Capitol Comments

Supreme Court Upholds Health Reform

By Jessica Franken, Director of Government Affairs & Dawnee Giammittorio, Associate Director of Government Affairs, INDA, Association of the Nonwoven Fabrics Industry | August 6, 2012

EPA proposes tougher soot standards; FDA issues unique device identifier plan; president authorizes device user fee measure.

In a landmark decision, the Supreme Court announced on June 28 it would uphold the Patient Protection and Affordable Care Act (PPACA), the 2010 healthcare overhaul championed by the White House and Congressional Democrats. While House Republicans held yet another symbolic vote to repeal the bill on July 11 and GOP lawmakers from both chambers have vowed to dismantle the law, if necessary, implementation of the PPACA continues its march forward.

Much of the controversy and resulting media attention surrounding the law has focused on provisions aimed at expanding coverage to 32 million uninsured people, specifically the “individual mandate” and the requirement that larger employers provide coverage, both of which go into effect in 2014. However, changes that have not been in the media spotlight, particularly some directed at cost containment and quality improvements, as well as an important “pay for” measure, are ones most likely to impact the nonwovens industry.

Beginning this year, hospitals will be penalized—through the withholding of Medicare reimbursements—for excess readmissions and hospital-acquired conditions (HACs). Medicare payments to hospitals will also be reduced for extra care related to “certain preventable infections and medical errors.” While initiatives aimed at reducing HACs and hospital readmissions could create new opportunities for nonwovens aimed at infection-control, a PPACA-mandated, value-based purchasing (VBP) scheme could significantly deplete the resources that hospitals and other providers have to spend on healthcare supplies, including nonwovens. Effective October 1, 2012, VBP will link Medicare payments to thousands of acute care hospitals based on their performance on government-established clinical processes of care and patient experience metrics. While ”pay-for-performance” measures may seem like a no-brainer, some studies have found that hospitals are not ready for the rigors of VBP and face big losses.

Another provision of importance to the nonwovens industry is one of the law’s many “pay-fors,” a 2.3% excise tax on the sale of certain medical devices set to take effect in 2013 that the industry says will cost billions of dollars each year. The provision does, however, exempt certain items, including eyeglasses, contact lenses, hearing aids and “any other medical device determined by the Secretary to be of a type that is generally purchased by the general public at retail for individual use.” However, the Internal Revenue Service (IRS) is still reviewing public input regarding its Feb. 7 proposed guidance on this so-called “retail exemption.”

Meanwhile, bills repealing the medical device tax have been introduced in both chambers of Congress, with the House on June 7 voting 270-146 to pass its version, The Protect Medical Innovation Act of 2012 (H.R. 436). The Senate has two similar repeal bills (S. 17 and S. 262) to consider; whether either will pass is unclear. Finance Committee Chairman Max Baucus (D-MT) has said he is reluctant to tinker with the healthcare reform law just as the benefits are starting to be appreciated, while Democratic Senators Amy Klobuchar (MN) and Al Franken (MN), whose state of Minnesota is home to many medical device manufacturers, both support repeal. Predicting passage is further complicated by the imperative to find a $20-billion offset to replace the tax revenue due to intensified focus on deficit reduction. INDA will continue to work with other device industry groups to support these repeal efforts in the coming months and will keep members posted on developments and opportunities to weigh-in.

So what does it all mean for our industry? This is a groundbreaking law that makes major changes to the health system as we know it. It appears PPACA could increase demand for our industry’s health related products by expanding medical care access to some 32 million more Americans. On the other hand, providers may be facing new resource constraints due to programs like VBP, which might reduce spending on these products. Add in questions about the law’s ability to survive legislative challenges and you’ve got a recipe for speculation no matter how expert you are on the topic. To learn more about healthcare reform, visit: www.kff.org.

EPA Proposes New Soot Standards

Faced with a court-imposed deadline, the Environmental Protection Agency (EPA) unveiled on June 14 its proposal to tighten pollution standards for fine particulate matter, commonly known as soot, that is released into the air by factories, power plants and automobile exhaust. The EPA proposed a new standard of 12-13 micrograms per cubic meter down from the current standard of 15 micrograms. 

The American Lung Association, environmental groups and 11 states that sued the agency to force the revision, applauded the announcement, saying it will save numerous lives and prevent tens of thousands of asthma attacks each year. As expected, the National Association of Manufacturers and other industry groups protested the proposed standard, arguing that complying with the new limits will be expensive for existing factories. 

As with many of these new EPA standards, the stricter particulate matter limits present opportunities and challenges for our members. Those who must bring their factories into compliance will face additional costs, while those who manufacture and market filtration devices will benefit from increased demand for their products. The EPA expects to issue its final rule by December 14. To read the proposed standards and additional summaries, visit: www.epa.gov/airquality/particlepollution/actions.html.

FDA Calls for Unique Device Plan

Five years after a Congressional directive to do so, the U.S. Food and Drug Administration (FDA) published a proposal on July 10 that would require most medical devices distributed in the U.S. to carry a unique device identifier (UDI) to allow for more effective tracking and recall of problem products.

The rule calls for manufacturers to mark their devices with a UDI—described as a numeric or alphanumeric code that includes a model type, serial number, batch number and expiration date. The rule also establishes a database that will allow the public to research devices and calls for a “risk-based, phased-in approach to implementation, focusing on the highest-risk medical devices first and exempting low-risk devices from some or all of the requirements,” the agency says. The FDA may also exempt over-the-counter devices sold at retail since they generally have UPC codes.

The agency will accept comments on the draft measure until November 7. To view the FDA’s UDI proposal, visit: www.ofr.gov/OFRUpload/OFRData/2012-16621_PI.pdf.

President Extends Device User Fee

President Obama signed on July 9 the Food and Drug Administration Safety and Innovation Act (S. 3187) extending through 2017 the user fees paid by medical device companies. Used for expediting the review process for medical device applications and for assuring the safety and effectiveness of devices, fees are expected to total $595 million over five years. In a rare display of bipartisanship, the bill passed with overwhelming majorities in both chambers, and the device industry and FDA both expressed satisfaction with the bill.

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