[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                     
          
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                          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 
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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

                      [email protected]

                    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 
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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.

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