End of year spending package

With the December 21 deadline looming to fund remaining areas of government for FY19, congressional Democratic leaders traveled to the White House on Tuesday to discuss the parameters of an end of year spending package. In a heated public meeting, the President and Leaders Schumer (D-NY) and Pelosi (D-CA) argued over the President’s request for $5 billion to build a border wall, with Trump claiming he would be “proud” to (partially) shut down the government if the request goes unfulfilled. Congressional leaders are now weighing options to avert or minimize the shutdown threat, including potentially separating the FY19 DHS bill from the other remaining measures, including Transportation-Housing and Urban Development and Commerce-Science-Justice.

Farm bill

Elsewhere, the Senate voted 87-13 on Tuesday to adopt the $867 billion farm bill conference report. The House followed suit Wednesday, 369-47, sending the bill to the President for his signature. Thursday, the Senate voted on a resolution to withdraw US support from Saudi Arabia’s efforts in Yemen’s civil war. Support for the measure grew after journalist Jamal Khashoggi’s murder, but it is unlikely to come to the House floor and the Administration opposes the measure and has threatened a veto.

Leadership changes

Senator Maria Cantwell (D-WA) confirmed this week that she will assume the top Democratic seat on the Senate Commerce, Science, and Transportation Committee, succeeding outgoing Ranking Member Bill Nelson (D-FL). Under incoming Chairman Roger Wicker (R-MS), the Committee is expected to focus at the outset on developing a federal consumer privacy framework, building on a series of hearings this year during which lawmakers heard from the private sector, consumer advocates, and those involved in developing the EU’s GDPR and the California Consumer Privacy Act (CCPA). For more on committee leadership changes and agendas for the 116th Congress, click here.

Virtual currency

Reps. Darren Soto (D-FL) and Ted Budd (R-NC) introduced legislation this week to promote US competitiveness in the global virtual currency marketplace. The bill defines virtual currency as “a digital representation of value that does not have legal tender status and that functions as a medium of exchange, a unit of account, or a store of value” and directs the Commodity Futures Trading Commission (CFTC) to produce a report on the state of virtual markets and ways to promote American competitiveness. Soto, Budd, and Rep. Bonnie Watson Coleman (D-NJ) also introduced a consumer protection-focused measure that orders a CFTC report on promoting fair and transparent virtual currency markets by examining the potential for price manipulation. Both bills are representative of the increasing importance of and congressional interest in both promoting and regulating financial technologies.

Read more in our Emerging Technologies Washington Update.

This Week: Congress averts government shutdown by passing two-week extension for Continuing Resolution, pushing the funding issues to Dec. 21.

House

Bipartisan, Bicameral Legislators Unveil FDA-Inspired Bill Regulating Diagnostic Tests

On Dec. 6, bipartisan House and Senate members released draft legislation for the Food and Drug Administration (FDA) to regulate in vitro clinical tests, including test kits and laboratory-developed tests (LDTs). The draft legislation resembles a legislative proposal put forward by the FDA in August.

The bill establishes a precertification program for lower-risk tests, where the FDA could establish standard validity requirements for non-novel, lower-risk tests. Reps. Larry Bucshon (R-IN) and Diana DeGette (D-CO) and Sens. Michael Bennet (D-CO) and Orrin Hatch (R-UT) introduced the bill, prioritizing the legislation in the 116th Congress.

Senate

Grassley, Wyden Introduce “The Right Rebate Act”

On Dec. 4, the incoming Senate Finance Committee chair Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR) introduced “The Right Rebate Act of 2018,” a bill to recoup Medicaid rebates from drug companies that misclassify drugs. Grassley and Wyden’s new bill would give HHS more power to recoup the full amount lost if companies misclassify their products in the future. It also would give HHS the ability to directly modify a drug’s classification, which HHS cannot currently do. The legislation is based on recent events related to the misclassification of a popular anti-allergy medicine as a generic instead of a brand-name product. That incorrect classification allowed the manufacturer to pay smaller rebates to states and government programs.

The bill also would let the government fine companies up to twice the amount in rebates they avoid by misclassifying brand drugs as generics, allow the Centers for Medicare and Medicaid Services (CMS) to suspend Medicaid coverage of drugs that companies refuse to reclassify and give the CMS power to force classification changes.

Read more about healthcare policy on the McGuireWoods Consulting website.

Wednesday, the President, Vice President, former Presidents and Vice Presidents, members of Congress, and other US and foreign dignitaries attended a state funeral honoring the late President George H.W. Bush at the National Cathedral in Washington. The federal government and the stock market also closed to mark the national day of mourning.

As the nation paused this week to remember President Bush, Congress took steps to extend the December 7 deadline to address the remaining four areas of FY19 appropriations, including Transportation-Housing and Urban Development (THUD) and Commerce-Science-Justice (CJS). Earlier this week, with support from the President and Senate leaders, House appropriators rolled out a bill to extend funding through December 21. Congress passed the measure earlier today, which heads to the President for his signature before current authorities expire tomorrow.

In the meantime, the Senate voted on Wednesday to end debate on Bernard McNamee’s nomination to be a member of the Federal Energy Regulatory Commission (FERC). The upper chamber confirmed McNamee early Thursday afternoon. Lawmakers also voted Thursday on Kathleen Kraninger’s nomination to be director of the Consumer Financial Protection Bureau (CFPB).

Incoming congressional committee leaders are making key staff appointments for the 116th Congress. John Keast, a former top aide to incoming Senate Commerce Committee Chairman Roger Wicker (R-MS), will return to Capitol Hill to serve as the Committee’s Staff Director. On Thursday, incoming House Transportation and Infrastructure Committee Ranking Member Sam Graves (R-MO) announced his Chief of Staff Paul Sass will serve as Republican Staff Director.

The White House hosted a number of senior executives from leading technology companies to discuss U.S. leadership within emerging technology sectors such as artificial intelligence (AI) and 5G. White House Deputy Chief of Staff Chris Liddell, Deputy U.S. Chief Technology Officer Michael Kratsios, and presidential advisors Jared Kushner and Ivanka Trump will represent the Administration during the discussion alongside White House Economic Adviser Larry Kudlow and U.S. Trade Representative Robert Lighthizer. Google CEO Sundar Pichai, Microsoft CEO Satya Nadella, and IBM CEO Ginni Rometty are among the industry leaders scheduled to attend Thursday’s meeting.

This Week: Congress focuses on organizing for the next Congress and the continuing resolution; previews of drug pricing legislation for the next Congress; CMS issues controversial guidance concerning how states can use subsidies.

House

Incoming House chairmen Ask Trump Officials for Documentation on Plan for Bypassing Key Requirements of the ACA
Reps. Pallone (D-NJ) and Richard Neal (D-MA), incoming chairmen of the House Energy and Commerce and House Ways and Means Committee, respectively, have asked Trump officials to provide documents and answers to questions about a plan, for which additional guidance was released on Nov. 30, to give states more options to bypass key requirements of the Affordable Care Act. States would be permitted to use subsidies for plans other than those that meet ACA requirements.

Senate

Senators Ask CMS to Move on Direct-to-Consumer Advertising by End of Year
On Nov. 16, incoming Senate Finance Committee Chairman Charles Grassley (R-IA) and Senate Democratic Whip Sen. Dick Durbin (D-IL) asked the Trump administration to finalize a proposal requiring drug manufacturers to disclose list prices in direct-to-consumer advertising, by the end of the year. The senators also called on the Department of Health & Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) to adopt additional drug-price disclosure measures.

Sanders, Khanna Release Drug-Pricing Bill Blending Republican and Democratic Ideas
On Nov. 20, Sen. Bernard Sanders (I-VT) and Rep. Ro Khanna (D-CA) unveiled a prescription drug-pricing bill that mixes Republican and Democratic proposals. The proposal expands the Trump administration’s international reference pricing concept to span the entire U.S. drug market and includes a Democratic proposal to give the government power to invalidate brand-drug manufacturers’ exclusivity if their drug prices are deemed excessively high. Sanders and Khanna plan to introduce the bill in the next session of Congress.

Sen. Merkley Proposes Bill to Sell Drugs at Reference Price
On Nov 29, Sen. Jeff Merkley (D-OR) proposed a bill to force prescription drug manufacturers to set prices at or below an international reference price based on 11 other countries, or get kicked out of Medicare, Medicaid and Affordable Care Act exchanges. The Department of Health & Human Services’s (HHS) secretary would determine reference prices for both brand and generic drugs.

 

Read more about healthcare policy on the McGuireWoods Consulting website.

This year’s midterm gubernatorial elections proved successful for Democrats, gaining seven seats that Republicans had held. This change shifts the margin from 33 Republican, 16 Democratic and 1 Independent governors to 26 Republican and 23 Democratic governors (pending official call in Georgia). Republicans appear to have secured an important hold in the state of Florida, where Republican Ron DeSantis holds a narrow lead over Democrat Andrew Gillum. This was one of the nation’s most watched races. Additionally, while state ballot initiatives ran the gamut, several states had ballot initiatives on a contentious state healthcare issue – Medicaid expansion. Four traditionally Republican states considered ballot initiatives on Medicaid expansion, and three approved these initiatives. Additionally, Maine elected a Democratic governor who has promised to implement a previously approved ballot initiative on Medicaid.

Paul Reagan on House Democrats

House Democrats can be expected to devote their initial weeks in power to campaign finance reform and other good government measures that featured prominently in their campaigns. This approach is similar to their playbook in 2007, when they last retook the House, and has the advantage of providing some early victories on legislation that has little fiscal or regulatory impact. Over the longer term, House Democrats can be expected to prioritize healthcare and infrastructure, as well as gun safety measures and legislation offering a legal path forward for Dreamers, the children of undocumented immigrants brought into the country unlawfully at a very young age.

The overarching challenge for House Democrats is to temper the high expectations of their base with restored, appropriate executive branch oversight and legislation that advances their broad agenda.

Stephanie Kennan on New Healthcare Leadership

In the House, Rep. Richard Neal (D-MA) has a long history of involvement in Medicare reimbursement issues, and helped craft the Affordable Care Act (ACA).  He does not oppose Medicare for all. However, he probably would prefer to spend time on stabilizing the individual market.  Rep. Frank Pallone (D-NJ) will chair the House Energy and Commerce Committee. He has already expressed interest in reviewing drug prices, as well as looking at Medicaid to provide more opioid treatment options. In the Senate, Sen. Chuck Grassley (R-IA) may take over the Finance Committee, which he chaired over 10 years ago. He is likely to focus on oversight of the healthcare programs.

Issues the 116th Congress are likely to take up include drug prices and reform to what is known as Stark law – self referral laws that have become difficult to interpret and are preventing alternative payment and delivery systems from flourishing. Congress may have its hand forced to address ACA-related issues because of several court cases that would require Congress to act depending on how they are settled. One case in particular involves the individual mandate, and those who brought the case argue that if the mandate is invalid then so are consumer protections in the law because of its interconnectedness. Look for Congress to consider slowing the rate of growth in Medicare and Medicaid, perhaps using the budget process; however, the House will serve as a block on any sweeping Medicare or Medicaid reforms.

Ryan Bernstein on Energy and Agriculture

Energy and agriculture will have a couple of overlapping major issues in 2019.  The largest will be trade followed by regulatory oversight.  Energy policy in the Senate will depend on who is going to be the ranking Democrat member of the Energy and Natural Resources Committee.  If Sen. Maria Cantwell (D-WA) moves to Commerce, Sen. Joe Manchin (D-WV) may take the position. If that is the case, we can expect more fossil fuel legislation and hearings about grid reliability. Rep. Frank Pallone (D-NJ) will lead the House Energy and Commerce Committee. It is expected he will spend time trying to promote clean energy and holding oversight hearings on the administration’s attempt to undo Obama-era rules such as the Waters of the U.S. rule and the Methane and Waste Prevention rule. The Farm Bill will be priority number one for Sen. Roberts (R-KS) and Rep. Collin Peterson (D-MN) if it is not completed during the lame duck session.

Michael Drobac on Technology and the Internet

With a few races still too close to call, Republicans expanded their majority in the Senate, while Democrats picked up enough seats to take control of the House. With a divided Congress, compromise will be key to any successful agenda. While there is certain to be continued partisan bickering, Democrats and Republicans alike believe there are opportunities to reach consensus in several areas which might result in legislation in the 116th Congress. Technology presents just such an opportunity.

Despite the political rancor that comes with a divided Congress, there are important and bipartisan issues such as consumer data security and privacy reforms, federal infrastructure programs, workforce realignment and immigration reforms that could receive bipartisan agreement. The internet and technology developments in the “sharing economy” and the “internet of things” movement have fundamentally changed the manner in which consumers have access to goods, services and content leading to necessary changes in law to keep pace.

With new leadership in the Congress and specifically within key committees of jurisdiction, we expect progress on a number of these issues. Most notably, industries reeling from the enactment of the California Consumer Privacy Act (CCPA), effective January 2020, and the current European Union’s General Data Protection Regulation (GDPR), are seeking bipartisan efforts to provide certainty on data security and privacy laws in order to avoid a patchwork of state laws and inconsistent foreign standards. Lawmakers and regulators alike recognize the need for action and believe legislation can be supported that does not overreach nor politicize the issue.

Finally, lawmakers, regulators and the Trump Administration have signaled a willingness to consider whether big technology and internet companies should be regulated and receive greater antitrust scrutiny with a focus on where there is direct harm to consumers that can be identified and quantified.

The new leadership on key House and Senate committees such as both Judiciary committees and Senate Commerce, Science, and Transportation will influence policymaking in technology, telecommunications, innovation, and other key areas.

Rob Wasinger on the Trump Administration

It is likely that the deregulatory framework established in the first two years of the Trump presidency will accelerate. The Office of Information and Regulatory Affairs set a goal of two deregulatory actions for every single regulatory action; and the current ratio is now twelve deregulatory actions for every regulatory action. Given the logjam in Congress that pre-dated the election, the majority of the President’s agenda will likely continue to be accomplished through the administrative process and unilateral actions. Also, with an expanded Senate majority and the retirements of Senators Bob Corker (R-TN) and Jeff Flake (R-AZ), we should expect a more aggressive agenda to confirm judges and appointees in less time. With a Senate more in tune with the President, the influence of Sens. Susan Collins (R-ME) and Lisa Murkowski (R-AK) on the overall process will likely diminish. The legislative agenda coming out of the White House will likely be one that focuses on infrastructure, which will present interesting opportunities for bipartisanship.

The House and Senate both returned to Washington on Tuesday to begin a post-election, lame duck session. In the lower chamber, House members considered a number of bills under suspension as well as a measure to remove the grey wolf from the Endangered Species list. Meanwhile, the Senate took up Michelle Bowman’s nomination to sit on the Federal Reserve Board of Governors and a Coast Guard reauthorization bill that has already passed the House. On Monday, Senate Commerce Committee Chairman John Thune (R-SD) and Senate Environment and Public Works Committee Ranking Member Tom Carper (D-DE) announced an agreement on a reauthorization bill through FY19, teeing up a cloture vote of 92-5 on Tuesday and final vote of 94-6 to pass the bill on Wednesday. The chamber will vote to confirm Bowman Thursday afternoon.

On Wednesday, both House and Senate Republicans and Senate Democrats held leadership elections. As expected, Majority Leader Mitch McConnell (R-KY) was re-elected to represent the Conference as Leader and Senator John Thune was elected to replace term-limited Senator John Cornyn (R-TX) as Majority Whip. Senator Joni Ernst (R-IA) beat Senator Deb Fischer (R-NE) in the only contested leadership race to serve as Conference Vice Chair. Additionally, Senators John Barrasso (R-WY), Roy Blunt (R-MO), and Todd Young (R-IN) were elected to join Senate Republican leadership ranks. On the House side, Leader Kevin McCarthy (R-CA) was elected House minority leader, beating Rep. Jim Jordan (R-OH) in a 159-43 vote, and Rep. Steve Scalise (R-LA) was elected Minority Whip. Reps. Liz Cheney (R-WY), Tom Emmer (R-MN), Gary Palmer (R-AL), Mark Walker (R-NC), and Jason Smith (R-MO) will also join the House Republican leadership team.

Democratic Senate leadership remained the same, with Minority Leader Chuck Schumer (D-NY) re-elected Leader. In the lower chamber, House Democrats held their first caucus meeting since the midterms, but leadership elections are not expected until after the Thanksgiving recess.

In a Nov. 9 Law360 article, McGuireWoods Consulting senior advisor, Frank Donatelli, reviewed the 2018 midterm elections with ten snap observations.

TEN: The turnout for the 2018 midterms was the largest in history – approaching 113 million voters.

NINE: Republican campaigns focused on immigration, and base Republican voters were energized by the Brett Kavanaugh U.S. Supreme Court hearings. However, Republicans did not do well in southwestern states, and the strong economy was not emphasized.

“Trump is comfortable talking about issues that motivate his base, and that won him an upset victory in 2016,” said Donatelli. “However, he has yet to construct a broader message that might win him support of new voters to fortify his electoral coalition.”

EIGHT: The congressional issue agenda will be altered with a Democratic House majority, including oversight investigations and scrutiny for the president’s revised trade treaty with Mexico and Canada. Progress on immigration and criminal justice reform may be possible – both parties now have a stake in seeing legislative results.

SEVEN: Republicans gained at least three Senate seats, making it easier to confirm Trump appointees.

SIX: Republicans control 62 of the 99 state legislative chambers, giving them a strong voice in redistricting, and Democrats won governorships in key states such as Pennsylvania, Michigan and Wisconsin – all states won by the president in 2016.

Donatelli noted, “Not only do those wins give Democrats more leverage in the next census and redistricting, but they also enhance Democratic chances to win those states’ electoral votes in 2020. Governors matter in many ways.”

FIVE: Progressive stars came up short.

“The results support the argument of Democratic centrists that their party needs to attract more independents and moderate voters to win larger states,” Donatelli said, and added a prediction – “Progressives will resist that conclusion.”

FOUR: Important voter groups such as college-educated women and suburban voters came out for Democrats in key swing districts – helped by Republican efforts to repeal the Affordable Care Act.

THREE: Republicans won governorships in Maryland, Massachusetts, New Hampshire and Vermont – all reliably blue and purple states. It is still possible to decouple a state campaign from national issues and partisan national interest groups, Donatelli added.

TWO: Spending on political advertising this election cycle is close to $4.7 billion.

ONE: Democrats continue to make inroads in the Southwest – winning in New Mexico, taking the Senate and governorship in Nevada, and Beto O’Rourke came within three points of winning the Senate in Texas. Democrats also made major gains at the state and local level. In the past, the business-friendly policies of Republicans attracted urban votes, but the GOP is now changing from “a suburban party to one dominated by rural voters and cultural matters,” he said.

Donatelli added, “For those of you who cannot get enough of politics, the next presidential election begins — RIGHT NOW.”

When Congress reconvenes in January, Democrats will be in control of the House for the first time in eight years. Lawmakers will continue to discuss privacy and cybersecurity issues, including whether there should be a federal standard for how companies should be allowed to use and safeguard consumer data and how to stop cyberattacks from foreign entities.

In a Nov. 7 article from Law360, McGuireWoods Consulting senior advisor, Michael Drobac, noted that these issues may receive more attention in a split Congress.

“When there’s a divided Congress that’s unlikely to be able to move forward with controversial issues such as middle-class tax cuts or reforming health care, then it becomes more likely that lawmakers will seek to address and bring to the fore issues like privacy that have been percolating and have bipartisan agreement,” said Drobac.

Republican and Democrat lawmakers have proposed standards around data security, breach notifications and privacy in the past decades. Leadership of the Commerce, Judiciary and Intelligence committees will determine the priority of these issues.

Rep. Frank Pallone (D-NJ) is expected to take over the House Commerce Committee and “has been incredibly eager to do research and to get information from companies about what privacy practices and safeguards have been put in place for consumers,” Drobac said.

He added that Sen. Roger Wicker (R-MS), who will likely become chairman of the Senate Commerce Committee, has shown an interest in making tweaks to the privacy landscape so companies are not dealing with a patchwork of privacy laws. The House Judiciary Committee may work to craft meaningful notice and disclosure regulations that make sense for members of the digital ecosystem under the expected leadership of Rep. Jerrold Nadler (D-NY).

Pallone, Nadler and Wicker “have shown an affinity and interest in doing a deep dive into what has taken place with the tech industry and how that compares with consumers’ expectations, and what needs to be done to address different laws that have been imposed and have been enacted in other states and countries, and they are likely to take leadership on these issues,” Drobac said.

Other influencing factors include former tech executive Sen. Maria Cantwell (D-WA), who could lead the Commerce Committee if current ranking member Bill Nelson loses his re-election race in Florida, and Rep. Adam Schiff (D-CA), who is expected to take over the House Intelligence Committee and reopen inquiries into possible Russian interference in the 2016 U.S. presidential election.

The 2018 midterm elections were significant due to the volume of statewide races across the country with potential policy and political impact.  As anticipated, there were significant victories for the Democratic candidates for Governor.  Democrats flipped seven governor seats from Republican control, bringing the total up to 23 Democrat and 26 Republican governors.  This is a big win for Democrats, especially considering no single party has netted more than 6 governorships since 1994.  Note: These numbers are based on projections of a Republican win in Alaska and no official call yet in Georgia.

At the Attorney General level, Senator Aaron Ford flipped the Nevada Attorney General office from Republican to Democrat. There also may be potential flips for the Democrats in Colorado and Michigan, but those races have not yet been called.  Other notable results include Tish James, who will become the first African American elected statewide in New York, Keith Ellison, the first Muslim elected to Congress, who will also be the first African American elected to the position in Minnesota, and William Tong, who will be the first Asian American Attorney General in Connecticut.  Once all the races are called, the Democrats are poised to take over the majority of the Attorney General seats across the country.

On the legislative level, Democrats made some inroads picking up new trifectas in Colorado, Illinois, Maine, New Mexico and New York.  Trifectas, which are valuable heading into redistricting after the next Census, signify that one party has control of both legislative chambers and the Governor’s mansion.  There are now 12 Democratic trifectas, up from seven, heading into next year.  Despite these gains for Democrats, Republicans still control a majority of state legislative chambers. Republicans, who currently control 67 chambers, lost control of only 5 chambers in this election.  In 2019, they will control 62 out of a possible 99 chambers.

Visit McGuireWoods Consulting’s website for midterm election results from the gubernatorial and attorneys general races across the country.

With several races still too close to call, Republicans maintained and expanded their majority in the Senate, while Democrats picked up enough seats to take control of the House. Once in the majority, House Democrats can be expected to exercise their oversight, and if necessary, subpoena authority to compel responses from the Administration to inquiries from the minority on a host of controversial topics that were not answered due to the process that only committee chairs could compel those responses. Despite the increased political rancor that comes with a divided Congress, there are important and bipartisan issues such as consumer data security and privacy reforms, federal infrastructure programs, and immigration reforms that could receive bipartisan agreement. There will also be new leadership on key committees like Senate Commerce, Science, and Transportation that will influence policymaking in technology, telecommunications, innovation, and other key areas.

Read the full update for an overview of expected changes in leadership on congressional committees that shape policies that determine how businesses can integrate emerging technologies to be competitive in today’s economy. We also explore the potential agenda for the 116th Congress as it may impact companies with a stake in issues ranging from data privacy to antitrust, oversight, and technology and innovation policy.

Learn more about McGuireWoods Consulting’s Emerging Technologies team.