Massive HHS reorganization set in motion; full extent of workforce reductions and impact won’t be known until summer
Last week HHS Secretary Robert F. Kennedy, Jr. announced a major restructuring of the U.S. Department of Health & Human Services, drawing praise from some and disdain from others. HHS claims the restructuring will serve multiple goals without impacting critical services. While a specific breakdown was not available, HHS claims the reorganization will save taxpayers $1.8 billion per year through a reduction in workforce of about 10,000 full-time employees. As a frame of reference, the total annual HHS budget is around $1.7 trillion. This employee downsizing number is in addition to the reported 10,000 employees who earlier agreed to an exit package from the department. This would bring the total downsizing from 82,000 to 62,000 full-time employees (a 25% reduction). While HHS did not provide official numbers by agency, it’s reported that the cuts will result in approximately 3,500 fewer staff at the Food & Drug Administration (FDA), 300 fewer at the Centers for Medicare & Medicaid Services (CMS), 2,400 at the Centers for Disease Control and Prevention (CDC) and 1,200 fewer at the National Institutes of Health (NIH). HHS has said that the reductions will not include inspectors or product reviewers and “will not impact Medicare and Medicaid services”. The reorganization also seeks to “streamline functions” which will reduce the number of HHS divisions from 28 to 15, including a new “Administration for a Health America” (AHA). The total number of HHS regional offices will be reduced from 10 to five (specific locations that would be eliminated have not yet been released). Currently HHS and all its agencies have regional offices in Boston, New York, Philadelphia, Atlanta, Dallas, Chicago, Kansas City, Denver, San Francisco and Seattle. Critics immediately assailed the move. The American Public Health Association called it a “nonsensical rearrangement” that will increase morbidity, mortality, and health costs. Congressional Democrats held a virtual press conference with former HHS leaders, primarily leaders who served during the Biden Administration, in which they said the workforce reductions and reorganization would result in catastrophic consequences. “This is the kind of carelessness that gets people killed,” said Senator Patty Murray (D-WA). Murray serves as Vice Chair of the Senate Appropriations Committee and a senior member of the Senate Health, Labor, Education & Pensions (HELP) Committee. Republicans in Congress generally applauded the move, stating that HHS is an example of government agencies that have grown significantly, creating redundancies and conflicting objectives.
What’s next? As part of the process, HHS issued notice to the various federal employee unions and expects the cuts to be fully implemented within 90 days. Secretary Kennedy asked staff to prepare for a “painful period” at HHS, but said the dramatic moves were necessary to combat “bureaucratic sprawl”. He also said that the planned reductions will primarily target administrative functions such as human resources, information technology and procurement. Meanwhile, many HHS employees await the news as to whether they will be terminated as part of the reduction in workforce.
Top FDA official, Dr. Peter Marks, resigns in protest of Secretary Kennedy’s “misinformation and lies” regarding vaccines
Dr. Peter Marks, an FDA veteran who led the agency’s Center for Biologics Evaluation and Research (CBER), resigned on March 28 after being threatened with dismissal. In his publicly-released resignation letter to acting director Sara Brenner, Marks scolded Kennedy, stating, “This man doesn’t care about the truth. He cares about what is making him followers”. Marks was a key figure, not only on vaccine development, but also cell and gene therapies. Generally seen as a transparent leader and well-respected among the biotechnology community, Marks is credited for shepherding the FDA’s approval processes and guidelines for innovative cell and gene therapies. The Alliance for Regenerative Medicine (ARM) released a statement highlighting Marks’ accomplishments in helping to bring 44 gene therapies for rare genetic disease orders and CAR-T therapies for blood cancers to market in the last decade. Current HHS officials said that Dr. Marks was not aligned with the new Administration’s commitment to transparency, especially as it relates to vaccines. Congressional Democrats on the House Committee on Oversight & Government Reform immediately sent a list of demands to Secretary Kennedy asking for records related to the termination of Dr. Marks. The Democrats demanded a response from HHS by April 14.
CMS Administrator nominee Dr. Mehmet Oz on track to be confirmed by Senate despite making troubling statements on biopharmaceutical innovation during hearings
Dr. Oz was narrowly confirmed by the Senate Finance Committee on March 25 by a party-line vote of 14-13. He is expected to be confirmed by the full Senate as early as this week. During his testimony, and in written responses to committee members, Oz appeared open to several drug pricing proposals that have long drawn the ire of biopharmaceutical innovators. First, in a response to Sen. Elizabeth Warren (D-MA), Oz indicated that he is “open” to exploring whether the government should include a drug’s price in determining whether and when to seize patents on any medicine that was developed with any government funding. Specifically, Oz said he would work with federal agencies and Congress to “learn more about the issue”. Oz also defended the Medicare Prescription Drug Negotiation program implemented through the Inflation Reduction Act (IRA) and called “international reference pricing” an option the Administration is considering to lower drug costs in the U.S. “President Trump has been very clear that he wants me to reduce drug prices, not just for government payees, but also for beneficiaries. International reference pricing is a way of doing that,” Oz said during his Senate Finance Committee confirmation hearing.
Oz’s statements are even more concerning in light of reports that a conservative think tank, the America First Policy Institute (AFPI), is calling on the Trump Administration to ensure Americans don’t pay more for prescription drugs than residents of other countries. The new AFPI report calls for ending “global freeloading”. The report references the “Most Favored Nation” drug pricing model, which Trump unsuccessfully pushed during his first Administration, as one way to address price differences between the U.S. and the rest of the world. While the Administration did not officially respond to AFPI’s report, Gridiron advises biotech companies and patient groups to be vigilant and ready to respond to international reference pricing proposals in the coming months.
Congress dives in on budget reconciliation: Senate and House strategies continue to differ
House Republicans are pushing Senate Republicans to accept their budget blueprint to enact President Trump’s policy agenda through the budget reconciliation process. Senate Republicans again reiterated last week that they have other ideas, with Senator Lindsey Graham (R-SC) calling the House proposal “woefully inadequate”. The Senate plans to revamp the House-approved framework, specifically by putting their own numbers together on the amount of spending reductions necessary to finance extension of the 2017 tax cuts and border security enhancements. The next critical date is April 7 which congressional leaders have set as a deadline for a preliminary bicameral outline. Congress leaves town for its two-week Easter Break on April 10. We’ll be keeping a close eye on budget reconciliation talks this week, but the back-and-forth between the House and Senate will likely drive this discussion deep into the summer.
Health Policy Snippets
- New tool explores Medicaid enrollees by Congressional District. As Congress continues to consider cuts to the Medicaid program as part of a budget reconciliation process, advocates have been sounding the alarm. While political pressure from Medicaid enrollees is certainly not as strong as those seeking to protect Medicare, the number of Medicaid enrollees around the country is being spotlighted in a new tool from the Kaiser Family Foundation. KFF’s tool breaks down Medicaid enrollment by congressional district.
- Virginia Governor Glenn Youngkin again vetoes Prescription Drug Affordability Board (PDAB) bill. Governor Youngkin balked at legislation pushed by Virginia Democrats that would have appointed a board to oversee and set prices on medications in the state. He vetoed similar legislation last session. While the governor applauded the intent of lowering prescription drug prices, he argued that PDAB is not the most effective way to do so. Youngkin said PDABs would result in less access to medicines and impede medical innovation. Democrats decried the veto as a “gift to Big Pharma”, but others, including some parents of children living with rare diseases, applauded Youngkin’s action, citing concerns that PDAB’s methodology would result in fewer medications and impede access.
