WASHINGTON - The job-creating immigrant investor visa program, known as the EB-5 Regional Center program, is set to expire in just one week if Congress does not move to reauthorize it.

Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) and Ranking Member Patrick Leahy (D-Vt.) are urging Congressional leaders to support a bipartisan, bicameral proposal that would provide much-needed reforms to the program and reauthorize it for four years.

"The EB-5 program is not working how it was intended to by Congress.  The EB-5 program has serious vulnerabilities, is loaded with fraud and abuse, and isn't nearly the job-creator it has been purported to be.  We need to be sure that the EB-5 Regional Center program is not only creating economic stimulus and jobs in areas that need it the most, but also not jeopardizing the nation's security or harming U.S. investors," Grassley said.  "The program needs an overhaul with the common sense reforms that we've put together in a bipartisan, bicameral way.  The status quo is unacceptable."

"The EB-5 Regional Center program has generated investment and created jobs in distressed communities, but the program is facing some pressing challenges. Reports of rampant fraud and abuse raise serious concerns and threaten the program's mission. The incentives Congress established to spur investment in high unemployment and rural communities are also routinely abused, undermining a core objective of the program," Leahy said. "The Regional Center should be reauthorized, but only if reformed.  There is now bipartisan consensus around these reforms, and we cannot squander this opportunity."

Since launching in 1993, this program has generated capital investment and created jobs across the country.  But the program has also experienced significant problems in recent years, underscoring the need for Congress to restore the program to one that transforms local economies in impoverished areas as well as rural states.

To improve the program and ensure its reauthorization, Grassley and Leahy on Friday released the text of a carefully-crafted compromise with House Judiciary Committee Chairman Bob Goodlatte (R-Va.) and Ranking Member John Conyers (D-Mich.), Congressman Darrell Issa (R-Calif.), and House Immigration Subcommittee Ranking Member Zoe Lofgren (D-Calif.). The proposal modifies legislation the lawmakers unveiled earlier this year to bolster the Department of Homeland Security's authorities to administer the program, and provide investors with greater protections and more information about their investments.

Additionally, the bipartisan proposal increases transparency and oversight and provides DHS the ability to proactively investigate fraud, both in the United States and abroad, using a dedicated fund paid for by certain program participants. It raises the amount of investment required and helps to restore the program to its original intent, by ensuring that much of the capital generated and jobs created occur in rural areas and areas with high unemployment.

The bipartisan compromise has the support of Invest in the USA (IIUSA), by far the largest association of regional centers and EB-5 stakeholders, as well as the Leadership Conference on Civil and Human Rights.

An outline of the bipartisan proposal can be found here.  Text of legislation can also be found here.

# # #

WASHINGTON - Sen. Chuck Grassley of Iowa and Sen. Maria Cantwell of Washington today introduced legislation to reform and extend the biodiesel tax credit.  The legislation is similar to the provision that passed out of the Finance Committee in July.

"This provision should be included in the tax extenders package under discussion," Grassley said.  "Converting to a production credit would improve the biodiesel incentive in many ways.  It would make the biodiesel incentive easier to administer.  Also, a credit for domestic production would ensure that we're incentivizing a domestic industry rather than subsidizing imported biofuels.  The goal is to meet the country's biodiesel needs and support domestic producers at the same time.  And it would save money over the current biodiesel tax incentive."

"Investing in America's clean energy economy is the smart thing to do for our environment and America's energy security," Cantwell said. "The biodiesel tax credit has been an extremely successful energy tax policy, allowing biodiesel to become America's first advanced biofuel. Since the credit was created in 2005, 8.2 billion gallons of biodiesel have replaced traditional diesel, the equivalent of removing nearly 16 million vehicles from our roadways. This bill gives businesses the certainty they need to invest in biodiesel, create jobs here in America, and continue the development of affordable, domestic alternatives to fossil fuels."

The senators' Biodiesel Tax Incentive Reform and Extension Act of 2015 would modify the biodiesel fuel blenders credit to a domestic production credit and extend the credit through 2018.

The change would offer numerous benefits, Grassley and Cantwell said.  The blenders credit can be difficult to administer, because the blending of the fuel can occur at many different stages of the fuel distribution.  This can make it difficult to ensure that only fuel that qualifies for the credit claims the incentive.  It has been susceptible to abuse because of this.

A credit for domestic production would ensure that the United States is incentivizing the domestic industry rather than subsidizing imported biofuels.  It's projected that imports from Argentina, Singapore, the European Union, South Korea and others could exceed 1.5 billion gallons over this year and next.   In many cases, foreign biodiesel is already heavily subsidized, so U.S. taxpayers should not be providing a subsidy to such imports.

Grassley and Cantwell said modifying the credit would have little to no impact on the consumer.  Much of the credit would continue to be passed on to the blender and ultimately, the consumer.  Additionally, the U.S. biodiesel industry is currently operating at only 60 percent of capacity.  The domestic biodiesel industry has the capacity and access to affordable feedstocks to meet the demand of U.S. consumers, the senators said.

The Biodiesel Tax Incentive Reform and Extension Act of 2015 would allow the nation to continue enjoying the significant benefits of biodiesel since Congress created the biodiesel tax incentive in 2005.  As a result of this incentive, the Renewable Fuel Standard, and consumer interest, biodiesel is providing significant benefits to the nation.  Domestic biodiesel production supports tens of thousands of jobs.  Replacing traditional diesel with biodiesel reduces emissions and creates cleaner air.  Homegrown biodiesel improves U.S. energy security by diversifying  transportation fuels and reducing dependence on foreign oil.  Biodiesel itself is a diverse fuel that can be produced from a wide array of resources such as recycled cooking oil, soybean and other plant oils, and animal fats.

The text of the Biodiesel Tax Incentive Reform and Extension Act of 2015 is available here.

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Senator Chuck Grassley's regional director based in Davenport, Penny Vacek, will be holding open office hours in Scott, Cedar, Clinton and Jackson counties on Monday, Dec. 14, and Thursday, Dec. 17.  The office hours provide an opportunity for Iowans to obtain casework assistance or to express views.

Vacek's schedule is as follows:

Monday, Dec. 14, 2015

2:30-3:30 p.m.
Scott County
Walcott City Hall
128 Lincoln St.
Walcott

 

Thursday, Dec. 17, 2015

8-9 a.m.
Cedar County
Cedar County Courthouse
Basement Meeting Room
400 Cedar St.
Tipton

 

10-11 a.m.
Clinton County
DeWitt City Hall
Council Chambers
510 9th St.
DeWitt

 

3-4 p.m.

Jackson County
Maquoketa City Hall
Council Chambers
201 East Pleasant St.
Maquoketa

 

Grassley's offices in Iowa regularly help constituents contact federal agencies to sort through problems with Social Security payments, military service matters, immigration cases and other issues.  His state offices are located in Cedar Rapids, Council Bluffs, Davenport, Des Moines, Sioux City and Waterloo.

Here is a comment from Grassley about his staff's upcoming office hours:

"Open office hours are designed to help more Iowans access the assistance that is available from the office of their United States senator.  I hope anyone with federal agency-related casework will take advantage of Penny's visits."

Should constituents have any questions, please contact Grassley's Davenport office at (563) 322-4331.

Prepared Floor Statement of Senator Chuck Grassley of Iowa

Federal Farm Policy and Reopening the Farm Bill

Thursday, December 3, 2015

Mr. President, I rise to speak about the 2014 farm bill and attempts to change it by members of this Congress.  The farm bill process was a long, hard and frustrating exercise.  Nobody got everything they wanted, but in the end we got a new bill for farmers across the country.

Our country needs good farm policy, which means an adequate, yet limited safety net for farmers.  Our farmers face real, uncontrollable risks every year.  The farm bill provides farmers with a number of programs that help mitigate those risks.

That is why I was very concerned when I learned the budget deal was cutting $3 billion from the federal crop insurance program.  That cut would have forced the Risk Management Agency at the Department of Agriculture to renegotiate the Standard Reinsurance Agreement next year and save $300 million per year.  These cuts were almost universally opposed by rural America.  Lenders, commodity groups, input suppliers, and many others opposed the cuts to the crop insurance program.

Beyond being bad policy, I opposed the crop insurance cuts, because like many of my colleagues on both the House and Senate Agriculture committees, I do not support reopening the 2014 Farm Bill.  I'm very glad the Highway Bill is going to reverse these cuts to the crop insurance program.

I also want to speak to the importance of not reopening the farm bill in the Omnibus.  Section 739 of the House Agriculture Appropriations Bill reauthorized commodity certificates.  For those who don't remember what commodity certificates are, they are a way around payment limits.  The language in the House bill specifically directs USDA to administer commodity certificates as they were in 2008 when they were not subject to any payment limits at all.

I want to be very clear so there is no misunderstanding by those in this body or the agriculture lobby - Section 739 of the House Ag Appropriations Bill brings back commodity certificates, which reopens the 2014 Farm Bill.

If the agriculture community wants to be taken seriously, we should heed our own advice and not reopen the Farm Bill by reauthorizing commodity certificates.  I'm opposing cuts to the crop insurance program today because that would reopen the farm bill.  I hope tomorrow I don't have to oppose commodity certificates in the Omnibus because a few people want to reinstate unlimited farm subsidies.

Mr. President, I yield the floor.

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WASHINGTON - Sen. Chuck Grassley of Iowa and Sen. Orrin Hatch of Utah are asking the Centers for Medicare and Medicaid Services (CMS) to account for how much federal money it has given to each state health care exchange, how much money it has identified as misused, what it can do to recover money for unallowable activities, and how much money for unallowable activities it has recovered.

"Given the continuing failure of SBMs (state-based marketplaces or exchanges) and the use of taxpayer funds for unallowable activities, CMS has an elevated responsibility to ensure that any future funding to SBMs is appropriate and that SBMs fulfill all grant terms and conditions," Grassley and Hatch wrote to CMS Acting Administrator Andrew Slavitt.  "With the ongoing risk that more SBMs will shut down or partially transition to the federal IT structure, and the continuing threat that SBMs will use taxpayer funds for unallowable activities, it is imperative to determine the full cost to the taxpayer of the failures thus far, and what funds the federal government has been able to recover."

Grassley and Hatch described the failure of Maryland's exchange as an example of a murky outcome for federal taxpayers.  As a result of a lawsuit, the Maryland exchange's prime contractor settled with the state for $45 million.  That amount appears to contain federal funds, since the federal government provided $179 million to create the Maryland exchange.  Grassley and Hatch said Slavitt wrote in a prior response that CMS is working with the Maryland SBM so that funds are returned to the Treasury.  The senators wrote, "but it is not clear what specifically the federal government is doing to recoup these federal monies."

The Grassley-Hatch letter to Slavitt is available here.  Their prior letter to Slavitt is available here.  Slavitt's response to the prior letter is available here.

Hatch is chairman and Grassley is former chairman and a senior member of the Finance Committee, with jurisdiction over federal health care programs.

 

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Floor Speech of Sen. Chuck Grassley on Obamacare and Reconciliation

Delivered Tuesday, Dec. 1, 2015

 

Several years ago, I gave a speech about Obamacare.  As we begin debate, I harken back to that speech.  Obamacare wasn't working then; it's not working now.  Webster's Dictionary defines the word "success" as the correct or desired result of an attempt. I want to discuss the definition of the word "success" as we consider repeal of Obamacare.

On the day the bill was signed into law, President Obama said the following:  QUOTE:  Today we are affirming that essential truth, a truth every generation is called to rediscover for itself, that we are not a nation that scales back its aspirations.  END OF QUOTE

Such grand words for where we are today.  Five years later, the success of the law that now bears his name, Obamacare, is defined in much more meager terms.

Think of all that we have been through to this point.  The fight over the bill and the extreme legislative means used to pass it through Congress.  The Supreme Court decision that effectively repealed half of the law's coverage.  Think of all the changes made to the law through regulation to make sure Obamacare launched. The postponing of the employer mandate.  The postponing of lifetime limits.  Think of the impact this law has had on our economy. People losing jobs.  People losing the health insurance they currently have, because if you like what you have you may NOT be able to keep it.

And let's talk about that for a moment. If you like what you have, you can keep it.  This was the promise the President made to the American people on at least thirty-six separate occasions.  It's a great soundbite.  It's easy to say; it rolls off the tongue.  It's also not true.  It was never true.  It was obviously not true when the law was written.  It was obviously not true when the first proposed regulation came out.  This is what I said on the Senate floor in September of 2010:

QUOTE: Only in the District of Columbia could you get away with telling the people if you like what you have you can keep it, and then pass regulations six months later that do just the opposite and figure that people are going to ignore it. END OF QUOTE

It's not that I have some magic crystal ball.  We all knew it.  The Administration certainly knew that the day would come when millions of people would receive cancellation notices.

Now, my constituents clearly know it. I heard from many Iowans who found out the hard way that the President made a bunch of pie-in-the-sky promises that he knew he couldn't keep.  Constituents like this one from Perry, Iowa, who wrote to me saying:

QUOTE: My husband and I are farmers. For nine years now we have bought our own policy. To keep the cost affordable our plan is a major medical plan with a very high deductible. We recently received our letter that our plan was going away.

Effective Jan 1, 2014, it will be updated to comply with the mandates of Obamacare.

To manage the risk of much higher premiums, our insurance company is asking us to cancel our current policy and sign on at a higher rate effective Dec 1, 2013 or we could go to the government exchange.

We did not get to keep our current policy. We did not get to keep our lower rates. I now have to pay for coverage that I do not want or will never use. We are not low income that might qualify for assistance.

We are the small business owner that is trying to live the American dream. I do not believe in large government that wants to run my life. END OF QUOTE

And from a constituent living in Mason City:

QUOTE: My wife and I are both 60 years old, and have been covered by an excellent Wellmark Blue Cross Blue Shield policy for several years.

It is not through my employer. We selected the plan because it had the features we wanted and needed...our choice. And because we are healthy, we have a preferred premium rate.

Yesterday, we got a call from our agent explaining that since our plan is not grandfathered, it will need to be replaced at the end of 2014.

The current plan has a $5,000 deductible and the premium is $511 per month. The best option going forward for us from Wellmark would cost $955 per month (a modest 87% increase), and have at $10,000 deductible!

And because we have been diligent and responsible in saving for our upcoming retirement, we do not qualify for any taxpayer-funded subsidies.  END OF QUOTE.

These are just two of the many letters, emails, and phone calls I've received from Iowans.

Several years ago, it was about losing the coverage you have.  And now the issue has turned to cost.  Millions of Americans face rising premiums.  The impact is real and undeniable.  Here's another from a constituent from Des Moines.

QUOTE: In 2013, I encountered some medical problems which caused me to retire early.

My spouse works as an adjunct instructor ... thus not qualifying for medical coverage.

In 2014, with 4 part-time jobs between us, we made $44,289 in Adjusted Gross Income.

Our Obamacare insurance cost $968 per month and after credits, we paid $478 per mo. or approximately 13% of our Adjusted Gross Income.

In 2015, our Adjusted Gross Income will be approximately the same, however our Obamacare insurance jumped to a premium of $1,028.82 and our cost to $590.12.

The insurance company touted that premiums went up less than 10%, but as you can see, my cost went up 23%!

The impact to Adjusted Gross Income went to 16%, a 23% increase.

I just received my 2016 premium estimate.

Our Adjusted Gross Income is likely to be the same.

Our gross premium is scheduled to rise 36% to nearly $1,400; our cost after the credit is jumping 63% and the impact to our Adjusted Gross Income is that 25% of our income will be spent on Health Insurance (a 56% increase!).  END OF QUOTE

Thousands of Iowans have contacted me asking what can be done, now that we clearly see that what the President sold the American people was a bag of Washington's best gift-wrapped hot air.   All the grandiose talk about the importance of this statute.  And what we ultimately have is an optional Medicaid expansion with a glorified high risk pool and a government portal that makes the DMV look efficient.

Finally, I would be remiss if I didn't mention the co-op disaster.  The first co-op to fail was Iowa's CoOportunity.   CoOportunity enrolled the second most beneficiaries of any co-op in America.  CoOportunity knew they were in trouble because they enrolled more than 100,000 people when they were planning for less than 20,000.  CoOportunity was in contact with CMS and so was the State of Iowa. CMS chose not to further fund CoOportunity and CoOportunity has since been liquidated.

American taxpayers have billions of dollars invested in these co-ops. The taxpayer only gets their money back when co-ops succeed.  CMS stewardship of this program has proven that CoOportunity was not an exception, but unfortunately the rule as more and more co-ops have failed.

Americans deserve better. They voted for better.  It is time to admit that Obamacare has not achieved the correct or desired result of an attempt.  It has not been a success by any measure.

Unless of course you lower your standard to the point that the mere act of keeping the doors open is a success. That simply has not changed.

How sad is that for all we have been through.  Maybe, just maybe, it is time to admit that massive restructuring has failed.  Partisanship has failed.  Perhaps it is time to sit down and consider common sense, bipartisan steps that we could take to lower cost and improve quality.

Perhaps we could enact alternative reforms aimed at solving America's biggest health-care problems.  Reforms like revising the tax code to help individuals who buy their own health insurance; allowing people to purchase health coverage across state lines and form risk pools in the individual market; expanding tax-free Health Savings Accounts; making health-care price and quality information more transparent; cracking down on frivolous medical-malpractice lawsuits; using high-risk pools to insure folks with preexisting conditions; giving states more freedom to improve Medicaid; and using provider competition and consumer choice to bring down costs in Medicare, and throughout the health care delivery system.

The American people need to know that this failed program is not the only answer and we are not scaling back our aspirations.  And with this vote this week, we once again demonstrate to the American people our willingness to not accept failure and aim for better.

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Sen. Chuck Grassley of Iowa is investigating the compressed natural gas station in Afghanistan that cost the U.S. taxpayers $43 million, as much as $42.5 million more than it should have, and the $800 million Pentagon task force that oversaw the construction.  The Special Inspector General for Afghanistan Reconstruction is releasing a letter to the Secretary of Defense regarding the security and housing expenditures of the task force, called the Task Force for Business and Stability Operations.  Please contact SIGAR for details.  Grassley made the following comment on the letter.

"I hope this inquiry is the beginning of much more insight into how this task force operated. So far, the Defense Department hasn't been forthcoming with task force documents.  The concerns raised in SIGAR's letter don't inspire confidence that the task force took care with spending.  For example, the assertion that task force employees had to have outside housing and security to set an example for private companies sounds like U.S. Grade A baloney.  I look forward to learning more about how the task force operated and what, if any, results it achieved in exchange for spending $800 million."

WASHINGTON - Sen. Chuck Grassley of Iowa is the lead Republican on a bipartisan investigative report released today that gives rare insight into how a company prices a landmark prescription drug.  In this case, the company anticipated it would face public outcry over a high price for a Hepatitis C drug but went forward anyway.

"This report sheds light on one example of the pricing decisions made by one company with a new prescription medicine that entered the market without competition in high demand," Grassley said.  "This might be an example that received the most attention in some time, but it won't be the last.  I look forward to discussions with my colleagues and the public on the policy questions in the report.  I encourage everyone to read the report for the level of detail into pricing strategy that we don't often see."

Grassley and Sen. Ron Wyden released the results of their 18 month investigation into the pricing and marketing of Gilead Sciences' Hepatitis C drug Sovaldi and its successor, Harvoni.  The investigation draws on internal documents from the company.  These include a chart linking  price points with levels of potential public outcry and an email from a company executive saying the company should "not fold to advocacy pressure" and should "hold our position whatever competitors do or whatever the headlines" on the price.

The drug went on the market for $1,000 per pill, or $84,000 for a single course of treatment, creating significant expense for Medicare, Medicaid and private insurance companies.  Iowa and many other states faced significant pressure on their Medicaid programs over the costs, struggling with wanting to give patients access to a landmark treatment and how much taxpayers can afford.

This is the second time in recent weeks that Grassley has weighed in significantly on high prescription drug costs.  Last month, he and Sen. John McCain pressed the secretary of the Department of Health and Human Services to use her full authority to allow the importation of prescription drugs from Canada.

The Sovaldi report, along with more information on the investigation, is available here.  Video of the senators' news conference unveiling the report is available here.

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Prepared Statement by Senator Chuck Grassley of Iowa

Chairman, Senate Judiciary Committee

Hearing on "Puerto Rico's Fiscal Problems:

Examining the Source and Exploring the Solution"

December 1, 2015

 

Good morning. The purpose of today's hearing is to learn more about the origin of Puerto Rico's fiscal problems, and what's needed to help restore fiscal balance and economic growth.  It's my hope that we'll have a valuable discussion based on facts, and informed by our witnesses' expertise.

Puerto Rico's debt crisis didn't happen overnight. It's been years in the making. Fundamentally, the starting point for any solution is to first identify the problem and understand its size and scope.  Unfortunately, confusion reigns as Puerto Rico has failed to provide audited financial statements for the past two years.

What we do know is that for many years as Puerto Rico's economy suffered, debt and spending increased to the point where the Island lost investor confidence. Puerto Rico has defaulted on certain debt obligations, lost access to the normal markets, and now faces a liquidity crisis.  The Governor and others have stated that the Island's current debt "is not payable."

Puerto Rico's economy has suffered for decades in part because of barriers to job creation and labor force participation. The federal minimum wage mandate, generous entitlement programs, bureaucratic red tape, and a bloated public sector have stifled business activity. This has a direct impact on Puerto Rico's residents, who are our fellow U.S. citizens. High unemployment rates have resulted in a declining population as Puerto Ricans have left the Island in search of jobs. A diminished population means lower tax revenues to fund government spending.

Despite these long-term economic challenges, for many years Puerto Rico maintained a balanced budget and high credit ratings on its debt. What, then, led to the fiscal crisis the Island faces today? While the economic challenges may be debatable, it's clear that since 2000, Puerto Rico's public debt has risen from 60 percent of GDP to now more than 100 percent. This is an indication of serious fiscal mismanagement.

Thanks to the highly attractive triple-tax exempt status of its bonds, it was easier for Puerto Rico to borrow and paper over deficits, rather than address financial shortcomings and economic realities in order to balance its budget.  The consequence of this decision is an accumulation of approximately $72 billion of debt, arising from roughly 17 different debt issuers.  This includes more than $18 billion in constitutionally protected general obligation debt.  And, also around $24 billion in debt issued by public corporations, like the Puerto Rico Electric Power Authority (PREPA).

Moreover, because of its triple-tax exempt status, a wide array of investors own Puerto Rican bonds. According to Bloomberg, Puerto Ricans alone hold $20 billion of the debt.  And nearly 60 percent of Puerto Rico's debt is held largely in the individual retirement accounts and 401(k)'s of regular folks throughout the U.S.  I'm told that approximately 16,000 Iowans are invested in funds that hold PREPA bonds. These folks aren't vultures. They're middle-class Americans who probably knew little about Puerto Rico's finances. They simply invested in one of many tax-exempt municipal bond fund's containing Puerto Rico's bonds.

Notwithstanding all of this, we're told that Puerto Rico's debt needs to be restructured in order to address its fiscal challenges.  Puerto Rico, though, lacks access to an orderly debt restructuring mechanism, like Chapter 9 of the bankruptcy code. Thus, Congress has been called upon to extend Chapter 9 to Puerto Rico's public corporations. Or to create a broad new bankruptcy regime, dubbed "Super Chapter 9," to restructure all debt, including the Island's constitutionally guaranteed general obligation bonds. According to a recent New York Times article, "advisers to the island's government have been urging the governor to default on the debt, saying that only a catastrophe would move Congress - especially Republicans - to help." I hope the Governor will tell us whether this is accurate. It would trouble me greatly if true.

This isn't the first time Congress has been asked to help address a situation like Puerto Rico now faces. In the past, we've provided help in a bipartisan way. During the 1990s, the District of Columbia faced its own fiscal crisis, as it was insolvent and unable to pay its bills. Congress worked with District and Clinton Administration officials to pass the District of Columbia Financial Responsibility and Management Assistance Act in 1995.  We'll hear more about the response to that crisis and others from our witnesses today.  I'll note that Congress considered extending Chapter 9 to the District of Columbia, but decided that there was "little practical significance or advantage to such a legislative gesture."  As the committee report to the bill stated, "the issues facing the District of Columbia . . . require political and structural, as well as financial remediation."

One of the reasons extending Chapter 9 to the District was rejected is because it's designed primarily to restructure and decrease municipal debt. The idea being that relief from creditors is what's needed in order to gain a fresh start. But Chapter 9 cannot bring about financial rehabilitation. It does not increase economic growth or alter the fundamental fiscal trajectory.  In short, Chapter 9 cannot address the root causes of fiscal problems, but instead pushes them off to future generations.

As for "Super Chapter 9," this is something that no State can do, and has been described as "unprecedented in the American context."  It would be a bad idea, with negative consequences, for Congress to permit Puerto Rico to walk away from its constitutional debt obligations.  Unlike other bonds, constitutional debt, whether issued by Puerto Rico or a State, has that government's full faith and credit commitment to repay the debt.

Let's not forget that Puerto Rico issued its bonds with the knowledge that Chapter 9 bankruptcy wasn't an option in the event of a default.  Is it fair to retroactively change the rules at the expense of these investors, if other options exist for addressing Puerto Rico's debt problems?  At the very least, this is an idea that should be at the end of the line, not the front.

The challenges Puerto Rico faces are great and require more than just short-term solutions that don't provide long-term relief. The debt is a symptom of a bigger problem.  Merely extending debt restructuring authority, absent tools to address the fundamental causes of the fiscal problem, is not a long-term solution that will help Puerto Rico.

Puerto Rico has struggled to make the difficult decisions to cut spending and balance its budget. If Congress is to act, then we must ensure that Puerto Rico has the tools to help itself out of this situation. Today's hearing can help us identify what may, or may not, need to be looked at for Puerto Rico to get its balance sheet back in order.

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WYDEN-GRASSLEY SOVALDI INVESTIGATION FINDS REVENUE-DRIVEN PRICING STRATEGY BEHIND $84,000 HEPATITIS DRUG

18-Month Investigation Reveals a Pricing and Marketing Strategy Designed to Maximize Revenue with Little Concern for Access or Affordability

 

Report Includes Landmark Release of Medicaid Data: In 2014, More than $1 Billion Spent by Medicaid Programs on Sovaldi Treated Less than 2.4 Percent of Enrolled Patients with Hepatitis C

 

Medicare Spent More on Gilead Hepatitis C Drugs in the First Half of 2015 than in All of 2014

WASHINGTON - Senate Finance Committee Ranking Member Ron Wyden, D-Ore., and senior committee member Chuck Grassley, R-Iowa, today released the results of an 18-month investigation into the pricing and marketing of Gilead Sciences' Hepatitis C drug Sovaldi and its second-wave successor, Harvoni. Drawing from 20,000 pages of internal company documents, dozens of interviews with health care experts, and a trove of data from Medicaid programs in 50 states and the District of Columbia, the investigation found that the company pursued a marketing strategy and final wholesale price of Sovaldi - $1,000 per pill, or $84,000 for a single course of treatment - that it believed would maximize revenue. Building on that price, Harvoni was later introduced at $94,500. Fostering broad, affordable access was not a key consideration in the process of setting the wholesale prices.

In the 18 months following Sovaldi's approval, Medicare spent nearly $8.2 billion before rebates on Sovaldi and Harvoni. Over that same span, Medicare's monthly spending on Hepatitis C treatments increased more than six-fold. In 2014 alone, Medicare and Medicaid combined to spend more than $5 billion on Sovaldi and Harvoni before rebates. That total is projected to climb in 2015. Gilead's recent financial statements show U.S. sales of Sovaldi and Harvoni, including through public programs and private payers, totaled $20.6 billion after rebates in the 21 months following Sovaldi's introduction.

Senators Wyden and Grassley will hold a press conference today at 11:15 a.m. in the Senate Radio/TV Gallery, S-325, to discuss the investigation. Details are below, including a streaming feed for media unable to attend in person. Further resources are also online and additional findings from the investigation are below.

 

"Gilead pursued a calculated scheme for pricing and marketing its Hepatitis C drug based on one primary goal, maximizing revenue, regardless of the human consequences. There was no concrete evidence in emails, meeting minutes or presentations that basic financial matters such as R&D costs or the multi-billion dollar acquisition of Pharmasset, the drug's first developer, factored into how Gilead set the price. Gilead knew these prices would put treatment out of the reach of millions and cause extraordinary problems for Medicare and Medicaid, but still the company went ahead. If Gilead's approach to pricing is the future of how blockbuster drugs are launched, it will cost billions and billions of dollars to treat just a fraction of patients," Senator Wyden said. "America needs cures for cancer, Alzheimer's, diabetes and HIV. If those cures are unaffordable and out of reach to millions who need them, Congress will not have met its responsibilities to the American people. I reject the idea that America has to choose between soaring, out-of-reach drug prices and one-size-fits-all government policies. Solving this challenge will take fresh, bipartisan thinking and political independence to bring people together."

"The Finance Committee has tremendous responsibility in overseeing the federal programs paying for prescription drug coverage," Senator Grassley said.  "With that responsibility, the committee should know how the costs to the public programs and private insurance companies of a single innovative drug entering the market without competition can have major effects on which patients get the new drug and when.  This report sheds light on one example of the pricing decisions made by one company with a new prescription medicine that entered the market without competition in high demand.  This might be an example that received the most attention in some time, but it won't be the last.  I look forward to discussions with my colleagues and the public on the policy questions in the report.  I encourage everyone to read the report for the level of detail into pricing strategy that we don't often see."

Additional major findings from the investigation include :

  • Gilead justified Sovaldi's high price point based on price-per-cure: Documents acquired during the course of investigation illustrate that Gilead was aware it was in a position to create clear savings for payers, but chose to pursue a "regimen neutral" price justified by "cost-per-cure" calculations that resulted in greater revenue per treatment than previous direct acting anti-virals [see page 42]. Given the increased clinical efficacy of Sovaldi, Gilead believed that it was more than justified in using the cost-per-cure pricing model [37, 46].
  • Gilead set a high price for Sovaldi with an eye toward ensuring a future high price for Harvoni: The documentation reviewed shows that Gilead considered a number of factors in determining a price point for Sovaldi, including costs for the existing standard of care for Hepatitis C treatment and setting a high baseline for the next wave of drugs, such as Harvoni [32-58]. In documents obtained during the course of investigation, Gilead officials noted the "value capture opportunity is in Wave 1," and "Wave 2 access will be enhanced with a high Wave 1 price." It went on to say that "[a]t any price, access for Wave 2 improves as the price for Wave 1 is increased, suggesting that Wave 1 will set a price benchmark against which Wave 2 will ultimately be evaluated." By elevating the price for the new standard of care set by Sovaldi, Gilead intended to raise the price floor for all future Hepatitis C treatments, including its follow-on drugs and those of its competitors [44].
  • Gilead underestimated the degree of access restrictions that it expected would result from its pricing decision: Gilead set a price as high as it thought the market would bear before significant access restrictions would be imposed [30]. Gilead's analyses were ultimately incorrect on this point as many payers adopted substantial access restrictions at the final price of $84,000 [81-88, 96-98].
  • Despite significant access restrictions, Gilead refused to significantly lower the net price: When confronted with the widespread initiation of access restrictions [99-106], Gilead refused to offer substantial discounts and did not significantly modify its contracting strategy to improve patient access. For example, Gilead offered Medicaid programs supplemental rebates of up to 10 percent; however, its offer came with the precondition that states had to drop some or all of their access restrictions [106]. For states already facing a steep financial burden, accepting that precondition in most cases would have increased the budgetary impact rather than easing it [107]. Only five state Medicaid programs reached agreements with Gilead to receive supplemental rebates in 2014 [138].
  • The burdens on Medicare, Medicaid, and the Bureau of Prisons were significant: The price of Sovaldi constituted a large burden?notably among state Medicaid programs, Medicare, and the BOP?and triggered access restrictions across public and private payers, thus limiting the number of Hepatitis C-infected patients who could access the new treatment options [81-88, 96-98]. For example, state Medicaid programs nationwide spent $1.3 billion before rebates on the drug in 2014. Even with that expenditure, less than 2.4 percent of the roughly 700,000 Medicaid enrollees with Hepatitis C were treated with Sovaldi [82-87]
  • Competition entered the market, prices responded, but there are still significant concerns: Three days following Viekira Pak's approval on December 19, 2014, Express Scripts Holding Co., the nation's largest pharmacy benefit manager, announced that it would make Viekira Pak its preferred treatment for Hepatitis C genotype 1 and would no longer cover Sovaldi and Harvoni for these patients [112]. Gilead responded in January and February 2015 by entering into discounting agreements for Harvoni and Sovaldi with CVS, Anthem, Humana, Aetna, and UnitedHealth Group. Cigna struck agreements with Gilead for Harvoni only [113]. Even as competition lowered prices for therapies, this report documents that concerns remain, particularly in the public payer community, about high costs for treating millions of people in the U.S. infected with Hepatitis C, as well as the budgetary effects of a future single source innovator that might not face competition as quickly [114-122].

The report in full is available here.

An executive summary is available here.

A timeline of events pertaining to Gilead, Sovaldi and Harvoni is available here.

A glossary of terms pertaining to the investigation is available here.

Letters from state Medicaid programs are available here.

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