth in the ORR Policy Guide. Staff who are
    required to have professional certifications must maintain licensure
    through continuing education requirements. In addition, all care
    provider staff must complete 40 hours of training annually. Foster care
    providers and foster families are subject to all ORR training and
    documentation requirements.

        Question. What training do the staff who care for these children
    have to address the trauma the children have experienced?

        Answer. HHS prioritizes the physical and emotional safety and well-
    being of all children in ORR care and custody. ORR works to ensure that
    care provider staff are trained in techniques for child-friendly and
    trauma-informed interviewing, assessment, observation and other
    techniques, and are also trained to identify children who have been
    smuggled (i.e., transported illegally over a national border) and/or
    trafficked in the United States. Furthermore, staff who are required to
    have professional certifications (i.e., mental health clinicians) must
    maintain licensure through continuing education requirements.

        Question. Please describe what, if any, protocols and training are
    in place to ensure adequate care for the needs of children that have
    been separated from their families, including those with disabilities,
    those with chronic health conditions, those with emotional support
    needs and the services and treatments you are providing to them.

        Answer. All children in ORR care receive mental health services
    while in care. Every child in care has a mental health clinician.
    Children in the UAC Program often have severe trauma histories, and the
    program is trauma-focused to respond to those needs.

        Question. Are there any children in your care who have
    disabilities? Please describe, without personally identifiable
    information, the number of separated children in your care with Down
    syndrome, autism, or any other type of disability. In addition, please
    provide these numbers grouped by age as well as a description of the
    services available and being provided to them.

        Answer. Within ORR's Unaccompanied Alien Children (UAC) Program,
    the Division of Health for Unaccompanied Children (DHUC) oversees
    public health screening and the provision of health services to UAC.
    DHUC monitors for serious medical conditions and infectious diseases of
    public health importance. DHUC responds to ORR-funded programs caring
    for UAC 24 hours a day, 7 days a week and provides management guidance
    on infectious diseases and complex medical cases.

        Each ORR-funded program that cares for UAC, including UAC with
    special health-care needs, has an established network of health-care
    providers, including specialists, emergency care services, mental
    health practitioners, and dental providers. ORR-funded programs are
    required to facilitate an initial medical examination (IME) within 2
    business days of admission into ORR custody. The IME is administered by
    an MD, DO, NP, or PA, who must review and assess specific components
    such as current health complaints, family history, mental health
    issues, sexual and physical abuse, and infectious disease screening. If
    the provider feels a health condition, including conditions identified
    among children with special health-care needs, warrants additional
    follow-up, a referral is made. Once approval from ORR is obtained, the
    ORR-funded program schedules the soonest available appointment.

        The requested information of separated children with special
    health-care needs is not captured in a currently accessible format.
    Children with special health-care needs, regardless of circumstances,
    are medically managed in a manner consistent with current medical best-
    practices.

        Question. What have been your recommendations to the President
    regarding the care and treatment of the children who have been
    separated from their families?

        Answer. HHS is continuing a strong history of providing excellent
    care to unaccompanied alien children (UAC) referred to us from the
    Department of Homeland Security. Our goal is, and always has been, to
    return these children to the care of a parent or, if a parent is not
    available, to safely release the child to a close relative or an
    unrelated sponsor designated by a parent. In this mission, we are
    carrying out the responsibilities given to HHS by Congress in the
    Homeland Security Act of 2002 and further developed in the William
    Wilberforce Trafficking Victims Protection Reauthorization Act of 2008
    (TVPRA). We are protecting and providing care for these UAC.

        Question. Have you shared with the President and Attorney General
    information about the trauma that separation and detention causes to
    these children and their parents?

        Have you shared with the President the recommendations of the
    American Academy of Pediatrics that separation of children from their
    parents and family detention can ``cause serious dangers to children's
    health and can result in lifelong consequences for educational
    achievement, economic productivity, health status, and longevity''
    itself?

        Have you shared with the President the recommendations of the over
    230 child welfare organizations that have condemned the separation and
    detention of children?

        Answer. The Unaccompanied Alien Children (UAC) Program at HHS was
    created by Congress in the Homeland Security Act of 2002. In the past
    16 years, HHS has seen more than 250,000 children who have experienced
    the sadness and loss of absent parents. These parents may have left
    their children behind in their home country when they came to the
    United States, resulting in years of separation during which the
    children were often left in the care of relatives, or sent the children
    to the United State for work or education. The President and the
    Attorney General know the trauma that the decisions of parents, such as
    committing a crime, can have on their children.

        Question. What has been your recommendation, as the
    administration's leader on health and human services, regarding
    separation of children from families and long-term detention of
    children?

        Answer. HHS has made reunification of separated children,
    consistent with the President's executive order and the orders of the
    U.S. District Court for the Southern District of California, a priority
    for the Department.

        Question. HHS has been caring for some of these children for
    months. How is the administration paying for this care? Where are the
    funds coming from? What is the total cost of this policy? Please
    provide a full accounting of how HHS is paying for the facilities and
    services necessary to care for these children, and to the extent
    applicable their families, and where those funds are diverted from.

        Answer. Funding for care of all Unaccompanied Alien Children in FY
    2018 came from appropriations for that year, carryover funding from
    prior years, reprogramming within the Refugee and Entrant Assistance
    account, and transfers from other sources within the Secretary's
    transfer authority.

        The estimate of expenditures in FY 2018 and FY 2019 related to the
    care and reunification (or other appropriate discharge) of possible
    children of potential Ms. L. class members is below. ORR estimates the
    shelter costs, including clothing, education, recreation, and food at
    $58,800,000. The estimated DNA screening costs are $1,400,000. The
    estimated medical services are $2,670,000. The estimated legal services
    are $4,010,000. The estimated case management and program support costs
    are $13,470,000. As of November 1, 2018, the total estimated cost is
    $80,350,000, or four percent of the total amount of funds obligated for
    the UAC program in FY 2018. This cost is only a small part of total UAC
    costs in FY 2018. The costs incurred are ongoing as separated children
    remain in ORR custody.

                                     ______

                 Questions Submitted by Hon. Sheldon Whitehouse
        Question. Secretary Azar, I have heard from hospitals in my State
    about the effect that drug shortages are having on the ability to
    safely and effectively practice medicine in emergency rooms and
    throughout the hospital. While I have been pleased to see the progress
    on addressing the shortage of saline after Hurricane Maria, that is far
    from the only drug shortage problem our country is facing. Hospitals in
    my State report shortages of local anesthetics, injectable opiates,
    epinephrine, sodium bicarbonate, parenteral nutrition, and more. One
    hospital system in my State has noted the need to use ``creative''
    purchasing practices, changing up the products and dosages it buys, and
    thus increasing the risk of providers making errors when needing to get
    up to speed on a new product.

        In 2017, we know there were 39 new and 41 ongoing shortages,
    despite what the FDA is already doing. What else is the FDA going to do
    to alleviate these shortages, and prevent future shortages from
    disrupting the practice of medicine? Does FDA have all the authority it
    needs to intervene in the case of a potential or ongoing drug shortage?
    Many of the drugs in shortage are low-margin, generic products with
    limited competition. How can the FDA and Congress prevent instances of
    limited competition from jeopardizing access to needed medications?

        Answer. In July 2018, FDA announced the formation of a new Drug
    Shortages Task Force charged with delving more deeply into the reasons
    behind some of the more persistent shortages and looking for solutions
    to address these ongoing challenges. FDA is directed to convene the
    group, we are working with our partners across the administration and
    seeking input from industry and other members of the public to evaluate
    the current authorities to consider how we might better help prevent
    and mitigate shortages. The new task force includes FDA's Federal
    partners on the shortage issues, including the Centers for Medicare and
    Medicaid Services, the Department of Defense, the Department of
    Veterans Affairs, the Office of the Assistant Secretary for
    Preparedness and Response, who collectively provide or pay for health-
    care services and prescription medicines for millions of Americans, and
    the Federal Trade Commission.

        The task force expands upon the work of a group that was created by
    FDASIA, which gave the FDA new authorities to help address drug
    shortages. This includes creating the requirements that manufacturers
    of certain drugs that are life-
    supporting, life-sustaining, or intended for use in the prevention or
    treatment of a debilitating disease or condition notify us of a
    permanent discontinuation or temporary interruption in manufacturing
    that is likely to lead to a meaningful disruption in the supply of such
    drugs in the United States.

                                     ______

                  Prepared Statement of Hon. Orrin G. Hatch,
                            a U.S. Senator From Utah
    WASHINGTON--Senate Finance Committee Chairman Orrin Hatch (R-Utah)
    today delivered the following opening statement at a hearing on drug
    pricing and innovation with Health and Human Services (HHS) Secretary
    Alex Azar.

        We are pleased to have Secretary Azar appear before the committee
    today, and I know members on both sides of the aisle are eager to hear
    from him on the Trump administration's plans to lower prescription drug
    costs.

        I was in the Rose Garden when the President announced his plan to
    put patients first by lowering prescription drug and out-of-pocket
    costs to consumers.

        I commend the President and the Secretary for their focus in this
    area and for releasing this comprehensive blueprint.

        I also appreciate that HHS is seeking feedback from the public on
    the policy ideas in the blueprint. The administration is prudent to
    work through options by properly consulting those affected by these
    policies first.

        As we continue to develop policy options, it is imperative to
    understand the impact on patient access, affordability and innovation
    before taking any specific action.

        To that end, today is a golden opportunity for members to discuss
    policy proposals and ideas in the blueprint, which contemplates many
    weighty issues that would seriously change the current way of doing
    things.

        And on that note, I believe that those who have criticized the
    blueprint as insufficient are either responding from a lack of
    knowledge or purely for political gain.

        Now, I bring to the table decades of experience of working on drug
    pricing. That's why we've titled today's hearing in a way that clearly
    explains the heart of these issues: ``Prescription Drug Affordability
    and Innovation.''

        This hearing title references a concept that has been very
    important to me throughout my time in the Senate.

        After all, the goal is to help consumers, and the best way to do
    that is to balance both affordability and innovation.

        Over 3 decades ago, I championed the Drug Price Competition and
    Patent Term Restoration Act, what has since become known as Hatch-
    Waxman.

        As I noted in an editorial that ran in Roll Call yesterday, the
    Hatch-Waxman law established a system for regulating drugs that rewards
    new products while encouraging generic competitors.

        Around that same time, I sponsored the Orphan Drug Act.

        And I am proud to say that law has resulted in new treatment
    options that have enhanced care and dramatically improved the quality
    of life for hundreds of thousands, if not millions, of people who live
    with rare diseases.

        Those two bills are just the tip of the iceberg though. I have
    since spearheaded numerous other legislative initiatives to address
    shortcomings in the system and to capitalize on opportunities for
    improvement.

        I brokered the agreement that allowed physician-administered
    biologics to flourish--providing effective treatment for many cancers
    and other serious medical conditions.

        More recently, I have successfully advocated for policies that
    promote development of biosimilars as a way to foster competition and
    lower costs.

        I do not bring up this history to boast, but to point out that the
    pursuit of the balance of affordability and innovation has served us
    well.

        Now, nearly 90 percent of prescription drugs dispensed to patients
    are generics. Yet, we also have realized life-altering breakthroughs in
    treatment.

        Maintaining this balance must be a part of the conversation here
    today and as we move forward. And any lasting solution must continue to
    be market-driven.

        The Medicare Part D prescription drug program is built on a system
    of private entities competing on price and service. This private-sector
    approach is ingrained in the design of the Part D program, which wisely
    forbids the government from interfering with the negotiations between
    these private entities.

        For Part B drugs and biologics, Medicare pays based on the average
    price that the manufacturer charges to other payers. This effectively
    represents a rate negotiated in the private sector.

        Don't take this to mean the way Medicare pays for prescription
    drugs is perfect. There is certainly room for improvement.

        But the fact that the United States continues to be a
    pharmaceutical research and development powerhouse is in large part
    because we have long preserved the
    market-based approach.

        It is vastly superior to the alternative of direct government
    involvement and price-setting.

        After all, the private sector has proven time and again that it is
    far better suited to identifying challenges and turning them into
    opportunities.

        One persistent challenge is that certain key drugs and items are in
    such short supply that hospitals and other providers can't even
    purchase them in sufficient quantity. These drug shortages, which
    include generic medications, threaten patient care and demonstrate a
    weakness in our system.

        I am proud to say that my home State of Utah is taking a leadership
    role by creating a market-based response.

        Utah-based Intermountain Healthcare has joined with other like-
    minded systems across the country to form a generic drug company.

        This new venture will fill a market need by producing and
    distributing drugs that are in short supply.

        This new company will also provide more competition that will
    improve prices and opportunities for consumers.

        There are others, too, like some commercial health plans that have
    responded to market demand by offering prescription drug coverage
    options that pass along the negotiated discounts and rebates to their
    enrollees at the point of sale, rather than only through lower
    premiums.

        Turning back to the President's blueprint, it contains policy ideas
    related to Medicare and Medicaid that merit serious consideration. For
    example, the idea of paying for a drug based on its success in
    achieving the intended patient benefit holds promise, especially for
    novel, breakthrough therapies that do not yet have competition.

        We should explore how these value-based arrangements can work
    within our Federal health programs.

        We should also assess how we can modernize the popular Part D
    program, because it is now more than 10 years old.

        And a review of the Part D program should involve action to
    mitigate the change in the bipartisan budget deal enacted earlier this
    year that increased the discount that manufacturers are required to
    provide on drugs in the coverage gap.

        This misguided change has only dampened some of the competitive
    forces that have made the program so successful.

        We will soon hear from Secretary Azar on the policy ideas in the
    blueprint. It will be important to understand how the policies in the
    blueprint would impact not only the list price but patient access,
    beneficiary premiums and other cost-sharing, as well as innovation.

        As the vast majority of the blueprint's policies are in the
    jurisdiction of the Finance Committee, this engagement with the
    secretary will inform how we move forward.

        Before I conclude my opening remarks, I must say that I suspect
    that some of my colleagues may want to talk about other pressing issues
    that touch on HHS's jurisdiction.

        To head off just one such issue, I have made my position on the
    situation at our southern border known: we must keep families together
    as we work to avoid illegal border crossings.

        We also need to ensure that children who have been separated from
    their parents are reunited, and I know the Secretary is working
    aggressively to do so.

        However, my experience tells me that our time at this hearing will
    be best spent discussing the issues we all have prepared for weeks to
    talk about with Secretary Azar.

        After all, the cost, innovation and availability of prescription
    drugs is a deeply important and often life-or-death issue for millions
    of our constituents each day.

        My hope is that we can all take advantage of the opportunity before
    us today and stay focused on the agreed upon subject matter of this
    hearing.

                                     ______

                      Submitted by Hon. Claire McCaskill,
                          a U.S. Senator From Missouri

                    Agent Eligibility and Underwriting Guide

                       HumanaOne Health and Life Products

    e-Query service (Ask an Underwriter)

    e-Query is a service which allows you to assess your client's insurance
    eligibility more accurately with the assistance of a Humana
    underwriter. It directly links you to a dedicated team of underwriters
    by means of an electronic form hosted on HumanaOne agent workbench.

    e-Query does not replace the Underwriting Guidelines herein, but rather
    compliments it. To access the e-Query form you will need to log onto
    the HumanaOne Agent Workbench from the Agent Portal on www.humana.com,
    and click on the ``e-Query/Ask an Underwriter'' link under the
    questions section. e-Query is not currently available in the state of
    Wisconsin.

    Eligibility requirements

    For health coverage

    > Issue ages: 2 weeks--64\1/2\ years
       Newborns on family and child only applications will be eligible for
    coverage when they have had a two week well baby exam with normal
    results.
       Please Note: This applies to full term babies. If they are born
    premature or with complications, we will underwrite as necessary.
    >  Maximum issue age of a dependent child varies by state.
    >  Dependents may include stepchildren, and/or legally adopted
    children. (Dependent definitions vary by state.)

    Children-only health coverage

    Children can be insured alone. The custodial parent or legal guardian
    who can attest to child's health history must complete the application.
    If an underwriting interview is required, the person that completed the
    application will be interviewed. The youngest child will be the primary
    applicant, and any others will be listed as dependents. Newborns
    applying for coverage require a two week well baby exam with normal
    results. Medical records are required for any child that is 2 weeks to
    2 months of age. A child only health policy is ineligible, if any
    family member of the applicant(s) is pregnant or currently an expectant
    parent. See the terms indicated under Current/Pregnancy/Expectant
    parent.

    Application scenarios:

    (1)  Parent A has custody and resides in a state in which Humana offers
    coverage. Parent B will be paying for the health insurance. Parent A
    must complete and sign the application to verify the health history.
    Parent B must sign the payer portion of the application.

    (2)  Parent A has custody and resides in a state in which Humana does
    NOT offer coverage. Parent B will be paying for the health insurance.
    Because benefits are based on the applicant's primary resident, Humana
    will not be able to accept an application for the child(ren).

    (3)  Both parents share custody and reside in a state in which Humana
    offers coverage. Either parent can complete and sign the application.

    (4)  Both parents share custody and reside in a state in which Humana
    offers coverage, however, their dependent student attends school in a
    state where Humana does not offer coverage. Coverage may be extended to
    the parents and their dependent college student(s).

    Current pregnancy/expectant parent

    For family applications, before applying for coverage, the mother must
    be two weeks postpartum, with no adverse findings, and the newborn must
    be two weeks old and have had a normal two week baby exam.

    For child-only health policies, if any family member of the child is
    currently an expectant parent, the application is ineligible. Before
    applying for coverage, the mother must be two weeks postpartum, with no
    adverse findings, and the newborn must be 2 weeks of age, and have had
    a normal 2 week well baby exam with normal results.

    Other coverage

    A person who is currently covered by another plan must replace that
    coverage with Humana. However, it is important that he or she does not
    cancel existing coverage until written notification is received from
    Humana that coverage will be issued. Some states may require a
    replacement form.

    U.S. citizenship

    The applicant's primary residence must be in a state where the product
    is approved for sale. If the applicant is not a U.S. citizen, he or she
    must have lived in the U.S. for a minimum of one year, plans to remain
    in the U.S. for over 3 years, has had a normal physical exam with blood
    work from a U.S. physician, and has no plans of foreign travel of
    greater than three months continuously. An immigration physical does
    not meet the criteria for an acceptable physical exam.

    Foreign travel

    An applicant who lives in a foreign country is not eligible for
    coverage, nor is an applicant who has plans for extended foreign travel
    of three consecutive months at a time or longer. (May vary by state.)

    Exceptions: An applicant who, for the purpose of Missionary Work, has
    plans for extended foreign travel for 0-2 years from the time of the
    application is eligible for coverage. An applicant with foreign travel
    plans exceeding 2 years for Missionary Work would not be eligible.

    An applicant who, for the purpose of studying abroad or occupational/
    business travel has plans for extended foreign travel for 0-2 years
    from the time of the application is eligible for coverage. An applicant
    with foreign travel plans exceeding 2 years for studying abroad or
    occupational/business travel would not be eligible.

    Tobacco usage--health

    Humana has two tobacco classes:

    1.  Non-user: Does not use ANY form of tobacco currently or has not
    used ANY tobacco cessation products in the last 12 months.

    2.  Tobacco user

    People who do not smoke or use any form of tobacco have their premium
    discounted. Humana conducts random nicotine testing during underwriting
    review.

    Health underwriting guidelines

    The following circumstances may result in a person not being eligible
    for health coverage:

    (1)  Currently pregnant, an expectant parent (including fathers and/or
    other family members)--entire application is ineligible;

    (2)  Health history that includes one of the ineligible health
    conditions:

    (3)  Height/weight that exceeds the limits identified in the health
    build chart; or

    (4)  Employment in an ineligible occupation. Not applicable in Florida.

    (5)  Non-U.S. citizen who has not consulted a physician in the U.S.

    (6)  Health history that includes 3 or more risk factors (build/
    overweight, elevated cholesterol/elevated triglycerides, hypertension,
    tobacco use).

    (7)  Hypertension with 50% rateable build.

    (8)  Hypertension with current treatment for Sleep Apnea.

    A ``yes'' answer to any one of these circumstances may result in a
    declination of coverage. However, this information only provides their
    potential eligibility; it is not a final determination. All final
    coverage decisions are made by our Underwriting department upon receipt
    of an application. This assessment is not an offer of coverage or a
    notice of declination for your client.

    Ineligible occupations (applicable to Florida for applications 2/2/2010
    and after)

    > Air traffic controllers
    > Asbestos and toxic chemical workers
    > Commercial fishermen who do not return to port every day
    > Divers (professional scuba or skin)
    > Explosive workers
    > High-risk aviation (experimental and test pilots, crop dusters)
    > Jockeys
    > Oil and natural gas workers, including offshore operations
    > Professional auto racers
    > Professional rodeo participants
    > Professional and semi-professional athletes (Note: Golfers are
    acceptable)
    > Structural steel workers, iron workers and steeplejacks
    > Underground miners

    Health build charts

    Use this table as a guide to determine if an applicant is rateable
    because of his or her build. Humana may request a paramedical exam (at
    our expense) to confirm an applicant's height and weight. An applicant
    must have maintained an acceptable build within the 12 months prior to
    applying to be considered eligible. If an individual's weight exceeds
    our ``Standard'' class but less than our ``Decline'' limit, they will
    be subject to a premium increase of 25-50%.

    To qualify for the lower build rating, an applicant must lose the
    weight to reach the lower range and maintain the weight loss for 12
    months.

    Applicants who have applied for individual insurance and who have been
    offered a rating due to build may also have an obesity rider added to
    his or her offer. Any diagnostic procedure, treatment, or surgery for
    obesity including any complications thereof, will be excluded from
    coverage. In states where riders are not offered, coverage may be
    declined.

    If an applicant is applying for both a Humana One health plan as well
    as for HumanaOne Term Life Insurance, the Health Build Chart will be
    followed during the underwriting process. (May vary by state.)

                                     Female
    ------------------------------------------------------------------------
                                                    Standard       Decline
    ------------------------------------------------------------------------
    411"                                            88-151 lbs.     175 lbs.
    ------------------------------------------------------------------------
    50"                                             90-155 lbs.     180 lbs.
    ------------------------------------------------------------------------
    51"                                             93-160 lbs.     187 lbs.
    ------------------------------------------------------------------------
    52"                                             97-167 lbs.     193 lbs.
    ------------------------------------------------------------------------
    53"                                            100-172 lbs.     199 lbs.
    ------------------------------------------------------------------------
    54"                                            102-178 lbs.     206 lbs.
    ------------------------------------------------------------------------
    55"                                            106-183 lbs.     212 lbs.
    ------------------------------------------------------------------------
    56"                                            110-189 lbs.     219 lbs.
    ------------------------------------------------------------------------
    57"                                            113-195 lbs.     225 lbs.
    ------------------------------------------------------------------------
    58"                                            116-200 lbs.     232 lbs.
    ------------------------------------------------------------------------
    59"                                            119-206 lbs.     239 lbs.
    ------------------------------------------------------------------------
    510"                                           123-212 lbs.     246 lbs.
    ------------------------------------------------------------------------
    511"                                           127-219 lbs.     253 lbs.
    ------------------------------------------------------------------------
    60"                                            130-224 lbs.     260 lbs.
    ------------------------------------------------------------------------
    61"                                            134-232 lbs.     266 lbs.
    ------------------------------------------------------------------------

                                      Male
    ------------------------------------------------------------------------
                                                    Standard       Decline
    ------------------------------------------------------------------------
    52"                                             97-177 lbs.     198 lbs.
    ------------------------------------------------------------------------
    53"                                            100-182 lbs.     205 lbs.
    ------------------------------------------------------------------------
    54"                                            102-189 lbs.     211 lbs.
    ------------------------------------------------------------------------
    55"                                            106-194 lbs.     218 lbs.
    ------------------------------------------------------------------------
    56"                                            110-200 lbs.     224 lbs.
    ------------------------------------------------------------------------
    57"                                            113-206 lbs.     232 lbs.
    ------------------------------------------------------------------------
    58"                                            116-212 lbs.     238 lbs.
    ------------------------------------------------------------------------
    59"                                            119-219 lbs.     245 lbs.
    ------------------------------------------------------------------------
    510"                                           123-225 lbs.     252 lbs.
    ------------------------------------------------------------------------
    511"                                           127-232 lbs.     260 lbs.
    ------------------------------------------------------------------------
    60"                                            130-238 lbs.     267 lbs.
    ------------------------------------------------------------------------
    61"                                            134-245 lbs.     274 lbs.
    ------------------------------------------------------------------------
    62"                                            138-252 lbs.     282 lbs.
    ------------------------------------------------------------------------
    63"                                            141-259 lbs.     289 lbs.
    ------------------------------------------------------------------------
    64"                                            145-266 lbs.     298 lbs.
    ------------------------------------------------------------------------

    Ineligible health conditions

    A series of medical questions will be asked of each of the proposed
    insured. Any applicant age 18 and older must review and attest to the
    questions individually (age requirements vary by state). Below is a
    partial listing of conditions that may cause Humana to decline
    coverage. The list is not all-inclusive.

    Please note that if your client is applying for both a health plan and
    a life policy at the same time, and they are denied a health plan based
    on their health status, the process will discontinue as well for the
    life policy.

    Below conditions are permanent declines, unless otherwise indicated.
    Handling of the below conditions may vary by state.

    A
    _______________________________________________________________________

    Achalasia, cardio spasm             Achondroplasia

    Acromegaly                          Addison's disease

    Adrenal disorders                   AIDS, ARC, or HIV

    Alcohol dependence or abuse--
    individual consideration after 5
    years of recovery                   Alport syndrome

    Alzheimer's disease                 Amyloidosis

    Amyotrophic lateral sclerosis (ALS
    or Lou Gehrig's disease)            Anemia--aplastic Cooley's, B-12
                                        deficiency, hemolytic,
                                        Mediterranean, pernicious, sickle
                                        cell or Thalassemia Major

    Anencephaly                         Aneurysm--if present or within 5
                                        years

    Angina                              Angioplasty

    Ankylosing spondylitis              Anorexia nervosa--individual
                                        consideration, after 8 years of
                                        recovery

    Anticoagulant therapy               Antiphospholipid syndrome

    Anticardiolipin antibody syndrome   Aortic arch arteritis

    Aortic insufficiency/stenosis/
    regurgitation--moderate or severe   Aortic Stenosis, Aortitis

    Arnold-Chiari malformation          Arterial embolism (clot)

    Arterial occlusion                  Arteriosclerosis, atherosclerosis

    Arteriosclerosis obliterans (ASO)   Arteriovenous malformation (A-V
                                        malformation)

    Arteritis                           Artificial heart valve

    Asperger's syndrome--except in
    Indiana                             Ascites

    Ataxia telangiectasia               Atherosclerosis obliterans

    Atherosclerosis thrombotic disease  Atrial fibrillation--one event less
                                        than 2 years ago or multiple events
                                        or chronic or with Pacemaker or
                                        Cardiverter

    Atrial septal defect--present or if
    surgically corrected with
    complications                       Autism--varies by state

    B
    _______________________________________________________________________

    Banti's syndrome                    Basal cell carcinoma--if present

    Berger's disease                    Biliary cirrhosis

    Bipolar disorders                   Bladder entropy--symptomatic

    Blastomycosis                       Brachial plexus disorder

    Brain attack                        Brain tumors

    Bright's disease                    Bronchiectasis--if lung resection,
                                        no residuals, no tobacco--
                                        individual consideration

    Bronchiolectasis                    Bruit

    Buerger's disease (thromboangiitis
    obliterans)                         Bulimia--individual consideration,
                                        after 8 years of recovery

    Burkitt's lymphoma (malignant
    lymphoma)                           Bypass surgery

    C
    _______________________________________________________________________

    Cachexia                            Cancer with lymph node involvement
                                        or metastasis

    Cardiac decompensation              Cardiac defibrillator (implantable)

    Cardiac or comorbidity risk
    factors--3 or more (build/
    overweight, elevated cholesterol/
    triglyercerides, hypertension,
    tobacco use)                        Cardiomegaly

    Cardiomyopathy                      Cardiospasm

    Celiac Disease                      Central serous retinopathy

    Cerebral palsy                      Cerebrovascular accident

    Cerebrovascular disease             Charcot-Marie-Tooth disease

    Chediak Kigaski syndrome            Chondrocalcinosis

    Christmas disease                   Chromosomal abnormalities

    Chronic granulomatous disease       Chronic glomerulonephritis

    Chronic hepatitis                   Chronic obstructive pulmonary
                                        disease (COPD)

    Chronic progressive external
    opthalmoplegia (CPEO)               Cirrhosis of the liver

    Coarctation of the aorta            Cocaine abuse

    Colitis (ulcerative)                Collagen diseases

    Congenital heart anomalies          Congenital lymphedema

    Congestive heart failure (CHF)      Connective tissue disorder

    Cor pulmonale                       Coronary artery bypass surgery
                                        (CABS)

    Coronary artery disease (CAD)       Coronary Fistula

    Coronary heart disease (CHO)        CREST syndrome

    Creutzfeldt-Jakob disease           Crigleer-NaJaar syndrome

    Curvature of the spine with
    pulmonary, cardiac or spinal cord
    involvement                         Cushing syndrome/disease

    Cystic fibrosis                     Cystic kidney diseases

    Cystic medial necrosis              Crohn's disease

    D
    _______________________________________________________________________

    Dejerine type sclerosis             Delirium

    Delusions                           Dementia

    Demyelinating diseases              Depressant addiction--current
                                        history of addiction with current
                                        usage

    Dermatitis herpetiformis--with
    evidence of significant immunologic
    compromise                          Dermatomyositis

    Depression--major, if
    hospitalization required or with
    suicidal attempt or ideation        DiGeorge syndrome

    Diabetes insipidus                  Diabetes mellitus (type 1 and type
                                        2)

    Down syndrome                       Drug dependence or abuse (illicit,
                                        illegal, over the counter or
                                        prescription)

    Drug psychosis                      Dwarfism

    E
    _______________________________________________________________________

    Eaton-Lambert syndrome              Ebstein's malformation (Ebstein's
                                        anomaly)

    Edward's syndrome                   Ehlers-Danlos syndrome

    Eisenmenger's complex
    (Eisenmenger's syndrome)            Ejection Fraction--less than 50% or
                                        more than 75%

    Embolism--arterial is permanent
    decline; pulmonary depends on
    frequency, treatment, etc           Emphysema

    Encephalocele                       Encephalocystocele

    Encephalopathy                      Eosinophilic granuloma

    Epidermolysis bullosa               Erythema Multiforee (Stevens
                                        Johnson syndrome)--if present or
                                        less than one year since complete
                                        recovery or residuals

    Esophageal varices

    F
    _______________________________________________________________________

    Fabry disease                       Factor V deficiency

    Factor VIII or IX deficiency        Familial Aadenomatous polyposis

    Fanconi syndrome--fanconi anemia    Fibromyalgia

    Flexure-hepatic or splenic          Fragile X syndrome

    Fragilitas ossium

    G
    _______________________________________________________________________

    Galactorrhea--if present            Galactosemia

    Gargoylism (mucopolysaccharidosis)  Gastrectomy--total removal

    Gastric bypass/stapling             Gastroparesis

    Gaucher's disease                   Gender identity disorder

    General paresis                     Glycogen storage disease

    Guillain-Barre Syndrome/
    Polyneuritis--if present or less
    than 3 years since recovered or if
    residual disability/permanent
    impairment

    H
    _______________________________________________________________________

    Hallucinations                      Hand-Schueller-Christian disease

    Heart attack or disease             Heart enlargement/hypertrophy

    Heart-lung transplants              Heavy chain disease

    Hemiplegia                          Hemochromatosis

    Hemophilia A or B                   Hemophilia vascular

    Henoch-Schoenlein purpura           Hepatic flexure

    Hepatomegaly                        Hepatitis (autoimmune)

    Hepatitis A--if less than 6 months
    after complete recovery             Hepatitis B carrier

    Hepatitis C                         Hepatitis D (HDC or delta virus)

    Hepatitis E (HEV)                   Hepatitis G (HGV)

    Hepatomegaly                        Hereditary angioedema

    Hereditary spherocytosis--if
    present                             Hirschsprung's disease--if
                                        unoperated or symptomatic

    Histocytosis X                      Histoplasmosis--if present or
                                        disseminated and less than 3 years
                                        since complete recovery

    HIV positive                        Hodgkin's disease

    Hughes syndrome                     Human T-cell leukemia virus

    Human T-cell lymphotropic virus     Hunner's ulcer

    Huntington's chorea                 Hydrocephalus

    Hydronephrosis--if present or
    bilateral                           Hyperhydrosis--if present or if
                                        surgically corrected with residual
                                        symptoms or any complications

    Hyperparathyroidism--if unoperated  Hypersplenism

    Hypogonadism (primary)              Hypoparathyroidism

    Hypoplastic anemia                  Hysteria

    I
    _______________________________________________________________________

    Idiopathic thrombocytopenic purpura
    (child form)--if present            IgA nephropathy/Berger's Disease

    IgG subclass deficiency             Immune deficiency

    Infectious neuritis--if present or
    multiple episodes                   Intermittent claudication

    Interstitial cystitis (chronic)/
    Hunner's Ulcer                      Intestinal infarction/Intestinal
                                        ischemia--unless acute with
                                        complete recovery more than 6 weeks
                                        ago

    Intestinal obstruction--if present  Iritis--if one episode, less than 6
                                        months ago or multiple episodes

    Ischemic heart disease              Ischemic/ulcerative colitis

    IV drug use                         Insulin resistance

    J
    _______________________________________________________________________

    Jaundice (adult)--present or less
    than 6 months since complete
    recovery                            Juvenile dermatomyositis--if
                                        present or less than 2 years since
                                        complete recovery
    K
    _______________________________________________________________________

    Kahler's disease                    Karposi's sarcoma

    Kartagener's syndrome               Keratoconus--present and surgery
                                        recommended

    Kidney injury--major injury with
    history of dialysis                 Kidney failure--if chronic or acute
                                        less than 2 months since recovery

    Kidney stone--if present or if more
    than 4 episodes                     Kidney transplant

    Korsakoff's psychosis               Klinefelter's syndrome

    L
    _______________________________________________________________________

    Left bundle branch block            Left ventricular hypertrophy

    Legionella pneumophilia
    (Legionnaire's disease)             Letterer-Siwe disease

    Leukemia                            Leukoencephalopathy

    Lipidosis (Niemann Pick disease)    Liver abscess with residuals

    Liver cancer                        Liver transplant

    Lobstein's disease                  Lou Gehrig's disease (ALS)

    Lung cancer                         Lung transplant

    Lyme's disease--if present          Lymphoblastoma

    Lymphoma                            Lymphoma, Hodgkins

    Lyinphomatoid papulosis

    M
    _______________________________________________________________________

    Malaria--more than one occurrence
    with complications or frequent
    disabling attacks                   Manic disorders

    Marchiatava-Micheli syndrome        Marfan's syndrome

    Medullary cystic kidney             Medullary sponge kidney--if present
                                        or less than 18 years of age or if
                                        more than 18 years of age--
                                        bilateral

    Mental retardation--severe,
    emotionally unstable, seizures or
    psychiatric impairments             Mesenteric vascular disease

    Metabolic syndrome                  Microcephaly

    Milroy's disease                    Mitral insufficiency

    Mitral stenosis                     Mixed connective tissue disease

    Moebius syndrome/Mobius syndrome    Mucopolysaccharidosis

    Multicystic kidney                  Multiple myeloma

    Multiple personality disorder       Multiple sclerosis

    Muscular dystrophy                  Myasthenia gravis

    Myelitis--if present or less than 6
    months since complete recovery      Myocardial infarction (MI)

    Myocardial ischemia                 Myotonic dystrophy

    Myxedema--if present

    N
    _______________________________________________________________________

    Nall-Patella syndrome               Narcotic use/addiction

    Nephritis (chronic)                 Nephrocalcinosis

    Nephrosclerosis                     Nephrotic syndrome

    Neuritis--if present                Neurofibromatosis

    Neurogenic bladder--if present      Neuromuscular disorders

    Niemann-Pick disease (Lipidosis)

    O
    _______________________________________________________________________

    Occlusion                           Organic brain disorder/syndrome

    Organ transplant recipient          Osteitis fibrosa cystica

    Osteitis fibrosa cystica
    disseminata                         Osteitis fibrosa cystica
                                        generalisata

    Osteogenesis imperfecta/Lobstein's
    Disease                             Ovarian cancer

    P
    _______________________________________________________________________

    Pacemaker                           Paget's disease

    Pancreatic cyst or pseudocyst       Pancytopenia

    Paralysis                           Paranoid disorder

    Paraplegia                          Parkinson's disease

    Paroxysmal nocturnal hemoglobinuria Pathological fractures

    Pemphigus                           Percutaneous transluminal coronary
                                        angioplasty

    Periarteritis nodosa                Peripheral occlusive arterial
                                        disease (POAD)

    Peripheral vascular disease or
    intermittent claudication           Pernicious anemia

    Pick's disease                      Pierre Robin's syndrome

    Pituitary Adenoma--if present       Pituitary dwarfism/Achondroplasia

    Plasmacytoma                        Pneumocystis carinii pneumonia
                                        (PCP)

    Pneumonitis                         Poliomyelitis--if present or more
                                        than one limb involved

    Polyarteritis                       Polycystic kidney

    Polycystic ovarian syndrome (PCOS)  Polycythemia vera

    Polyglandular autoimmune disease    Polyneuritis (Guillain-Barre
                                        syndrome)--if present or less than
                                        3 years since recovered or residual
                                        disability/permanent impairment

    Porphyria--diagnosed less than 5
    years prior to application          Portal hypertension

    Post-Polio syndrome                 Pregnant, an expectant parent
                                        (induding fathers and/or other
                                        family members)--the entire
                                        application is ineligible

    Primary biliary cirrhosis           Primary pulmonary hypertension

    Primary sclerosing cholangitis      Prinzmental's angina

    Pseudocyst--if present              Pseudotumor cerebri

    Psittacosis--with extensive
    respiratory involvement             Psoriasis--if severe or use of UV
                                        light

    Psychiatric disorder--severe
    including childhood and adolescence Psychosis

    Pulmonary embolism/thrombosis--if
    present, on anticoagulants or if
    less than 1 year                    Pulmonary fibrosis

    Pulmonary heart disease             Pulmonic insufficiency--it moderate
                                        to severe

    Pulmonic stenosis                   Pulseless disease

    Pyloric Stenosis--if present        Pyogenic arthritis

    Q
    _______________________________________________________________________

    Quadriplegia

    R
    _______________________________________________________________________

    Reflex sympathetic dystrophy        Renal failure--chronic, uremia

    Renal hypertension                  Renal Insufficiency--chronic or
                                        renal failure

    Respiratory failure                 Retinal detachment--if present

    Retinopathy--central serous and
    diabetic                            Rhabdomyosarcoma

    Rheumatic heart disease             Rheumatoid arthritis

    Russel-Silver syndrome--if less
    than 24 years of age

    S
    _______________________________________________________________________

    Sarcoidosis                         Schizo-affective disorders

    Schizophrenia                       Scleroderma--generalized

    Senility                            Severe combined immunodeficiency

    Sexual deviation or disorder        Shunt

    Sialadenitis                        Sialdenosis

    Sick sinus syndrome                 Sickle cell anemia

    Silent myocardial ischemia          Sjogren's disease

    Sleep apnea--central or mixed sleep
    apnea, or current tobacco user, or
    with ratable build, or with
    hypertemion or if surgery suggested

    Spherocytosis/Hereditary
    Spherocytosis--if present           Spina bifida (Manifesta)

    Splenic flexure                     Spondylitis

    Sprue disease                       Spurway's disease

    Status Asthmaticus                  Stents--artery or blood vessel

    Stevens Johnson syndrome/Erythema
    Multiforme--if present or less than
    one year since complete recovery or
    history of with residuals           Still's disease

    Stimulant usage                     Stokes-Adams syndrome

    Stroke                              Sturge-Weber syndrome

    Suicide attempt/ideation            Syndrome X

    Syphilis--if present or less than
    one year since complete recovery or
    more than 1 year since complete
    recovery without two normal lab
    results                             Syringomyelia

    Systemic fibrosclerosing syndrome   Systemic lupus erythematosis (SLE
                                        or lupus)

    Systemic sclerosis

    T
    _______________________________________________________________________

    Takayasu's arteritis                Tetrology of fallot

    Thalassemia major                   Thrombocythemia

    Total anomalous pulmonary venous
    connection                          Transient ischemic attack (TIA)

    Transplant (except corneal)         Transposition of the great vessels

    Transsexualism                      Tricuspid atresia

    Tricuspid insufficiency/
    regurgitation--moderate or severe   Tricuspid stenosis

    Trisomy 21 syndrome (Down syndrome) Truncus arteriosus

    Tuberous sclerosis                  Turner's syndrome

    U
    _______________________________________________________________________

    Ulcerative colitis/proctitis        Underdeveloped left ventricle
                                        syndrome

    Urachal remnant--if present         Uveitis--if chronic or less than 6
                                        months since recovery

    V
    _______________________________________________________________________

    Valve disorder                      Valve replacement

    Varicose veins of the esophagus     Vascular hemophilia

    Ventricular arrhythmias             Ventricular septal defect--present
                                        or less than 1 year since repaired
                                        or if surgically corrected with
                                        complications

    Von Hypple-Lindau syndrome          Von Willebrand's disease/
                                        Pseudohemophilia

    W
    _______________________________________________________________________

    Waldenstrom's macroglobulinemia     Warnick's disease

    Wegener's granulomatosis (Wegener's
    syndrome)                           Weight reduction surgery--other
                                        than gastric banding

    Williams syndrome                   Wilson's disease

    Wiskott-Aldrich syndrome

    X
    _______________________________________________________________________

    XYY syndrome

    Z

    Zollinger-Ellison syndrome

                                                       Actions for Common Medical Conditions--Rider States
    These guidelines may vary due to state-specific laws and regulations but can be followed as a general outline. This is not all inclusive. Final decision
      is based on underwriting review. Underwriting assessments in the below grid are based on customary and usual treatment seen for the conditions noted.
       Below are examples only; Humana will be solely responsible for the final underwriting decision, which is based on the completed application and the
                                       applicant's health history. Guidelines are subject to change without prior notice.
               NOTE: If an applicant on an application requires more than three exclusion riders (two in Indiana), the applicant will be declined.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
     Condition  We reserve the right to rate for the condition
     and/or medication use when appropriate. A modified rating
     is determined based on the severity of the condition and       $1,500 or lower          $2,500-$5,000          $2,000-$5,200         $6,000 or higher
    treatment and/or prescription medication cost, dosage, and    deductable plus Rx      deductable plus Rx       deductable no Rx      deductable plus Rx
                          premium amount.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acid Reflux/GERD/ Heartburn
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no hiatal hernia, non prescription medication  Standard                Standard                Standard               Standard
         (OTC only) no recommended consultations or testing
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, prescription medication, no hiatal hernia      Rider                   Standard or Rate Up KY  Standard               Standard or Rate Up
         present                                                                         or OH: Standard or                             KY or OH: Standard
                                                                                         Rider                                          or Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription medication use currently, hiatal hernia    Rider                   Rider                   Rider                  Rider
         present
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acne/Rosacea
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no treatment or OTC medication                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription meds, or < 6 months since med use, no      Rider                   Standard or Rating KY   Standard               Standard or Rating KY
         Accutane or equivalent                                                          & OH. Standard or                              & OH. Standard or
                                                                                         Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription meds, completed  6 months ago, complete    Standard                Standard                Standard               Standard
         recovery, no Accutane or equivalent
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Accutane treatment of equivalert or  1 year since       Rider                   Rider                   Rider                  Rider
         treatment completed
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Accutane treatment of equivalent or > 1 yer ago since   Standard                Standard                Standard               Standard
         treatment, complete recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Allergies
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recommended, pending or scheduled testing               Rate 50% NV: Decline    Rate 50% NV: Decline    Rate 50% NV: Decline   Standard
                                                                 if tobacco user         if tobacco user         if tobacco user
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seasonal prescription meds (3 refills or less per year  Standard                Standard                Standard               Standard
         or OTC), no immunotherapy treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription meds, more than 3 refills per year, no     Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
         immunotherapy treatment                                 & OH: Standard or       & OH: Standard or                              & OH: Standard or
                                                                 Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        With or without prescribed medications, current or      Rider                   Rider                   Standard--for          Rider
         recent immunotherapy                                                                                    prescribed
                                                                                                                 medications Rider--
                                                                                                                 immunotherapy
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Amputation/Prosthesis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Finger or toes, with or without prosthesis              Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Eye                                                     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All other amputations, with or without prosthesis       Rider KY, NM: Decline   Rider KY, NM: Decline   Rider KY, NM: Decline  Rider KY, NM: Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Caused by diabetes, severe artery disease or other      Decline                 Decline                 Decline                Decline
         disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Anemia--other than anemia listed in the ineligible health
     conditions list
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Aneurysm
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of, more than 5 years after repaired            Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Anxiety
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Well controlled with prescription medication, no        Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
         counseling, no more than 2 ER visits in the last 12     & OH: Standard or       & OH: Standard or                              & OH: Standard or
         months                                                  Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Counseling only, no medication                          Rate 10-20%             Rate 10-20%             Standard               Rate 10-20%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Asthma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Exercise induced, no regular medication required        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Medication use only                                     Rider                   Standard or Rating KY   Standard               Standard or Rating KY
                                                                                         & OH: Standard or                              & OH: Standard or
                                                                                         Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Medication use, steroid treatment (not including        Rider                   Rider                   Rider                  Standard or Rating KY
         Albuterol inhaler) less than 3 times and/or no more                                                                            & OH: Standard or
         than two emergency room visits in the past 12 months                                                                           Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Oral steriods required  3 times or more than 2 ER       Decline                 Decline                 Decline                Decline
         visits in the past 12 months
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Attention Deficit Disorder/ADD/ADHD
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No medication or counseling, more than 2 years          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One medication                                          Rider IN: Rate only KY  Rider or Rating IN:     Standard               Rating IN: Rate only
                                                                 & OH: Standard or       Rate only KY & OH:                             KY & OH: Standard or
                                                                 Rider                   Standard or Rider                              Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than one medication                                Rider IN: Rate only KY  Rider or Rating IN:     Standard               Rating IN: Rate only
                                                                 & OH: Standard or       Rate only KY & OH:                             KY & OH: Standard or
                                                                 Rider                   Standard or Rider                              Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Atrial Fibrillation
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single event, no continued medications, complete        Standard                Standard                Standard               Standard
         recovery, more than 2 years ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single event, < 2 years ago                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple events or continued use of medication or       Decline                 Decline                 Decline                Decline
         chronic atrial fibrillation
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Pacemaker or carioverter defibrillator                  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Back Sprain/Strain/Whiplash
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         1 year ago--complete recovery                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Less than 1 year ago or not recovered                   Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Baker's Cyst
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of no recurrence                                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic                                   Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, symptomatic                                    Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Basal Cell Carcinoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, complete recovery                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurences, or recurrent, removed (regardless  Rider--permanent        Rider--permanent        Rider--permanent       Standard
         of time frame)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Benign Prostatic Hypertrophy/BPH
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Incidental finding, no symptoms, no treatment or        Standard                Standard                Standard               Standard
         medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Well controlled on one medication                       Standard or Rate up OH  Standard or Rate up OH  Standard or Rate up    Standard or Rate up
                                                                 & KY Rider for med      & KY Rider for med                             OH & KY Rider for
                                                                                                                                        med
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than one medication                                Permanent Rider plus    Permanent Rider plus    Permanent Rider UT--   Permanent Rider plus
                                                                 Rating for meds UT--    Rating for meds UT--    Decline                Rating for meds UT--
                                                                 Decline                 Decline                                        Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prostatectomy, TURP, TUNA, TUIP, TUMT, or Lazer         Standard                Standard                Standard               Standard
         surgery completed, no follow up needed, complete
         recovery, no residual complications or medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bladder Infections (Cystitis)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Less than 4 per year                                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Four to six episodes per year                           Decline                 Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 6                                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast Cyst, Nodule or Mass
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present and benign                                      Rider VA: Rate 25%      Rider VA: Rate 25%      Rider VA: Rate 25%     Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Removed and benign                                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, pathology unknown                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast Implants
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no complications, placed for cosmetic          Standard                Standard                Standard               Standard
         purposes
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast Reduction/Macromastia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Condition present, no surgery completed                 Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery completed < 1 year ago, with complete recovery  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery completed < 1 year ago, with residuals          Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bronchitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-3 episodes in the past year, non tobacco user,        Standard                Standard                Standard               Standard
         complete recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-2 episodes in the past year, tobacco user, complete   Standard                Standard                Standard               Standard
         recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3 episodes a year, tobacco user, complete recovery      Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 3 episodes a year or Chronic Bronchitis               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bundle Branch Block (right)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete, no tobacco use for the last 12 months,        Standard                Standard                Standard               Standard
         symptoms and treatment free for last 12 months, build
         not ratable
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bursitis/Tendonitis/Tenosynovitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence with complete recovery                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, not recovered                        Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences                                    Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Carpal Tunnel
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or residuals                                    Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical repair complete recovery                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cataracts
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Rider KY: Decline       Rider KY: Decline       Rider KY: Decline      Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected, fully recovered, no residuals     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Chlamydia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or under treatment, no other STD history        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery                                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Colon Polyps
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 1 benign polyp removed within the past 5      Rider (permanent)--UT:  Rider (permanent)--UT:  Rider (permanent)--    Rider (permanent)--
         years during colonoscopy, scheduled follow up is        Non-tobacco--Max        Non-tobacco--Max        UT: Non-tobacco--Max   UT: Non-tobacco--Max
         every 10 years                                          rating applies--        rating applies--        rating applies--       rating applies--
                                                                 tobacco user IC CO:     tobacco user IC CO:     tobacco user IC CO:    tobacco user IC CO:
                                                                 rating                  rating                  rating                 rating
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single benign polyp removed during colonoscopy within   Standard                Standard                Standard               Standard
         the last 5 years, no colon resection, follow up
         scheduled more than 5 years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single benign polyp removed during colonoscopy, within  Rider (permanent)--UT:  Rider (permanent)--UT:  Rider (permanent)--    Rider (permanent)--
         the past 5 years no colon resection, follow up          Non-tobacco--Max        Non-tobacco--Max        UT: Non-tobacco--Max   UT: Non-tobacco--Max
         schedued every 3-5 years                                rating applies--        rating applies--        rating applies--       rating applies--
                                                                 tobacco user IC CO:     tobacco user IC CO:     tobacco user IC CO:    tobacco user IC CO:
                                                                 rating                  rating                  rating                 rating
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 1 polyp removed within the past 5 years.      Decline                 Decline                 Decline                Decline
         Surgically removed (not during colonoscopy) or part
         of colon surgically removed or follow up scheduled
         every 1-2 years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-2 polyps removed within the past 5 years during       Rider (permanent) UT:   Rider (permanent) UT:   Rider (permanent) UT:  Rider (permanent) UT:
         colonoscopy, only 1 colonoscopy completed within the    Non-tobacco--Max        Non-tobacco--Max        Non-tobacco--Max       Non-tobacco--Max
         past 5 years. Follow up scheduled every 3-5 years       rating applies--        rating applies--        rating applies--       rating applies--
                                                                 tobacco user IC CO:     tobacco user IC CO:     tobacco user IC CO:    tobacco user IC CO:
                                                                 rating                  rating                  rating                 rating
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 2 polyps removed within the past 5 years,     Decline                 Decline                 Decline                Decline
         follow up scheduled every 3-5 years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Condyloma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of--no HPV                           Rider UT: 55% rating,   Standard                Standard               Standard
                                                                 non tobacco users UT:
                                                                 Decline tobacco users
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present of history of--with HPV                         Rider UT: 55% rating,   Rider UT: 55% rating,   Rider UT: 55% rating,  Rider UT: 55% rating,
                                                                 non tobacco users UT:   non tobacco users UT:   non tobacco users      non tobacco users
                                                                 Tobacco users--         Tobacco users--         UT: Tobacco users--    UT: Tobacco users--
                                                                 Decline HPV             Decline HPV             Decline HPV            Decline HPV
                                                                 underwritten            underwritten            underwritten           underwritten
                                                                 separately              separately              separately             separately
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Deep Vein Thrombosis (DVT)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        On anticoagulants or one episode less than 3 months     Decline                 Decline                 Decline                Decline
         ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode--3 mos-2 years with complete recovery       Rider MI: 25% rating    Rider MI: 25% rating    Rider MI: 25% rating   Standard
                                                                 for non-tobacco user:   for non-tobacco user:   for non-tobacco
                                                                 Tobacco user--          Tobacco user--          user: Tobacco user--
                                                                 individual              individual              individual
                                                                 consideration           consideration           consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recurrent                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Depression
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Well controlled with prescription medication, no        Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
         counseling                                              & OH: Standard or       & OH: Standard or                              & OH: Standard or
                                                                 Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Counseling only, no medication                          Rate 10-20%             Rate 10-20%             Rate 10-20%            Rate 10-20%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Deviated Septum (nasal)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic or surgically repaired            Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Symptomatic                                             Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Disc Disorder (herniated, bulging, ruptured)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, surgically repaired less than 1 year ago or    Rider                   Rider                   Rider                  Rider
         with residuals
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Asymptomatic, surgically repaired more than 1 year ago  Standard                Standard                Standard               Standard
         with full recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Diverticulitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, No Surgery                                     Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery within 0-2 years                                Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected > 2 years ago                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Diverticulosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or with history of diverticulitis               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery within 0-2 years                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected > 2 years ago                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    DUI--Paramed exam is required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, within 5 years                       Rate 30%--Decline       Rate 30%--Decline       Rate 30%--Decline      Rate 30%--Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, more than 5 years                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences, within 5 years                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences, more than 5 years                 Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ear Infection (Otitis Media)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 in the past 12 months                               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 3 in the past 12 months                               Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Tubes Present                                           Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Tubes no longer present, no recurrence                  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Eczema
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or less than 2 years since symptomatic          Rider                   Standard or Rating KY   Standard               Standard or Rating KY
                                                                                         & OH: Standard or                              & OH: Standard or
                                                                                         Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2 years since treatment or symptoms                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Endometriosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or within 5 years of treatment                  Rider KY: Decline       Rider KY: Decline       Rider KY: Decline      Rider KY: Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 years since symptoms or treatment                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery < 3 years ago                                   Rider KY: Decline       Rider KY: Decline       Rider KY: Decline      Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery > 3 years ago                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Enlarged Prostate--See Benign Prostatic Hypertrophy
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Epilepsy, Grand Mal (Generalized)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure within past 2 years                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last seizure > 2 years ago                              Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Epilepsy, Petit Mal (Generalized)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure within past 2 years                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last seizure > 2 years ago                              Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Epilepsy, Temporal Lobe (Partial)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure < 1 year ago                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure > 1 year ago                                    Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Fibromyalgia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of                                   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Fractures
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--No fixation device                             Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--with permanent fixation device                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--with temporary fixation device                 Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recovered & released from care with no fixation device  Standard                Standard                Standard               Standard
         or permanent fixation device
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recovered, released from care with temporary fixation   Standard                Standard                Standard               Standard
         device
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Pathological                                            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ganglion Cyst
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present & symptomatic                                   Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically removed or history of and resolved           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gastric banding--weight loss surgery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band removed, no rateable build, weight maintained  Standard                Standard                Standard               Standard
         for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap Band removed, rateable build, or weight loss not    Decline                 Decline                 Decline                Decline
         maintained for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap Band present                                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Gastric Bypass/Gastric Stapling                         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    GERD (reflux)--see Acid Reflux/GERD
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gestational Diabetes
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 5 yrs ago, diet controlled during pregnancy, no       Rate 25%--UT: tobacco   Rate 25%--UT: tobacco   Rate 25%--UT: tobacco  Rate 25%--UT: tobacco
         recurrence                                              users, individual       users, individual       users, individual      users, individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 yrs ago, diet controlled during pregnancy, no       Standard                Standard                Standard               Standard
         recurrence
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 5 yrs ago, controlled with insulin during pregnancy,  Rate 50%--UT: tobacco   Rate 50%--UT: tobacco   Rate 50%--UT: tobacco  Rate 50%--UT: tobacco
         no recurrence                                           users, individual       users, individual       users, individual      users, individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 yrs ago, controlled with insulin during pregnancy,  Rate 25%--UT: tobacco   Rate 25%--UT: tobacco   Rate 25%--UT: tobacco  Rate 25%--UT: tobacco
         no recurrence                                           users, individual       users, individual       users, individual      users, individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of, no glucose test following pregnancy or      Decline                 Decline                 Decline                Decline
         Glucose levels did not return to normal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Glaucoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Symptomatic, but not diagnosed                          Rider and rating for    Rider and rating for    Rider for condition,   Rider and rating for
                                                                 medications             medications             no action for          medications
                                                                                                                 medications
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, well controlled                                Rating OH & KY: Rider   Rating OH & KY: Rider   Standard               Rating OH & KY: Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, not controlled: with or without medications    Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected both eyes, with or without         If no medications:      If no medications:      Standard               If no medications:
         medications                                             Standard; Medication    Standard; Medication                           Standard; Medication
                                                                 use: Rating OH & KY:    use: Rating OH & KY:                           use: Rating OH & KY:
                                                                 Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected in one eye: with or without        Rider                   Rider                   Rider                  Rider
         medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gout
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or within 2 years of symptoms or treatment      Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recovered and time from last symptoms or treatment > 2  Standard                Standard                Standard               Standard
         years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Grave's Disease--See Hyperthyroidism
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Guillain-Barre Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or < 3 years since recovered or Residual        Rate 25%--UT: Tobacco   Decline                 Decline                Decline
         disability/permanent impairment                         user--Individual
                                                                 consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 3 years since recovered, no disability, minimal       Rate 25%                Standard                Standard               Standard
         weakness, no relapse
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gynecomastia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical correction > 6 months ago                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hashimoto's Thyroiditis--See Hypothyroidism
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Heartburn--see Acid Reflux
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Heart Murmur
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Functional/Innocent, Grade I or II--Systolic            Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Organic, Grade III or greater, continuous--Diastolic    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hemorrhoids
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, symptomatic                                    Rider                   Standard or Rate up     Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 yr since symptoms or surgery                        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hepatitis A
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 6 months since treatment with normal liver tests      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hepatitis B
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Carrier                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or < 6 months since treatment                   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Others                                                  Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hernia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, all types other than Hiatal Hernia             Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically repaired                                     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Herpes
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        OTC medication                                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription medication                                 Rating or Rider KY &    Rating or Rider KY &    Standard               Rating or Rider KY &
                                                                 OH: Standard or Rider   OH: Standard or Rider                          OH: Standard or
                                                                                                                                        Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Herpes Zoster (shingles)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Standard or Rate-up     Standard or Rate-up     Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery, no medication                        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hiatal Hernia--see Acid Reflux/GERD
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure/Hypertension
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Underwritten based on age of onset, stability and
     comorbidity
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stable, average readings 150/90 or less, no other       Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
         cardiac risk factors, controlled with medication
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + 50% Ratable Build
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + Ratable Build + Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + High Cholesterol controlled with
     medication
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
                                                                 & OH: Hypertenstion:    & OH: Hypertension:                            & OH: Hypertension:
                                                                 Standard or Rating      Standard or Rating                             Standard or Rating
                                                                 Cholesterol: Standard   Cholesterol: Standard                          Cholesterol:
                                                                 or Rider                or Rider                                       Standard or Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + Sleep Apnea
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + High Cholesterol + Ratable Build
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + High Cholesterol + Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Cholesterol
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lipid panel results within normal limits, compliant     Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
         with follow up, controlled with medication              & OH: Standard or       & OH: Standard or                              & OH: Standard or
                                                                 Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Cholesterol + Ratable Build + Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Cholesterol + Ratable Build + Hypertension
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Human Papilloma Virus (HPV)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Low risk--no condyloma                                  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Low risk, with condyloma                                Rider CO, KY, & MI:     Rider CO, KY, & MI:     Rider CO, KY, & MI:    Rider CO, KY, & MI:
                                                                 Rate 100% UT: Rate      Rate 100% UT: Rate      Rate 100% UT: Rate     Rate 100% UT: Rate
                                                                 55%--non tobacco        55%--non tobacco        55%--non tobacco       55%--non tobacco
                                                                 user--individual        user--individual        user--individual       user--individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        High risk                                               Rider CO & KY: Decline  Rider CO & KY: Decline  Rider CO & KY:         Rider CO & KY:
                                                                 UT: Rate 55%--non       UT: Rate 55%--non       Decline UT: Rate       Decline UT: Rate
                                                                 tobacco user, Decline   tobacco user, Decline   55%--non tobacco       55%--non tobacco
                                                                 tobacco user            tabacco user            user, Decline          user, Decline
                                                                                                                 tabacco user           tabacco user
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hyperthyroidism
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--untreated                                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--treated with medication                        Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hypoglycemia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, follow up recommended                          Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, or history of, diet controlled, no follow-up   Standard                Standard                Standard               Standard
         recommended
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, treated with medication                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hypothyroid
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Infertility Treatment--male and female
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Current infertility drug treatment                      Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
                                                                                                                 family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with infertility drugs  a year without   Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
         a live birth                                                                                            family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with infertility drugs with a live       Standard                Standard                Standard               Standard
         birth, family planning complete
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with infertility drugs with a live       Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
         birth, family planning is not complete                                                                  family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with IVF, ZIFT, GIFT or others, family   Standard                Standard                Standard               Standard
         planning complete
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with IVF, ZIFT, GIFT or others, family   Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
         planning is not complete                                                                                family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Insomnia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with medication                                 Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
                                                                 & OH: Standard or       & OH: Standard or                              & OH: Standard or
                                                                 Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Irritable Bowel Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with OTC medication                             Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled w/prescription GI medication                 Rider                   Standard or Rating KY   Standard               Standard or Rating KY
                                                                                         & OH: Standard or                              & OH: Standard or
                                                                                         Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated w/non-GI prescription medication                Rider and Rating for    Standard or Rating      Standard               Standard or Rating
                                                                 non-GI meds
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ITP (blood disorder)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Child form, complete recovery, platelet count returned  Standard                Standard                Standard               Standard
         to normal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Child form, present                                     Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Adult form or chronic, less than 40 years of age, more  Rate 25% UT: tobacco    Rate 25% UT: tobacco    Rate 25% UT: tobacco   Rate 25% UT: tobacco
         than 3 years since treatment and a complete recovery    user--individual        user--individual        user--individual       user--individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Adult form or chronic, more than 6 years since          Standard                Standard                Standard               Standard
         treatment and a complete recovery, no current
         treatment, normal platelet count
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Joint replacement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Hip replaced                                            Permanent Rider KY &    Permanent Rider KY &    Permanent rider KY &   Permanent Rider KY &
                                                                 NM: Decline             NM: Decline             NM: Decline            NM: Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Knee replaced                                           Permanent Rider KY &    Permanent Rider KY &    Permanent Rider KY &   Permanent Rider KY &
                                                                 NM: Decline             NM: Decline             NM: Decline            NM: Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Shoulder replaced                                       Permanent Rider KY &    Permanent Rider KY &    Permanent Rider KY &   Standard
                                                                 NM: Rate 100%--         NM: Rate 100%--         NM: Rate 100%--
                                                                 Decline tobacco user    Decline tobacco user    Decline tobacco user
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Kidney Infection/Pyelonephritis/Pyelitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1 episode, within 0-3 years                             Rider UT: 25% rating,   Standard                Standard               Standard
                                                                 non tobacco users--
                                                                 Tobacco users,
                                                                 individual
                                                                 consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1 episode > 3 years ago                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        2 episodes, < 2 years ago                               Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        2 episodes, 2-5 years ago                               Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        2 episodes, > 5 years ago                               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3 or more episodes, regardless of time frame            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Kidney Stones
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Passed or surgically removed < 2 years ago              Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Passed or surgically removed > 2 years                  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        5 or more episodes                                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Lichen Planus
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild infrequent attacks                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Frequent or severe attacks                              Rider plus Rate         Standard or Rate-up     Rider                  Standard or Rate-up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Lipoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic, no surgery anticipated           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present and symptomatic                                 Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Lyme Disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or treatment completed less than 6 months ago   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 6 months since recovery, no residuals                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Macular Degeneration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Dry or wet                                              Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Meniere's Disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, confirmed diagnosis, stable, current or        Standard or Rating KY   Standard or Rating KY   Standard               Standard
         history of med use, no ongoing follow-up or treatment   & OH: Standard or       & OH: Standard or
                                                                 Rider (permanent)       Rider (permanent)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, confirmed diagnosis, stable, current or        Rider (permanent)       Rider (permanent)       Rider (permanent)      Rider (permanent)
         history of med use, ongoing follow-up or treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Migraines
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Occasional ( 3 episodes yearly) treated with OTC        Standard                Standard                Standard               Standard
         medication
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         4 episodes in the last 12 months, or severe. Workup    Rider                   Standard or Rating KY   Standard               Standard or Rating KY
         completed, symptoms controlled with current treatment                           & OH: Standard or                              & OH: Standard or
                                                                                         Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         4 episodes in the last 12 months. No workup completed  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Miscarriage
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-2, no underlying cause                                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2, no full term deliveries                            Rider UT: non tobacco   Rider UT: non tobacco   Rider UT: non tobacco  Rider UT: non tobacco
                                                                 user rate 50%,          user rate 50%,          user rate 50%,         user rate 50%,
                                                                 tobacco user            tobacco user            tobacco user           tobacco user
                                                                 individual              individual              individual             individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of with full term delivery                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Mitral Valve Prolapse
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No symptoms or treatment                                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild symptoms controlled with one med, no other heart   Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
         disorder
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Molluscum Contagiosum
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or complete recovery < 1 year                   Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery > 1 year                              Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    MRSA--Methicillin-Resistant Staphylococcus Aureus
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, currently under treatment                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Completed treatment, follow-up pending                  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated, full recovery of over 60 days                  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Nephritis/Glomerulonephritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1 episodes > 3 years ago, normal blood & urine results  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All other scenarios                                     Rating, individual      Rating, individual      Rating, individual     Rating, individual
                                                                 consideration or        consideration or        consideration or       consideration or
                                                                 decline                 decline                 decline                decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Osteoarthritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, only OTC meds, no PT or OT, no shoulder, hip,  Standard                Standard                Standard               Standard
         pelvis, back or spine, knee or ankle involvement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, all treatment except OTC meds, no shoulder,    Rider                   Rider                   Rider                  Standard or Rating
         hip, pelvis, back or spine, knee or ankle involvement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, regardless of treatment, with shoulder, hip,   Rider                   Rider                   Rider                  Rider
         pelvis, back or spine, knee or ankle involvement and
         no joint replacement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Joint replacement (see joint replacements)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Osteoporosis/Osteopenia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Current use of Prophylactic medication, due to age/     Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
         menopause, no diagnosis of osteoporosis or
         osteopenia, no fractures or Dexa scans done
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Diagnosis of Osteoporosis or Osteopenia with or         Rider (permanent)       Rider (permanent)       Rider (permanent)      Standard or Rate-up
         without medication use, Dexa scans stable or improved
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, severe, history of pathologic fractures,       Decline                 Decline                 Decline                Decline
         crippling, Dexa scans worsening
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ovarian Cyst
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Symptomatic                                             Rider UT: Decline       Rider UT: Non-tobacco   Rider UT: Non-tobacco  Rider UT: Non-tobacco
                                                                                         user 50% rating, user   user 50% rating,       user 50% rating,
                                                                                         individual              user individual        user individual
                                                                                         consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Removed                                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pancreatitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of attack, no underlying cause, resolved        Individual              Individual              Individual             Individual
                                                                 consideration,          consideration,          consideration,         consideration,
                                                                 medical records         medical records         medical records        medical records
                                                                 required                required                required               required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Chronic or recurrent                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pap Smear--Abnormal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        ASCUS, no high risk HPV, Class II or Class III          Standard                Standard                Standard               Standard
         followed by one normal pap, Class IV, treated,
         followed by three normal pap smears
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Phlebitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Current use of blood thinners                           Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, < 3 months, complete recovery, no          Rider                   Rider                   Rider                  Standard
         varicose veins or edema
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, 3 months-2 years, complete recovery, no    Standard                Standard                Standard               Standard
         varicose veins or edema
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recurrent episodes within 0-2 years                     Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of  2 years ago                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Varicose Veins--(see Varicose Veins)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pneumonia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery                                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prostatitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, full recovery                              Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 episode or chronic                                  Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prosthesis/Prosthetics Device (See Amputation)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prostate--Enlarged (See Benign Prostatic Hypertrophy/BPH)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Psoriasis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild symptoms, OTC medications or no treatment          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild to moderate symptoms, conservative treatments,     Rider                   Standard or Rating KY   Standard               Standard or Rating KY
         including prescription topical agents                                           & OH: Standard or                              & OH: Standard or
                                                                                         Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Severe symptoms requiring Rx medication such as         Decline                 Decline                 Decline                Decline
         Enbrel, Remicade, Sulfasalazine, gold therapy or
         Methotrexate
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Use of tanning bed only                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Use of UVA/PUVA light at a medical facility             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Psoriatic Arthritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All cases                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pyloric Stenosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected with complete recovery             Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Respiratory Syncytial Virus (RSV)/Bronchiolitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of, < 2 years of age, Synagis/       Decline                 Decline                 Decline                Decline
         Palivizumab use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2 years of age, Last occurrence < 1 year ago and      Decline                 Decline                 Decline                Decline
         Synagis/Palivizumab use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2 years of age, Last occurrence > 1 year ago, No      Standard                Standard                Standard               Standard
         medications for > 1 year, Complete recovery, No other
         respiratory conditions
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Restless Leg Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No medication or treatment for 12 months                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled with medication or treatment or no meds for  Standard or Rating KY   Standard or Rating KY   Standard               Standard or Rating KY
         < 12 months                                             & OH: Standard or       & OH: Standard or                              & OH: Standard or
                                                                 Rider                   Rider                                          Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Follow-up not completed, or testing pending or          Decline                 Decline                 Decline                Decline
         recommended
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Retinal Detachment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected < 2 years                          Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Scoliosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no surgery, under age of 20                    Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, over age of 20                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery completed, rod in place, full recovery          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Any cardiac, pulmonary or spinal cord involvement       Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Sinusitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 episodes in the past year                           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3-6 episodes in the past 12 months                      Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 6 episodes in the past 12 months                      Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Sleep Apnea
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled with CPAP                                    Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected                                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Sleep Apnea + Ratable build                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Sleep Apnea + Tobacco User                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Sleep Apnea + Hypertension                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Central or Mixed                                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Spina Bifida
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Occulta, incidental finding, asymptomatic               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Occulta--symptomatic                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Manifesta                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Spinal Manipulations
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        0-2 visits per year                                     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3-5 visits per year                                     All states Standard     All states Standard     Standard               All states Standard
                                                                 except: NV: Rider       except: NV--Rider                              except: NV--Rider
                                                                 Portrait plan only      Portrait plan &                                Autoshare 80 plus RX
                                                                 (all other plans        Autoshare 80 plus RX                           only (all other
                                                                 standard)               only (all other plans                          plans standard)
                                                                                         standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        6-10 visits per year                                    All states Ridered      All states Standard     Standard               All states Standard
                                                                 except: AZ, CO, NM &    except: NV--Rider                              except: NV--Rider
                                                                 WI: Rate 25%            Portrait plan &                                Autoshare 80 plus RX
                                                                                         Autoshare 80 plus RX                           only (all other
                                                                                         only (all other plans                          plans standard)
                                                                                         standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        11-15 visits per year                                   All states Ridered      All states Standard     Standard               All states Standard
                                                                 except: AZ, CO, NM &    except: NV--Rider                              except: NV--Rider
                                                                 WI: Rate 50%            Portrait plan &                                Autoshare 80 plus RX
                                                                                         Autoshare 80 plus RX                           only (all other
                                                                                         only (all other plans                          plans standard)
                                                                                         standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        16-20 visits per year                                   All states Ridered      All states Ridered      All states Ridered     All states Standard
                                                                 except: AZ, CO, NM &    except: AZ, CO, NM &    except: AZ, CO, NM &   except: NV--Rider
                                                                 WI: Rate 75%            WI: Rate 15%            WI: Rate 15%           Autoshare 80 plus RX
                                                                                                                                        only (all other
                                                                                                                                        plans standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        21--25 visits per year                                  All states Ridered      All states Ridered      All states Ridered     All states Standard
                                                                 except: AZ, CO, NM &    except: AZ, CO, NM &    except: AZ, CO, NM &   except: NV--Rider
                                                                 WI: Rate 100%           WI: Rate 25%            WI: Rate 25%           Autoshare 80 plus RX
                                                                                                                                        only (all other
                                                                                                                                        plans standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        26-30 visits per year                                   All states ridered      All states ridered      All states ridered     All states Standard
                                                                 except: AZ, CO, NM &    except: AZ, CO, NM &    except: AZ, CO, NM &   except: NV--Rider
                                                                 WI: Rate 125%           WI: Rate 40%            WI: Rate 40%           Autoshare 80 plus RX
                                                                                                                                        only (all other
                                                                                                                                        plans standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        31-35 visits per year                                   All states ridered      All states ridered      All states ridered     All states Standard
                                                                 except: AZ, CO, NM &    except: AZ, CO, NM &    except: AZ, CO, NM &   except: NV--Rider
                                                                 WI: Rate 150%           WI: Rate 50%            WI: Rate 50%           Autoshare 80 plus RX
                                                                                                                                        only (all other
                                                                                                                                        plans standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        36+ visits per year                                     All states ridered      All states ridered      All states ridered     All states ridered
                                                                 except: AZ, CO, NM &    except: AZ, CO, NM &    except: AZ, CO, NM &   except: AZ, CO, LA,
                                                                 WI: Decline             WI: Rate 75%            WI: Rate 75%           MI, NM & WI: Rate
                                                                                                                                        15%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Stents
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Heart                                                   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Other locations                                         Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tachycardia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No attacks in past 12 months, maintained and well       Rider + Rating for      Rider + Rating for      Rider + Rating for     Standard or Rate-up
         controlled on medications to control attacks and        meds UT: tobacco        meds UT: tobacco        meds UT: tobacco       UT: tobacco user--
         symptoms, no other cardiovascular disorders             user--individual        user--individual        user--individual       individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         3 attacks per year, < 1 year since last attack         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         3 attacks per year, 1-3 years since last attack,       Rider UT: tobacco       Rider UT: tobacco       Rider UT: tobacco      Rider UT: tobacco
         prompt response to treatment, no other cardivascular    user--individual        user--individual        user--individual       user--individual
         disorders                                               consideration           consideration           consideration; UT:     consideration; MI:
                                                                                                                 individual             Rate 75%
                                                                                                                 consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 attacks per year, > 3 years since last attack,      Standard                Standard                Standard               Standard
         prompt response to treatment, no other cardiovascular
         disorders
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Others                                                  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical ablation  6 months ago                         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical ablation > 6 months ago, no residuals          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tendonitis--see Bursitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tenosynovitis--see Bursitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tonsillitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 episodes per year                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3-5 episodes per year                                   Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 episodes per year                                   Rider                   Rider                   Rider                  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tourettes Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Simple tics, no behavioral disorders                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled with medication                              Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Disabling, behavioral issues, extensive psychotherapy   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tuberculosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        TB infection without disease, + skin test, Negative     Standard                Standard                Standard               Standard
         bacteriologic studies, Negative chest x-ray, No
         evidence of active disease, Prophylactic drug therapy
         complete > 6 months ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        TB infection without disease, + skin test, Negative     Decline                 Standard                Standard               Standard
         bacteriologic studies, Negative chest x-ray, No
         evidence of active disease, Current use of < 6 months
         of prophylactic drugs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ulcer (Peptic)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, complete recovery                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 episode, well controlled with medications           Rider UT: Individual    Rider UT: Individual    Rider UT: Individual   Standard
                                                                 consideration           consideration           consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of bleeding or perforation, < 2 years after     Decline                 Decline                 Decline                Decline
         episode, OR multiple occurrences of bleeding or
         perforation
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of bleeding or perforation, > 2 years after     Standard                Standard                Standard               Standard
         episode, single occurrence, no known cause OR NSAID's
         discontinued, Vagotomy performed > 3 years ago, No
         symptoms
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Uterine Fibroids
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Post-menopausal, no HRT, asymptomatic or myomectomy or  Standard                Standard                Standard               Standard
         hysterectomy completed
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Others                                                  Rider                   Rider                   Rider                  Rider
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Vaginitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One occurrence, complete recovery                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 occurrence, < 1 year since last occurrence          Rider                   Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Varicose Veins of the lower extremities--UT only
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present-asymptomatic, no recommendations for treatment  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present with ulcer                                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with lazer, stripping or sclerotherapy, full    Rider                   Standard                Standard               Standard
         recovery no symptoms or treatment < 1 yr ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with lazer, stripping or sclerotherapy, full    Standard                Standard                Standard               Standard
         recovery no symptoms or treatment > 1 yr ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Varicose Veins
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present-asymptomatic, no recommendations for treatment  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present with ulcer                                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with lazer, stripping or sclerotherapy, full    Rider                   Standard                Standard               Standard
         recovery no symptoms or treatment < 1 yr ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with lazer, stripping or sclerotherapy, full    Standard                Standard                Standard               Standard
         recovery no symptoms or treatment > 1 yr ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ventricular Septal Defect--APS Required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Repaired > 1 year ago, complete recovery, normal        Standard                Standard                Standard               Standard
         cardiac exam
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or repaired with symptoms or abnormal cardiac   Decline                 Decline                 Decline                Decline
         exam
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Weight loss medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Use of any weight loss medication (other than Xenical)  Indivdual               Indivdual               Indivdual              Indivdual
         or combination with hypertension or cardiac issues      consideration--medica   consideration--medica   consideration--medic   consideration--medic
                                                                 l records required      l records required      al records required    al records required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Continuous use of weight loss medication for more than  Decline                 Decline                 Decline                Decline
         one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All other scenarios or Xenical use in combination with  Standard                Standard                Standard               Standard
         hypertension or cardiac disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Weight loss surgery--Gastric banding
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band removed, no rateable build, weight maintained  Standard                Standard                Standard               Standard
         for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band removed, rateable build, or weight loss not    Decline                 Decline                 Decline                Decline
         maintained for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band present                                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Gastric Bypass/Gastric Stapling                         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Cancer Guidlines--APS Required for all--Mazimum
         allowable rating varies by state
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                Actions for Common Medical Conditions--Non-Rider States (LA & MI)
                                 Below are underwriting actions for conditions for which Humana does not place exclusion riders.
    These guidelines may vary due to state-specific laws and regulations but can be followed as a general outline. This is not all inclusive. Final decision
      is based on underwriting review. Underwriting assessments in the below grid are based on customary and usual treatment seen for the conditions noted.
       Below are examples only; Humana will be solely responsible for the final underwriting decision, which is based on the completed application and the
                                       applicant's health history. Guidelines are subject to change without prior notice.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
     Condition  We reserve the right to rate for the condition
     and/or medication use when appropriate. A modified rating
     is determined based on the severity of the condition and       $1,500 or lower          $2,500-$5,000          $2,000-$5,200         $6,000 or higher
    treatment and/or prescription medication cost, dosage, and    deductable plus Rx      deductable plus Rx       deductable no Rx      deductable plus Rx
                          premium amount.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acid Reflux/GERD/ Heartburn
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no hiatal hernia, non prescription medication  Standard                Standard                Standard               Standard
         (OTC only) no recommended consultations or testing
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, prescription medication, no hiatal hernia      Standard or Rating      Standard or Rating      Standard               Standard or Rating
         present
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription medication use currently, hiatal hernia    Decline                 Decline                 Decline                Standard or Rating
         present
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acne/Rosacea
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no treatment or OTC medication                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription meds, or < 6 months since med use, no      Standard or Rating      Standard or Rating      Standard               Standard or Rating
         Accutane or equivalent
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription meds, completed  6 months ago, complete    Standard                Standard                Standard               Standard
         recovery, no Accutane or equivalent
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Accutane treatment of equivalent or  1 year since       Decline                 Decline                 Decline                Decline
         treatment completed
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Accutane treatment of equivalent or > 1 year ago since  Standard                Standard                Standard               Standard
         treatment complete recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Allergies
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recommended, pending or scheduled testing               Rate 50%                Rate 50%                Rate 50%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seasonal prescription meds (3 refills or less per year  Standard                Standard                Standard               Standard
         or OTC), no immunotherapy treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription meds, more than 3 refills per year, no     Standard or Rating      Standard or Rating      Standard               Standard or Rating
         immunotherapy treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        With or without prescribed medications, current or      Individual              Individual              Individual             Individual
         recent immunotherapy                                    Consideration with      Consideration with      Consideration with     Consideration with
                                                                 Max Rating              Max Rating              Max Rating             Max Rating
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Amputation/Prosthesis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Finger or toes--with or without prosthesis              Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Eye                                                     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All other amputations, with or without prosthesis       Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Caused by diabetes, severe artery disease or other      Decline                 Decline                 Decline                Decline
         disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Anemia--other than anemia listed in the ineligible health
     conditions list
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Aneurysm
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically repaired > 5 years, no residuals             Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Anxiety
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Well controlled with prescription medication, no        Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
         counseling, no more than 2 ER visits in the last 12
         months
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Counseling only, no medication                          Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Asthma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Exercise induced, no regular medication required        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Medication use only                                     Standard or Rate up     Standard or Rate up     Standard or Rate up    Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Medication use, steroid treatment (not including        Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
         Albuterol inhaler) less than 3 times and/or no more
         than two emergency room visits in the past 12 months
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Oral steroids required  3 times or more than 2 ER       Decline                 Decline                 Decline                Decline
         visits in the past 12 months
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Attention Deficit Disorder/ADD/ADHD
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No medication or counseling, more than 2 years          Standard                Standard or Rate up     Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One medication                                          Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than one medication                                Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Atrial Fibrillation
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single event, more than 2 years ago                     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Chronic or ongoing treatment                            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single events less than 2 years ago or multiple events  Decline                 Decline                 Decline                Decline
         or Pacemaker/defibrillation
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Back Sprain/Strain/Whiplash
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         1 year ago--complete recovery                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Less than 1 year ago or not recovered                   Rate 50%                Rate 50%                Rate 50%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Baker's Cyst
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present and symptomatic                                 Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present and asymptomatic                                Decline                 Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of no recurrence                                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Basal Cell Carcinoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence removed within 2 years                Rate 25%                Rate 25%                Rate 25%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, complete recovery                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurences, or recurrent, removed (regardless  Rate 25% permanent      Rate 25% permanent      Rate 25% permanent     Standard
         of time frame)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Benign Prostatic Hypertrophy/BPH
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Incidental finding, no symptoms, no treatment or        Standard                Standard                Standard               Standard
         medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Well controlled on one medication                       Standard or Rate up     Standard or Rate up     Standard or Rate up    Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than one medication                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prostatectomy, TURP, TUNA, TUIP, TUMT, or Lazer         Standard                Standard                Standard               Standard
         surgery completed, no follow up needed, complete
         recovery, no residual complications or medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bladder Infections (Cystitis)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Less than 4 per year                                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        4-6 episodes per year                                   Decline                 Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 6 per year                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast Cyst, Nodule or Mass
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present and benign                                      Rate 25%                Rate 25%                Rate 25%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Removed and benign                                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, pathology unknown                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast Implants
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no complications, placed for cosmetic          Standard                Standard                Standard               Standard
         purposes
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast Reduction/Macromastia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Condition present, no surgery completed                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery completed < 1 year ago, with complete recovery  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery completed < 1 year ago, with residuals          Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bronchitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-3 episodes in the past year, non tobacco user,        Standard                Standard                Standard               Standard
         complete recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-2 episodes in the past year, tobacco user, complete   Standard                Standard                Standard               Standard
         recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3 episodes a year, tobacco user, complete recovery      Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 3 episodes a year or Chronic Bronchitis               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bundle Branch Block (right)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete, no tobacco use for the last 12 months,        Standard                Standard                Standard               Standard
         symptom and treatment free for last 12 months, build
         not ratable
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bursitis/Tendonitis/Tenosynovitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence with complete recovery                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, not recovered                        Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences                                    Rate 25%                Rate 25%                Rate 25%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Carpal Tunnel
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or residuals                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical repair, complete recovery                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cataracts
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected, fully recovered, no residuals     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Chlamydia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or under treatment, no other STD history        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery                                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Colon Polyps
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 1 benign polyp removed within the past 5      Max Rating or           Max Rating or           Max Rating or          Max Rating or
         years during colonoscopy, scheduled follow up is        Individual              Individual              Individual             Individual
         every 10 years                                          Consideration           Consideration           Consideration          Consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single benign polyp removed during colonoscopy within   Standard                Standard                Standard               Standard
         the last 5 years, no colon resection, follow up
         scheduled more than 5 years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single benign polyp removed during colonoscopy, within  Max Rating or           Max Rating or           Max Rating or          Max Rating or
         the past 5 years, no colon resection, follow up         Individual              Individual              Individual             Individual
         schedued every 3-5 years                                Consideration           Consideration           Consideration          Consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 1 polyp removed within the past 5 years.      Decline                 Decline                 Decline                Decline
         Surgically removed (not during colonoscopy) or part
         of colon surgically removed or follow up scheduled
         every 1-2 years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-2 polyps removed within the past 5 years during       Max Rating or           Max Rating or           Max Rating or          Max Rating or
         colonoscopy, only 1 colonoscopy completed within the    Individual              Individual              Individual             Individual
         past 5 years. Follow up scheduled every 3-5 years       Consideration           Consideration           Consideration          Consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        More than 2 polyps removed within the past 5 years,     Decline                 Decline                 Decline                Decline
         follow up scheduled every 3-5 years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Condyloma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of--No HPV                           Rate 100%: LA: 84%      Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of--with HPV                         Rate 100%: LA: Rate     Rate 100%: LA: Rate     Rate 100%: LA: Rate    Rate 100%: LA: Rate
                                                                 84%: HPV underwritten   84%: HPV underwritten   84%: HPV               84%: HPV
                                                                 separately              separately              underwritten           underwritten
                                                                                                                 separately             separately
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Deep Vein Thrombosis (DVT)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        On anticoagulants or one episode less than 3 months     Decline                 Decline                 Decline                Decline
         ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1 episode 3 months-2 years                              Rate: 25%               Rate: 25%               Rate: 25%              Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recurrent                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Depression
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Well controlled with prescription medication, no        Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
         counseling
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Counseling only, no medication                          Rate 10-20%             Rate 10-20%             Rate 10-20%            Rate 10-20%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Deviated Septum (nasal)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic or surgically repaired            Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Symptomatic                                             Rate 100%: LA: 84%      Rate 100%: LA: 84%      Rate 100%: LA: 84%     Rate 100%: LA: 84%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Disc Disorder (herniated, bulging, ruptured)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, surgically repaired less than 1 year ago or    Decline                 Decline                 Decline                Decline
         with residuals
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Asymptomatic for more than 1 year without surgery or    Standard                Standard                Standard               Standard
         surgically repaired more than 1 year ago with full
         recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Diverticulitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, No Surgery                                     Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery within 0-2 years                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected > 2 years ago                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Diverticulosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or with history of diverticulitis. No surgery   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery within 0-2 years                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected > 2 years ago                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    DUI--Paramed exam is required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, within 5 years                       Rate 30%--Decline       Rate 30%--Decline       Rate 30%--Decline      Rate 30%--Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, more than 5 years                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences, within 5 years                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences, more than 5 years                 Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ear Infection (Otitis Media)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 in the past 12 months                               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3 or more in the past 12 months                         Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Tubes Present                                           Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Tubes no longer present, no recurrence                  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Eczema
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or less than 2 years since symptomatic          Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2 years since treatment or symptoms                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Endometriosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or within 5 years of treatment                  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 years since symptoms or treatment                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery < 3 years ago                                   Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery > 3 years ago                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Enlarged Prostate--See Benign Prostatic Hypertrophy
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Epilepsy, Grand Mal (Generalized)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure within past 2 years                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last seizure > 2 years ago                              Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Epilepsy, Petit Mal (Generalized)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure within past 2 years                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last seizure > 2 years ago                              Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Epilepsy, Temporal Lobe (Partial)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure < 1 year ago                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seizure > 1 year ago                                    Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Fibromyalgia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of                                   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Fractures
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--No fixation device                             Rate 75%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--with permanent fixation device                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--with temporary fixation device                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recovered & released from care with no fixation device  Standard                Standard                Standard               Standard
         or permanent fixation device
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recovered, released from care with temporary fixation   Decline                 Decline                 Decline                Decline
         device
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Pathological                                            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ganglion Cyst
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present & symptomatic                                   Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically removed, asymptomatic or history and         Standard                Standard                Standard               Standard
         resolved
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gastric banding--weight loss surgery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band removed, no rateable build, weight maintained  Standard                Standard                Standard               Standard
         for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap Band removed, rateable build, or weight loss not    Decline                 Decline                 Decline                Decline
         maintained for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap Band present                                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Gastric Bypass/Gastric Stapling                         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    GERD (reflux)--see Acid Reflux/GERD
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gestational Diabetes
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 5 yrs ago, diet controlled during pregnancy, no       Rate 25%                Rate 25%                Rate 25%               Rate 25%
         recurrence
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 yrs ago, diet controlled during pregnancy, no       Standard                Standard                Standard               Standard
         recurrence
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 5 yrs ago, controlled with insulin during pregnancy,  Rate 50%--UT: tobacco   Rate 50%--UT: tobacco   Rate 50%--UT: tobacco  Rate 50%--UT: tobacco
         no recurrence                                           users, individual       users, individual       users, individual      users, individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 yrs ago, controlled with insulin during pregnancy,  Rate 25%                Rate 25%                Rate 25%               Rate 25%
         no recurrence
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of, no glucose test following pregnancy or      Decline                 Decline                 Decline                Decline
         glucose levels did not return to normal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Glaucoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Symptomatic, but not diagnosed                          Rate 25% for condition  Rate 25% for condition  Rate 25% for           Rate 25% for
                                                                 and additional rating   and additional rating   condition and          condition and
                                                                 for meds                for meds                additional rating      additional rating
                                                                                                                 for meds               for meds
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, well controlled                                Rating                  Rating                  Standard               Rating
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, not controlled: with or without medications    Decline                 50-75% rating for       Rate 50% no actions    Rate 50% and
                                                                                         condition, and          for meds               additional rating
                                                                                         additional rating for                          for meds
                                                                                         medications
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected both eyes, with or without         If no medications:      If no medications:      Standard               If no medications:
         medications                                             Standard Medication     Standard Medication                            Standard Medication
                                                                 use: Rating             use: Rating                                    use: Rating
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected in one eye: with or without        Decline                 50-75% rating for       Rate 50% no actions    Rate 50% and
         medication use                                                                  condition, and          for meds               additional rating
                                                                                         additional rating for                          for meds
                                                                                         medications
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected                                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gout
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or within 2 years of symptoms or treatment      Rate 25%                Rate 25%                Rate 25%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recovered and time from last symptoms or treatment > 2  Standard                Standard                Standard               Standard
         years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Grave's Disease--See Hyperthyroidism
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Guillain-Barre Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or < 3 years since recovered or Residual        Decline                 Decline                 Decline                Decline
         disability/permanent impairment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 3 years since recovered, no disability, minimal       Rate 25%                Standard                Standard               Standard
         weakness, no relapse
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Gynecomastia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of, complete recovery                           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hashimoto's Thyroiditis--See Hypothyroidism
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Heartburn--see Acid Reflux
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Heart Murmur Diastolic
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Functional/Innocent, Grade I or II--Systolic            Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Organic, Grade III or greater, continuous--Diastolic    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hemorrhoids
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, symptomatic                                    Rate 50%                Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 year since symptoms or surgery                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hepatitis A
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 6 months since treatment with normal liver tests      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hepatitis B
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Carrier                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or < 6 months since treatment                   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Others                                                  Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hernia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, all types other than Hiatal Hernia             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically repaired, with complete recovery and no      Standard                Standard                Standard               Standard
         residuals
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hiatal Hernia--see Acid Reflux/GERD
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Herpes
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        OTC medication                                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription medication                                 Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Herpes Zoster (shingles)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Standard or Rate up     Standard or Rate up     Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery, no medication                        Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure/Hypertension
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Underwritten based on age of onset, stability and
     comorbidity
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stable, average readings 150/90 or less, no other       Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
         cardiac risk factors, controlled with medication
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + 50% Ratable Build
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + Ratable Build + Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + High Cholesterol controlled with
     medication
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + High Cholesterol + Ratable Build
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + High Cholesterol+ Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + Rateable Build + Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Blood Pressure + Sleep Apnea
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Cholesterol
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lipid panel results within normal limits, compliant     Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
         with follow up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Cholesterol + Ratable Build + Tobacco User
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    High Cholesterol + Ratable Build + Hypertension
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Human Papilloma Virus (HPV)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Low risk--no condyloma                                  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        High risk                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hyperthyroidism
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--untreated                                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present--treated with medication                        Rate 25% or higher      Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hypoglycemia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, follow up recommended                          Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, or history of, diet controlled, no follow-up   Standard                Standard                Standard               Standard
         recommended
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, treated with medication                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Hypothyroid
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Infertility Treatment--male and female
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Current infertility drug treatment                      Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
                                                                                                                 family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with infertility drugs  a year without   Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
         a live birth                                                                                            family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with infertility drugs with a live       Standard                Standard                Standard               Standard
         birth, family planning complete
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with infertility drugs with a live       Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
         birth, family planning is not complete                                                                  family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with IVF, ZIFT, GIFT or others, family   Standard                Standard                Standard               Standard
         planning complete
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Last treatment with IVF, ZIFT, GIFT or others, family   Decline--entire family  Decline--entire family  Decline--entire        Decline--entire
         planning is not complete                                                                                family                 family
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Insomnia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with medication                                 Standard or Rating up   Standard or Rating up   Standard               Standard or up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Irritable Bowel Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with OTC medication                             Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with medication                                 Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with non-GI prescription medication             Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    ITP (blood disorder)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Child form, complete recovery, platelet count returned  Standard                Standard                Standard               Standard
         to normal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Child form, present                                     Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Adult form or chronic, less than 40 years of age, more  Rate 25%                Rate 25%                Rate 25%               Rate 25%
         than 3 years since treatment and a complete recovery
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Adult form or chronic, more than 6 years since          Standard                Standard                Standard               Standard
         treatment and a complete recovery, no current
         treatment, normal platelet count
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Joint replacement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Hip replaced                                            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Knee replaced                                           Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Shoulder replaced                                       Rate 100%: LA: Rate     Rate 100%: LA: Rate     Rate 100%: LA: Rate    Standard
                                                                 84%                     84%                     84%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Kidney Infection/Pyelonephritis/Pyelitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1 episode, within 0-3 years                             Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1 episode > 3 years ago                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        2 episodes, < 2 years ago                               Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        2 episodes, 2-5 years ago                               Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        2 episodes, > 5 years ago                               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3 or more episodes, regardless of time frame            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Kidney Stones
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Passed on its own or surgically > 2 years               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 episodes                                            Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Lichen Planus
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild infrequent attacks                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Frequent or severe attacks                              Rate 25% or higher      Rate                    Rate 25%               Rate
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Lipoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic, no surgery anticipated           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present and symptomatic                                 Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Lyme Disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or treatment completed less than 6 months ago   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 6 months since recovery                               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Macular Degeneration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Dry or wet                                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Meniere's Disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, confirmed diagnosis, stable, current or        Standard or Rating      Standard or Rating      Standard               Standard
         history of med use, no ongoing follow-up or treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, confirmed diagnosis, stable, current or        Decline                 Decline                 Decline                Decline
         history of med use, ongoing follow-up or treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Migraines
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Occasional ( 3 episodes yearly) treated with OTC        Standard                Standard                Standard               Standard
         medication
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         4 episodes in the last 12 months, or severe. Workup    Rating                  Rating                  Standard               Rating
         completed, symptoms controlled with current treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         4 episodes in the last 12 months. No workup completed  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Prescription medication                                 Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Miscarriage
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        1-2, no underlying cause                                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2, no full term deliveries                            Rate 50%                Rate 50%                Rate 50%               Rate 50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of with full term delivery                      Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Mitral Valve Prolapse
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No symptoms or treatment                                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild symptoms controlled with one med, no other heart   Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
         disorder
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Molluscum Contagiosum
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or complete recovery < 1 year                   Rate 50%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery > 1 year                              Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Nephritis/Glomerulonephritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode > 3 years ago                               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode < 3 years ago                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Osteoarthritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, only OTC meds, no PT or OT, no shoulder, hip,  Standard                Standard                Standard               Standard
         pelvis, back or spine, knee or ankle involvement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, all treatment except OTC meds, no shoulder,    Rating                  Rating                  Rating                 Rating
         hip, pelvis, back or spine, knee or ankle involvement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, regardless of treatment, with shoulder, hip,   Decline                 Decline                 Decline                Decline
         pelvis, back or spine, knee or ankle involvement and
         no joint replacement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Osteoporosis/Osteopenia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Current use of Prophylactic medication, due to age/     Standard or Rate-up     Standard or Rate-up     Standard               Standard or Rate-up
         menopause, no diagnosis of osteoporosis or
         osteopenia, no fractures or Dexa scans done
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Diagnosis of Osteoporosis or Osteopenia with or         Minimum rate of 25% +   Minimum rate of 25% +   Rate 25%               Standard or Rate-up
         without medication use, Dexa scans stable or improved   Pharmacy rating if on   Pharmacy rating if on
                                                                 meds or 50% Rate if     meds or 50% Rate if
                                                                 not on meds             not on meds
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, severe, history of pathologic fractures,       Decline                 Decline                 Decline                Decline
         crippling, Dexa scans worsening
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ovarian Cyst
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, asymptomatic                                   Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Symptomatic                                             Decline                 Rate 50%                Rate 50%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Removed                                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pancreatitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of attack, no underlying cause, resolved        Individual              Individual              Individual             Individual
                                                                 consideration,          consideration,          consideration,         consideration,
                                                                 medical records         medical records         medical records        medical records
                                                                 required                required                required               required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Chronic or recurrent                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pap Smear--Abnormal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        ASCUS, no high risk HPV, Class II or Class III          Standard                Standard                Standard               Standard
         followed by one normal pap, Class IV, treated,
         followed by three normal pap smears
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Phlebitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Current use of blood thinners                           Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, < 3 months, complete recovery, no          Rate 25%                Rate 25%                Rate 25%               Standard
         varicose veins or edema
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, 3 months-2 years, complete recovery, no    Standard                Standard                Standard               Standard
         varicose veins or edema
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Recurrent episodes within 0-2 years                     Rate 25%                Rate 25%                Rate 25%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of  2 years ago                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Varicose Veins--(see Varicose Veins)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pneumonia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Complete recovery                                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prostatitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, full recovery                              Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 episode or chronic                                  Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prosthesis/Prosthetics Device (See Amputation)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prostate--Enlarged (See Benign Prostatic Hypertrophy/BPH)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Psoriasis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild symptoms, OTC medications or no treatment          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Mild to moderate symptoms, conservative treatments,     Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
         including prescription topical agents
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Severe symptoms requiring Rx medication such as         Decline                 Decline                 Decline                Decline
         Enbrel, Remicade, Sulfasalazine, gold therapy or
         Methotrexate
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Use of tanning bed only                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Use of UVA/PUVA light at a medical facility             Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Psoriatic Arthritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All cases                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pyloric Stenosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected with complete recovery             Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Respiratory Syncytial Virus (RSV)/Bronchiolitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or history of, < 2 years of age, Synagis/       Decline                 Decline                 Decline                Decline
         Palivizumab use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2 years of age, Last occurrence < 1 year ago and      Decline                 Decline                 Decline                Decline
         Synagis/Palivizumab use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 2 years of age. Last occurrence > 1 year ago, no      Standard                Standard                Standard               Standard
         medications for > 1 year. Complete recovery, no other
         respiratory conditions
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Restless Leg Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No medication or treatment for 12 months                Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled with medication                              Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Diagnosis not confirmed, secondary condition not ruled  Decline                 Decline                 Decline                Decline
         out
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Retinal Detachment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected < 2 years                          Rate 50%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Rheumatoid Arthritis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Scoliosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, no surgery, under age of 20                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present, over age of 20                                 Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgery completed, rod in place, full recovery          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Any cardiac, pulmonary or spinal cord involvement       Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Sinusitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 episodes in the past year                           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3-6 episodes in the past 12 months                      Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 6 episodes in the past 12 months                      Rate 25%                Rate 25%                Rate 25%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Sleep Apnea
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled with CPAP                                    Rate 150%: LA Decline   Rate 150%: LA Decline   Rate 150%: LA Decline  Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgically corrected                                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Sleep Apnea + Ratable build                             Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Sleep Apnea + Tobacco User                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Sleep Apnea + Hypertension                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Central or Mixed                                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Spina Bifida
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Occulta, incidental finding, asymptomatic               Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Occulta--symptomatic                                    Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Manifesta                                               Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Spinal Manipulations
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        0-5 visits per year                                     Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        6-10 visits per year                                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        11-15 visits per year                                   Rate 50%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        16-20 visits per year                                   Rate 25%                Rate 15%                Rate 15%               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        21--25 visits per year                                  Rate 75% Except: LA:    Rate 15% Except: LA:    Rate 15% Except: LA:   Standard
                                                                 Rate 84%                Rate 84%                Rate 84%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        26-30 visits per year                                   Rate 75% Except: LA:    Rate 15% Except: LA:    Rate 15% Except: LA:   Standard
                                                                 Rate 84%                Rate 40%                Rate 40%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        31-35 visits per year                                   Rate 75% Except: LA:    Rate 15% Except: LA:    Rate 15% Except: LA:   Standard except: NV--
                                                                 Rate 84%                Rate 50%                Rate 50%               Rider Autoshare 80
                                                                                                                                        plus Rx only (all
                                                                                                                                        other plans
                                                                                                                                        standard)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        36+ visits per year                                     Rate 75% Except: LA:    Rate 75% Except: LA:    Rate 15% Except: LA:   Rate 15%
                                                                 Decline                 Decline                 Rate 75%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Stents
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Heart                                                   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Other locations                                         Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tachycardia
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        No attacks in past 12 months, maintained and well       Rate 25% or higher      Rate 25% or higher      Rate 25%               Standard Rate
         controlled on medications to control attacks and
         symptoms, no other cardiovascular disorders
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         3 attacks per year, < 1 year since last attack         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
         3 attacks per year, 1-3 years since last attack,       Rate 75%                Rate 75%                Rate 75%               Rate 75%
         prompt response to treatment, no other cardivascular
         disorders
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        < 3 attacks per year, > 3 years since last attack,      Standard                Standard                Standard               Standard
         prompt response to treatment, no other cardiovascular
         disorders
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Others                                                  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical ablation  6 months ago                         Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Surgical ablation > 6 months ago, no residuals          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tendonitis--see Bursitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tonsillitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Less than 3 episodes per year                           Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        3-5 episodes per year                                   Decline                 Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 episodes per year                                   Decline                 Decline                 Decline                Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tourettes Syndrome
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Simple tics, no behavioral disorders                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Controlled with medication                              Standard or Rate up     Standard or Rate up     Standard               Standard or Rate up
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Disabling, behavioral issues, extensive psychotherapy   Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tuberculosis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        TB infection without disease, + skin test, negative     Standard                Standard                Standard               Standard
         bacteriologic studies, negative chest x-ray, no
         clinical evidence of active TB disease, prophylactic
         drug therapy complete > 6 months ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        TB infection without disease, + skin test, negative     Decline                 Standard                Standard               Standard
         bacteriologic studies, negative chest x-ray, no
         clinical evidence of active TB disease, current use
         of < 6 months of prophylactic drugs
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ulcer (Peptic)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode, complete recovery                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        History of bleeding or perforation less than 2 years    Decline                 Decline                 Decline                Decline
         ago or multiple occurrences of bleeding or
         perforation
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One episode of bleeding or perforation > 2 years ago,   Standard                Standard                Standard               Standard
         no symptoms or vagotomy completed > 3 years ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Uterine Fibroids
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Post-menopausal, no HRT, asymptomatic or myomectomy or  Standard                Standard                Standard               Standard
         hysterectomy completed
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Others                                                  Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Vaginitis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        One occurrence, complete recovery                       Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 1 occurrence, < 1 year since last occurrence          Rate 25%                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Varicose Veins
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present-asymptomatic, no recommendations for treatment  Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present with ulcer                                      Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with lazer, stripping or sclerotherapy, full    Rate 25%                Standard                Standard               Standard
         recovery no symptoms or treatment < 1 year ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Treated with lazer, stripping or sclerotherapy, full    Standard                Standard                Standard               Standard
         recovery no symptoms or treatment > 1 year ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Ventricular Septal Defect--APS Required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Repaired > 1 year ago complete recovery, normal         Standard                Standard                Standard               Standard
         cardiac exam
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present or repaired with symptoms or abnormal cardiac   Decline                 Decline                 Decline                Decline
         exam
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Weight loss medication use
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Use of any weight loss medication (other than Xenical)  Individual              Individual              Individual             Individual
         in combination with hypertension or cardiac issues      consideration,          consideration,          consideration,         consideration,
                                                                 medical records         medical records         medical records        medical records
                                                                 required                required                required               required
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Continuous use of any weight loss medication for more   Decline                 Decline                 Decline                Decline
         than one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        All other scenarios or Xenical use in combination with  Standard                Standard                Standard               Standard
         hypertension or cardiac disease
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Weight loss surgery--Gastric banding
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band removed, no rateable build, weight maintained  Standard                Standard                Standard               Standard
         for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band removed, ratable build, or weight loss not     Decline                 Decline                 Decline                Decline
         maintained for one year
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Lap band present                                        Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                       Actions for Cancer
      The following grid includes possible underwriting actions for applicants with cancer history. This is not an all-inclusive list. Medical records are
                                           required for all cancer history, regardless of the original diagnosis date.
      Eligibility is determined based on the underwriter assessment of complete medical records, confirmation of compliance with all physician recommended
    follow-up, a current physician assessment of the condition, supporting stability and no recurrence of the condition. Treatment for cancer may be defined
                            as: office visits, preventive maintenance medication, screenings, monitoring, diagnostics, and lab work.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
     Condition  We reserve the right to rate for the condition
     and/or medication use when appropriate. A modified rating
     is determined based on the severity of the condition and       $1,500 or lower          $2,500-$5,000          $2,000-$5,200         $6,000 or higher
    treatment and/or prescription medication cost, dosage, and    deductible plus Rx      deductible plus Rx       deductible no Rx      deductible plus Rx
                          premium amount.
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Basal Cell Carcinoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, complete recovery                    Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurences, or recurrent, removed (regardless  Rate 25%--permanent     Rate 25%--permanent     Rate 25%--permanent    Standard
         of time frame)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Breast
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage 0, > 4 years from treatment                       All states except FL    All states except FL    All states except FL   All states except FL
                                                                 and UT: Rate 25% UT:    and UT: Rate 25% UT:    and UT: Rate 25% UT:   and UT: Rate 25% UT:
                                                                 tobacco user--          tobacco user--          tobacco user--         tobacco user--
                                                                 individual              individual              individual             individual
                                                                 consideration FL: see   consideration FL: see   consideration FL:      consideration FL:
                                                                 below                   below                   see below              see below
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage 0,  2 yrs from treatment                          FL only: Rating if      FL only: Rating if      FL only: Rating if     FL only: Rating if
                                                                 cancer free for  2      cancer free for  2      cancer free for  2     cancer free for  2
                                                                 years                   years                   years                  years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I, > 11 yrs from treatment                        All states: Rate 25-    All states: Rate 25-    All states: Rate 25-   All states: Rate 25-
                                                                 50%                     50%                     50%                    50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I,  2 years from treatment                        FL only: Rating if      FL only: Rating if      FL only: Rating if     FL only: Rating if
                                                                 cancer free for  2      cancer free for  2      cancer free for  2     cancer free for  2
                                                                 years                   years                   years                  years
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage II, III, IV                                       Decline FL only:        Decline FL only:        Decline FL only:       Decline FL only:
                                                                 Exception  2 years      Exception  2 years      Exception  2 years     Exception  2 years
                                                                 cancer free, 150%       cancer free, 150%       cancer free, 150%      cancer free, 150%
                                                                 rating applies          rating applies          rating applies         rating applies
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Bladder
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage 0, 10+ years from treatment                       Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I, > 10 years from treatment                      Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Cervical
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage 0 (carcinoma in situ), > 3 years from treatment   Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I, IA1, IA2, IB1, IB2 (lymph node removed), > 10  Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
         years from treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage IA, IIA, IIIA, IBA & IVB, > 10 years ago          Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Colon
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage 0 or Carcinoma in situ, 3+ years from treatment   Rate 25-50%             Rate 25-50%             Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I or Duke's A, > 5 years from treatment           Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage II or Duke's B, > 12 years from treatment         Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage III or IV, Duke's C or D, > 10 years from         Individual              Individual              Individual             Individual
         treatment                                               consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Kidney
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I & II, normal kidney function, > 10 years from   Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
         treatment:
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I & II, abnormal kidney function, > 10 years      Individual              Individual              Individual             Individual
         from treatment                                          consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage III & IV, > 10 years from treatment               Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Melanoma, localized
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Clark's Level I, II & III--.76-1.5 mm thick, > 5 years  Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Clark's Level I, II & III, > 1.5 mm thick, > 10 years   Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Clark's Level I, II & III, < .75 mm thick, > 3 years    Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Clark's Level I, II & III, unknown thickness, > 10      Individual              Individual              Individual             Individual
         years                                                   consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Clark's level IV or V, > 10 years                       Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Melanoma In Situ, > 2 years                             Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple Malignant Melanoma, > 10 years                 Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Osteoid Osteoma
        Removed with complete recovery                          Standard                Standard                Standard               Standard
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Prostate
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I or Gleason score 2-4, > 2 years                 Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Gleason Score 5, > 3 years                              Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage II or Gleason Score 6, > 5 years                  Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Gleason score 7, > 5 years                              Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage III or Gleason Score 8-10, > 10 years             Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage IV or Recurrent, > 10 years                       Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Skin, Sarcoma
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Adult
    --------------------------------------------------------------------------------------------------------------------------------------------------------
            Stage I, G1 or G2, T1, > 3 years                    Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
            Stage I, G1 or G2, T2, > 10 years                   Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
            Stage II, III or IV, > 10 years                     Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Under age 20:
    --------------------------------------------------------------------------------------------------------------------------------------------------------
            Group I, > 3 years                                  Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
            Group II, > 5 years                                 Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
            Group II, IV or Recurrent, > 10 years               Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Skin, Squamous Cell
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Present                                                 Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Single occurrence, complete recovery--margins free of   Standard                Standard                Standard               Standard
         tumor
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences or recurrent, last removal < 3     Rider--permanent        Rider--permanent        Rider--permanent       Rider--permanent
         years ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Multiple occurrences or recurrent, last removal  3      Rider--permanent        Rider--permanent        Rider--permanent       Standard
         years ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Deep Tumor: invaded muscle, cartilage or bone, no       Decline                 Decline                 Decline                Decline
         metastasis
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Metastasis                                              Decline                 Decline                 Decline                Decline
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Stomach
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Testicular
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Nonseminoma & Seminoma combination, Stage I, > 3 years  Rate 25%                Rate 25%                Rate 25%               Rate 25%
         ago
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Nonseminoma & Seminoma Combination Stage II or Stage    Individual              Individual              Individual             Individual
         III > 10 years                                          consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Nonseminoma Stage I, > 3 years                          Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Nonseminoma, Stage II or III, > 10 years                Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seminoma State I, > 3 years                             Rate 25%                Rate 25%                Rate 25%               Rate 25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Seminoma Stage II or III, > 10 years                    Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Throat
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Tongue--oropharyngeal
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage 0, > 5 years                                      Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I, no alcohol or tobacco use within the past 2    Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
         years, > 5 years from treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I, current alcohol or tobacco use, > 10 years     Individual              Individual              Individual             Individual
         from treatment                                          consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage II, no alcohol or tobacco use within the past 2   Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
         years, > 10 years from treatment
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage II, current alcohol or tobacco use, > 10 years    Individual              Individual              Individual             Individual
         from treatment                                          consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage III, IV or Recurrent, > 10 years from treatment   Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Thyroid, Papillary
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        > 5 years from treatment                                Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Uterine
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage I, II, > 5 years from treatment                   Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage III, > 10 years from treatment                    Rate 25-50%             Rate 25-50%             Rate 25-50%            Rate 25-50%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Stage IV, > 10 years                                    Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------
        Uterine sarcoma, > 10 years                             Individual              Individual              Individual             Individual
                                                                 consideration           consideration           consideration          consideration
    --------------------------------------------------------------------------------------------------------------------------------------------------------

    HumanaOne Short Term Medical Plans

    HumanaOne's Short Term Medical Plans are not subject to complete
    underwriting like other HumanaOne plans. Instead, applicants will be
    asked four or five eligibility and health questions to determine their
    eligibility. The following questions must be answered fully and
    truthfully; including information related to spouse and/or dependents
    applying for coverage:

     >
     No
     Yes Are you or is any immediate family member (whether or not named in
    this application) pregnant, an expectant parent, in the process of
    adopting a child, or undergoing infertility treatment?

     >
     No
     Yes Have/Are you, your spouse, or any person applying for coverage
    resided in the U.S. for less than 6 months?

     >
     No
     Yes Are you, your spouse, or any person applying for coverage over 300
    pounds if male, or over 250 pounds if female?

     >
     No
     Yes For any of the following conditions, has any person to be insured
    received, in the past 5 years, any abnormal test results; medical or
    surgical consultation, treatment, or advice; consulted a health care
    professional; or taken medication for: diabetes, emphysema, cancer or
    tumor, stroke, heart disorder including but not limited to heart attack
    or chest pain, AIDS or tested positive for HIV, kidney disorder
    (excluding kidney stones), alcoholism, chemical dependency, drug or
    alcohol abuse?

    In Colorado, an additional question will be asked of the applicants:

     >
     No
     Yes Have you or any other person to be insured been covered under two
    or more non-renewable short term plans during the past 12 months?

    Eligibility

    If ``no'' is answered to all of the following questions, your client
    will be eligible for coverage. If ``yes'' is answered to any of the
    following questions, your client will need to provide the name of the
    person the answer applies to. The person(s) named will not be covered
    under the policy. If your client is not eligible for coverage, they may
    choose to apply for a different HumanaOne plan that is fully
    underwritten.

    If you have any questions about HumanaOne's Short Term Medical plans,
    please contact your local sales representative.

                                     ______

                     Submitted by Hon. Sheldon Whitehouse,
                        a U.S. Senator From Rhode Island

                  Hospital Association of Rhode Island (HARI)

                                       &

                                    Lifespan

    June 21, 2018

    Seema Verma
    Administrator
    Centers for Medicare and Medicaid Services
    Department of Health and Human Services
    Attention: CMS-1694-P
    P.O. Box 8011
    Baltimore, MD 21244-1850

    RE: CMS-1694-P, Medicare Program; Hospital Inpatient Prospective
    Payment Systems for Acute Care Hospitals and the Long-Term Care
    Hospital Prospective Payment System and Proposed Policy Changes and
    Fiscal Year 2019 Rates; Proposed Quality Reporting Requirements for
    Specific Providers; Proposed Medicare and Medicaid Electronic Health
    Record (EHR) Incentive Programs (Promoting Interoperability Programs)
    Requirements for Eligible Hospitals, Critical Access Hospitals, and
    Eligible Professionals; Medicare Cost Reporting Requirements; and
    Physician Certification and Recertification of Claims (Vol. 83, No.
    88), May 7, 2018

    Dear Administrator Verma:

    On behalf of the ten acute care hospitals in Rhode Island, the Hospital
    Association of Rhode Island (HARI) and Lifespan appreciate the
    opportunity to comment on the Centers for Medicare and Medicaid
    Services' (CMS) proposal to not extend the imputed rural floor wage
    index policy for federal fiscal year (FY) 2019.

    We would like to express our disappointment that CMS proposes to not
    extend the imputed rural floor provision past the September 30, 2018
    expiration date. This payment policy is critical to address a hospital
    wage index reclassification system that does not reflect the unique
    size and location of Rhode Island. Specifically, since Rhode Island is
    just 1,000 square miles, many Rhode Island residents commute to and
    from jobs in nearby Massachusetts and Connecticut every day. The fiscal
    condition of hospitals in Rhode Island will be severely impacted if
    this policy is discontinued, and a competitive disadvantage will be
    created for the state's entire healthcare system. Many hospitals in our
    state are located very close to hospitals in neighboring states that
    are benefitting from a higher reimbursement rate due to their state's
    rural floor. The imputed rural floor policy provides Rhode Island with
    the same protections that Massachusetts and Connecticut currently
    benefit from.

    In the FY 2005 IPPS, CMS proposed, then finalized, an imputed ``rural
    floor'' policy for all-urban states. Part of the agency's rationale was
    that hospitals in all-urban states did not have any protection, or
    ``floor,'' from declines in their wage index (69 FR 49110), which all
    other states have through the traditional rural floor. However, this
    imputed rural floor methodology was not beneficial to Rhode Island due
    to the entire state being located in one core-based statistical area
    (CBSA). In the FY 2013 IPPS, CMS amended the policy to establish an
    alternative methodology for computing the imputed floor wage index and
    address this concern (77 FR 53368 through 53369). The hospitals in
    Rhode Island have strongly supported the policy ever since, as it
    creates wage index consistency and equity between states with rural
    areas and states that are entirely urban.

    In addition, we would like to address the following policy views in
    favor of maintaining the imputed floor policy and the alternative
    calculation that was established in the FY 2013 IPPS.

    Wage Index System Reform

    In both the FY 2014 and FY 2015 inpatient PPS final rules, CMS extended
    the imputed floor for an additional year, during which time the agency
    would continue to explore potential wage index reform. While
    recommendations for wage index reform continue to be researched and
    evaluated, no comprehensive reform of the Medicare wage index system
    has been established nor have plans to do so been announced. CMS should
    maintain the status quo for the entirety of the Medicare wage index
    system--including the imputed floor policy and alternative calculation
    current in place--until such reform is achieved.

    Elimination of the Rural Floor Reinstates the Anomaly

    Part of CMS' reasoning for eliminating the imputed floor provision is
    that it creates ``a disadvantage in the application of the wage index
    to hospitals in States with rural hospitals but no urban hospitals
    receiving the rural floor'' (83 FR 20363). However, those urban
    hospitals in states with rural hospitals retain all future wage index
    protections associated with the rural floor. Eliminating the imputed
    rural floor ultimately reinstates the disadvantages that existed prior
    to its inclusion, where all-urban states have no protections from
    declines in the wage index.

    There is precedent for CMS to restore, in the final rule, policies or
    provisions that were scheduled for elimination or discontinuation in
    the proposed rule. Last year, CMS proposed to allow the imputed rural
    floor to expire in FY 2018. That decision was reversed in the final
    rule and the policy was extended through FY 2018. Additionally, in the
    FY 2012 inpatient PPS proposed rule, CMS stated that the imputed floor
    would expire on Sept. 30, 2011. However, in the final rule CMS
    announced that the imputed floor provision was extended (and every year
    after), during which time the agency would continue to explore
    potential wage index reform.

    HARI and Lifespan, on behalf of the hospitals in Rhode Island, advocate
    that maintaining the imputed floor wage index policy and the
    alternative calculation creates equity and consistency in the Medicare
    reimbursement process. We are committed to working with you to ensure
    that Rhode Island and other all-urban states benefiting from the
    imputed rural floor continue to have the same protections provided to
    states with rural areas and hospitals. Thank you for your consideration
    of this matter.

    Sincerely,

    M. Teresa Paiva Weed                David A. Balasco
    President,                          Vice President of Government
                                        Relations,
    Hospital Association of Rhode
    Island                              Lifespan

                                     ______

                State of Rhode Island and Providence Plantations

                                  State House

                      Providence, Rhode Island 02903-1196

                                  401-222-2080

    Gina M. Raimondo
    Governor

    June 13, 2018

    The Honorable Seema Verma
    Administrator
    Centers for Medicare and Medicaid Services
    7500 Security Boulevard
    Baltimore, MD 21244

    Dear Administrator Verma:

    I am writing to request your assistance in helping to reinstate the
    imputed rural floor provision in the FY 2019 Inpatient Prospective
    Payment System (IPPS) final rule promulgated by the Centers for
    Medicare and Medicaid Services (CMS).

    Last year, we had the opportunity to discuss this issue in Rhode Island
    during the National Governor's Association Conference. Specifically,
    the IPPS proposed rule for FY 2019, recently released by CMS,
    eliminates the imputed rural floor and its alternative calculation for
    ``all-urban'' states. The ``imputed'' rural floor policy was first
    created by CMS in FY 2005 because CMS believed that there was merit to
    the concept that all-urban states were disadvantaged by the wage index
    system. Since FY 2013, the IPPS rules have included an alternative
    methodology for calculating the imputed rural floor in Rhode Island,
    which has been key for our state's hospitals to preserve access to care
    for Rhode Islanders. The elimination of this provision will reduce
    hospital Medicare payments in our state by approximately $28.6 million
    in FY 2019.

    Hospitals are among Rhode Island's top employers and the impact of the
    discontinuation of this policy would adversely impact this important
    sector of our economy. This loss of funding will put Rhode Island at a
    competitive disadvantage for recruiting and maintaining staff.
    Hospitals in Rhode Island must compete with our neighboring states,
    which are located just miles away and are benefitting from a much
    higher reimbursement rate.

    I want to thank you again for continuing this long-standing policy in
    the FY 2018 IPPS final rule, which addresses a wage index disparity for
    hospitals in Rhode Island and ask for your consideration of restoring
    this provision in the final rule again this year.

    Sincerely,

    Gina M. Raimondo
    Governor

                                     ______

                         Congress of the United States

                              Washington, DC 20515

                                 June 20, 2018

    The Honorable Seema Verma
    Administrator
    Centers for Medicare and Medicaid Services
    7500 Security Blvd.
    Baltimore, MD 21244

    Dear Administrator Verma:

        We write to express grave concern that your proposed Fiscal Year
    (FY) 2019 Inpatient Prospective Payment System (IPPS) rule ends a
    longstanding policy correcting a wage index disparity for hospitals in
    Rhode Island. Since FY 2013, the IPPS rules have included an
    alternative methodology for calculating the imputed rural floor in
    Rhode Island, which has been key to improving the overall fiscal
    condition of Rhode Island's health care system and maintaining access
    to care for Rhode Islanders.

        The alternative methodology for calculating the imputed rural floor
    has been in place for many years to address the disadvantages faced by
    all-urban states, like Rhode Island, which do not benefit from any
    other payment programs for rural areas. This policy protects our
    hospitals from falling to some of the lowest reimbursement rates in the
    country, all the while competing with some of the most highly
    reimbursed urban and academic hospitals in New England.

        If the alternative methodology for calculating the imputed rural
    floor is not reinstated in the IPPS final rule later this summer, we
    expect Medicare reimbursement rates for hospitals in Rhode Island to be
    cut by $28 million. These cuts will also have a ripple effect
    throughout the insurance market in the state, because private insurance
    reimbursement rates under the Medicare Advantage program are based on
    underlying Medicare reimbursements. This would effectively double down
    on cuts to hospitals in Rhode Island, which already have some of the
    lowest operating margins in the country.

        The alternative methodology for calculating the imputed floor has
    been a crucial lifeline for hospitals in our state, many of which
    continue to report operating losses each year. Hospitals are often the
    economic backbone in a community, providing well-paying jobs for health
    care workers, researchers, laboratory technicians, as well as
    maintenance and administrative workers. A cut of this magnitude to
    hospitals in Rhode Island would have a devastating impact throughoutour
    economy.

        We urge you to reverse your decision to end this payment policy for
    hospitals in Rhode Island and reinstate the alternative methodology for
    calculating the imputed rural floor in the final FY 2019 IPPS rule.
    Thank you for your consideration of this important request and we look
    forward to working with you to see this policy extended.

    Sincerely,
    Jack Reed                           Sheldon Whitehouse
    United States Senator               United States Senator

    James R. Langevin                   David N. Cicilline
    Member of Congress                  Member of Congress

                                     ______

                     Prepared Statement of Hon. Ron Wyden,
                           a U.S. Senator From Oregon
        There's a lot to cover this morning. I'll get to rescuing Americans
    who are getting mugged by their prescription drug bills, as well as the
    administration gutting safeguards for those with preexisting
    conditions. But first, the American people are owed an answer about
    what's going to be done to protect the thousands of children the Trump
    administration separated from their mothers and fathers and put in the
    custody of the witness.

        As of this morning, HHS, Homeland Security, and the Justice
    Department seem to be doing a lot more to add to the bedlam and deflect
    blame than they're doing to tell parents where their kids are.
    According to new reports, the government is ransoming these children by
    telling their parents they can have their kids back if they agree to
    leave the country. The president tweeted that the U.S. should forget
    about due process rights for immigrants, essentially an endorsement of
    judging people by the color of their skin.

        The White House chief of staff floated their family-shredding
    policy in the press more than a year ago. It wasn't conjured out of
    thin air this spring. But with news reports that HHS is scrambling to
    collect resumes of individuals with experience in child care, it's
    clear the Department was woefully unprepared.

        This committee has oversight of the child welfare system. Members
    have worked hard on bipartisan child welfare policies that keep
    families together whenever it's possible and safe. That's because
    unnecessarily ripping children away from their families and putting
    them in institutions is harmful. It's harmful to their health. It's
    scarring to their emotional well-being. It's detrimental to their
    growth. That is a fact, and your department knows it. You should know
    it.

        Secretary Azar, I'd be ready for a lot of questions about this
    today. An administration that has traumatized thousands of child
    refugees, dehumanized these kids and their parents, and tried to
    normalize this behavior through deception has a lot to answer for.

        Now let's shift to discuss Americans getting hit with enormous
    bills when they walk up to the pharmacy window. When the President said
    in early 2017 that drug companies were ``getting away with murder,'' he
    offered his diagnosis of the prescription drug cost problem. A year and
    a half later, it sure looks like he's decided not to treat the problem.

        The President made prescription drug costs a key part of his pitch
    to the American people on health care. But the party in power hasn't
    done any legislating on it. The White House put out a 44-page, so-
    called ``blueprint''--essentially a collection of the same questions
    people have been asking about this issue for a decade or more. To me,
    it looks less like a blueprint than it looks like blue smoke and
    mirrors.

        A lot of what the President and his team have said is head-
    scratching stuff. For example, the President labeled European countries
    ``freeloaders.'' He said that if drugs got more expensive overseas,
    fattening big pharma's wallets, prices would fall here at home. You've
    got to be living in fantasy land to buy that theory.

        First of all, I don't know what magic wand the administration is
    planning on using to hike drug prices in other countries, but that's
    not a power the U.S. has today.

        Second, even if drug companies did come into a windfall from
    overseas, it's naive and laughable to expect that they'd take that as a
    reason to slash prices in America. Look at the Trump tax law. Huge
    amounts of cash were showered onto these multinational drug companies.
    They funneled it into stock buybacks that benefit shareholders, not
    consumers.

        Another trip to fantasyland: on May 30th, the President said that
    in 2 weeks, drug companies would be announcing, quote, ``voluntary
    massive drops in prices.'' Two weeks went by, then 3 weeks, and now
    it's been nearly a month. No massive drops in prices to report.

        As long as Americans are getting mugged at the pharmacy counter,
    this situation demands serious, bipartisan action. That's why today I
    am releasing a comprehensive report that looks at exactly what makes
    this industry so complicated, and why it seems like prices only ever go
    up.

        It's not just a look at the drug manufacturers. There are a lot of
    pieces to the puzzle of holding drug prices down, including the
    middlemen, the distributors, the misplaced incentives, and broken, out-
    of-date policies on the law books. This report is all about getting a
    comprehensive look under the hood of the entire drug industry in
    America for the first time. That information is key to having a full
    debate.

        Otherwise, what Americans are getting from the Trump
    administration, and the president in particular, is mostly a lot of
    empty talk. The fact is, many of the questions raised in the
    administration's 44 page document are important. They reflect an
    interest in some of the challenges I've worked on with respect to drug
    costs. But it's discouraging to see the Trump administration pretend
    that repeating the same questions is equivalent to getting results.

        There's a big gap between the triumphant headlines the Trump
    administration tries to grab on prescription drugs and the lack of
    serious proposals they've put forward. I want to see that gap close,
    starting today.

        I'll wrap up on this last issue. The Trump administration announced
    recently that it was going to get out of the business of defending
    protections for Americans with preexisting conditions--protections
    which are the law of the land.

        This isn't some narrow regulation that only applies to a handful of
    people. There are more than 150 million Americans who get insurance
    through their employers, and I'd wager most of them would be surprised
    to learn this Trump decision hurts them too. If you don't have a pre-
    existing condition, I guarantee you know somebody who does. And the
    Trump administration decided it isn't going to protect them.

                                     ______

                                 Communications

                                  ----------

                    America's Health Insurance Plans (AHIP)

             601 Pennsylvania Avenue, NW, Suite 500, South Building

                              Washington, DC 20004

    America's Health Insurance Plans (AHIP) appreciates this opportunity to
    comment on challenges in the pharmaceutical market and solutions that
    are needed to help millions, of Americans who are burdened by out-of-
    control prescription drug prices. We thank the committee for calling
    attention to these important issues and for inviting Secretary Azar to
    testify on the Trump Administration's proposals.

    AHIP is the national association whose-members provide coverage for
    health care and related services to millions of Americans every day.
    Through these offerings, we improve and protect the health and
    financial security of consumers, families, businesses, communities, and
    the nation. We are committed to market-based solution and public-
    private partnership that improve affordability, value access, and well-
    being for consumers.

    As the committee addresses concern about rising drug prices, we urge
    you to recognize that the entire pricing process is driven entirely by
    the original list price of a branded drug--which is determined solely
    by the drug company, not by the market or. Any other participant in the
    pharmaceutical supply chain. Congress needs to address this reality--
    the problem is the price--as part of any strategy for reducing
    pharmaceutical costs for the people.

    Out-of-control prescription drug prices are a direct consequence of
    pharmaceutical companies taking advantage of a broken market for their
    own financial gain at the expense of patients. The lack of competition,
    transparency and accountability in the prescription drug market has
    created extended, price-dictating monopolies with economic power that
    exist nowhere else in the U.S. economy. The end result is that everyone
    pays more-from patients, businesses and taxpayers to hospitals,
    doctors, and pharmacists.

    Bold steps are needed, at both the legislative and regulatory levels,
    to ensure that people have access to affordable medications. With
    solutions that deliver real competition, create more consumer choice,
    and ensure open and honest drug prices, we can deliver more affordable
    pharmaceutical products--while at the same time protecting and
    supporting innovations to deliver new treatments and cures for
    patients. Accessible, affordable medicines are the cornerstone to
    keeping patients with chronic disease healthier and out of emergency
    rooms. Reducing the price of medicines is a necessary step toward
    achieving this goal.

    Our statement focuses on the following topics:

          Our initial perspectives on the Trump Administration's
    ``Blueprint to Lower Drug Prices,'' including policies that address the
    role of Medicare and Medicaid in providing access to affordable
    medications;

          The consequences that out-of-control prescription drug prices
    have on consumers; and

          How health plans work hard on behalf of all consumers to
    negotiate lower prescription drug costs.

    The Trump Administration's ``Blueprint to Lower Drug Prices''

    We commend President Trump and his Administration for focusing on out-
    of-control prescription drug prices by releasing a ``Blueprint for
    Lower Drug Prices'' and publishing a request for information (RFI) that
    solicits comments from stakeholders and interested parties on policy
    proposals to lower prescription drug prices and reduce out-of-pocket
    costs.

    We are working closely with AHIP members to develop a formal response
    to the Administration's RFI and we will submit comments and
    recommendations by the July 16 deadline. In the meantime, we want to
    emphasize that we share the Administration's goal of getting the most
    clinically effective drugs into the hands of patients at the lowest
    cost. Several of the President's proposed solutions will have a real
    impact on lowering drug prices for Americans.

    We support the Administration's overall goals of:

          Stopping the pharmaceutical industry from gaming the patient and
    the regulatory systems to keep drug prices high;

          Keeping drug prices from increasing at out-of-control rates;

          Increasing flexibility for insurance providers to negotiate
    lower prices;

          Encouraging doctors to prescribe lower-priced medications; and

          Getting patients clear information about costs as they consider
    treatments.

    To provide consumers relief from high prescription drug costs, AHIP has
    developed recommendations for effective, market-based solutions in
    three areas: (1) delivering real competition; (2) ensuring open and
    honest drug pricing; and (3) delivering value to patients. Specific
    solutions in each of these areas are outlined in an appendix to our
    statement.

    Various elements of the Administration's Blueprint are aligned with
    AHIP's policy recommendations. Below we highlight several examples that
    offer significant promise for putting downward pressure on prescription
    drug prices.

    Promote Generic Competition: We support the Administration's efforts to
    prevent brand name drug manufacturers from using risk evaluation and
    mitigation strategies (REMS) to block competition front generic drug
    makers. The Food and Drug Administration (FDA) recently issued two
    draft guidance documents addressing this priority.

    Promoting Biosimilars: We support the Administration's efforts to
    improve the availability, competitiveness, and adoption of biosimilars
    as affordable alternatives to branded biologics. We appreciate that
    these efforts will include steps to educate clinicians, patients, and
    payors about biosimilar and interchangeable products to increase
    awareness about these treatments.

    Benefit Flexibility: We support the Administration's consideration of a
    proposal to allow Medicare Part D plans to address price increases for
    a sole source generic drug through changes to their formulary or
    benefit design during the coverage year. This flexibility would allow
    plan sponsors to quickly respond to price increases imposed by the only
    manufacturer of a generic drug.

    Negotiation Tools: We support the Administration's consideration of a
    proposal to provide Medicare Part D plans with ``full flexibility'' in
    using formulary management tools for high-cost drugs for which rebates
    are often limited or unavailable (e.g., protected class drugs, drugs
    without competition). These tools, which are widely used in the private
    sector outside of the Medicare program would allow plan sponsors to
    negotiate better drug prices on behalf of Medicare beneficiaries.

    Increased Transparency: We support the Administration's release of
    enhanced CMS Drug Pricing Dashboards for Medicare Part B, Medicare Part
    D, and Medicaid. The Dashboards can provide patients, families, and
    caregivers with additional information to make informed decisions and
    predict their cost-sharing. By increasing transparency the updated
    Dashboards have the potential to help hold pharmaceutical manufacturers
    accountable for drug price increases, highlight drugs that have not
    increased in price, and recognize when competition is working.

    Star Ratings: We support the Administration's consideration of a
    proposal to update the methodology used to calculate Drug Plan Customer
    Service Star Ratings for Medicare Part D plans that are appropriately
    managing the utilization of high-cost drugs. This would be an important
    step toward ensuring that Star Rating measures are aligned with the
    goal of reducing unnecessary use of high-cost drugs.

    While the Blueprint and RFI offer mostly positive steps for addressing
    out-of-control drug prices, we have concerns that several other ideas
    the Administration appears to be considering would actually lead to
    higher costs for Americans by weakening the ability of plans to
    negotiate lower prices. For example, health insurance providers already
    share the savings from negotiations with drug manufacturers by lowering
    premiums and cost-sharing for all consumers. However, requiring drug
    rebates to be passed through the point-of-sale to individual
    beneficiaries at the pharmacy counter, rather than be distributed to
    all enrollees, would likely lead to higher drug prices from
    manufacturers, higher Part D premiums for all seniors, greater cost-
    sharing for non-rebated drugs, as well as over $40 billion in
    additional costs for hardworking taxpayers.\1\ Similarly, policies that
    would eliminate or make it more difficult for plans to negotiate lower
    prices through rebates without replacing the rebating process with an
    alternative would similarly drive up costs for all beneficiaries.
    ---------------------------------------------------------------------------
        \1\ FY 2019 Budget in Brief (page 61), Department of Health and
    Human Services, https://www.hhs.gov/sites/default/files/fy-2019-budget-
    in-brief.pdf.

    On a host of other issues, we are continuing to hold discussions and
    solicit feedback from AHIP work groups to develop detailed
    recommendations for HHS. We look forward to working together with the
    Administration, Congress, and other stakeholders to lower drug prices
    through market-based solutions that deliver real competition, create
    more consumer choice, and ensure open and honest drug prices that are
    driven by their value to patients.

    The Impact of Out-of-Control Prescription Drug Prices

    Rising prescription drug prices and costs impose a heavy burden on all
    Americans. From patients who cannot afford life-saving medications, to
    consumers who pay higher and higher premiums because of higher and
    higher drug prices, to employers who must divert dollars that could be
    used for salaries to pay for more expensive prescriptions, to
    hardworking taxpayers who fund public programs like Medicaid and
    Medicare, the consequences are profound.

    It is important to understand the unambiguous root causes of this
    problem: lack of real market competition due to the extension and
    distortion of government-granted exclusivity and patent protections,
    opaque pharmaceutical pricing practices, questionable sales and
    marketing practices, and limited correlation between drug prices and
    the value they deliver to patients.

    A May 2018 AHIP analysis concluded that 23.2 cents out of every premium
    dollar goes to pay for prescription drugs--making this the largest
    component of health care spending.\2\ Our analysis found that
    prescription drug spending outpaces the amount spent on physician
    services, office and clinic visits, and hospital stays. These costs
    impose a heavy burden on consumers, employers, government programs,
    taxpayers, and the entire health care system. When prescription drug
    prices go up, the cost of health insurance goes up. That is a
    fundamental economic reality: rising health care costs, including drug
    costs, are driving increases in the cost of health coverage.
    ---------------------------------------------------------------------------
        \2\ Where Does Your Health Care Dollar Go?, AHIP, May 22, 2018,
    https://www.ahip.org/where-does-your-health-care-dollar-go-ahip-has-
    the-answer/.

    Even for products that have been on the market for decades, sharp price
    increases are not uncommon. One study shows that the price of insulin
    has increased more than 240 percent over the past decade; for example,
    the price of Lantus increased from $88.20 per vial in 2007 to $307.20
    per vial in late 2017, while the price of Levemir increased from $90.30
    per vial to $322.80 per vial during the same time period.\3\ These
    sharp price increases harm patients and reduce the affordability of
    coverage for all consumers and payers who must bear the cost through
    higher insurance premiums.
    ---------------------------------------------------------------------------
        \3\ Several Probes Target Insulin Drug Pricing, Kaiser Health News,
    October 28, 2017, https://www.nbcnews.com/health/health-news/several-
    probes-target-insulin-drug-pricing-n815141.

    A June 2018 report from the Department of Health and Human Services'
    (HHS) Office of Inspector General (OIG) found that unit costs for
    brand-name drugs in the Medicare Part D program rose nearly six times
    faster than inflation from 2011 to 2015, with the average Part D unit
    cost increasing 29 percent over this time frame.\4\
    ---------------------------------------------------------------------------
        \4\ Increases in Reimbursement for Brand-Name Drugs in Part D,
    Department of Health and Human Services' (HHS) Office of Inspector
    General (OIG), June 2018, https://oig.hhs.gov/oei/reports/oei-03-15-
    00080.pdf.

    The HHS OIG report identifies 20 brand-name drugs that experienced the
    largest percentage increases in Part D unit costs from 2011 to 2015.
    This includes six drugs with unit cost increases of more than 4,000
    percent and four other drugs with unit cost increases exceeding 2,000
    ---------------------------------------------------------------------------
    percent. For example:

          Isordil Titradose, used to treat angina, increased by 6,112
    percent from 2011 to 2015;

          Timentin, used to treat infections, increased by 4,661 percent;

          Levsin, used to treat irritable bowel syndrome, increased by
    4,212 percent;

          Salex, used to treat shin disorders, increased: by 4,202
    percent;

          Miacalcin, used to treat osteoporosis, increased by 2,771
    percent;

          Thiola, used for kidney stone prevention, increased by 2,465
    percent; and

          Cuprimine, used to treat rheumatoid arthritis, increased by
    2,143 percent;

    The pharmaceutical cost crisis is clearly demonstrated by numerous
    other research findings:

          Price Inflation is a Primary Cost Driver: Segal Consulting, a
    prominent benefits consulting firm, estimates that prescription drug
    spending for
    employer-sponsored plans will increase by 10.3 percent in 2018--with a
    17.7 percent cost increase in specialty drugs and biologics.\5\
    Prescription drug spending trends are primarily driven by price
    inflation (8.8%) as opposed to increases in utilization (2.1%)
    according to the Segal Consulting study.\6\
    ---------------------------------------------------------------------------
        \5\ High Rx Cost Trends Projected to Be Lower for 2018, Segal
    Consulting, Fall 2017.
        \6\ Ibid.

          Financial Burden on Hospitals and Providers: An October 2016
    study commissioned by the American Hospital Association and the
    Federation of American Hospitals cautioned that hospitals ``bear a
    heavy financial burden when the cost of drugs increases and must make
    tough choices about how to allocate scarce resources.'' This study
    highlighted an example of one hospital for which the price increases of
    four common drugs (which ranged between 479 and 1,261 percent) cost the
    same amount in 2015 as the salaries of 55 full-time nurses.\7\
    ---------------------------------------------------------------------------
        \7\ Trends in Hospital Inpatient Drug Costs: Issues and Challenges,
    NORC, October 11, 2016, http://www.aha.org/content/16/aha-fah-rx-
    report.pdf.

          Unfair Burden of High Drug Prices for American Consumers,
    Businesses and Taxpayers: In a March 2017 Health Affairs blog,
    researchers at the Memorial Sloan Kettering Center for Health Policy
    and Outcomes analyzed the 15 companies selling the top 20 drugs (by
    sales) in the United States. Researchers reported that: (1) list prices
    in other developed countries averaged just 41 percent of U.S. net drug
    prices; and (2) the additional income generated by higher U.S. net drug
    prices totaled $116 billion in 2015.\8\ The authors further stated:
    ``We found that the premiums pharmaceutical companies earn from
    charging substantially higher prices for their medications in the U.S.
    compared to other Western countries generates substantially more than
    the companies spend globally on their research and development. This
    finding counters the claim that the higher prices paid by U.S. patients
    and taxpayers are necessary to fund research and development. Rather,
    there are billions of dollars left over even after worldwide research
    budgets are covered.''
    ---------------------------------------------------------------------------
        \8\ R&D Costs for Pharmaceutical Companies Do Not Explain Elevated
    U.S. Drug Prices, Nancy Yu, Zachary Helms, and Peter Bach, March 7,
    2017, http://healthaffairs.org/blog/2017/03/07/rd-costs-for-
    pharmaceutical-companies-do-not-explain-elevated-us-drug-prices/.

          Higher Prices Often Do Not Mean Better Outcomes: While some
    recent high-priced, breakthrough medications have improved patient
    outcomes, this is not always the case. For example, an April 2015 study
    by researchers from the National Institutes of Health (NIH) in JAMA
    Oncology examined 51 oncology drugs approved by the Food and Drug
    Administration (FDA) from 2009 through 2013. Researchers concluded that
    current pricing models were irrational and had no connection to better
    patient outcomes. Remarkably, the NIH researchers found that prices had
    no significant correlation to improvements in progression-free survival
    or overall survival.\9\ With new cancer drugs now often costing well
    over $100,000 annually, manufacturers appear to be setting the price of
    new therapies based on the highest-priced oncology treatment approved
    most recently by the FDA--a practice known as ``shadow-pricing''--
    rather than the value or the improved outcomes they deliver to
    patients.
    ---------------------------------------------------------------------------
        \9\ ``Five Years of Cancer Drug Approvals: Innovation, Efficacy,
    and Costs,'' Sham Mailankody, MB, BS; Vinay Prasad, MD, MPH, JAMA
    Oncology, July 2015, http://oncology.jama
    network.com/article.aspx?articleid=2212206.

          ``Unreasonable'' Drug Prices Forcing Tradeoffs Between Taking
    Medicines and Other Necessities: A September 2016 tracking poll from
    the Kaiser Family Foundation found that 77 percent of Americans believe
    that prescription drug costs are ``unreasonable.'' \10\ The difficulty
    in affording unreasonably priced prescription drugs can lead to
    treatment non-adherence, which can harm patient health, creating
    adverse outcomes, and lead to expensive complications. According to a
    survey by Consumer Reports, many respondents took ``potentially
    dangerous'' steps to limit the impact of high drug costs: not filling a
    prescription (17 percent), skipping a scheduled dose (14 percent); or
    taking an expired medication (14 percent). This survey also found that
    19 percent of respondents spent less on groceries, and 15 percent
    postponed paying other bills so they could afford their prescription
    drugs.\11\
    ---------------------------------------------------------------------------
        \10\ Kaiser Health Tracking Poll: September 2016, http://
    www.kff.org/health-costs/report/kaiser-health-tracking-poll-september-
    2016/.
        \11\ ``Some Americans take risks with needed drugs due to high
    costs,'' Consumer Reports, September 2014, http://
    www.consumerreports.org/cro/2014/09/some-americans-take-risks-with-
    needed-drugs-due-to-high-costs/index.htm.

    These facts paint a clear picture of the crisis we face: drug companies
    exploit a broken market to set seemingly unbounded prices for seemingly
    unlimited periods while consumers, businesses, and taxpayers bear the
    ---------------------------------------------------------------------------
    staggering costs.

    While some have tried to divert attention away from high prescription
    drug prices and, instead, point to others in the supply chain--namely,
    pharmacy benefit managers (PBMs) and rebates--as the source of the
    problem, we should focus on how the supply chain actually functions and
    the true root of the cost crisis when evaluating polity options.

    The Role of Health Plans in Negotiating Lower Costs for All Consumers

    AHIP's members negotiate with health care providers and pharmaceutical
    manufacturers on behalf of consumers and other health care purchasers
    (e.g., employers, government) to provide coverage for high-quality
    treatments and services at the most competitive prices possible. Health
    insurance providers offer comprehensive coverage under the pharmacy
    benefit for prescription drugs delivered through retail mail order and
    specialty pharmacies. Health plans also provide coverage under the
    medical benefit for physician-administered drugs, biologics, and
    devices in outpatient and inpatient settings. This gives health plans a
    unique perspective into the pharmaceutical supply chain and a 360-
    degree view of the broader U.S. health care system--working with PBMs
    and negotiating with drug and device manufacturers, pharmacies,
    physicians, and hospitals to ensure that enrollees have coverage for
    the treatments and services they need.

    While prescription drug pricing and the pharmaceutical supply chain are
    complex, health plans are still, on the whole, able to successfully
    navigate the system and provide significant savings. Health plans
    aggressively negotiate with drug manufacturers for lower prices--and
    then pass those savings directly on in the form of both lower out-of-
    pocket costs and lower premiums for all consumers.

    Health plans negotiate for price concessions from manufacturers, just
    as they do with providers. Health plans leverage competition between
    manufacturers to drive deeper discounts in exchange for preferred
    formulary placement and lower cost-sharing for their products, just as
    they do with providers. However, in discussing how plans obtain
    discounts from manufacturers, it is important to understand the role
    rebates play within the broader system and why the rebate structure is
    used to obtain cost savings for pharmaceuticals rather than the
    ``negotiated rates'' typically used to obtain savings for health
    services.

    Though not broadly understood, plans do not directly reimburse
    pharmaceutical manufacturers for their products even though they do
    negotiate directly for price concessions. Instead, distributors and
    some large pharmacies and health systems directly purchase drugs from
    manufacturers. The price paid by these entities is highly correlated to
    the list price set by the manufacturer with only modest discounts based
    on volume or prompt pay. Distributors resell pharmaceutical products to
    smaller and mid-sized pharmacies and providers after a small markup
    above the discounted price.\12\ Finally, plans directly reimburse
    pharmacies or providers (depending on where the drug is obtained) once
    a claim is filed and any consumer cost-sharing obligations are
    accounted for.
    ---------------------------------------------------------------------------
        \12\ Prescription Drug Pricing in the Private Sector, Congressional
    Budget Office, 2007, https://www.cbo.gov/.sites/default/files/11Oth-
    congress-2007-2008/reports/01-03-prescriptiondrug.pdf.

    Since pharmacies and providers obtain drugs at or near the list price,
    plans must also reimburse them at (or very close to) this rate, plus an
    additional negotiated add-on fee to ensure these entities are not
    ``underwater'' for their purchase. Because there is no interaction
    between plans and manufacturers at the point-of-sale, all price
    concessions must come after the fact through rebates. These rebate
    amounts are typically calculated and paid by a manufacturer to a health
    plan on an aggregate basis, accounting for all fulfilled claims for a
    ---------------------------------------------------------------------------
    product long after an individual prescription is filled by a consumer.

    Since drug costs comprise a significant portion of a health plan's
    total costs, plans may use these estimated discounts to reduce the
    premiums they charge for the overall benefit. They also incorporate the
    savings into the overall cost-sharing design for the benefit, including
    for individual rebated drugs. Plan benefit design and premiums are
    heavily regulated by state departments of insurance and/or the Centers
    for Medicare and Medicaid Services (CMS). By contrast, pharmaceutical
    manufacturers are not subject to any governmental oversight or
    regulation before setting list prices or pushing through price
    increases.

    It is important to understand that while plans are able to negotiate
    significant price concessions from manufacturers, this only applies to
    a subset of drugs that have therapeutic alternatives. For most branded
    drugs and biologics without therapeutic alternatives, manufacturers'
    wi1lingness to negotiate on price is small or nonexistent and they have
    no rebates. Evidence shows that the percentage of rebated drugs is
    decreasing and that list prices are also consistently rising whether
    drugs are rebated or not. In fact, the recent HHS OIG report states:
    ``Total reimbursement for all brand-name drugs in Part D increased 77
    percent from 2011 to 2015, despite a 17-percent decrease in the number
    of prescriptions for these drugs. . . . After accounting for
    manufacturer rebates, reimbursement for brand-name drugs in Part D
    still increased 62 percent from 2011 to 2015. . . . In addition, the
    percentage of brand-name drugs for which manufacturers paid rebates
    decreased [over this period].'' \13\ Further, rebates are not commonly
    found for physician-administered drugs, which account for 30 percent of
    prescription drug spending.\14\
    ---------------------------------------------------------------------------
        \13\ Increases in Reimbursement for Brand Name Drugs in Part D,
    Department of Health and Human Services' (HHS) Office of Inspector
    General (OIG), June 2018, https://oig.hhs.gov/oei/reports/oei-03-15-
    00080.pdf.
        \14\ Trends in Specialty Drug Benefits, Pharmacy Benefit Management
    Institute, 2017.

    The bottom line is that whether a drug is rebated or not, the original
    list price of a drug drives costs in the entire system. This price is
    solely determined and controlled by the drug company, and if the
    original list price is high, the final cost that a consumer pays will
    be high. It is that simple: the problem is the price.

    Conclusion

    Thank you for considering our perspectives on these important issues.
    We are strongly committed to solving the pharmaceutical cost crisis.
    With the right solutions that deliver real competition and create more
    consumer choices, we can bring down the cost of prescription drugs. We
    look forward to working with the committee to advance market-based
    solutions to ensure that consumers have access to affordable
    medications.

         Appendix: AHIP Recommendations to Reduce Drug Prices and Costs

    Rising prescription drug costs hurt everyone. From patients who cannot
    access breakthroughs and consumers who pay higher and higher premiums
    to taxpayers who fund public programs like Medicaid and Medicare, the
    consequences are profound. Pharmacy now accounts for approximately 23
    percent of all medical spending. We need effective market-based
    solutions that deliver real competition, create more consumer choice,
    and ensure that open and honest drug prices are driven by the value
    they bring to patients.

    Solution #1: Real Competition

    3  Create a Robust Biosimilars Market: Ensure that providers and
    patients have unbiased information available to them about the benefits
    of biosimilars. Address anti-competitive strategies, such as the
    development of ``patent estates,'' and tactics aimed at delaying the
    availability of biosimilars. Policies for labeling, naming, and
    interchangeability should provide clarity, ensure safety, and avoid
    unnecessary regulatory hurdles.

    3  Reduce Rules and Red Tape to Generic Entry: Provide FDA with the
    necessary resources to clear the backlog of generic drug applications,
    particularly for classes of drugs with no or limited generic
    competition. Anti-competitive tactics such as ``pay for delay''
    settlements and ``product hopping'' should be prohibited, and the Inter
    Partes Review (IPR) process should be preserved. Legislation requiring
    brand manufacturers to share needed information and samples to promote
    generic development should be advanced.

    3  Revisit and Revise Orphan Drug Incentives: Ensure that the Orphan
    Drug Act's incentives are used by those developing medicines to treat
    rare diseases--not as a gateway to premium pricing and blockbuster
    sales beyond orphan indications. In cases of rare diseases for which no
    effective therapy yet exists, ensure that newly approved drugs are
    priced in accordance with their efficacy.

    Solution #2: Open and Honest Price Setting

    3  Publish Rx Prices, True R&D Costs, and Price Increases: As part of
    the FDA approval process, require that manufacturers disclose
    information regarding intended launch price, use, and direct and
    indirect R&D costs. After approval, require manufacturer reporting of
    list price increases over a percentage threshold amount that explains
    why such price increases are justified.

    3  Limit Third-Party Schemes That Raise Costs: Examine and address the
    impact of drug coupons and co-pay card programs--and related charitable
    foundations--on overall pharmaceutical cost trends. Ensure that
    existing protections aimed at prohibiting their use in all federal
    programs are sufficient.

    3  Evaluate DTC Advertising Impact: Assess impacts of the growth in
    direct-to-consumer (DTC) advertising, particularly broadcast
    advertising, and evaluate the best approaches for conveying information
    to consumers.

    Solution #3: Delivering Value to Patients

    3  Inform Patients on Effectiveness and Value: Increase funding for
    private and public efforts to provide information on the comparative
    and cost-effectiveness of different treatments to physicians and their
    patients. These tools can help them make appropriate assessments about
    the value and effectiveness of different treatment approaches,
    particularly those with very high costs.

    3  Expand Value-Based Formulary Programs: Promote value-based payments
    in public programs like Medicare for drugs and medical technologies,
    based on agreed-upon standards for quality and outcomes.

    3  Reduce Regulatory Barriers to Value-Based Pricing: Address existing
    statutory and regulatory requirements (e.g., Medicaid best price) that
    may inhibit the development of pay-for-indication and other value-based
    strategies in public programs.

                                     ______

                         American Hospital Association

                              800 10th Street, NW

                           Two CityCenter, Suite 400

                           Washington, DC 20001-4596

                                 (202) 638-1100

                                  www.aha.org

    On behalf of our nearly 5,000 member hospitals, health systems and
    other health care organizations, and our clinician partners--including
    more than 270,000 affiliated physicians, 2 million nurses and other
    caregivers--and the 43,000 health care leaders who belong to our
    professional membership groups, the American Hospital Association (AHA)
    appreciates the opportunity to submit for the record our comments on
    the out of control cost of medications.

    America's hospitals rely on innovative drug therapies to save lives
    every day. Without them, more lives would be lost to diseases like
    cancer and AIDS, and others who now can live comfortably while managing
    their chronic conditions would see their quality of life deteriorate.
    In short, modern pharmaceuticals play a critical role in getting and
    keeping patients healthy. Hospitals are major purchasers and dispensers
    of pharmaceuticals; they also play a crucial role in the development of
    new drug therapies.

    Spending on pharmaceuticals has increased dramatically over the past
    several years. The burden of this increase falls on all purchasers,
    including patients and the providers who treat them. For example,
    hospitals frequently see patients show up in the emergency department
    or return for follow up care sicker than when they left because they
    were unable to afford their medications. As drug purchasers, hospitals
    and health systems face significant resource constraints and trade-offs
    as spending on drugs increases.

    The primary driver behind increased drug spending is higher prices, not
    increases in utilization. Within the health care field,
    ``pharmaceuticals'' was ``the fastest growing category'' in terms of
    pricing for every month of 2016 and for most months of 2017.\1\ We see
    both higher launch prices for new drugs and increases in prices for
    existing drugs. Drug manufacturers have full control over the initial
    price for a drug and any subsequent price increases. They are
    responsible for setting the price of a drug at $89,000,\2\ $159,000,\3\
    or even $850,000 \4\ for a course of treatment. They also solely decide
    whether to increase that price by 20 percent,\5\ 948.4 percent,\6\ or
    1,468 percent.\7\ Limited competition and drug shortages have
    facilitated this price growth.
    ---------------------------------------------------------------------------
        \1\ Altarum Institute, ``Price Briefs,'' October 2017 (https://
    altarum.org/sites/default/files/uploaded-related-files/CSHS-Price-
    Brief_October_2017.pdf), September 2017 (https://altarum.
    org/sites/default/files/uploaded-related-files/CSHS-Price-
    Brief_Sept_2017.pdf), August 2017 (https://altarum.org/sites/default/
    files/uploaded-related-files/CSHS-Price-Brief_Aug_2017.
    pdf), July 2017 (https://altarum.org/sites/default/files/uploaded-
    related-files/CSHS-Price-Brief_July_2017.pdf), June 2017 (https://
    altarum.org/sites/default/files/uploaded-related-files/CSHS-Price-
    Brief_June_2017.pdf).
        \2\ Triblle, S.J., ``Duchenne Drug Delayed After Outrage Over
    Price,'' National Public Radio, February 14, 2017, https://www.npr.org/
    sections/health-shots/2017/02/14/515046376/duchenne-drug-delayed-after-
    outrage-over-price.
        \3\ Szabo, L., ``As Drug Costs Soar, People Delay or Skip Cancer
    Treatments,'' National Public Radio, March 15, 2017, https://
    www.npr.org/sections/health-shots/2017/03/15/520110742/as-drug-costs-
    soar-people-delay-or-skip-cancer-treatments.
        \4\ Fox, M., ``Luxturna gene therapy for blindness to cost
    $850,000,'' NBC News, January 3, 2018, https://www.nbcnews.com/health/
    health-news/luxturna-gene-therapy-blindness-cost-850-000-n834261.
        \5\ Herman, B., ``Drug prices are still going through the roof,''
    Axios, March 21, 2018, https://www.axios.com/drug-prices-exploding-
    2017-1521564090-aa025591-9e50-491d-b3e2-c981e85adb60
    .html.
        \6\ Tirrell, M., ``Martin Shkreli's legacy: Putting a `fine point'
    on the drug pricing debate,'' CNBC, March 9, 2018, https://
    www.cnbc.com/2018/03/09/martin-shkrelis-legacy-shaping-the-drug-
    pricing-debate.html.
        \7\ Herman, B., ``Drug prices are still going through the roof,''
    Axios, March 21, 2018, https://www.axios.com/drug-prices-exploding-
    2017-1521564090-aa025591-9e50-491d-b3e2-c981e85adb60
    .html.

    We explore these challenges in more detail below.

    HOSPITALS AND HEALTH SYSTEMS AND DRUG INNOVATION

    Hospitals and health systems rely on continued innovation in drug
    therapies, and they play an important role in the development of new
    drugs. Academic medical centers play a leading role in both the
    development of the underlying science supporting new drug therapies
    (basic science research), as well as the development and testing of new
    therapies (applied or translational research). A combination of public
    and private funding supports this work, including grants from the
    National Institutes of Health, philanthropy and biopharmaceutical
    companies.

    A report from Tufts University underlined that ``a close and
    synergistic relationship between [the biopharmaceutical and academic
    medical center] sectors is critical to ensuring a robust national
    capacity.'' \8\ The report noted that more than 50 percent of
    researchers at academic medical centers contribute to drug and device
    medical trials, and partnerships between biopharmaceutical companies
    and academic hospitals have increased in recent years.
    ---------------------------------------------------------------------------
        \8\ Milne, Christopher-Paul, et al., ``Academic-Industry
    Partnerships for Biopharmaceutical Research and Development: Advancing
    Medical Science in the U.S.,'' Tufts Center for the Study of Drug
    Development, April 2012, http://csdd.tufts.edu/files/uploads/
    tuftscsdd_academic-industry.pdf.

    A New England Journal of Medicine report underscored the benefits
    provided by public-sector research institutions (PSRI), which include
    academic medical centers and their affiliated universities.
    Specifically, the study's authors found that PSRI were responsible for
    153 drugs, vaccines or new indicators for existing drugs approved by
    the Food and Drug Administration (FDA) between 1970 and 2009. They also
    found that hospitals and PSRIs were predisposed to discover drugs that
    have a disproportionately important clinical effect \9\ and those that
    could be used for widespread public health concerns, including the
    treatment of cancer and infectious diseases, as well as vaccination
    development.\10\
    ---------------------------------------------------------------------------
        \9\ Forty-six percent of drugs developed by PSRIs received priority
    reviews from the FDA--an indication that the drugs offered a
    substantial improvement over existing treatments. Only 20 percent of
    new drugs from the private sector received a priority review
    designation.
        \10\ Stevens, Ashley J., et al., ``The Role of Public-Sector
    Research in the Discovery of Drugs and Vaccines,'' New England Journal
    of Medicine 364: 535-541, February 2011.
    ---------------------------------------------------------------------------

    HOSPITAL EXPERIENCE WITH DRUG PRICES AND SPENDING

    Hospitals purchase drugs that clinicians use to treat patients in their
    facilities. Nearly all hospitals work with group purchasing
    organizations (GPOs) to negotiate prices with manufacturers. GPOs
    enable hospitals to achieve the best price as they benefit from the
    negotiating power of aggregate purchasing volume over many hospitals.
    They can save hospitals 10 to 18 percent on the cost of drugs.\11\ And
    one report found that GPOs save the health care system between $25
    billion and $55 billion per year.\12\
    ---------------------------------------------------------------------------
        \11\ DeBenedette, V., ``The Evolution of Group Purchasing
    Organizations,'' Modern Medicine, October 10, 2016, http://
    drugtopics.modernmedicine.com/drug-topics/news/evolution-group-
    purchasing-organizations?page=0,3.
        \12\ Ibid.

    Most hospitals do retain some direct contracting with drug
    manufacturers. This is primarily true for branded therapies for which
    there is no competition. In these instances, manufacturers are not
    compelled to negotiate with GPOs. Hospitals may directly negotiate with
    the manufacturer and contract with the wholesaler for delivery. Only a
    handful of hospitals directly contract for all of their drug supply.
    These are larger organizations that have both the patient volume and
    the staff capacity to make one-on-one negotiations worthwhile. A
    significant challenge arises for small hospitals that have neither the
    staff capacity nor the volume to enter into direct negotiations with
    manufacturers. In some instances, small, rural hospitals have been
    ---------------------------------------------------------------------------
    unable to obtain access to certain therapies.

    Whether hospitals are contracting directly or relying on GPOs, the
    pharmaceutical manufacturers set the starting price in negotiations.
    The ability of the GPO or hospital to obtain a discount off this
    initial price largely has to do with volume and whether, and how much,
    competition for such a therapy exists. In instances where no
    competition exists, such as for many of the new, high-cost specialty
    drugs, large discounts are not available.

    Like other purchasers, hospitals and health systems have faced
    significant increases in spending over the past several years.
    Recently, the Centers for Medicare and Medicaid Services (CMS) released
    updated National Health Expenditures (NHE) data that showed that retail
    drug spending increased by 1.3 percent in 2016. While this level of
    growth may appear low, it follows two consecutive years of expansive
    growth in retail drug spending: 12.4 percent in 2014 and 8.9 percent in
    2015. In other words, the lower growth comes on top of a much higher
    spending base for drugs. In addition, these figures capture retail drug
    spending only; they do not include spending on drugs purchased by
    providers, such as hospitals. Detailed non-retail drug spending data is
    not publicly available, as it is not easily collected.

    In order to explore the experience of non-retail drug purchasers, the
    AHA and the Federation of American Hospitals worked with the NORC at
    the University of Chicago to collect and evaluate data on inpatient
    drug spending. The NORC found that increases in drug spending for
    inpatient care outpaced what the NHE reported for retail drug spending.
    Specifically, the NORC found that, while retail spending on
    prescription drugs increased by 10.6 percent between 2013 and 2015,
    hospital spending on drugs in the inpatient space rose 38.7 percent per
    admission during the same period.\13\,  \14\
    ---------------------------------------------------------------------------
        \13\ National Health Expenditure Data for 2013-2015.
        \14\ ``Trends in Hospital Inpatient Drug Costs: Issues and
    Challenges,'' American Hospital Association and the Federation of
    American Hospitals, October 11, 2016, http://www.aha.org/content/16/
    aha-fah-rx-report.pdf.

    Drug prices, not volume, are the primary driver of this increased
    spending. After examining data from two GPOs that collectively purchase
    drugs for more than 1,400 hospitals, the NORC was able to track changes
    in price, utilization, and total spending for a select group of drugs.
    Consistently, changes in pricing drove increases in spending. These
    price increases, from the hospitals' perspective, appeared to be
    random, inconsistent and unpredictable: large unit price increases
    occurred for both low- and high-volume drugs and for both branded and
    ---------------------------------------------------------------------------
    generic drugs.

    Our members were not surprised to learn that their purchasing
    experience differs from what the NHE reports for retail drugs. In
    testimony to the Committee on Oversight and Government Reform of the
    U.S. House of Representatives, one drug manufacturer acknowledged
    targeting hospital-administered drugs for price increases. Howard
    Schiller, then-interim CEO and director of Valeant Pharmaceuticals,
    stated: ``Because these drugs are hospital-administered, and not
    purchased by patients directly, increasing the cost of the drugs to
    hospitals would affect the hospital's profits on these procedures, but
    it should not reduce patient access.'' \15\
    ---------------------------------------------------------------------------
        \15\ Statement of Howard B. Schiller, Interim Chief Executive
    Officer and Director, Valeant Pharmaceuticals International, Inc.
    before the Committee on Oversight and Government Reform of the U.S.
    House of Representatives, February 4, 2016, https://
    oversight.house.gov/wp-content/uploads/2016/02/Statement-of-Howard-
    Schiller-2016-02-04.pdf.

    While the NORC study supports Mr. Schiller's admission that
    manufacturers target hospitals for price increases, we challenge his
    assessment that such practices do not reduce patient access.
    Researchers at the Cleveland Clinic found that patient access to
    Valeant drugs nitroprusside and isoproterenol declined after the
    company increased the prices for both substantially. From 2012 to 2015,
    53 percent fewer patients were treated with nitroprusside and 35
    percent less were treated with isoproterenol.\16\ This is because
    hospitals bear a heavy burden when the cost of drugs increases, in
    large part due to how hospital reimbursement it structured, and this
    has direct implications for the availability of certain drug therapies.
    ---------------------------------------------------------------------------
        \16\ Khot, U.N., et al., ``Nitroprusside and Isoproterenol Use
    After Major Price Increases,'' New England Journal of Medicine, August
    10, 2017, http://dx.doi.org/10.1056/NEJMc1700244.

    Most payments to hospitals for inpatient care are made on a bundled
    basis--either per discharge (Diagnostic Related Group or DRG) or per
    diem. In other words, all input costs are reimbursed under a single,
    predetermined reimbursement. Hospitals are responsible for managing
    input costs within that fixed payment amount and reimbursement does not
    necessarily increase as input costs, such as those for drugs, increase.
    Medicare, which is one of the largest payers for most hospitals and on
    which many commercial insurers base their rates, cannot keep up with
    new and frequently changing drug prices. The program relies on drug
    pricing data collected and reported by the Bureau of Labor Statistics,
    which does a full ``refresh'' of drug pricing information only every
    five to seven years. This data lag means that hospital reimbursement
    does not necessarily increase proportionally to drug price increases.
    As a result, hospitals must divert resources to cover the cost, which
    also has implications for other hospital costs. Managing skyrocketing
    prescription drug costs forces difficult choices between providing
    adequate compensation to employees, many of whom are highly skilled in
    professions facing shortages; upgrading and modernizing facilities;
    ---------------------------------------------------------------------------
    purchasing new technologies to improve care; or paying for drugs.

    A number of factors contribute to the increase in drug spending, and
    those factors have evolved over time. In the past several years,
    hospital have faced widespread price increases on existing drugs. While
    drug manufacturers have increased some prices by multiple hundreds or
    even thousands of percent, hospitals report that the 10 to 20 percent
    increases on widely used generic drugs often have a greater impact on
    their budgets given the high volumes of these drugs that hospitals
    purchase.

    Increasingly, our members report that high launch prices and increased
    spending due to drug shortages are new challenges they face, as well as
    budget pressures associated with the ancillary service costs associated
    with highly complex and potent drugs. Launch prices are the basis for
    negotiations with purchasers. Examples of recent launch prices include:

          Talz (Eli Lilly), used for treating psoriasis, costs $50,000 a
    year.\17\
    ---------------------------------------------------------------------------
        \17\ Waxman, H., et. al., ``Getting to the Root of High
    Prescription Drug Prices: Drivers and Potential Solutions,''
    Commonwealth Fund, July 2017, http://www.commonwealthfund.org//media/
    files/publications/fund-report/2017/jul/
    waxman_high_drug_prices_drivers_solutions_
    report.pdf?la=en.
    ---------------------------------------------------------------------------
          Keytruda (Merck), used for treating melanoma, costs $152,400 a
    year.\18\
    ---------------------------------------------------------------------------
        \18\ Szabo, L., ``As Drug Costs Soar, People Delay or Skip Cancer
    Treatments,'' National Public Radio, March 15, 2017, https://
    www.npr.org/sections/health-shots/2017/03/15/520110742/as-drug-costs-
    soar-people-delay-or-skip-cancer-treatments.
    ---------------------------------------------------------------------------
          Kymriah (Novartis), used for treating leukemia, costs $475,000
    for a course of treatment.\19\
    ---------------------------------------------------------------------------
        \19\ Sagonowsky, E., ``At $475,000, is Novartis' Kymriah a
    bargain--or another example of skyrocketing prices?'', FiercePharma,
    August 31, 2017, https://www.fiercepharma.com/pharma/at-475-000-per-
    treatment-novartis-kymriah-a-bargain-or-just-another-example-
    skyrocketing.
    ---------------------------------------------------------------------------
          Spinraza (Biogen), used to treat spinal muscular atrophy, costs
    $750,000 for the first year of treatment and $375,000 per year
    thereafter.\20\
    ---------------------------------------------------------------------------
        \20\ Picci, A., ``The cost of Biogen's new drug: $750,000 per
    patient,'' CBS News, December 16, 2016, https://www.cbsnews.com/news/
    the-cost-of-biogens-new-drug-spinraza-750000-per-patient/.

    Many new drug therapies are highly potent and come with significant
    side effects. A recent example is Kymriah, a new blood cancer drug
    using ``CAR-T cell therapy'' through which patients' own genes are
    extracted, modified and reinjected to kill leukemia cells. The
    potential side effects require extensive ancillary services to monitor
    patients and prevent infections and other adverse events for a
    prolonged period of time. While these services do not directly increase
    ---------------------------------------------------------------------------
    the cost of the drug, they do impact the overall cost of care.

    According to the FDA, ``Treatment with Kymriah has the potential to
    cause severe side effects. It carries a boxed warning for cytokine
    release syndrome (CRS), which is a systemic response to the activation
    and proliferation of CAR T-cells causing high fever and flu-like
    symptoms, and for neurological events. Both CRS and neurological events
    can be life-threatening. Other severe side effects of Kymriah include
    serious infections, low blood pressure (hypotension), acute kidney
    injury, fever, and decreased oxygen (hypoxia). Most symptoms appear
    within 1 to 22 days following infusion of Kymriah. Since the CD19
    antigen is also present on normal B-cells, and Kymriah will also
    destroy those normal B cells that produce antibodies, there may be an
    increased risk of infections for a prolonged period of time'' \21\
    (emphasis added).
    ---------------------------------------------------------------------------
        \21\ Food and Drug Administration, ``FDA approval brings first gene
    therapy to the United States,'' August 30, 2017, https://www.fda.gov/
    NewsEvents/Newsroom/PressAnnouncements/ucm574058.htm.

    Drug shortages also are a major contributor to increases in drug
    spending. Medications that experience shortages are largely injectable
    products that are off patent and have few suppliers; shortages
    typically arise from quality concerns that cause a halt to production.
    If a product has few competitors, this disruption cannot be absorbed by
    other companies and demand outpaces supply. This not only results in a
    shortage, but also causes prices to rise. For drugs with a sole
    manufacturer, shortages are exacerbated--since there is no alternative,
    clinicians must scramble to find the drug or compound the drug in cases
    where it is possible. They also may recommend an alternative (often
    less effective) therapy, if one exists. This, in turn, can result in
    higher spending because manufacturers often capitalize on the situation
    by increasing the price of the alternative therapy. For example, a 2017
    study that examined how drug prices change during supply disruptions
    \22\ found that after quality-control issues forced a manufacturer of
    glycopyrrolate--an injectable agent commonly used before surgery to
    reduce secretions--to suspend production, the remaining manufacturer
    increased the price of its product by 855 percent. The list price
    remained at the new level even after production capacity was restored.
    ---------------------------------------------------------------------------
        \22\ Davies, B., Hwang, T., and Kesselheim, A., ``Ensuring Access
    to Injectable Generic Drugs--The Case of Intravesical BCG for Bladder
    Cancer,'' New England Journal of Medicine, April 13, 2017.
    ---------------------------------------------------------------------------

    HOSPITALS' APPROACH TO REDUCING DRUG COSTS

    Hospitals and health systems are committed to ensuring patients receive
    high-value care. Hospital pharmacists continually work to reduce the
    costs of drug therapies in order to maintain and expand access to care.
    Specific examples of approaches taken by hospitals include:

          Identifying equally effective and safe alternative therapies
    that may be less costly;
          Ongoing monitoring of pricing changes to anticipate upcoming
    needs;
          Improving inventory management, including by changing how and
    where medicines are stocked and how they are delivered to clinicians;
          Reducing waste by identifying safe approaches to splitting
    excessively large single dose vials into multiple doses; and
          Compounding therapies in-house.

    Despite these efforts, increased drug spending remains a challenge and
    one which we believe requires legislative and regulatory intervention.
    We urge Congress and the Administration to support patients and
    providers by taking immediate action to reign in the rising cost of
    drugs, including by passing the Creating and Restoring Equal Access to
    Equivalent Samples Act (CREATES Act) and protecting the 340B Program.
    We also offer a broader set of comprehensive solutions in Appendix A.

    The CREATES Act. Generic drugs are one tool for reducing drug prices,
    as they increase competition after the monopoly enjoyed by drug
    manufacturer ends when a drug's patent expires. The CREATES Act targets
    two forms of anticompetitive behavior that are being used to block and
    delay entry of generic drugs. The first is known as sample-sharing.
    This occurs when brand-name drug companies refuse to sell samples of
    their product to potential generic competitors so the generic company
    cannot perform testing to show that its product is bioequivalent to the
    brand-name product, a prerequisite for approval by the FDA. The second
    involves participation in a shared safety protocol. This occurs when
    brand-name manufacturers whose products require a distribution safety
    protocol refuse to allow generic competitors to participate in that
    safety protocol, which is needed to gain FDA approval. The CREATES Act
    allows a generic drug manufacturer facing the sample-sharing delay
    tactic to bring an action in federal court for injunctive relief, such
    as to obtain the sample it needs. The bill also authorizes a judge to
    award damages to deter future delaying conduct. We urge Congress to
    pass the CREATES Act.

    The 340B Program. Congress created the 340B program to permit safety-
    net hospitals that care for communities with a high number of low-
    income and uninsured patients ``to stretch scarce Federal resources as
    far as possible, reaching more eligible patients and providing more
    comprehensive services.'' \23\ Section 340B of the Public Health
    Service Act requires pharmaceutical manufacturers participating in
    Medicaid to sell outpatient drugs at discounted prices to these health
    care organizations. For 25 years, the 340B program has been critical in
    helping hospitals expand access to lifesaving prescription drugs and
    comprehensive health care services to communities across the country
    with a high number of low-income and uninsured individuals, at no cost
    to the federal government.
    ---------------------------------------------------------------------------
        \23\ https://www.hrsa.gov/opa/index.html.

    Given the increasingly high cost of pharmaceuticals, the 340B program
    provides critical support to help hospitals' efforts to build healthy
    communities. In 2015, the 340B program accounted for only 2.8 percent
    of the $457 billion in annual drug purchases made in the U.S. However,
    hospitals were able to use those savings to support many programs that
    are improving and saving lives.\24\
    ---------------------------------------------------------------------------
        \24\ Assistant Secretary for Planning and Evaluation, ``Issue
    Brief: Observations on Trends in Prescription Drug Spending,'' March
    2016, https://aspe.hhs.gov/system/files/pdf/187586/Drugspending.pdf;
    and The Health Resources and Services Administration, ``FY 2018
    Justification of Estimates for Appropriations Committees,'' https://
    www.hrsa.gov/sites/default/files/hrsa/about/budget/budget-
    justification-2018.pdf.

    Thirty percent of the hospitals that serve 340B communities are located
    in rural communities. Nearly 50 percent of those hospitals' communities
    significantly exceeded the minimum Medicare disproportionate share
    hospital (DSH) adjustment percentage of 11.75 percent, which is the
    qualifying threshold for the 340B program. In fact, one-fifth of these
    hospitals have a Medicare DSH adjustment percentage of more than 25
    percent. Many 340B hospitals are financially vulnerable and, in 2015,
    one out of every four hospitals had a negative operating margin.\25\
    ---------------------------------------------------------------------------
        \25\ AHA 2015 Annual Survey Data.

    The 340B program enables these hospitals to serve their communities by
    reinvesting savings from reduced drug pricing into programs that
    benefit their patients, particularly their vulnerable patients. In
    2015, 340B hospitals provided $23.8 billion in uncompensated care.\26\
    Examples of programs provided by 340B hospitals include:
    ---------------------------------------------------------------------------
        \26\ AHA 2015 Annual Survey Data.

          Financial assistance programs for patients unable to afford
    their prescriptions;
          Provision of clinical pharmacy services, such as disease
    management programs or medication therapy management;
          Increased access to other medical services, such as obstetrics,
    diabetes education, oncology services and other ambulatory services;
          Establishment of additional outpatient clinics to improve access
    to care;
          Community outreach programs; and
          Free vaccinations for vulnerable populations.

    In addition, an examination of hospital services illustrates that 340B
    hospitals provide access to essential services to their
    communities:\27\
    ---------------------------------------------------------------------------
        \27\ Ibid.

          Nearly two-thirds of 340B hospitals provide trauma care.
          Three-quarters of 340B hospitals provide pediatric medical
    surgical services.
          Nearly all 340B hospitals have obstetrics (OB) units.
          Approximately two-thirds of 340B hospitals provide psychiatric
    services.
          42 percent of 340B hospitals provide substance abuse or
    dependency services.
          58 percent of 340B hospitals have Neonatal Intensive Care Units
    (NICUs).
          Nearly all 340B hospitals provide breast cancer screening.

    The 340B program is under threat, especially as a result of a recent
    change in Medicare payment policy that reduces by nearly 30 percent, or
    $1.6 billion, Medicare payments to certain hospitals for outpatient
    drugs purchased under the 340B program. Cuts of this magnitude will
    negate the intent of the program, reducing resources that hospitals use
    to expand access to care and services to vulnerable communities. We
    urge Congress to pass H.R. 4392, which would prevent these cuts from
    going into effect and reducing critical health care resources in
    vulnerable communities.

    CONCLUSION

    We appreciate the opportunity to provide these comments and support the
    Committee's efforts and attention to examining the issue of the cost of
    medications. We remain deeply committed to working with Congress, the
    Administration and other health care stakeholders to ensure that all
    Americans can access the drug therapies they need to lead healthy,
    happy and productive lives.

                                     ______

    FINAL REPORT

    Trends in Hospital Inpatient Drug Costs: Issues and Challenges

    October 11, 2016

    PRESENTED TO:                       PRESENTED BY:
    American Hospital Association       NORC at the University of Chicago
    800 10th Street, NW                 55 East Monroe Street
    Two CityCenter                      30th Floor
    Washington, DC 20001                Chicago, IL 60603

    Federation of American Hospitals
    750 9th Street, NW, Suite 600
    Washington, DC 20001

    Preface

    The price of prescription drugs has skyrocketed over the past several
    years. It seems that every day we hear a new report of how the cost of
    drugs hurts patients. When the price of a two-pack of Epipens jumped
    from $100 to $600 between 2007 and 2016--an increase of 500 percent--
    parents around the country wondered if they would be able to acquire
    this life-saving medication for their children. When the cost of the
    infection-control drug Daraprim went from $13.50 to $750 a pill
    overnight, real patients ended up in the hospital when they could not
    follow their treatment regimens.

    These price increases are extremely troublesome throughout the health
    care system. They not only threaten patient access to drug therapies,
    but also challenge providers' abilities to provide the highest quality
    of care. Drug costs also are a major factor in the rising cost of
    health care coverage.

    Hospitals bear a heavy financial burden when the cost of drugs
    increases and must make tough choices about how to allocate scarce
    resources. One hospital put the challenge starkly: last year, the price
    increases for just four common drugs, which ranged between 479 and
    1,261 percent, cost the same amount as the salaries of 55 full-time
    nurses. And while nearly everyone can agree that price increases in the
    hundreds or thousands of percent are unjustifiable, many hospitals
    report that annual price increases of 10 or 20 percent on widely-used
    older generic drugs can have an even greater effect, given the large
    quantities that a hospital must purchase. Managing these skyrocketing
    cost increases forces difficult choices between providing adequate
    compensation to employees, many of whom are highly skilled in
    professions facing shortages; upgrading and modernizing facilities;
    purchasing new technologies to improve care; or paying for drugs,
    especially when these price increases are not linked to new therapies
    or improved outcomes for patients.

    The American Hospital Association and the Federation of American
    Hospitals commissioned this study to better understand how drug prices
    are changing in the inpatient hospital setting. Given that inpatient
    hospital services are generally reimbursed under a bundled payment
    model, there is no single source for information on how much hospitals
    spend on drugs and how that amount has changed over time. We intend for
    this study to help inform policymakers and other stakeholders about the
    challenges hospitals face in acquiring life-saving treatments, and
    serve as a basis for further evaluating how drug prices impact the
    patients we serve.

    Richard J. Pollack                  Charles N. Kahn III
    President and CEO                   President and CEO
    American Hospital Association       Federation of American Hospitals

    EXECUTIVE SUMMARY

    While there has been recent high profile media coverage of retail drug
    price increases, the hospital inpatient pharmaceutical market is often
    overlooked and is not systematically evaluated. This report presents
    recent trends in hospital inpatient drug prices and spending, providing
    policymakers and others with quantifiable information on challenges
    posed by recent increases in inpatient drug prices.

    In conjunction with the American Hospital Association and the
    Federation of American Hospitals, NORC conducted a survey of all U.S.
    community hospitals and analyzed survey results of 712 responding to
    the survey. Additionally, two group purchasing organizations (GPOs)
    representing over 1,400 community hospitals contributed price and
    spending data on a subset of drugs. The drugs sampled were identified
    by expert hospital pharmacy workgroups as being high-spend due to
    volume, price, or both, or as having experienced substantial price
    increases in recent years.

    Between FY 2013 and FY 2015, inpatient drug spending increased an
    average 23.4 percent annually, and on a per admission basis, by 38.7
    percent. Over 90 percent of responding hospitals reported that recent
    inpatient drug price increases had a moderate or severe effect on their
    ability to manage the overall cost of patient care, with one-third of
    the respondents indicating that the impact was severe. Many of the
    sampled drugs that experienced substantial unit price increases in CY
    2014 and CY 2015 were high volume drugs. In most cases, the sampled
    drugs were not new entrants. This report provides a valuable look at a
    section of the pharmaceutical market that affects hospitals and the
    patients they serve.

                                  Key Findings

          Average annual inpatient drug spending increased by 23.4 percent
    between FY 2013 and FY 2015.

          Inpatient drug spending increased on a per admission basis by
    38.7 percent during the same period.

          Growth in unit price--not volume--was primarily responsible for
    the increase in total inpatient drug spending.

          Over 90 percent of surveyed hospitals reported that inpatient
    drug price increases had a moderate or severe effect on their ability
    to manage costs.

          Due to delays in refreshing the pharmaceutical index, Medicare
    reimbursement cannot keep pace with rapidly increasing drug prices.

          The growth in spending on inpatient drugs exceeds the growth in
    spending on retail drugs.

          Price increases appear to be random, inconsistent, and
    unpredictable: large unit price increases occurred for both low- and
    high-volume drugs and for both branded and generic drugs. About half of
    the drugs sampled had no generic competition.

    Background

    _______________________________________________________________________

    Total net spending on prescription drugs, inclusive of discounts, has
    accelerated over the past year to $309.5 billion annually, making
    prescription drugs the fastest growing segment of the U.S. healthcare
    economy.\1\, \2\ Growth in spending on drugs in 2014 (12.2
    percent) dwarfs the overall rate of health care spending growth (5.3
    percent) as well as the rate of spending growth on hospital and
    physician care (4.1 and 4.6 percent, respectively).\3\ The price of
    drugs--not utilization--is the predominant contributor to increased
    drug spending. While spending on drugs rose 8.5 percent in 2015, total
    prescriptions dispensed increased by only 1 percent.\4\ The Bureau of
    Labor Statistics (BLS) Producer Price Index (PPI) suggests that
    pharmaceutical price inflation was 7.2 percent in 2015, greatly
    outpacing both general inflation (0.7 percent) and medical inflation
    (2.7 percent).\5\
    ---------------------------------------------------------------------------
        \1\ IMS Health, ``Medicines Use and Spending in the U.S.--A Review
    of 2015 and Outlook to 2020,'' http://www.imshealth.com/en/thought-
    leadership/ims-institute/reports/medicines-use-and-spending-in-the-us-
    a-review-of-2015-and-outlook-to-2020#form.
        \2\ Total spending on an invoice price basis in FY 2015 was $425
    billion.
        \3\ Centers for Medicare and Medicaid Services, ``National health
    expenditure fact sheet,'' Baltimore, MD, U.S. Department of Health and
    Human Services (2015).
        \4\ IMS Health, ``IMS Health Study: U.S. Drug Spending Growth
    Reaches 8.5 Percent in 2015,'' April 14, 2016, http://
    www.imshealth.com/en/about-us/news/ims-health-study-us-drug-spending-
    growth-reaches-8.5-percent-in-2015.
        \5\ U.S. Department of Labor, U.S. Bureau of Labor Statistics, PPI
    Detailed Report, December 2015, http://www.bls.gov/ppi/ppidr201512.pdf.

    Healthcare purchasers, including federal and state governments,
    insurers, individual consumers, and providers, have identified the
    rising cost of drugs as a major challenge for retaining patient access
    to care. Hospitals bear a heavy financial burden when the cost of drugs
    increases. Hospitals are significant purchasers of prescription drugs,
    such as anesthesia and antibiotics to prevent infections during
    surgery. They also treat patients suffering the repercussions of being
    unable to afford or otherwise access their medications, often when
    ---------------------------------------------------------------------------
    these individuals return through the emergency department.

    While existing studies have quantified the rate of increase in retail
    drug prices and spending, data limitations have prevented a more
    detailed examination of the impact of high and rising drug prices on
    hospitals and their patients.\6\, \7\ This study sought to
    document the extent to which inpatient drug prices and spending have
    increased in the inpatient setting, allowing policymakers and others to
    examine the impact such changes may have on patients.
    ---------------------------------------------------------------------------
        \6\ Leigh Purvis and Stephen Schondelmeyer, ``Rx Price Watch
    Report: Trends in Retail Prices of Prescription Drugs Widely Used by
    Older Americans: 2006 to 2013,'' AARP Public Policy Institute, http://
    www.aarp.org/health/drugs-supplements/info-08-2010/rx_price_watch.html.
        \7\ Allan Coukell and Chuck Shih, ``What's Driving Increased
    Pharmaceutical Spending?'', The Pew Charitable Trust, 2016, http://
    www.pewtrusts.org/en/research-and-analysis/analysis/2016/05/26/whats-
    driving-increased-pharmaceutical-spending.

    As large purchasers, hospitals appear to be particular targets for drug
    price increases. At least one pharmaceutical company, Valeant,
    specifically looked to increase prices for hospital-administered
    drugs.\8\ These increases can be dramatic. In 2015, Valeant raised the
    list prices of Isuprel and Nitropress, common heart medications, by an
    average of more than 200 percent and 500 percent respectively.\9\ These
    increases may be higher at individual hospitals: for example, the
    Cleveland Clinic reported price increases for these two drugs of 310
    and 718 percent, respectively, and the hospital spent more than $5.3
    million on them alone that year. These are just some examples of the
    price increases reflected in national data.\10\
    ---------------------------------------------------------------------------
        \8\ Committee on Oversight and Government Reform, ``Memorandum Re:
    Documents Obtained by Committee From Valeant Pharmaceuticals,'' 2016,
    http://democrats.oversight.house.gov/sites/
    democrats.oversight.house.gov/files/documents/
    Memo%20on%20Valeant%20Documents0.
    pdf.
        \9\ Brady Dennis, ``Rattled by Drug Price Increases, Hospitals Seek
    Ways to Stay on Guard,'' The Washington Post, March 13th, 2016, https:/
    /www.washingtonpost.com/national/health-science/rattled-by-drug-price-
    increases-hospitals-seek-ways-to-stay-on-guard/2016/03/13/1c593
    dea-c8f3-11e5-88ff-e2d1b4289c2f_story.html.
        \10\ Katie Thomas, ``Valeant Promised Price Breaks on Drugs. Heart
    Hospitals Are Still Waiting,'' The New York Times, May 11, 2016, http:/
    /www.nytimes.com/2016/05/12/business/valeant-promised-price-breaks-on-
    drugs-heart-hospitals-are-still-waiting.html.

            From the beginning, a key selling point advanced by Marathon
            was data that it had accumulated showing that Nitropress and
            Isuprel were mispriced relative to their value to hospitals . .
            . we elected to implement significant price increases
            immediately upon purchasing the drugs. In retrospect, we relied
            too heavily on the industry practice of increasing the price of
    ---------------------------------------------------------------------------
            brand name drugs in the months before generic entry.

          -- J. Michael Pearson, Chief Executive of Valeant Pharmaceuticals

    The way in which hospitals are reimbursed compounds the impact of
    increasing drug costs. Most hospitals are not directly reimbursed for
    the drugs they purchase for use in the inpatient setting.\11\ Instead,
    they generally receive a single payment for all non-physician services,
    including drugs, that they provide during an inpatient stay or, less
    commonly, each inpatient day (per diem). For example, Medicare, which
    accounts for a significant source of payments to hospitals for
    inpatient services nationally, uses a reimbursement system that cannot
    keep pace with changes in drug prices. Some commercial and other payers
    either use the Medicare payment model, called the Inpatient Prospective
    Payment System (IPPS),\12\ or pay directly based on the Medicare rate,
    e.g., as a percentage of Medicare reimbursement. When reimbursement
    rates cannot keep up with input costs, such as drugs, hospitals must
    absorb the excess.
    ---------------------------------------------------------------------------
        \11\ Some small, rural hospitals, called Critical Access Hospitals,
    are reimbursed on a cost basis.
        \12\ Under the IPPS, hospitals are paid a single pre-determined
    amount that is based on a national base payment rate, which is adjusted
    to account for factors such as a patient's condition, the treatment
    provided, and local market conditions that affect hospitals' costs of
    providing care. The national base payment rate reflects the capital and
    operating costs that ``efficient'' hospitals are expected to incur for
    providing inpatient services. The capital and operating base payments
    are updated annually to account for changes in patient case mix, market
    conditions, and other factors.

    Each year, CMS evaluates changes in the prices of goods and services
    required to furnish acute inpatient care for purposes of updating the
    IPPS. For purposes of evaluating changes in drug prices, CMS uses the
    BLS PPI prescription drug component, which in turn relies on
    manufacturers to provide timely information on prices. The BLS reviews
    a sample of drugs that it selects based on probability proportionate to
    size (dollar value). The BLS refreshes the pharmaceuticals index every
    5 to 7 years to allow entirely new products or new trends in the market
    to be incorporated into the sample.\13\ To address the continuous
    introduction of new drugs, the BLS draws supplemental samples every
    year.\14\ However, these annual samples do not include existing drugs
    that may have experienced significant price increases in a very short
    period of time. Thus, the delay in refreshing the pharmaceuticals index
    fails to capture sudden price increases. Rapid and unpredictable
    changes in drug prices adversely affect hospitals due to their
    reimbursement model.
    ---------------------------------------------------------------------------
        \13\ Bureau of Labor Statistics (U.S.), The Pharmaceutical
    Industry: An Overview of CPI, PPI, and IPP Methodology, 2011.
        \14\ The FDA Orange Books list all new drugs approved for marketing
    in the United States.

    Study Objectives

    _______________________________________________________________________

    This study aims to evaluate trends in hospital inpatient drug prices
    and spending nationwide and assess the impact of such trends on
    hospitals. Because most payers reimburse hospitals for inpatient
    services using a predetermined, fixed payment model, data does not
    readily exist on the price of drugs or other services that are used in
    the inpatient setting. This study used a large sample survey design to
    obtain data on this largely unknown market. The study targeted the
    following research questions:

          Did inpatient drug spending increase between FY 2013 and FY
    2015?

          To what extent was price--not volume--a contributor to changes
    in inpatient drug spending?

          To what extent have changing drug costs impacted hospitals'
    ability to manage costs within a predetermined, fixed-amount payment
    system?

    Definitions

    _______________________________________________________________________

    This study used the following definitions:

         Inpatient drug spending per admission. This study includes
    hospital-based pharmacy spending on prescription drugs (injectable,
    non-injectable, and biological products) in inpatient settings during
    the fiscal year net of discounts. Radiopharmaceuticals are excluded
    from the estimates. Inpatient drug spending is divided by total
    admissions per year \15\ to calculate inpatient drug spending per
    admission for each sampled hospital.
    ---------------------------------------------------------------------------
        \15\ Number of hospital admissions are derived from the AHA annual
    survey.

         Community hospitals: All nonfederal, short-term general, and other
    specialty hospitals. Other specialty hospitals include obstetrics and
    gynecology; eye, ear, nose, and throat; rehabilitation; orthopedic; and
    other individually described specialty services. Community hospitals
    include academic medical centers or other teaching hospitals if they
    are nonfederal short-term hospitals. Excluded are hospitals not
    accessible by the general public, such as prison hospitals or college
    ---------------------------------------------------------------------------
    infirmaries.

         Price: Price in this report is typically referred to as unit cost
    or unit purchase cost. For average price, weighted averages were taken
    based on spending on a drug across different suppliers, formulations
    and dosages. Prices are inclusive of all discounts, including those
    offered as volume-based discounts as well as those rebates offered for
    drugs of varying market competitiveness and relative efficacy.

         Total spending: The total amount spent on a drug across inpatient
    community hospitals responding to the survey.

    METHODS

    Study Population and Data Sources

    _______________________________________________________________________

    The study population includes all U.S. community hospitals. According
    to the 2014 AHA Annual Survey, there are 4,369 community hospitals in
    the United States.

    This study utilized several complementary data sources. First, we share
    data collected through a survey sponsored by the American Hospital
    Association (AHA) and the Federation of American Hospitals (FAH) that
    targeted all U.S. community hospitals (the Drug Survey). Second, we
    analyze aggregate prescription drug purchasing information from two
    group purchasing organizations (GPOs). Third, the study uses
    information on hospitals' characteristics from the 2014 AHA Annual
    Survey. Finally, NORC, the AHA and the FAH interviewed key stakeholders
    from a variety of inpatient settings to supplement the study with
    qualitative findings on changes in inpatient drug prices.

    The Drug Survey was administered using the AHA's Annual Survey web-
    based platform, and was fielded for two months between April and June
    2016. Of the sampled hospitals, 778 hospitals responded. Of the 778
    responding hospitals, data from 712 hospitals remained in the survey
    after data cleaning and quality assurance processes (Table 1).

    The GPO data include aggregate inpatient prescription drug purchase
    cost information for 28 selected drugs for more than 1,400 U.S.
    community hospitals. Approximately, 38% percent of these hospitals also
    responded to the Drug Survey. The sampled drugs were selected by expert
    pharmacist and hospital budget workgroups because they are either drugs
    with high inpatient spend or drugs that have experienced substantial
    price increases in the past several years. Total spending for these
    drugs for all hospitals in the two GPO networks amounted to
    $972,208,384 in CY 2015.

                   Table 1. Target Population and Study Sample
    ------------------------------------------------------------------------
            Population and Sample Definition           Number of Hospitals
    ------------------------------------------------------------------------
    All U.S. Community Hospitals *                                     4,369
    ------------------------------------------------------------------------
    U.S. Community Hospitals Responding to AHA-FAH                       712
     Drug Survey
    ------------------------------------------------------------------------
    All Community Hospitals Belonging to Two                More than 1,400
     Sampled GPO Networks
    ------------------------------------------------------------------------
    * Source: 2014 AHA Annual Survey.
     Source: AHA-FAH Drug Survey.
     Source: 2014 AHA Annual Survey; GPO Rx Data.

    Analysis

    _______________________________________________________________________

    The study used survey weights to account for overall selection
    probability of each responding community hospital in the Drug Survey
    and make the results nationally representative. We used Taylor series
    variance estimation to compute standard errors. We applied post-
    stratification weight adjustments to calibrate the survey weights so
    that they sum to known population totals for key hospital
    characteristics. We obtained the population totals from the recent
    census of U.S. community hospitals in the 2014 AHA Annual Survey data
    set. Post-stratification weight adjustments resulted in reduced
    variance and bias in the final survey estimates. As shown in Table 2,
    compared to all U.S. community hospitals, a larger proportion of
    hospitals responding to the survey were for-profit; belonged to a
    hospital system; participated in a GPO network; were located in an
    urban setting; lacked a critical access hospital designation; were
    designated as teaching hospitals; and were larger in size in terms of
    number of beds and total Medicare discharges. After post-stratification
    adjustments were made to the survey weights, survey respondents matched
    the census of U.S. community hospitals from the 2014 AHA Annual Survey,
    across all key characteristics.

    To estimate inpatient drug spending per hospital admission, information
    on number of admissions for each surveyed hospital was sourced from the
    2013 and 2014 AHA Annual Surveys. Information on number of admissions
    for FY 2015 was not available at the time this report was published.
    Since volume of admissions was similar between 2013 and 2014, we
    assumed that volume of admissions in 2015 was similar to 2014.\16\
    ---------------------------------------------------------------------------
        \16\ 2013 AHA Annual Survey; 2014 AHA Annual Survey.

               Table 2. Key Characteristics of Sampled Hospitals Compared to all U.S. Community Hospitals
    ----------------------------------------------------------------------------------------------------------------
                                                                                     Sampled Community Hospitals
                   Hospital Characteristic                  All U.S. Community -------------------------------------
                                                                Hospitals        Unweighted     Weighted [95% CI]
    ----------------------------------------------------------------------------------------------------------------
    Number of Hospitals                                                  4,369          712                    4,369
    ----------------------------------------------------------------------------------------------------------------
    Ownership
    ----------------------------------------------------------------------------------------------------------------
        Government                                                       22.5%        13.9%      22.5% [18.5%-27.2%]
    ----------------------------------------------------------------------------------------------------------------
        Not-for-profit                                                   61.8%        57.3%      61.8% [57.3%-66.1%]
    ----------------------------------------------------------------------------------------------------------------
        For-profit                                                       15.6%        28.8%      15.6% [13.3%-18.2%]
    ----------------------------------------------------------------------------------------------------------------
    Hospital System
    ----------------------------------------------------------------------------------------------------------------
        Yes                                                              60.9%        75.4%       60.9% [56.2%-5.4%]
    ----------------------------------------------------------------------------------------------------------------
        No                                                               39.1%        24.6%      39.1% [34.6%-43.8%]
    ----------------------------------------------------------------------------------------------------------------
    Group Purchasing Organization
    ----------------------------------------------------------------------------------------------------------------
        Yes                                                              74.7%        76.3%      74.7% [70.5%-78.5%]
    ----------------------------------------------------------------------------------------------------------------
        No                                                                1.8%         1.4%         1.8% [0.8%-3.8%]
    ----------------------------------------------------------------------------------------------------------------
        Not Available                                                    23.5%        22.3%      23.5% [19.8%-27.6%]
    ----------------------------------------------------------------------------------------------------------------
    Geography (Core Based Statistical Area)
    ----------------------------------------------------------------------------------------------------------------
        Division                                                           14%        14.9%      14.0% [11.5%-16.9%]
    ----------------------------------------------------------------------------------------------------------------
        Metropolitan                                                     41.4%        48.7%      41.4% [37.3%-45.7%]
    ----------------------------------------------------------------------------------------------------------------
        Micropolitan                                                     18.9%        21.2%      18.9% [15.8%-22.4%]
    ----------------------------------------------------------------------------------------------------------------
        Rural                                                            25.7%        15.2%      25.7% [21.4%-30.5%]
    ----------------------------------------------------------------------------------------------------------------
    Critical Access Hospital
    ----------------------------------------------------------------------------------------------------------------
        Yes                                                              29.6%        14.8%      29.2% [24.6%-34.2%]
    ----------------------------------------------------------------------------------------------------------------
        No                                                               70.2%        85.3%      70.8% [65.8%-75.4%]
    ----------------------------------------------------------------------------------------------------------------
    Teaching Status
    ----------------------------------------------------------------------------------------------------------------
        Yes                                                              26.3%        31.9%      26.3% [23.0%-30.0%]
    ----------------------------------------------------------------------------------------------------------------
        No                                                               73.7%        68.1%      73.7% [70.0%-77.0%]
    ----------------------------------------------------------------------------------------------------------------
    Bed Size
    ----------------------------------------------------------------------------------------------------------------
        Up to 99                                                         49.4%        35.0%      49.4% [44.9%-53.8%]
    ----------------------------------------------------------------------------------------------------------------
        100 to 399                                                       40.4%        51.7%      40.4% [36.4%-44.6%]
    ----------------------------------------------------------------------------------------------------------------
        400 or more                                                      10.2%        13.3%       10.2% [8.3%-12.5%]
    ----------------------------------------------------------------------------------------------------------------
    Medicare Discharges
    ----------------------------------------------------------------------------------------------------------------
        4th Quartile (highest)                                             25%        10.0%        25% [20.4%-30.2%]
    ----------------------------------------------------------------------------------------------------------------
        3rd Quartile                                                       25%        23.7%        25% [21.5%-28.8%]
    ----------------------------------------------------------------------------------------------------------------
        2nd Quartile                                                       25%        35.1%        25% [21.9%-28.4%]
    ----------------------------------------------------------------------------------------------------------------
        1st Quartile                                                       25%        31.2%       25% [21.9%-28.5%]
    ----------------------------------------------------------------------------------------------------------------
    Source: AHA-FAH Drug Survey; 2014 AHA Annual Survey.

    To identify the drugs that had the greatest impact on hospital budgets
    due to changes in price and not volume, we analyzed the GPO data
    containing information on spending, price, and volume for the 28
    selected drugs over a three-year period (CY 2013 to CY 2015). Total
    spending and pricing information was aggregated across dosage/strength
    combinations and branded/generic versions for each drug.\17\ We then
    identified the 10 drugs that had the highest total inpatient drug
    spending by the GPOs during CY 2015, and computed growth in total
    spending and unit price for these drugs. We also identified the 10
    drugs with the largest unit price growth between 2013 and 2015. As
    shown in Table 3, compared to all U.S. community hospitals, a larger
    proportion of GPO hospitals were for-profit; belonged to a hospital
    system; were located in an urban setting; were not a critical access
    hospital; were designated as teaching hospitals; and were larger in
    size in terms of number of beds. The GPO hospital sample is a
    convenience sample; in other words, no sampling weights are used.
    Because the information from the GPOs was aggregated, we could not
    apply post-stratification weighting. However, as shown in Table 3, on
    aggregate, the characteristics of GPO hospitals are quite similar to
    that of all U.S. community hospitals.
    ---------------------------------------------------------------------------
        \17\ Prices are inclusive of all discounts, including those offered
    as volume based discounts as well as those rebates offered for drugs of
    varying market competitiveness and relative efficacy.

      Table 3. Key Characteristics of Sampled GPO Hospitals Compared to all
                            U.S. Community Hospitals
    ------------------------------------------------------------------------
                                                       Community Hospitals
           Hospital              All Community         Belonging to the Two
        Characteristic             Hospitals               GPO Networks
    ------------------------------------------------------------------------
    Number of Hospitals                       4,369          More than 1,400
    ------------------------------------------------------------------------
    Ownership
    ------------------------------------------------------------------------
        Government                            22.5%                    19.2%
    ------------------------------------------------------------------------
        Not-for-profit                        61.8%                    64.3%
    ------------------------------------------------------------------------
        For-profit                            15.6%                    16.5%
    ------------------------------------------------------------------------
    Hospital System
    ------------------------------------------------------------------------
        Yes                                   60.9%                    67.1%
    ------------------------------------------------------------------------
        No                                    39.1%                    32.9%
    ------------------------------------------------------------------------
    Geography (Core Based
     Statistical Area)
    ------------------------------------------------------------------------
        Division                                14%                    11.4%
    ------------------------------------------------------------------------
        Metropolitan                          41.4%                    45.8%
    ------------------------------------------------------------------------
        Micropolitan                          18.9%                      22%
    ------------------------------------------------------------------------
        Rural                                 25.7%                    20.9%
    ------------------------------------------------------------------------
    Critical Access
     Hospital
    ------------------------------------------------------------------------
        Yes                                   29.6%                    24.6%
    ------------------------------------------------------------------------
        No                                    70.2%                    75.4%
    ------------------------------------------------------------------------
    Teaching Status
    ------------------------------------------------------------------------
        Yes                                   26.3%                    31.2%
    ------------------------------------------------------------------------
        No                                    73.7%                    68.8%
    ------------------------------------------------------------------------
    Bed Size
    ------------------------------------------------------------------------
        Up to 99                              49.4%                    46.4%
    ------------------------------------------------------------------------
        100 to 399                            40.4%                    40.7%
    ------------------------------------------------------------------------
        400 or more                           10.2%                    12.9%
    ------------------------------------------------------------------------
    Medicare Discharges
    ------------------------------------------------------------------------
        4th Quartile                            25%                    18.7%
         (highest)
    ------------------------------------------------------------------------
        3rd Quartile                            25%                    27.4%
    ------------------------------------------------------------------------
        2nd Quartile                            25%                    25.8%
    ------------------------------------------------------------------------
        1st Quartile                            25%                   28.1%
    ------------------------------------------------------------------------
    Source: 2014 AHA Annual Survey; GPO Rx Data

    KEY FINDINGS

    Inpatient drug spending increased significantly between FY 2013 and FY
    2015. Average annual inpatient drug spending at U.S. community
    hospitals increased by 23.4 percent between FY 2013 and FY 2015 (from
    $5.2 million to $6.5 million).\18\ Over the same period, average
    inpatient drug spending increased 38.7 percent on a per admission basis
    (from $714 to $990, see Figure 1).\19\
    ---------------------------------------------------------------------------
        \18\ Average annual spending was estimated to increase 11.5 percent
    between FY 2013 and FY 2014 from $5.2 million to $5.8 million. Between
    FY 2014 and FY 2015, average annual spending increased by 10.7 percent
    to $6.5 million.
        \19\ On a per-admission basis, average inpatient drug spending was
    estimated to be $714 during FY 2013. Between FY 2013 and FY 2014,
    spending increased by 24 percent to $886 [$795-$976]. Between FY 2014
    and FY 2015, spending increased by 12 percent to $990 [$893-$1,086].

    [GRAPHIC] [TIFF OMITTED] T2618.001

    Changes in inpatient drug spending impacted hospitals' ability to
    manage costs within a fixed payment system between FY 2013 and FY 2015.
    Over 90 percent of the hospitals responding to the Drug Survey reported
    that recent changes in drug prices had a moderate or severe impact on
    their budgets, with a third of hospitals rating the impact as
    ``severe'' (Figure 2). These observations are reinforced by the fact
    that growth in inpatient drug spending during this period exceeded the
    Medicare hospital rate update (IPPS market basket plus/minus
    adjustments), the pharmaceutical price inflation rate, as well as the
    spending in the retail drug market (Figures 3 and 4).\20\
    ---------------------------------------------------------------------------
        \20\ Medicare payments are adjusted annually based on changes to
    the cost of goods and services (``market basket'') plus or minus any
    other adjustments as a result of other policy changes, such as coding
    adjustments.

            There might be upgrades you were trying to do, but there is
            only [so much] budget to do those things. Is it mandated? Can
            we duct tape this equipment? If it breaks in six months, we'll
            buy it out of contingency. These are the tough choices that a
            small community hospital needs to make. . . . Drug volume has
            gone down while dollars [prices] have gone up. . . . We'll do
            anything to drive costs down, even [cut] costs like gas and
    ---------------------------------------------------------------------------
            electricity. It's really like a household budget.

          -- Pharmacy Administrator

        [GRAPHIC] [TIFF OMITTED] T2618.002

        [GRAPHIC] [TIFF OMITTED] T2618.003

        [GRAPHIC] [TIFF OMITTED] T2618.004

    Drug price increases had a larger impact on hospital drug spending than
    utilization between CY 2013 and CY 2015. The data from the two GPOs
    included information on total inpatient spending, unit price, and
    change in unit price between CY 2013 and CY 2015 for the selected
    drugs. From this data, we were able to calculate total utilization for
    each year and evaluate how utilization changed over the three year
    period. By comparing changes in drug prices and changes in utilization
    on total spend for a drug, we were able to identify where spending was
    more significantly impacted by price or volume. Consistently, changes
    in prices drove increases in spending. Figure 5 and Appendix Table A.1
    presents information for the 10 drugs with the highest spending; Figure
    6 and Appendix Table A.2 presents information for the 10 drugs with the
    greatest change in unit cost.

    Drug price increases appear to be random and inconsistent from one year
    to the next. The unit price of many of the drugs changed significantly
    and unpredictably. Many of these drugs--but not all--were high-volume
    drugs (e.g., calcitonin, nitroprusside, isoproterenol, neostigmine
    methylsulfate, phytonadione, and glycopyrrolate; Figures 5 and 6). Most
    were not innovator drugs, that is, brand name drugs under patent
    protection. While some drugs increased at similar rates each year
    (e.g., glucagon), others varied dramatically one year to the next
    (e.g., acetaminophen, calcitonin).

    The rationale for changes in price is not immediately clear. For some,
    it appears that the instigator for the price change was simply a change
    in the drug's ownership. For example, the leukemia drug Oncaspar
    (pegaspargase) was originally approved in 1994. The price of the drug
    increased by nearly $10,000 last year after Baxalta Inc.'s purchase.
    The antiparasitic Daraprim (pyrimethamine) was originally approved in
    1953, yet cost hospitals substantially more in CY 2015 after new owner
    Turing Pharmaceuticals increased the price by more than 3,000 percent.
    As previously noted, Valeant increased the prices of Isuprel and
    Nitropress by hundreds of percent between CY 2013 and CY 2015 after
    they purchased the rights to those drugs from Marathon
    Pharmaceuticals.\21\
    ---------------------------------------------------------------------------
        \21\ These figures still reflect aggregated GPO data and represent
    the price change across 2 years, see Table A.2.

            You can pretty much ballpark medications that were already high
            priced, but it's for the ones that were $5 last year and $300
            this year. Those are the ones that make it very difficult to
            budget. These types of increases are being more commonly found
            for generics. It used to be you could buy these generics and
            save, now all of a sudden these generics are not cheap anymore.
            For Isuprel, which is in all your crash carts and increased 500
            percent overnight, there is no way to budget ahead of time.
            It's taking up pretty much the entire DRG reimbursement on
    ---------------------------------------------------------------------------
            cases.

          -- Pharmacy Vice President

    Temporary market failures also appear to impact drug pricing, sometimes
    with lasting consequences. In 2012 Luitpold Pharmaceuticals, one of
    only two makers of glycopyrrolate (a drug used to dry secretions prior
    to surgery) temporarily closed its factory to fix quality control
    problems.\22\ Hikma Pharmaceuticals, the other manufacturer, then
    raised its prices of the injectable version in 2013. As a result, GPOs
    experienced a 334 percent increase in the drug's price in CY 2014.
    However, once both manufacturers were making it again, its price
    decreased by just 5 percent in CY 2015.
    ---------------------------------------------------------------------------
        \22\ Cynthia Koons, ``Broken Markets for Old Drugs Means Price
    Spikes Are Here to Stay,'' Bloomberg, November 18, 2015, http://
    www.bloomberg.com/news/articles/2015-11-18/the-law-of-pharma-pricing-
    physics-what-goes-up-often-stays-up.

            We did a presentation on nitroprusside and other old drugs to
            our CEO and our executive team. Our CEO was a former surgeon so
            he was familiar with the drug. He couldn't believe the
    ---------------------------------------------------------------------------
            magnitude of the increases--he knew it's been around forever.

          -- Chief Pharmacy Officer

        [GRAPHIC] [TIFF OMITTED] T2618.005

        [GRAPHIC] [TIFF OMITTED] T2618.006

    CONCLUSIONS

    This study examines trends in inpatient drug spending for hospitals
    nationwide in order to determine the quantitative impact and to
    discover how such changes may have impacted hospitals' ability to
    manage costs. Findings show:

          Drug spending in the hospital inpatient setting is quickly
    increasing. Growth in annual inpatient drug spending between FY 2013
    and FY 2015 increased on average 23.4 percent, and on a per admission
    admission basis, 38.6 percent. Growth in spending in the inpatient
    setting exceeded the growth in retail spending, which increased 9.9
    percent during this period. In contrast, CMS's update to hospital rates
    through the IPPS increased by only 2.7 percent. Large and unpredictable
    increases in the price of drugs used in the inpatient setting
    significantly impacted hospitals' ability to manage costs within a
    fixed price based payment system.

          Many of the sampled drugs that accounted for a substantial
    proportion of total inpatient drug spending experienced dramatic unit
    price increases in CY 2014 and CY 2015. In most cases, the identified
    top ten drugs were not new entrants.\23\ About half of the 28 drugs had
    no active generic competition, leaving hospitals no lower cost
    alternatives. For most of the drugs, growth in unit price--not volume--
    was primarily responsible for the increase in total inpatient drug
    spending.
    ---------------------------------------------------------------------------
        \23\ The drugs received FDA approval prior to CY 2013.

          Stakeholder interviews suggest that significant budgetary
    accommodations are needed to keep up with rising drug prices. Most of
    those interviewed raised concerns about older generic drugs whose
    prices have increased unpredictably and the lack of alternatives
    available in order to provide high quality care to their patients.

    Limitations

    _______________________________________________________________________

    The conclusions of this study should be considered in the context of
    the following limitations:

          The information on total spending for inpatient drugs between FY
    2013 and FY 2015 gathered from the Drug Survey was self-reported.

          Of the 4,369 hospitals that met the criteria to participate in
    the survey, only 778 responded and the data from only 712 was
    sufficiently clean to be used.

          Although the survey solicited responses from individual
    hospitals, some hospitals systems reported aggregate information for
    the entire system. The analysis took account such responses where it
    was readily evident that the response was at the system level.

          Not all hospitals participate in GPOs (the GPO data include
    information on 1,409 of 4,369 U.S. community hospitals), which allow
    hospitals to consolidate their collective purchasing power. As such,
    the GPO data may not be reflective of the experience of all hospitals,
    and likely understates the actual rate of growth.

                                                                            APPENDIX
                                Table A1. Change in Unit Cost for Top Ten Drugs With Highest Total Spending in CY 2015 (GPO Data)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                      Percent      Percent
                                          Total Inpatient  Total Inpatient  Total Inpatient                                          Change in    Change in
                Generic name                Spending  CY     Spending  CY     Spending  CY    Unit Price   Unit Price   Unit Price   Unit Price   Unit Price
                                                2013             2014             2015         CY 2013      CY 2014      CY 2015     (CY 2013-    (CY 2014-
                                                                                                                                      CY 2014)     CY 2015)
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Acetaminophen                           43,156,542.02    87,113,521.07    99,061,331.23        12.94        27.64        30.46         114%          10%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Nitroprusside                            9,802,140.32    48,278,606.78    94,966,434.83       102.34       150.31       790.46          47%         426%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Isoproterenol                            5,602,447.81    23,066,826.13    86,541,461.54       278.67       804.16     1,617.62         189%         101%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Neostigmine methylsulfate                   56,818.46     4,311,153.48    78,814,217.26        15.69        16.44        85.59           5%         421%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Glycopyrrolate                           4,932,748.72    66,606,577.06    73,082,412.98         5.46        23.83        22.70         337%          -5%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Pegaspargase                            32,142,583.64    34,337,561.15    60,374,093.00     5,605.44     5,617.24    12,858.14           0%         129%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Vasopressin                              1,923,293.58     3,698,147.36    55,243,306.86            -        48.76        88.16            -          81%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Calcitonin, salmon                       2,372,551.94    12,529,284.26    55,226,841.19        67.98       923.51     2,286.23       1,259%         148%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Glucagon                                23,427,876.25    26,041,923.88    39,738,796.65       109.66       132.91       166.80          21%          25%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Phytonadione                            12,731,141.91    20,809,335.38    35,609,824.48       549.84     1,241.61     2,502.80         126%        102%
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    Source: GPO Rx Data

                     Table A2. Top Ten Drugs With Highest Unit Price Increases in CY 2015 (GPO Data)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                           Percent
                                                                                                          Change in
     Generic   Total Inpatient  Total Inpatient  Total Inpatient   Unit Price   Unit Price   Unit Price   Price per
       name      Spending  CY     Spending  CY     Spending  CY     CY 2013      CY 2014      CY 2015      Unit (CY
                     2013             2014             2015                                                2013-CY
                                                                                                            2015)
    ----------------------------------------------------------------------------------------------------------------
    Pyrimetha       595,748.81       801,690.28       812,109.32       919.10     1,045.52    34,882.24       3,695%
     mine
    ----------------------------------------------------------------------------------------------------------------
    Calcitoni     2,372,551.94    12,529,284.26    55,226,841.19        67.98       923.51     2,286.23       3,263%
     n,
     salmon
    ----------------------------------------------------------------------------------------------------------------
    Hydralazi     6,951,150.65     7,725,372.30    17,568,936.99         4.72         5.02        41.32         776%
     ne
    ----------------------------------------------------------------------------------------------------------------
    Nitroprus     9,802,140.32    48,278,606.78    94,966,434.83       102.34       150.31       790.46         672%
     side
    ----------------------------------------------------------------------------------------------------------------
    Isoproter     5,602,447.81    23,066,826.13    86,541,461.54       278.67       804.16     1,617.62         480%
     enol
    ----------------------------------------------------------------------------------------------------------------
    Neostigmi        56,818.46     4,311,153.48    78,814,217.26        15.69        16.44        85.59         446%
     ne
     methylsu
     lfate
    ----------------------------------------------------------------------------------------------------------------
    Phytonadi    12,731,141.91    20,809,335.38    35,609,824.48       549.84     1,241.61     2,502.80         355%
     one
    ----------------------------------------------------------------------------------------------------------------
    Glycopyrr     4,932,748.72    66,606,577.06    73,082,412.98         5.46        23.83        22.70         316%
     olate
    ----------------------------------------------------------------------------------------------------------------
    Sodium        4,857,185.90     3,559,993.22    12,651,343.86    11,118.66     5,192.88    45,665.71         311%
     benzoate
    ----------------------------------------------------------------------------------------------------------------
    Ephedrine     7,533,234.15    10,528,689.87    34,552,474.48         5.98         8.90        23.96        300%
     sulfate
    ----------------------------------------------------------------------------------------------------------------
    Source: GPO Rx Data.

                               Table A3. Glossary
    ------------------------------------------------------------------------
                                                 Approval in
      Generic      Therapeutic     Medical Use    Past Four     Any Generic
        Name          Class                         Years       Competition
    ------------------------------------------------------------------------
    Acetaminoph  Analgesic        Treats minor  No            Yes
     en                            aches and
                                   pains, and
                                   reduces
                                   fever
    ------------------------------------------------------------------------
    Calcitonin,  Calcitonin       Treats bone   No            Yes
     salmon                        pain and
                                   other
                                   symptoms of
                                   Paget's
                                   disease,
                                   hypercalcem
                                   ia, and
                                   osteoporosi
                                   s
    ------------------------------------------------------------------------
    Ephedrine    Sympathomimetic  Used to       No            Yes
     sulfate      s;               prevent low
                  decongestants,   blood
                  vasopressors     pressure
                                   during
                                   spinal
                                   anesthesia
    ------------------------------------------------------------------------
    Glucagon     Hormone,         Treats        No            Yes
                  hyperglycemic    severe low
                  agent            blood sugar
    ------------------------------------------------------------------------
    Glycopyrrol  Synthetic        Reduces       No            Yes
     ate          anticholinergi   secretions
                  c                in the
                                   mouth,
                                   throat,
                                   airway and
                                   stomach
                                   before
                                   surgery
    ------------------------------------------------------------------------
    Hydralazine  Vasodilator,     Direct-       No            Yes
                  arteriolar       acting
                  vasodilator      smooth
                                   muscle
                                   relaxant
                                   used to
                                   treat high
                                   blood
                                   pressure
    ------------------------------------------------------------------------
    Isoproteren  Nonselective     Used to       No            No
     ol           beta-agonist;    improve
                  sympathomimeti   breathing
                  c                while a
                                   patient is
                                   under
                                   anesthesia,
                                   or to treat
                                   certain
                                   types of
                                   heart
                                   problems
    ------------------------------------------------------------------------
    Neostigmine  Antianginal,     Reversal      May 31, 2013  No
     methylsulf   antihypertensi   agent of       Approval
     ate          ve               certain
                                   kinds of
                                   muscle
                                   relaxants
                                   used in
                                   surgery
    ------------------------------------------------------------------------
    Nitroprussi  Vasodilator      Used to       No            No
     de                            treat
                                   congestive
                                   heart
                                   failure and
                                   life
                                   threatening
                                   high blood
                                   pressure,
                                   or to keep
                                   blood
                                   pressure
                                   low during
                                   a surgery
    ------------------------------------------------------------------------
    Pegaspargas  Chemotherapy,    Leukemia      No            No
     e            asparaginase     treatment
    ------------------------------------------------------------------------
    Phytonadion  Vitamin K        Aids blood    No            Yes
     e                             clotting
    ------------------------------------------------------------------------
    Pyrimethami  Antiparasitic,   Treats        No            No
     ne           antimalarial     toxoplasmos
                  agent            is, can
                                   also
                                   prevent
                                   malaria and
                                   other
                                   infections
    ------------------------------------------------------------------------
    Sodium       Metabolic Agent  Treatment of  No            Yes
     benzoate                      urea cycle
                                   disorders
                                   and
                                   hyperammone
                                   mia
    ------------------------------------------------------------------------
    Vasopressin  Hormone,         A blood       April 17,     Yes
                  vasoconstricto   vessel        2014
                  r                constrictin   Approval
                                   g agent
                                   used in
                                   emergencies
                                   , also used
                                   to treat
                                   diabetes
                                   insipidus,
                                   after
                                   stomach
                                   surgery or
                                   before
                                   stomach x-
                                   rays
    ------------------------------------------------------------------------

                                     ______

                Association of American Physicians and Surgeons

                         1601 N. Tucson Blvd., Suite 9

                                Tucson, AZ 85716

             Statement of Jane M. Orient, M.D., Executive Director

    Chairman Hatch, Ranking Member Wyden, and Members of the U.S. Senate
    Committee on Finance:

    There are many obstacles impeding prescription drug affordability. Yet,
    one especially responsible culprit is the safe harbor to Medicare anti-
    kickback law enjoyed by Group Purchasing Organizations (GPOs) that has
    been further extended by administrative guidance to Pharmacy Benefit
    Managers (PBMs).

    The Federal statute granting this ``safe harbor'' is 42 U.S.C. 1320a-
    7b(b)(3)(C), the language of which was established by the ``Omnibus
    Budget Reconciliation Act of 1986,'' strengthened by the ``Medicare and
    Medicaid Patient and Program Protection Act of 1987,'' and subsequently
    ensconced in federal regulation at 42 CFR 1001.952(j).

    The provision ostensibly facilitates greater bargaining power for the
    purchasing of supplies and drugs. However, the safe harbor has in
    practice driven up costs and scarcity by perpetuating a system rife
    with hidden kickbacks, rebates, and single source contracts that
    financially benefit GPOs, PBMs, and large manufacturers, but constrain
    competition and ultimately harm patients.

    It is time to repeal 42 U.S.C. 1320a-7b(b)(3)(C) and direct HHS to
    revoke any related regulations and guidance that protect such improper
    kickbacks.

    Physicians Against Drug Shortages calculates that such ``corrupt
    practices have driven up the prices of drugs sold by PBMs to individual
    consumers by at least $100 billion annually.'' This is in addition to
    the $100 billion per year in inflated supply costs that result from
    kickbacks to GPOs. For additional details see http://
    www.physiciansagainstdrugshortages.com/.

    Diabetes patients are one group particularly hard hit by the collusion
    between PBMs and manufacturers. CBS News recently reported that ``the
    cost of two common types of insulin increased 300 percent in the past
    decade'' thanks in large part to kickbacks to PBMs. Contracts between
    GPOs, PBMs, suppliers, and manufacturers are hidden from public view,
    despite the fact that taxpayers fund nearly two-thirds of every dollar
    spent on medical care.

    This Committee should request, subpoena if needed, and make public,
    contracts related to the sale of insulin to help shine sunlight on
    these secret backroom deals. In addition it should similarly obtain
    copies of contracts related to other medical products that have
    recently seen a dramatic rise in scarcity or price: e.g., Baxter's
    contracts related to saline market allocation, the Hospira (now Pfizer)
    contracts for fentanyl, and Mylan's contracts for Epipen.

    Meanwhile, independent physicians are providing tremendous savings to
    patients with in-office dispensing of prescriptions that cut out the
    cost increases caused by middlemen like PBMs. For example, a 72 year
    old female patient with multiple chronic conditions purchases all nine
    of her medications through a Direct Primary Care office for $14.63/
    month. Through her Medicare ``coverage'' her cost would be $294.25 per
    month.

    The Senate Committee on Finance has jurisdiction over S 1358, the
    Direct Primary Care Enhancement Act, which would increase patient
    access to this promising delivery model by simply clarifying that
    Health Savings Accounts can be used for these arrangements. We urge the
    Committee to expedite consideration and approval of S. 1358.

    In conclusion, lowering costs for care is going to mean ending the
    improper flow of money to middlemen profiting without adding value to
    patient care. We encourage the Committee to take action to end failed
    policies that benefit the bottom lines of these special interests and
    simultaneously implement solutions that hand control back to patients.

    Please do not hesitate to reach out to us for further discussion about
    our concerns.

    Sincerely,

    Jane M. Orient, MD
    AAPS Executive Director

                                     ______

                  Campaign for Sustainable Rx Pricing (CSRxP)

                Testimony of Lauren Aronson, Executive Director

    Chairman Hatch, Ranking Member Wyden, and members of the Senate Finance
    Committee, the Campaign for Sustainable Rx Pricing (CSRxP) thanks you
    for the opportunity to submit testimony for the record on the
    critically important issue of increasing prescription drug
    affordability for consumers and taxpayers while at the same time
    fostering a marketplace for the development of innovative medicines.

    CSRxP is a nonpartisan coalition of organizations committed to
    promoting an informed discussion on sustainable drug pricing and to
    developing bipartisan, market-based solutions that improve
    affordability while maintaining access to innovative prescription drugs
    for American patients and their families. Our members represent
    organizations including consumers, hospitals, physicians, nurses,
    pharmacists, employers, pharmacy benefit managers and health insurance
    providers.

    We very much appreciate the leadership of this Committee and Department
    of Health and Human Services (HHS) Secretary Azar in finding ways to
    address the unsustainable growth in prescription drug costs. Consumers
    currently spend 23 cents of every healthcare dollar on prescription
    drugs--an amount that can and must come down, as needlessly high drug
    prices and out-of-pocket spending can threaten the financial security,
    health and well-being of American patients and their families, as well
    as strain Federal and State budgets.\1\
    ---------------------------------------------------------------------------
        \1\ America's Health Insurance Plans, ``Where Does Your Health Care
    Dollar Go?'', May 22, 2018.

    CSRxP welcomes HHS's ``Blueprint to Lower Drug Prices and Reduce Out-
    of-Pocket Costs'' as a good first step in the effort to reduce
    needlessly high list prices and lower overall prescription drug costs
    for consumers and taxpayers.\2\ The Blueprint includes a number of
    thoughtful and creative ideas on innovative methods to reduce
    prescription drug spending and we would like to work with the Committee
    and HHS to ensure that those policy ideas are successfully implemented.
    However, we believe that more can and should be done to bring prices
    down. Policies must be implemented to address the root of the problem:
    brand drug makers set list prices too high and increase them at
    excessively high rates. Prescription drug costs will continue to grow
    at unacceptably unsustainable rates unless serious actions are taken to
    thwart the pricing practices of the brand industry. Without addressing
    the root cause of the problem, many American patients, particularly
    those on limited incomes, will continue facing choices they should
    never have to make between buying groceries for their families or
    purchasing the medications they need to get well and stay healthy.
    ---------------------------------------------------------------------------
        \2\ 83 Fed. Reg. 22692-22700.

    Below, CSRxP expresses support for policies in the Blueprint that will
    improve the affordability of prescription drugs while at the same time
    fostering a competitive market, which drives innovation in drug
    development. We then discuss our concern with certain policy ideas
    that, while very well-intentioned, unfortunately will not lower
    prescription drug costs for most consumers and taxpayers. Finally, we
    recommend a limited number of additional bipartisan, market-based
    policies for adoption that will increase affordability and promote
    ---------------------------------------------------------------------------
    innovation in drug development.

    CSRxP looks forward to working with the Committee and HHS to
    successfully implement policies that will help address the goal we all
    mutually share: to make prescription drugs more affordable and
    accessible for U.S. consumers and taxpayers without imperiling the
    discovery of innovative breakthrough therapies that can improve the
    health and well-being of patients.

    I. Policies That Improve Market Competition and Lower Out-of-Pocket
    Costs for Consumers

    A. Increasing Transparency in Prescription Drug Pricing

    CSRxP strongly agrees with HHS that improving transparency in
    prescription drug pricing is a critical component to making
    prescription drugs more affordable for consumers and taxpayers. Among
    other benefits, increased transparency will support and better enable
    transformation of the U.S. health care system toward one based on
    value; will better inform patients, prescribers, and dispensers of
    actual drug costs as they determine the most appropriate treatments to
    meet individual patient needs; and encourage drug makers to justify the
    high prices they set for their products. Hence, CSRxP welcomes policies
    in the Blueprint that promote drug pricing transparency, including:

          Requiring drug manufacturers to include list prices in direct-
    to-
    consumer (DTC) advertisements: DTC advertising has come under scrutiny
    as prescription drug spending takes up a bigger portion of health care
    dollars each year both for consumers and taxpayers. DTC advertising has
    the potential to lead to over-utilization of high-cost medicines.
    Presenting list prices--as well as price increases--in DTC advertising
    will make patients much more aware of prescription drug costs when they
    talk with their providers about treatment options for their individual
    health care needs. Thus, CSRxP urges the Committee to work with HHS and
    the Food and Drug Administration (FDA) to require drug makers to
    include list prices and list price increases in DTC advertisements for
    their products.

          Updating routinely, and expanding, the amount of information
    available on the Medicare and Medicaid Drug Dashboards: The Medicare
    and Medicaid Dashboards have provided valuable data and information to
    consumers and providers on prescription drug costs in a transparent
    manner. Hence, CSRxP urges the Committee to encourage HHS to routinely
    update information on both dashboards, including list prices, price
    increases, and year-over-year pricing data, among other data points, so
    that consumers have a more transparent understanding of the
    prescription drug cost increases they face each year.

    Furthermore, CSRxP urges the Committee and HHS to build on the
    important policy initiatives ongoing at the Department and described in
    the Blueprint that will increase transparency in prescription drug
    pricing, including:

          Mandating that drug makers release details of a drug's unit
    price, cost of treatment, and projection on federal spending before FDA
    approval: Given the significant impact pharmaceuticals have on overall
    health care spending, manufacturers should be required to disclose
    information on the estimated unit price for the product, the cost of a
    course of treatment, and a projection of federal spending on the
    product so that patients, providers, taxpayers and policymakers have a
    better understanding of actual treatment costs.

          Requiring drug companies to annually report increases in their
    drugs' list prices: Similar to requirements already in place for other
    entities like health insurance providers, hospitals and nursing
    facilities, pharmaceutical companies should be required to report
    increases in a drug's list price on an annual basis, as well as how
    many times during the year the price has increased.

          Compelling drug manufacturers to disclose R&D costs: Drug makers
    should be required to disclose how much research was funded by public
    entities like the National Institute of Health (NIH), other academic
    entities, or other private companies, so that regulators and taxpayers
    can properly weigh return on investment.

          Producing annual HHS reports on overall prescription drug
    spending trends and price increases for individual prescription drugs:
    HHS should produce and publicly release annual reports covering (1)
    overall prescription drug pricing trends similar to the one produced by
    the HHS Assistant Secretary for Planning and Evaluation (ASPE) in March
    2016; and (2) the top 50 price increases per year by branded or generic
    drugs; the top 50 drugs by annual spending and how much the government
    pays in total for these drugs; and historical price increases for
    common drugs, including those in Medicare Part B.\3\ These important
    pieces of information will better inform patients, prescribers,
    dispensers, policymakers, and taxpayers of the significant costs of
    prescription drugs that consumers face today.
    ---------------------------------------------------------------------------
        \3\ HHS ASPE, ``Observation on Trends in Prescription Drug
    Spending,'' March 8, 2016.

    ---------------------------------------------------------------------------
    B. Thwarting Anti-Competitive REMS Abuses by Brand Drug Makers

    The FDA uses the Risk Evaluation and Mitigation Strategy (REMS) program
    to allow products with potential safety issues to enter the market.
    When employed effectively and appropriately, REMS improves patient
    safety and makes accessible medicines that otherwise might not be
    available due to safety concerns. However, as described in the HHS
    Blueprint, drug manufacturers often engage in abusive, anti-competitive
    behaviors that manipulate REMS to block generic drug companies from
    obtaining samples of brand drugs under the guise of addressing patient
    safety concerns, effectively preventing them from pursuing the research
    needed to bring less expensive generic drugs to market. CSRxP
    appreciates the leadership of FDA Administrator Gottlieb in using
    administrative action to help curb these abuses. However, we believe
    more can be done and therefore urge the Committee to encourage and
    welcome further actions by the FDA to thwart anti-competitive abuses of
    REMS by brand drug makers identified in the Blueprint, including:

          Evaluating current REMS programs to determine whether existing
    limited distribution programs are appropriate: CSRxP urges FDA to
    assess whether existing REMS programs inappropriately restrict access
    to samples necessary for testing by generic drug makers. Lifting any
    inappropriate and anti-competitive restrictions in sample access will
    better enable generic drug makers to develop products that can inject
    competition into the marketplace and bring drug prices down for
    consumers and taxpayers.

          Applying the same scrutiny to reference biologic manufacturers
    as applied to brand drug companies when assessing potential anti-
    competitive REMS abuses by reference biologic manufacturers: CSRxP
    welcomes HHS's recognition in the Blueprint that reference biologic
    manufacturers have the potential to engage in the same shenanigans that
    certain brand drug manufacturers do with respect to REMS; namely,
    developers of biosimilars and interchangeable biologic products may
    face challenges in obtaining samples of reference biologics for testing
    due to anti-competitive REMS abuses by reference biologic
    manufacturers. As such, CSRxP urges FDA to apply the same scrutiny to
    reference biologic manufacturers as it does to brand drug companies
    when evaluating REMS programs for reference biologics.

    Support for the CREATES Act and FAST Generics Act: In addition to the
    actions described in the Blueprint to curb REMS abuses, bipartisan
    legislation has been introduced in the Senate and the House--the
    CREATES Act and the FAST Generics Act--that would inhibit anti-
    competitive REMS practices by brand drug makers. CSRxP urges enactment
    of these bipartisan pieces of legislation, which will build on the
    important and ongoing work at FDA to curb REMS abuses and better enable
    generic drugs to enter the market.

    C. Fostering a Robust Market for Biosimilar and Interchangeable
    Biologic Products

    Biosimilars and interchangeable biologic products have the potential to
    expand treatment options and substantially lower prescription drug
    costs for consumers and taxpayers. For example, one study found that 11
    biosimilars already approved for sale in Europe and elsewhere could
    generate approximately $250 billion in savings over 10 years if they
    were available in the U.S.\4\ Thus, CSRxP welcomes implementation of
    policies identified in the Blueprint that promote and incentivize the
    development of biosimilars and interchangeable biologic products to
    compete against high-priced specialty brands and lower costs for
    consumers and taxpayers, including:
    ---------------------------------------------------------------------------
        \4\ Express Scripts, ``The $250 Billion Potential of Biosimilars,''
    April 23, 2013.

          Improving the interchangeability of biosimilars: CSRxP strongly
    supports efforts to improve the interchangeability of biosimilars,
    which will provide enhanced competition in the marketplace particularly
    for high-cost specialty drugs. FDA has approved eleven biosimilar
    products since enactment of the Biologics Price Competition and
    Incentive Act (BPCIA) over 8 years ago. However, the agency has not
    deemed any as interchangeable, which means they cannot be substituted
    without the intervention of a health care provider. CSRxP is concerned
    that this continued dynamic will discourage further investment from
    biosimilar developers and ultimately reduce the number of
    ---------------------------------------------------------------------------
    interchangeable biologics that reach the market.

           FDA has not finalized its draft guidance entitled
    ``Considerations in Demonstrating Interchangeability With a Reference
    Product,'' which outlines the process a biosimilar manufacturer must
    follow to obtain an interchangeable designation from FDA.\5\ CSRxP
    urges the Committee to encourage FDA to finalize this guidance as soon
    as possible. Developers of interchangeable products need the final
    guidance for certainty so that they have a clear and consistent pathway
    for demonstrating interchangeability, fostering the ability of more of
    these products to enter the market.
    ---------------------------------------------------------------------------
        \5\ FDA, ``Considerations in Demonstrating Interchangeability With
    a Reference Product,'' Guidance for Industry, Draft Guidance, January
    2017.

          Educating providers and patients on the value, safety, and
    efficacy of biosimilars: CSRxP strongly agrees with HHS that,
    ``[p]hysician and patient confidence in biosimilar and interchangeable
    products is critical to the increased market acceptance of these
    products.'' \6\ Hence, we firmly support efforts by the FDA to educate
    patients, prescribers and dispensers about the value, safety, and
    efficacy of biosimilar and interchangeable biologic products. Along
    similar lines, we further recommend that the Centers for Medicare and
    Medicaid Services (CMS) engage with patients, prescribers, dispensers
    and health plans to develop and implement tools that offer education on
    the value, safety, and efficacy of biosimilars and interchangeable
    products specifically for Medicare beneficiaries enrolled in Part Band
    Part D. Enhanced education efforts from FDA and CMS on biosimilars and
    interchangeable biologics will help to generate improved comfort,
    acceptance and increased utilization of these more affordable products
    over time.
    ---------------------------------------------------------------------------
        \6\ 83 Fed. Reg. 22696.

          Improving FDA's Purple Book: CSRxP supports improvements to
    FDA's Purple Book that make it a more useful tool for developers of
    biosimilars and interchangeable biologics, as well as patients and
    prescribers. Researchers have documented how the Purple Book does not
    include the same level of information as that available in FDA's Orange
    Book for small molecule drugs and have suggested that the lack of
    sufficient information has the potential to hinder development of
    biosimilars.\7\ Moreover, these same researchers described how the
    limited information available in the Purple Book is not easily
    accessible and searchable online, particularly compared to the Orange
    Book, which can create additional challenges for biosimilar developers,
    patients, prescribers, dispensers, and health plans.\8\ As such, CSRxP
    would welcome efforts by the Committee to encourage FDA to make
    modifications to the Purple Book so that the Purple Book for biologics
    maintains similar levels to--or improves upon--the information and
    online accessibility of the Orange Book for small molecule drugs.
    ---------------------------------------------------------------------------
        \7\ Feldman, Robin et al., ``May Your Drug Price Ever Be Green,''
    UC Hastings Research Paper No. 256, October 29, 2017, page 89.
        \8\ Ibid., page 90.

    Shortening the market exclusivity period for brand biologics: In
    addition to these policies included in the HHS Blueprint, CSRxP urges
    the Committee to work with the Administration on shortening the market
    exclusivity period for brand biologics to foster a more robust
    marketplace for biosimilars and interchangeable biologic products.
    Currently, reference biologics enjoy a 12-year market exclusivity
    period. Analyses suggest this amount of time may be unnecessary and
    prevents lower-cost alternatives from entering the market. Although
    providing for intellectual property protections is important to
    encourage innovation and the introduction of medical advancements in
    the U.S. market, consideration should be given to shortening the
    periods of exclusivity. It is important to find the right balance of
    incentives for pharmaceutical companies while alleviating cost
    pressures for consumers and payers. CSRxP believes that action in this
    area is particularly important, as a growing proportion of the drug
    ---------------------------------------------------------------------------
    development pipeline is comprised of high cost biologics.

    D. Promoting Value-Based Arrangements in Federal Health Programs

    Currently Medicare and Medicaid purchase prescription drugs for their
    beneficiaries, but not generally in a manner to accommodate value-based
    payment models. CSRxP agrees with HHS that steps should be taken to
    ensure these programs can best take advantage of recent developments in
    value-based purchasing so that all parts of the U.S. health care system
    benefit from market-based negotiating efforts to lower drug prices. In
    particular, certain value-based arrangements such as indications-based
    pricing have the potential to lower drug costs and would benefit from
    more comparative effectiveness research on the value of various
    treatment options. Public and private institutions such as the
    Institute for Clinical and Economic Review have introduced important
    information into the public domain on the value of particularly high-
    cost efforts and should receive additional funding for this critical
    work.

    However, CSRxP cautions that value-based arrangements remain in their
    infancy and oftentimes do not directly lower costs for U.S. patients
    and their families. More importantly, any savings that accrue from such
    arrangements are not expected to occur in the near-term, severely
    limiting their ability to provide meaningful price relief. While
    representing innovative and important steps in helping to lower drug
    costs, value-based arrangements do not address the root of the problem,
    namely that drug prices are too high and brand pharmaceutical companies
    alone are responsible the high cost of prescription drugs that American
    consumers and taxpayers face every day.

    E. Better Management of High-Cost Medications

    High-cost drugs are significant drivers in the unsustainable growth in
    prescription drug costs. CSRxP supports efforts to lower this
    unsustainable growth in spending through the extension of increased
    flexibility to health insurance providers in managing prescription drug
    costs. With increased flexibility, health plans can employ their
    substantial private sector experience to Medicare and lower costs
    particularly for high-cost medications while maintaining appropriate
    beneficiary access to treatments needed to get well and stay healthy.

    As part of these changes, CSRxP strongly urges HHS to revisit its
    existing exceptions and appeals processes to ensure that they are
    transparent, easy-to-understand, and fair. HHS also should be willing
    to regularly revisit and make changes to such processes as necessary.

    II. Policies That Ultimately Will Not Lower Prescription Drug Costs for
    Consumers and Taxpayers

    HHS requests information in the Blueprint on a number of policies that
    it believes have potential to slow the unsustainable growth in
    prescription drug costs and increase the affordability of medications
    for consumers. While CSRxP supports many of the policies under
    consideration, we are concerned that certain policies identified in the
    Blueprint unfortunately will have the unintended consequence of
    increasing--not decreasing--the costs of prescription drugs for most
    consumers and taxpayers. While we very much share the Department's goal
    of lowering out-of-pocket costs for patients and reducing government
    spending on prescription drugs, we are very concerned that certain
    policies will harm consumers and further strain Federal and State
    health budgets. In particular, policies that would limit or prohibit
    rebates in Medicare Part D or establish long-term financing models for
    purchase of prescription drugs in Federal health care programs, will
    harm consumers and further strain Federal and State health budgets.

    A. Limiting or Prohibiting Rebates in Medicare Part D

    HHS asks in the Blueprint whether limiting or prohibiting pharmacy
    benefit managers (PBMs) from negotiating rebates for Part D drugs could
    lower costs for consumers and taxpayers would lower drug list prices.
    While CSRxP very much shares HHS's concern that list prices for drugs
    are too high and welcomes actions that will actually bring down list
    prices, we disagree that PBMs are responsible for high list prices. In
    fact, brand drug companies alone set excessively high list prices and
    continuously implement significant price increases. By contrast, PBMs,
    negotiate with drug manufacturers to lower costs for Medicare
    beneficiaries enrolled in Part D plans, as well as employers, unions,
    and government plans offering prescription drug coverage.

    Indeed, a recent study found that there is no correlation between the
    prices set by drug companies set and the rebates they negotiate with
    PBMs and that drug companies increase prices regardless of rebate
    levels.\9\ In certain instances, the study pointed to prominent cases
    of higher-than-average price increases in drug categories where
    manufacturers negotiated relatively low rebates and, conversely,
    prominent cases of lower-than-average price increases in drug
    categories where manufacturers negotiate relatively high rebates.\10\
    ---------------------------------------------------------------------------
        \9\ Visante, ``No Correlation Between Increasing Drug Prices and
    Manufacturer Rebates in Major Drug Categories,'' April 2017.
        \10\ Ibid.

    In fact, rebates and other discounts negotiated by PBMs and Medicare
    Part D plans produce significant savings for the program and its
    beneficiaries. One recent analysis estimated that PBMs and Part D plans
    saved the Part D program and its beneficiaries over $20 billion in drug
    costs in 2017.\11\ Similarly, in their most recent report, the Medicare
    Trustees projected significantly slower growth in Part D spending in
    part due to higher manufacturer rebates negotiated by PBMs.\12\ Again,
    while CSRxP appreciates the intent of the question in looking to solve
    this critical problem, we disagree that PBMs are the cause. Instead,
    the root cause of the problem belongs to drug makers and drug makers
    alone, which set high list prices and routinely raise them.
    ---------------------------------------------------------------------------
        \11\ Milliman, ``Value of Direct and Indirect Remuneration: Impact
    on Part D Prescription Drug Plan (PDP) Stakeholders,'' July 2017.
        \12\ The Board of Trustees, Federal Hospital Insurance and Federal
    Supplementary Insurance Trust Funds, ``2018 Annual Report of the Board
    of Trustees of the Federal Hospital Insurance and Federal Supplementary
    Insurance Trust Funds,'' page 112.

    B. Establishing Long-Term Financing Models for Purchase of Prescription
    ---------------------------------------------------------------------------
    Drugs

    HHS asks in the Blueprint about the feasibility of establishing long-
    term financing models for the purchase of prescription drugs. Once
    more, while CSRxP welcomes the goal of looking for innovative methods
    to lower drug costs, we are concerned that implementing long-term
    financing models for the purchase of prescription drugs actually will
    make prescription drugs less--not more--affordable for consumers and
    taxpayers.

    Indeed, long-term financing mechanisms could encourage drug makers to
    continue increasing their prices at excessively high rates for years,
    knowing that the multi-year financing would blunt the total upfront
    cost of the drug--all at the expense and burden of patients and Federal
    and State health programs that unfairly would bear such costs. Any
    lower drug prices generated from market competition incented in
    traditional insurance benefit designs would be eliminated under long-
    term financing models, enabling drug makers to increase prices
    throughout the term of the long-term financing model. Such financing
    mechanisms merely would function as perpetual debt payments and cost
    shifts, unfairly transferring the burden of prescription drug
    affordability from manufacturers to consumers and taxpayers; patients
    would have to make onerous debt payments for years while Federal and
    State health programs already faced with significant budgetary
    challenges would have to absorb even more long-term costs that they
    simply cannot afford in the current fiscal environment.

    Moreover, long-term financing models would be very challenging to
    implement and operate. Drug makers likely would insist that State and
    Federal health programs develop the infrastructure and continuously
    operate a highly complex financing mechanism, increasing government
    administrative spending for years. Administrators of these financing
    programs would have to determine how to handle situations where a
    patient takes a drug for a meaningful period time, burdened with
    significant continuous costs, only to find out during the course of
    treatment that the drug has not been effective. These patients should
    not have to bear those costs, although it is unclear how a long-term
    financing model would handle such unfortunate situations. These
    represent just a few of the many complexities and operational
    difficulties long-term financing models present.

    Insurers currently manage many costly diseases and conditions such as
    cancer, traumatic brain injury, and organ transplant, belying the
    notion that traditional insurance cannot handle the management of
    expensive treatments today. As such, CSRxP firmly believes that using
    traditional insurance rather than long-term financing models will
    better address prescription drug pricing problems for consumers and
    taxpayers. While we appreciate thoughtful and creative approaches to
    tackling the challenging problem of prescription drug pricing, long-
    term financing models are not the solution as they simply serve to prop
    up an unsustainable pricing market.

    III. Additional Policies to Slow the Unsustainable Growth in
    Prescription Drug Costs

    Brand biopharmaceutical companies employ a variety of anti-competitive
    tactics to delay competition and keep lower cost generic drugs and
    biosimilars from entering the market. These inappropriate and unfair
    abuses effectively extend the period of market exclusivity for brand
    products and, consequently, cause consumers to continue experiencing
    needlessly high out-of-pocket expenses and Federal and State
    governments to engage in unnecessary spending on prescription drugs. To
    help combat these anti-competitive tactics by brand drug makers, CSRxP
    urges the Committee and the Administration to work together to adopt
    the bipartisan, market-based solutions described below, which inject
    more competition into the market particularly after brand products
    already have benefitted from market exclusivity post FDA approval.

    A. Enhancing Oversight of ``Pay-for-Delay'' Settlements

    Brand and generic drug makers enter into patent dispute settlements--
    often referred to as ``pay-for-delay'' settlements--that result in a
    generic company agreeing to refrain from marketing its products for a
    specific period of time in return for compensation (often undisclosed)
    from the branded company. The Federal Trade Commission (FTC) has cited
    these arrangements as anti-competitive and estimates that they cost
    consumers and taxpayers $3.5 billion in higher drug costs every
    year.\13\ More recently, these settlements unfortunately have extended
    to biologics, delaying the entry of less costly biosimilars into the
    market. For example, the top-selling product in the world, Humira, with
    global sales exceeding $18 billion in 2017 and a more than doubling of
    its price over the past 5 years, will not face biosimilar competition
    until 2023 due to a settlement agreed to by the brand and biosimilar
    manufacturer of the product.\14\, \15\, \16\
    ---------------------------------------------------------------------------
        \13\ FTC, ``Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers
    Billions,'' January 2010.
        \14\ AbbVie, ``AbbVie Reports Full-Year and Fourth-Quarter 2017
    Financial Results,'' January 26, 2018.
        \15\ Reuters, ``AbbVie. Amgen settlement sets Humira U.S.
    biosimilar launch for 2023,'' September 28, 2017.
        \16\ The Center for Biosimilars, ``Latest Humira Price Increase
    Could Add $1 Billion to U.S. Healthcare System in 2018,'' January 5,
    2018.

    ``Pay-for-delay'' settlements hurt consumers who need to have lower
    out-of-pocket costs, especially when taking high-cost specialty
    medications like Humira, as well as taxpayers who effectively have to
    foot the bill of delayed competition. As such, CSRxP urges robust
    oversight and opposition to settlements that are deemed anticompetitive
    and prevent generics and biosimilars from entering the market in a
    ---------------------------------------------------------------------------
    timely manner.

    B. Targeting Exclusivity Protections to Truly Innovative Products

    Currently, pharmaceutical manufacturers can extend patent and market
    exclusivity protections by seeking approval for a ``new'' product that
    is essentially the same as the original product, such as extended
    release formulations or combination therapies that simply combine two
    existing drugs into one pill. These anti-competitive tactics--often
    referred to as ``evergreening'' or ``product hopping''--inhibit entry
    of generic drugs into the market. For example, a recent analysis
    suggested that anti-competitive drug reformulations potentially can
    result in up to $2 billion in losses per anti-competitive reformulation
    for consumers each year.\17\ Prohibiting these anti-competitive
    ``evergreening'' and ``product hopping'' tactics by brand drug makers
    will foster increased availability of generic drugs, resulting in lower
    costs for consumers and taxpayers. Therefore, CSRxP urges the
    appropriate federal agencies to closely monitor and increase scrutiny
    of these schemes and prosecute if they are found to be in violation of
    antitrust laws.
    ---------------------------------------------------------------------------
        \17\ Shadowen, Steve et al., ``Anticompetitive Product Changes in
    the Pharmaceutical Industry,'' Rutgers Law Journal, Vol. 41, No. 1-2,
    Fall/Winter 2009, page 78.
    ---------------------------------------------------------------------------

    IV. Conclusion

    In conclusion, CSRxP appreciates the leadership from the Committee on
    the critically important issue of prescription drug pricing and thanks
    the Committee for the opportunity to submit testimony for the record on
    this issue that impacts consumers and taxpayers every day. CSRxP looks
    forward to continued work with the Committee on developing and
    implementing market-based policies that promote competition,
    transparency, and value to make prescription drugs more affordable for
    all American patients and their families while at the same time
    maintaining access to the innovative treatments that can improve health
    outcomes and save lives.

                                     ______

                            Center for Fiscal Equity

                          14448 Parkvale Road, Suite 6

                           Rockville, Maryland 20853

                          fiscalequitycenter@yahoo.com

                        Statement of Michael G. Bindner
    Chairman Hatch and Ranking Member Wyden, thank you for the opportunity
    to submit these comments for the record to the Committee on Finance.

    As you may recall, we have in the past written urging a combination of
    catastrophic insurance, health savings accounts (Archer) and medical
    lines of credit, which is a bit more liquid version of a flexible
    spending account, with all accessed by one card with costs allocated
    based on account balances and income levels. Poor people would have
    minimum or even no copays, but would always have credit access. As
    income rises, so would copays and available balances, as well as
    catastrophic deductibles.

    This plan would offer little incentive for the poor to shop for cheaper
    drugs; however, wealthier patients could be made to feel the pain of
    drug prices a bit more, but only if they were denied comprehensive
    insurance. Good luck passing that; it may be what cost Senator McCain
    the White House in 2008. Additionally, the Archer accounts and lines of
    credit are designed to assure universal access to care and drugs with
    little pain. It only helps the well who can redirect funds to asset
    accumulation (thus causing asset inflation, speaking of 2008).

    Single Payer and negotiation by government payers, state or federal
    price controls or taxing away excess profits would all control prices,
    which are monopolistically high. Unless an economist is far out on the
    rightward fringe, there is no doubt about the equity of stopping
    monopoly prices. The only question is how.

    While some favor restricting patent rights, I would argue in favor of
    having every drug approval disclose all government-supported research
    used to develop the product, giving the sponsoring agency the right to
    both share in the profits and have a say in the pricing. This both
    keeps the research dollars flowing and limits cost.

    The last possibility is through our proposed Net Business Receipts Tax/
    Subtraction Value-Added Tax. It would replace corporate income taxes
    and proprietary and pass-through taxes and treat all business income
    the same. It would provide for the health insurance exclusion or fund
    single payer insurance. Companies who hire their own doctors and
    pharmacists and buy their own drugs would get a tax exclusion from
    single payer (third party insurance would be discouraged), and would
    negotiate with drug makers for lower prices, although this would leave
    small firms at a distinct disadvantage and would discourage such
    practices as franchising and 1099 employment. Still, on the whole, it
    would decrease cost while not discouraging innovation.

    Short of that, an NBRT subsidized Public Option would allow sicker,
    poorer and older people to enroll for lower rates, allowing some
    measure of exclusion to private insurers and therefore lower costs.
    Drug prices would also decrease if the Public Option is allowed to
    negotiate with drug companies. Of course, the profit motive will
    ultimately make the patient exclusion pool grow until private insurance
    would not be justified, leading again to Single Payer if the race to
    cut customers leads to no one left in private insurance who is actually
    sick.

    Thank you for the opportunity to address the committee. We are, of
    course, available for direct testimony or to answer questions by
    members and staff.

                                     ______

               National Community Pharmacists Association (NCPA)

                             100 Daingerfield Road

                           Alexandria, VA 22314-2888

                              (703) 683-8200 phone

                               (703) 683-3619 fax

    Chairman Hatch and Ranking Member Wyden, and Members of the Committee:

    Thank you for conducting this hearing on prescription drug
    affordability, innovation, and the President's ``Blueprint to Lower
    Drug Prices and Reduce Out-of-Pocket Costs.'' In this statement, NCPA
    will offer support and suggestions on a number of policy considerations
    outlined in the President's Blueprint. NCPA represents America's
    community pharmacists, including the owners of more than 22,000
    independent community pharmacies. Together they represent an $80
    billion health care marketplace and employ more than 250,000
    individuals on a full or part-time basis. Independent community
    pharmacies are typically located in traditionally underserved rural and
    urban communities, providing critical access to residents of these
    communities.

    Importantly, community pharmacists are health care providers on the
    front-lines who regularly talk to patients about their concerns with
    prescription drug costs and work diligently to address these concerns.
    NCPA addresses a number of these concerns below in the hopes that
    community pharmacists can add meaningful solutions for patients,
    especially those seniors in the Medicare Part D program.

    Changes to the application and usage of manufacturer rebates and
    pharmacy DIR

    NCPA recognizes that this administration, through the President's
    Budget or recent request for information pending at HHS, largely has
    focused on changes to the application and usage of manufacturer
    rebates. However, rebates are not the only concession that leads to
    inflated drug prices and higher out-of-pocket costs for seniors. In
    fact, while the application of rebates is an important aspect to the
    drug pricing conversation, the out-of-pocket costs conversation is
    incomplete without specific discussion regarding all direct and
    indirect remuneration (DIR), including all pharmacy price concessions
    in the Part D program and how PBMs leverage these fees to pad their
    pockets at the expense of patients, the government, and small
    businesses.

    DIR fees imposed on pharmacies participating in Medicare Part D
    networks by plan sponsors and their PBMs have exploded in recent
    years.\1\ The treatment of these pharmacy price concessions as DIR
    rather than as reductions in the ``negotiated price'' of a drug at the
    point of sale has had a crippling impact on patients, the government,
    and community pharmacies. The retroactive nature of these fees means
    beneficiaries face higher cost-sharing for drugs and are accelerated
    into the coverage gap or ``donut hole'' phase of their benefit.
    ---------------------------------------------------------------------------
        \1\ The HHS Office of Inspector General has noted that these
    catastrophic costs that are driven by retroactive pharmacy DIR fees
    have tripled in recent years--from $10 billion in 2010 to $33 billion
    in 2015.

    What's more, beneficiaries reach the catastrophic phase of the benefit,
    for which CMS incurs approximately eighty percent of the cost. Costs to
    the government have surged as liability for Part D costs is
    increasingly being shifted from Part D plan sponsors to CMS. Finally,
    all retroactive pharmacy DIR fees are taken back from community
    pharmacies months later rather than deducted from claims on a real-time
    basis. This reimbursement uncertainty makes it extremely difficult for
    ---------------------------------------------------------------------------
    community pharmacists to operate their small businesses.

    As this administration has discussed the possibility of prohibiting
    PBMs from using rebates in contracts with manufacturers, NCPA argues
    that the same policy should be applied to pharmacy price concessions.
    Therefore, NCPA requests that the administration or Congress eliminate
    pharmacy DIR in the Medicare Part D program.

    If this administration or Congress does not eliminate all DIR including
    pharmacy price concessions, the administration or Congress should
    prohibit all retroactive pharmacy DIR fees leveraged against
    pharmacies, as policymakers have considered this policy move several
    times over the past few years. Just this spring, CMS collected
    information on what it could mean if DIR, including pharmacy price
    concessions, were included in the negotiated price at point of sale.
    CMS has yet to do anything with this information, but it is clear that
    the need for change is sorely needed.

    Finally, this administration or Congress should seek to limit and
    control the way in which PBMs and plan sponsors impose arbitrary and
    inconsistent performance-based standards and incentive payment schemes
    on community pharmacies. While not all pharmacy DIR is performance
    based, the proliferation of pharmacy DIR is now intricately tied to
    performance-based standards. PBMs and plan sponsors have argued they
    should have the ability to create programs that are accounted for as
    DIR to reward pharmacies for achieving contractual, performance-based
    metrics. However, these retroactive fees are based on a payment
    methodology that withholds a certain amount with the opportunity for
    the pharmacy to either ``earn back'' or have the retroactive fees
    decreased based on achieving certain arbitrary quality measures.

    Therefore, NCPA requests that the administration or Congress define
    pharmacy quality within the Medicare Part D program and hold plans
    accountable for determining performance-based payments. Performance-
    based payments should be based on standardized, achievable, and proven
    criteria that measure pharmacy performance, as opposed to criteria that
    focus on measuring plan performance or criteria which pharmacies have
    little to no opportunity to influence.

    Fiduciary duty for Pharmacy Benefit Managers

    NCPA continues to urge policymakers to require PBMs to have a fiduciary
    duty to the entity for whom they manage pharmaceutical benefits, a move
    that would shed light on opaque PBM practices, including the PBM's
    incentive to charge the plan more than the pharmacy is reimbursed and
    keep the difference as profit. This would force PBMs to put patients'
    financial interests before their own and would eliminate the loophole
    of PBMs leveraging their clients' purchasing power.

    By way of background, PBMs serve as the ``middleman'' in all
    prescription drug transactions in the United States. They are able to
    leverage the number of beneficiaries in a particular plan in order to
    negotiate lucrative rebates from pharmaceutical manufacturers. They
    also formulate pharmacy provider networks that will supply or dispense
    these drugs to the plans' beneficiaries. What most consumers and plan
    sponsors alike do not know is that PBMs extract ``spread'' profits from
    both these activities.

    The amount that the PBM pays the pharmacy for dispensing the drug to
    the plan beneficiary is rarely the same amount that the PBM ``charges''
    the plan for the same drug. Typically, the PBM ``marks up'' the cost of
    the drug, charging the plan more than the pharmacy is reimbursed,
    keeping the difference as profit for the PBM. It is precisely these
    hidden spread amounts that are one of many opaque PBM practices that
    need to be disclosed. Fiduciary status for PBMs would force PBMs to put
    patients' financial interests before their own.

    Federal preemption of contracted pharmacy gag clause laws

    NCPA supports this administration's efforts to abolish gag clauses in
    contracts. The RFI calls for immediate action to prohibit ``gag
    clauses'' in Part D contracts. Under some contracts, pharmacists have
    been unable to inform patients of lower-cost alternatives due to
    overbroad confidentiality clauses and the pharmacist's inability to
    disclose the negotiated price to patients. NCPA supports the
    administration's successful efforts to abolish all pharmacy gag clauses
    to the extent such clauses were present in Medicare Part D contracts,
    including CMS' recent letters sent to plan sponsors that state gag
    clauses in contracts are unacceptable.

    However, NCPA remains concerned about the number and scope of other
    provisions in one-sided PBM contracts that pharmacists are forced to
    sign, including multiple provisions that in one way or the other
    prohibit the free flow of information.

    Those include overly broad confidentiality provisions, non-
    disparagement clauses, and requirements that the pharmacy charge
    insured patients what the PBM tells them to charge. NCPA urges
    policymakers to examine all contract provisions that prevent the
    pharmacist from discussing drug costs with patients.

    Conclusion

    In conclusion, prescription drug prices continue to grow at an alarming
    rate. There are many factors in the pharmaceutical supply chain and
    delivery system that may contribute to this growth, including pharmacy
    benefit manager ``middlemen.'' NCPA stands ready to work with the
    administration and Congress to implement policies that will lower drug
    prices at the pharmacy counter.

                                      [all]