Obama Administration Announces Plan to Combat Antibiotic Resistant Bacteria

On March 27, 2015, the Obama Administration released its National Action Plan for Combating Antibiotic Resistant Bacteria (NAP), a five-year, government-wide plan to address the spread of resistant bacteria. The main components of the strategy, which identifies roles for the public and private sectors, are as follows:

  1. Slow the emergence of resistant bacteria and prevent the spread of resistant infections through the judicious use of antibiotics in health care and agriculture settings;
  2. Strengthen national “One-Health” surveillance efforts to track resistant bacteria in diverse settings in a timely fashion.
  3. Advance development and use of rapid and innovative diagnostic tests to allow health care providers to distinguish between viral and bacterial infections and recommend appropriate, targeted treatment.
  4. Accelerate basic and applied research and development, including through streamlining the drug development process and increasing the number of candidate drugs in development.
  5. Improve international collaboration and capacities to monitor antibiotic resistance, spur therapeutics and diagnostics development, and strengthen regional networks and global partnerships that help prevent and control the emergence and spread of resistance.

GAO Calls for Expanded HHS Efforts to Reduce Antipsychotic Drug Use in Community Settings

The Government Accountability Office (GAO) has issued a report examining the extent to which antipsychotic drugs are prescribed for older adults with dementia in nursing homes and other settings. The GAO found that, according to Medicare Part D data, about one-third of older adults with dementia who spent more than 100 days in a nursing home in 2012 were prescribed an antipsychotic, compared to about 14% of Medicare Part D enrollees with dementia living outside of a nursing home were prescribed an antipsychotic that year. While several agencies within HHS have taken steps to address antipsychotic drug use in nursing homes as part of the National Alzheimer's Plan, these efforts have not applied to older adults in other settings, such as assisted living facilities or individuals' homes. The GAO therefore recommends that HHS update its National Alzheimer's Plan to expand outreach and educational efforts to reduce antipsychotic drug use among older adults with dementia residing outside of nursing homes; HHS concurred.  For details, see the full report, “Antipsychotic Drug Use: HHS Has Initiatives to Reduce Use among Older Adults in Nursing Homes, but Should Expand Efforts to Other Settings.” 

FDA to Host Clinical Outcome Assessments Public Workshop (April 1)

On April 1, 2015, the FDA is hosting a workshop entitled “Clinical Outcomes Assessment Development and Implementation: Opportunities and Challenges.” The workshop will update the public on ongoing efforts in the use of clinical outcome assessments (COAs), and plan for the future of COA development and utilization in drug development programs. The workshop will also discuss how to incorporate patient-centered outcome measures, standards for COA use, and collaborative processes for COA development and dissemination.  Interested parties may participate in person or via webcast. The registration deadline is March 27, 2015.

CMS Releases April 2015 Medicare Part B Drug ASP Update

CMS has posted its April 2015 update to the Medicare average sales price (ASP) drug pricing files, which contain the payment amounts CMS will use to pay for Part B covered drugs for the second quarter of 2015. According to CMS, prices for the top Part B drugs decreased by 0.6% on average compared to the previous quarter, and prices changed 2% or less for most of the higher-volume drugs.

CMS Schedules May 2015 Meetings on HCPCS Applications

CMS has announced that it is holding series of meetings in May 2015 to discuss pending  Healthcare Common Procedure Coding System (HCPCS) applications. The meeting dates are as follows:

May 7 & 8 -- Drugs/Biologicals/Radiopharmaceuticals/Radiologic Imaging Agents
May 21 & 22 -- Supplies and Other
May 27 -- Durable Medical Equipment (DME) and Accessories; and Orthotics and Prosthetics (O&P)

Deadlines and instructions for speaker and general registration and submission of comments are set forth in a notice to be published tomorrow.  Additional information, include preliminary coding determinations, will be posted in advance of each meeting at the CMS HCPCS website

Update: the preliminary determinations for the Drugs, Biologicals and Radiopharmaceuticals HCPCS meeting are now available.

Upcoming House Hearing on 340B Program (March 25)

The House Energy and Commerce Subcommittee on Health will hold a hearing on Thursday, March 5, 2015 on “Examining the 340B Drug Pricing Program,” focusing on the functionality of the program and the extent to which it meets its goal of improving access to prescription drugs for needy patients at facilities serving these populations. Scheduled witnesses include officials from the Health Resources and Services Administration, the Government Accountability Office, and the Office of the Inspector General. 

** Note: this hearing has been rescheduled for March 25.

Final Medicare Advantage/Part D Rule for Contract Year (CY) 2016

CMS has published a final rule revising Medicare Advantage (MA) and Part D prescription drug benefit regulations for CY 2016. Among other things, the final rule:

  • Implements a statutory provision requiring MA and Part D contracts to provide the right to “timely”’ inspection and audit and allowing CMS to require MA organizations or Part D prescription drug plan (PDP) sponsors to hire an independent auditor to validate correction of CMS audit findings.
  • Establishes U.S. citizenship and lawful presence as an eligibility requirement for enrollment in MA and Part D plans (effective June 1, 2015).
  • Makes several policy changes intended to promote efficient dispensing of drugs in long-term care (LTC) facilities, including prohibiting payment arrangements that penalize the adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed, and requiring that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques.
  • Requires MA Prescription Drug (MA-PD) plans to establish and maintain a process with network pharmacies to ensure timely and accurate point-of-sale transactions and coordinate Part A, Part B, and Part D drug benefits administered by the MA PD plan.
  • Requires a sponsor’s Pharmacy & Therapeutics committee to document its process for an objective party to determine whether disclosed financial interests are conflicts of interest and management of any recusals due to conflicts.

Other provisions of the rule address, among other things, business continuity for MA organizations and PDP sponsors; codification of recent quality improvement program policies; and notification requirements related to changes to Part D plans. CMS is not finalizing a number of proposals included in the January 2014 proposed rule, including provisions that would have: lifted the protected class designation on three drug classes; required Medicare Part D sponsors to include in preferred networks any pharmacy willing to accept the sponsor’s terms and conditions; reduced the number of Part D plans a sponsor may offer; and codified CMS interpretation of the Part D non-interference clause.

Obama Administration Releases FY 2016 Budget Proposal with Medicare/Medicaid Provisions

On February 2, 2015, the Obama Administration released its proposed federal budget for fiscal year (FY) 2016. The budget would impact all types of health care providers, health plans, and drug manufacturers if adopted as proposed – which is unlikely given Republican control of the House and Senate. Nevertheless, Congress can be expected to consider the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) during expected debate in the coming months on Medicare physician fee schedule (MPFS) reform legislation or during future budget negotiations.

The following is a summary of the major Medicare, Medicaid, and related policy proposals contained in the FY 2016 budget proposal.

Medicare Delivery & Payment Reforms

The proposed FY 2016 budget includes a package of Medicare legislative proposals estimated to save $423.1 billion over 10 years (note that the proposals are scored off an adjusted baseline that assumes a zero percent update to Medicare physician payments). Highlights include the following (all savings estimates are for the 10-year period of FYs 2016-2025):

  • Repeal the Sustainable Growth Rate (SGR) formula used to update MPFS payments, and replace it with reforms contained in recent bipartisan reform legislation (including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing). The Administration estimates that this would cost $44 billion over 10 years.
  • Reduce Medicare payment for services provided in off-campus hospital outpatient departments under the Outpatient Prospective Payment System to either the MPFS-based rate or the rate for surgical procedures covered under the Ambulatory Surgical Center (ASC) payment system. The provision would be phased in over four years beginning in 2017 ($29.5 billion in savings).
  • Implement bundled payment for post-acute care providers, including long-term care hospitals (LTCHs), inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and home health agencies (HHAs) beginning in 2020. Payments would be bundled for at least half of the total payment for post-acute care providers, with rates set to produce a permanent and total cumulative adjustment of -2.85% by 2022, with beneficiary coinsurance equal to current levels ($9.3 billion).
  • Allow the Centers for Medicare & Medicaid Services (CMS) to assign more Medicare fee-for-service (FFS) beneficiaries to Federally Qualified Health Centers and Rural Health Clinics that participate in an Accountable Care Organization (ACO) under the Medicare Shared Savings Program ($80 million), and expand the basis for beneficiary assignment for ACOs to include nurse practitioners, physician assistants, and clinical nurse specialists ($60 million).
  • Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ASCs, hospital outpatient departments, and community mental health centers beginning in 2017. At least 2% of payments must be tied to the quality and efficiency of care in the first two years, rising to at least 5% in 2019 (no budget impact).
  • Eliminate the 190-day lifetime limit on inpatient psychiatric facility services: ($5 billion in costs).
  • Reduce market basket updates for IRFs, LTCHs, and HHAs by 1.1 percentage points each year from 2016 through 2025 (the update could not fall below 0%), and reduce SNF updates by -2.5% in FY 2016, tapering down to a -0.97% update in FY 2023 ($102.1 billion).
  • Increase the minimum Medicare Advantage coding intensity adjustment ($36.2 billion).
  • Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2016 ($31.1 billion).
  • Strengthen the Independent Payment Advisory Board (IPAB) by reducing the target rate of Medicare cost growth from gross domestic product plus one percentage point to plus 0.5 percentage point, which would make it easier to trigger Affordable Care Act (ACA) provisions requiring reductions to Medicare provider reimbursement ($20.9 billion).
  • Reduce Medicare indirect medical education add-on payments ($16.3 billion).
  • Exclude radiation therapy, therapy services, advanced imaging, and anatomic pathology services from the in-office ancillary services exception to the prohibition against physician self-referrals (Stark law), except in cases where a practice is “clinically integrated” and demonstrates cost containment, as defined by the Secretary ($6 billion).
  • Adjust the standard for classifying a facility as an IRF; at least 75% of patient cases admitted would be required to meet one or more of 13 designated conditions beginning in 2016 ($2.2 billion).
  • Reduce critical access hospital (CAH) reimbursement to 100% of costs ($1.7 billion) and limit CAH designation eligibility for hospitals within 10 miles of another hospital ($770 million).
  • Expand the Part B benefits to cover short-term scheduled dialysis at a Medicare-certified End Stage Renal Disease (ESRD) facility for the treatment of acute kidney injury ($200 million).
  • Modify documentation requirement for face-to-face encounters for durable medical equipment (DME), orthotics, prosthetics, and supplies (DMEPOS) to allow certain non-physician practitioners to document the face-to-face encounter (no budget impact).

Medicare, Medicaid, & Other Prescription Drug Provisions

  • Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2017 ($116.1 billion).
  • Accelerate manufacturer Medicare Part D “coverage gap” discounts from 50% to 75% beginning in plan year 2017 ($9.4 billion).
  • Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP) starting in 2016. If a physician’s cost for purchasing the drug exceeds 103% of ASP, the drug manufacturer would be required to provide a rebate to ensure that the provider’s net cost to acquire the drug equals 103% of ASP minus an overhead fee to be determined by the Secretary. The Secretary would be authorized to pay a portion of the entire amount above ASP as a flat fee rather than a percentage in a budget-neutral manner ($7.4 billion).
  • Extend Medicare Secondary Payer reporting requirements to group health plans offering prescription drug coverage ($480 million).
  • Authorize the Secretary to negotiate Part D prices for biologics and high-cost prescription drugs eligible for placement on a plan’s specialty tier (no budget impact).
  • Authorize the Secretary to require high-risk Medicare beneficiaries to use certain prescribers and/or pharmacies to obtain controlled substance prescriptions under Part D; allow the Secretary to suspend coverage and payment for Part D drugs prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, or that that pose an imminent risk to patients; and allow the Secretary to require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage (no budget impact).
  • Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.9 billion).
  • Increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to stop companies from entering into “pay for delay” agreements ($10.1 billion) and modifying the length of exclusivity on brand name biologics ($4.4 billion).
  • Lower Medicaid drug costs by clarifying the definition of brand drugs, collecting an additional rebate for generic drugs when prices grow faster than inflation, and including certain prenatal vitamins and fluorides in the rebate program. The plan also would make a technical correction to the ACA alternative rebate for new drug formulations; limit to 12 quarters the timeframe for which manufacturers can dispute drug rebate amounts; exclude authorized generic drugs from average manufacturer price calculations for determining rebate obligations for brand drugs; calculate Medicaid federal upper limits based only on generic drug prices; and exempt emergency drug supply programs from the Medicaid rebate calculations. ($6.3 billion.)
  • Require manufacturers to pay Medicaid rebate equal to the entire amount that the state has paid for the drugs in cases where the state improperly reported non-drug products as covered outpatient drugs, or where the state improperly reported drugs that the Food and Drug Administration (FDA) has found to be less than effective. The budget also would allow more regular audits and surveys of manufacturers to ensure compliance with Medicaid drug rebate agreement requirements; require drugs to be electronically listed with the FDA to receive Medicaid coverage; and increase penalties for reporting false information for the calculation of Medicaid rebates. ($10 million.)
  • Fully fund a nationwide retail pharmacy survey incorporating prices paid by cash-paying, third-party insured, and Medicaid insured consumers. The funding also permits collection of actual invoice prices from retail community pharmacies to enable states to set reasonable payment rates to pharmacies. CMS would be authorized to collect wholesale acquisition costs for all Medicaid covered drugs. ($30 million in costs.)
  • Requires states to track high prescribers and utilizers of Medicaid prescription drugs ($710 million).

Major Program Integrity Provisions

  • Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other HHS program integrity efforts.
  • Expand the current authority to exclude individuals and entities from federal health programs if they are affiliated with a sanctioned entity by closing a “loophole” that allows an officer, managing employee, or owner of a sanctioned entity to avoid exclusion by resigning his or her position or divesting his or her ownership; and extending the exclusion authority to entities affiliated with a sanctioned entity ($70 million).
  • Authorize civil monetary penalties for providers who do not update enrollment records ($29 million).
  • Establish a registration process for clearinghouses and billing agents that act on behalf of Medicare providers and suppliers (no budget impact).
  • Expand CMS’s authority to require prior authorization for all Medicare FFS items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
  • Increase the minimum amount of the HHA surety bond to $50,000 (no budget impact).
  • Authorize Medicaid Fraud Control Units to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings (no budget impact).
  • The budget includes several provisions to reform the Medicare appeals process, including allowing Department of Health and Human Services (HHS) to retain a portion of Recovery Audit Contractor recoveries to fund related appeals; increasing the minimum amount in controversy required for Administrative Law Judge adjudication; allowing the Office of Medicare Hearings and Appeals (OMHA) to use attorney adjudicators for certain claims; establishing expedited OMHA procedures for claims with no material fact in dispute; remanding an appeal to the first level of review when new documentary evidence is submitted into the administrative record at the second level of appeal or above; and authorizing the Secretary to adjudicate appeals through the use of sampling and extrapolation techniques

Other Medicare & Medicare Reforms

  • Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D ($66.4 billion).
  • Increase Part B deductible for new enrollees ($3.7 billion), and increase premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements ($4 billion).
  • Establish a new home health copayment ($830 million).
  • Base Medicaid rates for DME on Medicare rates ($4.3 billion).
  • Rebase future Medicaid Disproportionate Share Hospital allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).

Precision Medicine Initiative

The President proposes a high-profile “Precision Medicine Initiative,” which would provide $215 million to focus on developing treatments, diagnostics, and prevention strategies tailored to the individual genetic characteristics of each patient. This effort includes $200 million for the National Institutes of Health to launch a national research cohort of a million or more Americans who volunteer to share their genetic information, expand current cancer genomics research, and initiate new studies on how a tumor’s DNA can inform prognosis and treatment choices. The budget provides $10 million for the FDA to modernize its regulatory framework to support the development and use of molecular diagnostics in precision medicine, and it provides the HHS Office of the National Coordinator for Health Information Technology (ONC) with $5 million to define standards to enable the exchange of genomic data. The Office for Civil Rights will also work with the participating agencies to ensure that privacy protections are in place.

Note that the budget proposal includes numerous other proposals impacting programs and operations throughout the HHS agencies.

Congressional Panels Take Steps to Speed Patient Access to Medical Innovation

On January 27, 2015, the House Energy and Commerce Committee released its “21st Century Cures Act” discussion draft, the product of a year-long, bipartisan effort by the Committee to accelerate the pace of medical cures in the United States. The nearly 400-page bill addresses a wide range of topics, including, among many other things: the drug and device approval processes; clinical trials; Medicare coverage, payment, and coding; drug safety; and other proposals intended to streamline medical technology regulations across government. The Committee invites interested stakeholders to submit specific suggestions about how to improve the legislation; no deadline is specified.

In a related development, on January 29, the Senate Health, Education, Labor and Pensions (HELP) Committee launched its own initiative to examine and reform public policies in order to speed patient access to safe and effective medical products and treatments. To kick off this effort, the HELP Committee released a report entitled “Innovation for Healthier Americans: Identifying Opportunities for Meaningful Reform to Our Nation’s Medical Product Discovery and Development.” The report seeks feedback on a series of questions on ways to decrease the time and costs associated with bringing medical products to patients, including questions related to: more effectively targeting government resources; evaluating public-private partnerships; promoting biomedical research; streamlining clinical trial requirements; modernizing Food and Drug Administration medical product approval processes; and harmonizing US regulations with international standards. Feedback is requested by February 23, 2015. The Committee also intends to hold a series of hearings on issues raised in the report. 

Electronic Distribution of Prescribing Information for Prescription Drugs & Biologicals

The FDA published a proposed rule on December 18, 2014 that would require electronic distribution of the prescribing information intended for health care professionals, which is currently distributed in paper form on or within the prescription drug or biological product packaging. FDA also is proposing that prescribing information intended for health care professionals will no longer be permitted to be distributed in paper form with the package from which a prescription drug or biological product is dispensed, except as provided by this regulation. According to the FDA, its proposal is intended to facilitate the distribution of updated prescribing information as new information becomes available or prescribing information changes are made, and to ensure that “the most current prescribing information for distributed prescription drugs will be available and readily accessible to health care professionals at the time of clinical decisionmaking and dispensing.” Comments on the proposed rule will be accepted until March 18, 2015.

CMS Posts January 2015 Update to Medicare Part B Drug Pricing Files

CMS has posted the January 2015 update to the Medicare average sales price (ASP) drug pricing files, which contain the payment amounts that CMS will use to pay for Part B covered drugs for the first quarter of 2015. CMS notes that prices for the top Part B drugs decreased by 0.1 % on average this quarter, and prices changed 2% or less for 26 of the top 50 higher-volume drugs.

OIG: Compendia Publishers Comply with Transparency Rules for Evaluating Anticancer Drugs, Identifying Potential Conflicts

Under current law, Medicare Parts B and D cover anticancer drugs for indications not approved by the FDA only if the drugs are supported by one or more of four authorized compendia. Publishers of these compendia must comply with statutory requirements to maintain transparent processes for evaluating anticancer drug therapies and identifying potential conflicts of interest. In a recent report, the OIG concludes that each of the four authorized compendia publishers complied with these requirements, although the number and nature of disclosures of potential conflicts of interest varied across publishers.

FDA Revises Guidance Defining Delays, Denials, Limits and Refusals of a Drug Inspection

This post was written by Vicki Morris.

The Food and Drug Administration (FDA) recently issued a notice announcing the Agency’s revised guidance for industry defining the types of action, inaction, and circumstances that FDA considers to constitute delaying, denying, or limiting inspection, or refusing to permit entry or inspection for the purposes of making a drug adulterated. The revised guidance, entitled “Circumstances that Constitute Delaying, Denying, Limiting, or Refusing a Drug Inspection,” follows the enactment of the 2012 Food and Drug Administration Safety and Innovation Act (FDASIA), which added a provision (and teeth) to the Food, Drug, and Cosmetic Act (the FD&C Act) concerning inspections that render a drug “adulterated” – a new term used by the FDA in this context. Specifically, a drug adulterated under FDASIA “has been manufactured, processed, packed, or held in any factory, warehouse, or establishment and the owner, operator, or agent of such factory, warehouse, or establishment delays, denies, or limits an inspection, or refuses to permit entry or inspection.” FDA issued the revised guidance in response to comments on the Agency’s draft guidance for industry of the same title issued in July 2013.

The revised guidance clarifies FDA’s expectations regarding the types of action, inaction, and circumstances that make a drug adulterated under FDASIA and the FD&C Act. FDA also provides examples that constitute reasonable explanations for actions, inactions, or circumstances that could otherwise be considered delaying, denying or limiting inspection, or refusing to permit entry or inspection, as discussed below.

Delays of Inspections: While the guidance acknowledges that delays may occur for many reasons – some of which are beyond the control of the facility – it explicitly states that where an owner, operator or agent causes the delay of an inspection, this may cause the drugs to be deemed adulterated. FDA provides examples of delaying a pre-announced inspection that include, but are not limited to:

  • A facility will not agree to a proposed inspection start date and does not give a reasonable explanation for its failure to do so
  • A facility, after scheduling an inspection, requests a later start date without giving a reasonable explanation
  • A facility fails to respond following the FDA’s attempt to contact the facility’s designated contact(s)

Delay During an Inspection: The guidance suggests that actions by a facility’s owner, operator, or agency before or after the beginning of an inspection, that impede an FDA investigator at the inspection site from performing the inspection in a reasonable manner, may be considered delaying the inspection. However, FDA notes that it will recognize minor delays from good faith efforts by the facility to comply with FDA requests as not unreasonable. FDA provides examples of delays during an inspection that may cause drugs to be adulterated:

  • A facility does not allow the FDA investigator access to an area of the facility until a specific future date or time, even though the area is operational and is an area of the inspection site that FDA has authority to inspect, without giving a reasonable explanation
  • A facility leaves the FDA investigator in a conference room without access to necessary documentation or responsible individual for an unreasonable period of time that interferes with the investigator’s ability to complete the inspection

Delays in Producing Records: FDA emphasizes the importance of the Agency’s preparation for inspecting drug facilities in collecting and reviewing hardcopy and electronic records, files and papers. The guidance offers examples of delays in producing records that may cause drugs to be deemed adulterated that include, but are not limited to:

  • The FDA investigator, during an inspection, requests, within a specific, reasonable timeframe, records that it has authority to inspect, but the facility fails to produce the requested records within the timeframe requested by the Agency, without reasonable explanation
  • The FDA requests records under its legal authority to do so, but the facility fails to produce the requested records in a timely manner, without reasonable explanation

FDA emphasizes that in instances where the facility provides a reasonable explanation for delaying production of records, the facility should also ensure that the resulting delay is of a reasonable duration.

Limiting of Inspection: The guidance explains four circumstances where an owner, operator, or agent of a drug facility prevents an authorized FDA representative from conducting an inspection that constitutes a limitation that may cause drugs to be deemed adulterated:

  • Limiting access to facilities and/or manufacturing processes
  • Limiting photography
  • Limiting access to or copying of records
  • Limiting or preventing collection of samples

While the guidance suggests that impeding or resisting photography by an FDA investigator may be considered a limitation if such photographs are determined by the investigator to be necessary to effectively conduct that particular inspection, there is no mention of the Agency’s authority to regulate this activity in MAPPs, FDA’s internal guidelines.

Refusal to Permit Entry or Denials of Inspection: FDA interprets the term “refuses to permit entry or inspection” to include not only active, but also passive behavior and non-action by the owner, operator or agent of a drug facility, to prevent an authorized representative of the FDA from conducting an inspection, or to prevent the FDA from completing an inspection. Denials of inspection also include statements or physical actions intended to avoid inspection, or to mislead, deceive or impede the investigator. FDA provides examples that may constitute denying an inspection that may cause drugs to be adulterated:

  • A facility ignores or rejects the FDA’s attempt to schedule a pre-announced inspection
  • The facility does not allow the FDA investigator, upon arrival at the facility, to enter the facility or begin the inspection
  • A facility does not allow the FDA investigator to inspect the facility because certain staff members are not present, without a reasonable explanation, or
  • A facility sends staff home for the day and tells the FDA investigator that the facility is not producing any product

Although neither the FDA’s revised guidance nor the FD&C Act specifically define “reasonable,” FDA has long maintained that the inspectional authority under section 704 of the Act “extends to what is reasonably necessary to achieve the objective of the inspection.” Further, FDA contends that it will consider reasonable explanations for behavior that may otherwise be considered to be delaying, denying, limiting, or refusing an inspection under the revised guidance. The guidance’s vagueness reinforces the importance of taking the following key steps to ensure FDA inspection compliance:

  • Review FDA rules and guidance on how to conduct a good inspection
  • Assess facility’s existing plans for FDA inspection
  • Develop written internal procedures and systems that specifically address inspectional issues
  • Consider rationale for any delays, limits, or denials of inspection
  • Train and prepare staff for FDA inspections, including understanding the company’s positions and employees’ roles before, during, and after FDA investigations
  • Track what is stored at the facility and what is provided to the authorized FDA representative at inspection

Vicki Morris (Law Clerk) is a member of the firm’s Life Sciences Health Industry Group and is based in our Washington, D.C. office.

Update on Sunshine Act "Open Payments" Public Data Review and Data Correction Deadline

CMS has released a beta version of its Open Payments search tool, which is intended to facilitate public review of payments and transfers of value made by drug and device manufacturers and group purchasing organization (GPOs) to physicians and teaching hospitals, as well as physician ownership information.  The tool allows the public to search identified data for physicians, teaching hospitals, or companies.  CMS is also reminding applicable manufacturers and GPOs of an October 31, 2014 deadline for making corrections to any 2013 Open Payments disputed records for publication on or before December 31, 2014 (although data corrections can be performed at any time). Disputes that remain unresolved as of October 31, 2014 will display as disputed in the Open Payments database.

HHS OIG Paints with Broad Brush in Criticizing Drug Manufacturer Coupon Programs

This post was written by Robert Hill, Carol Loepere, and Joseph Metro

In its September 19, 2014 Special Advisory Bulletin (SAB), the Office of Inspector General (OIG) of the Department of Health & Human Services (HHS) noted the potential risks to federal health care programs presented by pharmaceutical manufacturers’ coupon programs designed to reduce or eliminate patient copayment requirements for brand-name drugs, and emphasized that coupon program sponsors and pharmacies are at risk of sanctions if they fail to take appropriate steps to carve out federal health care program beneficiaries from using the coupons. The OIG points out these coupon programs – which may take different forms, such as print coupons, electronic coupons, debit cards, and direct reimbursements – are remuneration offered to consumers to induce the purchase of specific items, and therefore implicate the criminal federal anti-kickback statute, 42 U.S.C § 1320a-7b(b). Where remuneration is knowingly and willfully paid with the intent to induce or reward referrals of items or services payable by a federal health care program, the anti-kickback statute is violated. The OIG goes on to observe that a claim that includes items or services resulting from a kickback violation would also constitute a false or fraudulent claim under the False Claims Act, 31 U.S.C. § 3729, and grounds for civil money penalties for beneficiary inducement if offer or acceptance of copayment coupons may induce a beneficiary to use a particular practitioner or pharmacy, 42 U.S.C § 1320a-7a(a)(5). While the SAB’s focus is on manufacturer coupon practices, in a footnote, the OIG states that pharmacies accepting coupons for Part D copayments may also be subject to these sanctions.

Notwithstanding the potential benefits of coupon programs to provide access to brand-name drugs and adherence to drug regimens, the OIG claims that such coupon programs may interfere with federal health care program cost-sharing requirements to promote prudent prescribing and purchasing choices by physicians and patients based on the “true costs” of drug and price competition in the market. As a result, the OIG writes, “[w]hile copayment coupons provide an immediate financial benefit to beneficiaries, they ultimately can harm both Federal health care programs and their beneficiaries.”

In the SAB, the OIG acknowledges that the pharmaceutical industry is aware of the potential anti-kickback concerns and generally has implemented a variety of controls to exclude federal health care program beneficiaries from these programs. The OIG’s concern seems to be that these controls don’t go far enough or don’t always work. In other words, the OIG sees the glass as “half empty.” The OIG does not seem to acknowledge that the glass may actually be half-full – i.e., the industry's attempt to have some controls (even if imperfect) evidences manufacturers’ intent to comply with the statute, making it difficult to show criminal liability.

In fact, the OIG’s report, “Manufacturer Safeguards May Not Prevent Copayment Coupon Use for Part D Drugs” (OEI-05-12-00540) http://go.usa.gov/pdYQ, issued concurrently with the SAB, describes in detail mechanisms used by various manufacturers, most notably through claims processing and “switches,” to prevent use of the coupons for drugs paid for by Medicare Part D. The report identifies the principal shortcomings identified with these mechanisms as stemming from the fact that CMS does not permit manufacturers to submit Part D enrollment verification requests (“E1 transactions”) to the Part D Transaction Facilitator because of privacy concerns, so that manufacturers must use various “proxies” to attempt to determine whether the individual using the coupon is enrolled in a Part D plan. The report finds that these proxies, which may include elements as inexact as beneficiary age, may not be accurate enough to guarantee exclusion of Part D claims. Consequently, the OIG appears to be asserting that manufacturers may have liability for having imperfect controls, even though the current claims-processing system does not make a perfect solution available to them. The report did not identify any specific Part D claims for which coupons had in fact been used contrary to coupon terms and conditions.

The OIG recommends that CMS cooperate with industry stakeholders to improve the reliability of pharmacy claims edits, and make coupons transparent. CMS concurred with the recommendation.

CMS Updates Medicare Part B Drug Pricing Files

CMS has posted its October 2014 update to the Medicare average sales price (ASP) drug pricing files, which contain the payment amounts that CMS will use to pay for Part B covered drugs for the fourth quarter of 2014. CMS notes that prices for the top Part B drugs decreased by 0.4% on average this quarter. 

GAO Highlights Differences in Federal Program Drug Prices

The Government Accountability Office (GAO) has released data comparing retail prescription drug prices paid by the Department of Defense (DOD), Medicaid, and Medicare Part D for a sample of 78 high-utilization/high-expenditure drugs. In general, the GAO determined that Medicaid paid the lowest average net prices for both brand-name and generic drugs in the sample based on data for the third quarter of 2010. For the entire sample, Medicare Part D paid an estimated 32% higher average net price than Medicaid, while DOD paid 60% more than Medicaid (although Medicare Part D paid more for brand-name drugs than did DOD). Key factors affecting net prices paid by each program included the amount of any post-purchase price adjustments (e.g., refunds, rebates, or price concessions received by each program from drug manufacturers), which equaled approximately 15% of the gross price for Medicare Part D, 31% for DOD, and almost 53% for Medicaid across the entire sample.

FDA Meeting on Biomarker Development (Sept. 5)

On September 5, 2014, the FDA is holding a public meeting at the Washington Plaza Hotel, in Washington DC, to discuss current scientific and regulatory approaches to biomarker development, acceptance, and utility in the development of therapeutic products (e.g., drugs and biologics). Specifically, FDA will focus on (1) identifying challenges for biomarker applications in early- and late- phase clinical trials, and (2) emerging best practices for successful biomarker-based programs (including codevelopment of in vitro diagnostic devices and use of biomarkers as outcome measures in clinical trials). Public input from the meeting will be used to identify opportunities for biomarker-related regulatory guidance, improve understanding and consistency in regulatory review of therapeutic product applications that incorporate biomarkers in clinical trial designs, and identify potential strategies to facilitate scientific exchanges in regulatory and non-regulatory contexts. For more information on the meeting, which is being held in collaboration with Brookings Institution, and for early registration deadlines to attend the live meeting, see the FDA announcement.  FDA will also accept comments on this topic through November 5, 2014.

FDA Releases Drug/Device Industry Social Media Guidance Documents

The FDA released two draft social media guidance documents last week, describing how manufacturers, packers and distributors of prescription drugs and medical devices may: (1) communicate both benefit and risk information on Internet/social media platforms with character space limitations, and (2) correct independent third-party misinformation about a firm’s products.  For details, see Reed Smith's Client Alert posted on our Life Sciences Legal Update blog.

OIG Finds Drug Manufacturers' Medicaid AMP Determinations Follow Federal Rules

In a recent report, “Average Manufacturer Price Determinations by Selected Drug Manufacturers Generally Were Consistent With Federal Requirements,” the OIG has determined that the methodologies used by 20 selected (unnamed) drug manufacturers to determine average manufacturer price (AMP) for drugs reimbursed by Medicaid generally were consistent with federal requirements. In particular, the manufacturers consistently included transactions from retail community pharmacies rather than the more broadly-defined retail pharmacy class of trade. The OIG did note that manufacturers treated authorized generic sales to a secondary manufacturer differently, and suggested that CMS clarify this policy. The OIG also recommended that CMS permit a presumptive-inclusion methodology for wholesaler sales, since manufacturers would not have been able to calculate the AMP for a number of drugs without this methodology. Finally, the OIG recommended that CMS expand the use of a 12-month rolling average to estimate and remove indirect sales related to ineligible customers (in addition to using this for average for manufacturer price concessions).

Older Entries

June 10, 2014 — Full Energy and Commerce Committee Approves Three Bipartisan Health Bills

June 2, 2014 — OIG Issues Advisory Bulletin Impacting Independent Charity Patient Assistance Programs

June 2, 2014 — CMS Finalizes ACA Exchange, Insurance Market Standards for 2015 and Beyond

June 2, 2014 — House Energy and Commerce Subcommittee Approves Health Bills

May 29, 2014 — Expedited Drug Development and Review: New FDA Resource Now Available

May 14, 2014 — OIG Examines Medicare Part B Payments for Compounded Drugs

May 13, 2014 — CMS Invites Comments on Sunshine Act "Open Payments" Dispute Resolution/Corrections Process

May 13, 2014 — HRSA Releases 340B Audit Results

May 12, 2014 — Exploring the "Country of Origin" Question for Pharmaceutical Products

May 8, 2014 — Hundreds of Drugs and Biologics Face Labeling Changes under New FDA Plan

April 22, 2014 — CMS Call: National Partnership to Improve Dementia Care in Nursing Homes (May 20)

April 10, 2014 — Will Physician Payment Sunshine Act Data Usher in a New Era of False Claims Act Litigation?

April 8, 2014 — CMS Seeking Comments on Supervision Levels for Select Hospital Outpatient Services

April 8, 2014 — OIG Recommends Adjustments to Medicare ESRD Drug Payment Policies

March 14, 2014 — Drug Companies are Reminded - FDA is Following Facebook

March 5, 2014 — Obama Administration Proposes FY 2015 Budget with Medicare, Medicaid Savings Provisions

February 24, 2014 — FDA to Overhaul an OTC System That "Isn't Working"

February 24, 2014 — Coming to a TV Near You? FDA Seeks Public Input on Limiting Risks Presented in Direct-to-Consumer Television Ads

February 13, 2014 — House Panel, GAO Examine Drug Shortages

January 30, 2014 — Omnibus Government Spending Signed to Fund HHS, Other Departments

January 30, 2014 — CMS Call on Partnership to Improve Dementia Care in Nursing Homes (Feb. 26)

January 28, 2014 — FDA Provides Direction on "Dear Doctor" Letters

January 20, 2014 — FDA Seeks Comments on Drug Company Social Media Guidance

January 8, 2014 — CMS Proposes Updates to Medicare Advantage/Part D Policies for 2015

January 7, 2014 — FDA Releases Final Guidance on Qualification Process for Drug Development Tools

January 7, 2014 — DOJ Touts $3.8 Billion in FY 2013 False Claims Act Recoveries

December 10, 2013 — CMS Issues Final Medicare OPPS, ASC Policies for 2014

December 10, 2013 — CMS Finalizes 2014 ESRD PPS Rates; Phases in ESRD Drug Utilization Cut

December 10, 2013 — Drug Distribution Security Legislation Signed into Law

November 11, 2013 — CMS Update on Medicare IVIG Demonstration (Nov. 22)

October 30, 2013 — CMS Call on Dementia Care in Nursing Homes (Nov. 25)

October 8, 2013 — HHS OCR Releases HIPAA Privacy Rule Guidance Documents

September 17, 2013 — HHS Seeks Comments on Draft National Action Plan for Adverse Drug Event Prevention

August 2, 2013 — FDA Proposes New Rule to Exercise its Administrative Detention Authority for Drugs

August 2, 2013 — New Draft Guidances from FDA Address Expedited Review, Safety Labeling and More

July 29, 2013 — CMS Issues Proposed OPPS, ASC Policies for 2014, Including Expanded OPPS Packaging Proposal

July 29, 2013 — CMS Proposed Rule Calls for 9.4% Cut in CY 2014 ESRD PPS Rates

July 29, 2013 — July Health Policy Hearings

July 29, 2013 — In Advance of Sunshine Act Reporting, CMS Releases Physician & Industry Resources

June 27, 2013 — Health Policy Hearings

June 25, 2013 — CMS Call on Improving Dementia Care in Nursing Homes (July 10)

June 20, 2013 — FDA Amends Orphan Drug Regulations

June 11, 2013 — OIG Recommends Changes to Medicare Dialysis Payments to Reflect Lower Drug Utilization

May 28, 2013 — FDA Issues New Draft Guidance Documents on Access to Investigational Drugs

May 28, 2013 — OIG Report Examines High-Risk Compounded Sterile Preparations

May 10, 2013 — Congressional Health Policy Hearings & Markups

May 8, 2013 — Updated Draft Medicaid Federal Upper Limit (FUL) Files Posted

April 24, 2013 — Lawmakers Float Draft Drug Distribution Security Plan; Comment Opportunity

April 15, 2013 — CMS Letter to Issuers on Federally-Facilitated and State Partnership Exchanges

March 13, 2013 — CMS Plans to Include DME Infusion Drugs in Competitive Bidding in Response to OIG Findings

March 12, 2013 — FDA Issues New Guidance Documents

February 18, 2013 — CMS Proposes Medicare Advantage, Part D Drug Plan Medical Loss Ratio Rule and Advance 2014 Rate Information

February 18, 2013 — CMS Announces Dates for 2013 HCPCS Public Meetings

February 1, 2013 — CMS Releases Physician Payments Sunshine Act Final Rule

January 30, 2013 — CMS Proposes Changes to Medicaid Eligibility, Benefits, and Appeals Rules

January 29, 2013 — FDA Issues Final Rule on Current Good Manufacturing Practice Requirements for Combination Products

January 29, 2013 — FDA Announces 2013 Generic Drug Active Pharmaceutical Ingredient and Finished Dosage Form Facility User Fee Rates

January 29, 2013 — New FDA Draft Guidance Addresses Combination Product Postapproval Modification Submissions

January 14, 2013 — Obama Administration's Regulatory Agenda Points to Busy 2013 for HHS

January 14, 2013 — CMS Call to Focus on Improving Dementia Care in Nursing Homes (Jan. 31)

January 11, 2013 — New Law Establishes IVIG Demonstration/Makes MSP Policy Revisions

January 11, 2013 — CMS Releases Updated Draft Medicaid FUL Files

January 11, 2013 — D.C. Circuit Decision Upholding DOD Rule May Leave Drug Manufacturers on the Hook for Refunds

January 11, 2013 — FDA Issues Final Guidance Documents on Drug and Medical Device Submissions

January 11, 2013 — FDA Releases Draft Guidance Documents on Providing Submissions in Electronic Format

December 20, 2012 — IRS Issues Notice on ACA Branded Prescription Drug Fee Parameters for 2013

December 19, 2012 — GAO Examines Medicare Dialysis Reimbursement

December 18, 2012 — FDA Issues Two New Draft Guidance Documents Related to the Conduct of Clinical Trials

December 17, 2012 — OIG Releases 2012 Compendium of Unimplemented Recommendations

November 28, 2012 — Upcoming FDA Public Meeting: Framework for Pharmacy Compounding/State and Federal Roles (Dec. 19)

November 28, 2012 — CMS Posts Information on Medicaid Data and the ACA Branded Prescription Drug Fee Program

November 27, 2012 — Massachusetts Issues Final Drug/Device "Sunshine" Rules

November 12, 2012 — November Congressional Health Policy Hearings

November 5, 2012 — Massachusetts Approves Emergency Amendments on State "Sunshine Act" Drug/Device Manufacturer Reporting Requirements

October 30, 2012 — CMS Posts Updated Draft Medicaid Drug Pricing Files

October 16, 2012 — CMS Invites Comments on Draft Medicaid Drug Pricing Data (FULs, NARP, NADAC)

September 27, 2012 — State Collection of Medicaid Rebates for Drugs Paid Through Medicaid MCOs

September 27, 2012 — FDA Meetings on Patient-Focused Drug Development Initiative

September 6, 2012 — Vermont Offers Limited Amnesty to Device and Biologic Manufacturers who Failed to Report Payments to Health Care Providers

September 5, 2012 — FDA Establishes FY 2013 User Fee Rates for Biosimilars and Prescription Drugs

August 16, 2012 — IRS Schedules Nov. 9, 2012 Hearing on ACA Branded Prescription Drug Fee

July 31, 2012 — Congressional Health Policy Hearings

July 25, 2012 — CMS Webinar on Retail Community Pharmacy Consumer Prices Survey (July 26)

July 18, 2012 — OIG Examines Medicare Part D Drug Payments for Hospice Beneficiaries

July 18, 2012 — OIG Reviews Nursing Facility Compliance with Rules for Residents Receiving Atypical Antipsychotic Drugs

July 17, 2012 — Massachusetts Loosens Drug/Device Manufacturer Gift Ban and Disclosure Law, Allows Certain Drug Coupons and Vouchers

July 16, 2012 — FDA Small Entity Compliance Guidance: Toll Free Number Labeling for Drugs

July 16, 2012 — FDA Draft Guidances Describe Product-Specific Bioequivalence Recommendations

July 16, 2012 — FDA Guidance Addresses Genotoxicity Testing and Data Interpretation for Human Drugs

June 28, 2012 — Congress Clears FDA Safety & Innovation Act

June 27, 2012 — Health IT Pilot Targets Prescription Drug Abuse

June 27, 2012 — House Approves Medical Product Counterfeiting Act

June 27, 2012 — GAO Examines HHS Action on Privacy and Security of Prescription Drug Data

June 23, 2012 — CMS Webinar on Medicaid National Average Drug Acquisition Cost Survey (June 28)

June 18, 2012 — House Panel Clears Legislation to Address Medical Product Theft, Counterfeiting

June 8, 2012 — CMS Accepting Comments on Draft Methodology for Calculating National Average Drug Acquisition Cost (NADAC)

May 30, 2012 — CMS Partnership Seeks to Improve Dementia Care In Nursing Homes

May 14, 2012 — Congressional Health Policy Hearings

May 11, 2012 — House Panel Unanimously Approves FDA User Fee Act

May 11, 2012 — FDA Reports on Post-Approval Drug Safety Monitoring