BUSINESS OVERVIEW 6 pricing, review the relationship between pricing and manufacturer legislative initiatives. In March 2010, then-President President patient programs, reduce the cost of products under Medicare, Obama signed into law the ACA, a sweeping law intended to and reform government program reimbursement methodologies broaden access to health insurance, reduce or constrain the for products. At the federal level, the Trump administration’s growth of healthcare spending, enhance remedies against fraud budget proposal for fiscal year 2019 contains further price and abuse, add new transparency requirements for the healthcare control measures that could be enacted during the 2019 budget and health insurance industries, impose new taxes and fees on the process or in other future legislation, including, for example, health industry and impose additional health policy reforms. measures to permit Medicare Part D plans to negotiate the price of certain products under Medicare Part B, to allow some states The ACA established an annual, non-deductible fee on any to negotiate product prices under Medicaid, and to eliminate cost entity that manufactures or imports certain specified branded sharing for generics for low-income patients. While any proposed prescription drugs and biologic agents, addressed a new measures will require authorization through additional legislation methodology by which rebates owed by manufacturers under to become effective, Congress and the Trump administration the Medicaid Drug Rebate Program are calculated for drugs that have each indicated that it will continue to seek new legislative are inhaled, infused, instilled, implanted or injected, increased the and/or administrative measures to control pharmaceutical costs. minimum Medicaid rebates owed by most manufacturers under At the state level, legislatures are increasingly passing legislation the Medicaid Drug Rebate Program, extended the Medicaid and implementing regulations designed to control pharmaceutical Drug Rebate program to utilization of prescriptions of individuals and biological product pricing, including price or patient enrolled in Medicaid managed care organizations, and provided reimbursement constraints, discounts, restrictions on certain incentives to programs that increase the federal government’s product access and marketing cost disclosure and transparency comparative effectiveness research. In addition, the ACA measures, and, in some cases, designed to encourage importation implemented payment system reforms including a national pilot from other countries and bulk purchasing. We expect that program on payment bundling to encourage hospitals, physicians additional state and federal healthcare reform measures will be and other providers to improve the coordination, quality and adopted in the future, any of which could limit the amounts that efficiency of certain healthcare services through bundled federal and state governments will pay for healthcare products payment models. and services, which could result in reduced demand for our products or additional pricing pressure. There have been judicial and Congressional challenges to certain aspects of the ACA, as wel l as recent efforts by the Trump Moreover, in certain countries, the proposed pricing for a drug administration to repeal or replace certain aspects of the ACA. must be approved before it may be lawful ly marketed. The Since January 2017, President Trump has signed two Executive requirements governing drug pricing vary widely from country to Orders and other directives designed to delay the implementation country. For example, the European Union provides options for of certain provisions of the ACA or otherwise circumvent some its Member States of the EEA to restrict the range of medicinal of the requirements for health insurance mandated by the products for which their national health insurance systems ACA. Concurrently, Congress has considered legislation that provide reimbursement and to control the prices of medicinal would repeal or repeal and replace all or part of the ACA. While products for human use. A Member State may approve a specific Congress has not passed comprehensive repeal legislation, two price for the medicinal product or it may instead adopt a system bills affecting the implementation of certain taxes under the ACA of direct or indirect controls on the profitability of the company have been signed into law. The Tax Cuts and Jobs Act includes placing the medicinal product on the market. For example, in a provision repealing, effective January 1, 2019, the tax-based France, effective access to the market assumes that our future shared responsibility payment imposed by the ACA on certain products will be supported by the hospital (through an agreement individuals who fail to maintain qualifying health coverage for all for local communities) or reimbursed by social security. The price or part of a year that is commonly referred to as the “individual of medications is negotiated with the Economic Committee for mandate.” Additionally, on January 22, 2018, President Trump Health Products, or CEPS. signed a continuing resolution on appropriations for fiscal year Healthcare Reform 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost Among policy makers and payors in the United States and employer-sponsored insurance plans, the annual fee imposed on elsewhere, there is significant interest in promoting changes in certain health insurance providers based on market share, and healthcare systems with the stated goals of containing healthcare the medical device excise tax on non-exempt medical devices. costs, improving quality and/or expanding access. In the United Further, the Bipartisan Budget Act of 2018, or the BBA, among States, the pharmaceutical industry has been a particular focus other things, amends the ACA, effective January 1, 2019, to of these efforts and has been significantly affected by major increase from 50 percent to 70 percent the point-of-sale discount GENSIGHT BIOLOGICS – 2017 Registration Document– 99