On May 20, 2014, CMS is hosting another call to discuss the National Partnership to Improve Dementia Care in Nursing Homes, which includes as a goal reducing the use of unnecessary antipsychotic medications in nursing homes. This call will focus on efforts to monitor enforcement rates and track surveyor training completion; the role that activity professionals play in the mission to improve dementia care; and nonpharmacologic care approaches.
While attention has been focused on Medicare physician payment data released by CMS yesterday, upcoming Sunshine Act data will shine a new spotlight on financial relationships between physicians and pharmaceutical and medical device companies – with potential FCA implications.
Last week marked the deadline for pharmaceutical and medical device manufacturers and group purchasing organizations (GPOs) to register with and submit aggregate 2013 payment and investment interest data to the Centers for Medicare & Medicaid Services (CMS) on certain financial relationships between themselves and physicians and teaching hospitals, as required by the Physician Payment Sunshine Act.1 In May, manufacturers and GPOs will be required to submit to CMS detailed 2013 payment data. With some exceptions, CMS will be making these data public by September 1, 2014. While the publicly available data are intended to provide more transparency for patients – to allow them to have a better understanding of the financial relationships between physicians and pharmaceutical and medical device companies – patients will certainly not be the only group interested in this public information. The Department of Health and Human Services (HHS) Office of the Inspector General (OIG), Department of Justice (DOJ), and relators’ attorneys will likely utilize these data to initiate investigations and support complaints under the federal False Claims Act (FCA). As with the recent release of the 2012 Medicare Part B Physician Fee Schedule data, members of the media will likely make inferences about certain financial relationships.
The U.S. government recovered $3.8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013.2 Fiscal 2014 looks to be a record-breaking year, with ever-increasing civil settlements by major pharmaceutical companies.3
As the reporting deadlines approach, it is worth considering an interesting, and largely unknown, potential implication of the public availability of these data: How will it affect future FCA litigation? The publically available Sunshine Act data could become relevant to FCA litigation in a variety of ways; two in particular are discussed below.
Anti-Kickback Statute Violations
The data could give rise to suspicions of violations of the federal Anti-kickback Statute (AKS). The AKS makes it a criminal offense to knowingly and willfully offer or pay remuneration to induce the referral of, or arrange for the provisions of, federal health care program business.4 In other words, the law prohibits any person or entity from giving, receiving – or offering to give or receive – anything of value in return for or to induce referrals for businesses covered by Medicare, Medicaid, or any other federally funded health care program. Violators of the AKS face imprisonment, criminal, and civil fines, as well as exclusion from federal health care programs.5
It is easy to see how publishing information regarding payments from pharmaceutical and medical device manufacturers to physicians and teaching hospitals could implicate the AKS, and by extension, the FCA. The Patient Protection and Affordable Care Act (ACA) made explicit that violations of the AKS are also violations of the FCA.6 Any payment from a pharmaceutical or medical device manufacturer to a physician who prescribes a product manufactured by the company providing the payment could be viewed as potentially inappropriate remuneration intended to influence prescribing behavior.
Publically available information reported as a result of the Sunshine Act may also have off-label promotion implications. Notably, reports to CMS must include the name of the drug or the type of device that forms the basis of the payment.7 Tying the payment to a particular drug or type of device could raise suspicions of off-label promotion. A pharmaceutical or medical device manufacturer that promotes its products for uses for which the product has not yet been approved by the United States Food and Drug Administration (FDA), i.e., off-label uses, is at risk of FCA liability. A false claim can arise when a manufacturer promotes a product for off-label, non-covered uses (that is, for a use that both has not been approved by FDA and is not covered by the federal health care programs). Payments going to physicians who specialize in an area that is outside the scope of a pharmaceutical or medical device’s approved indication could necessarily raise suspicions that the manufacturer is promoting the product for unapproved uses.
Besides the risk of government identifying potential issues for further investigation and prosecution as a result of reported Sunshine Act data, private parties may also mine the publically available data. One substantial impediment to relators’ attorneys using Physician Sunshine Payment data in FCA litigation is the limitation that publicly available data cannot form the basis of a whistleblower claim.8 This is known as the public disclosure bar, although the effectiveness of this defense has been diminished with recent FCA amendments.
That said, the Sunshine Act data, even if not the basis of a claim, could nonetheless impact the litigation in many ways. For example, it could provide additional evidence for the government to review in reaching its decision whether to intervene in a qui tam action. Both OIG and DOJ could review the data before it is publicly available to assist in the determination that a given matter warrants intervention. Additionally, the publicly available data – beyond providing flavor in support of an FCA claim and assisting with meeting the heightened pleading standard associated with fraud allegations9 – could be a potential mine for plaintiff attorneys to locate areas of focus. Relators’ attorneys will no doubt track the data to ascertain potential problem drugs or companies about which they can then dedicate efforts to uncovering fraud and abuse in the federal health care system.
It remains to be seen how all of these risks will play out going forward. Courts will have to decide how these new data will fit into FCA litigation. OIG and DOJ will have to determine how much to rely on the new information. And relators’ attorneys will need to make decisions about how many resources to dedicate to mining the Sunshine Act data.
One potential consequence that we are already starting to see occur is that pharmaceutical and medical device manufacturers may halt or limit payments to physicians, and/or that physicians themselves will be reluctant to accept such payments, e.g., for research, for expenses associated with training on a device, and the like. Companies may decide to do so for a variety of reasons, including avoiding the administrative burdens associated with tracking and reporting such payments for purposes of the Sunshine Act, fear of FCA litigation, or for public relations reasons. Many physicians simply do not want their names publicized. It remains to be seen how these trends will evolve.
1 42 C.F.R. § 403.908(a).
2 DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/December/13-civ-1352.html. 3 See, e.g., DOJ Press Release, available at: http://www.justice.gov/opa/pr/2013/November/13-ag-1170.html.
4 42 U.S.C. § 1320a-7.
6 42 U.S.C. § 1320a-7b(g). Note that manufacturers may submit “assumptions documents” as part of Sunshine reporting. Although CMS stated in the preamble to the Sunshine regulations its belief that the contents of such documents “should not be made public,” it acknowledged that it could provide access to the documents during an audit or investigation by other HHS divisions, the Office of Inspector General, or the Department of Justice.
7 42 C.F.R. 403.94(c)(8).
8 31 U.S.C. § 3730(e)(4).
9 Fed. R. Civ. P. Rule 9(b).
CMS has released its preliminary decisions on potential changes to outpatient supervision level requirements for a number of medical services in response to recommendations made last month by the Hospital Outpatient Payment (HOP) Panel. Notably, CMS proposes not to change the supervision level from direct to general for several codes describing injection and intravenous infusion of chemotherapy or other highly complex drugs or complex biological agents. While CMS is proposing to maintain the direct supervision standard for chemotherapy administration, the agency is raising the question of whether to distinguish the supervision level between initial and subsequent administrations of a given chemotherapeutic or biological agent. CMS will accept comments on the preliminary supervision level determinations until April 30, 2014, and final decisions will be effective on July 1, 2014.
The OIG recently offered recommendations to CMS on how to update Medicare payments to end stage renal disease (ESRD) facilities for drugs used by dialysis patients. Based on a review of ESRD drug prices in the first quarter of 2012, the OIG concluded that independent dialysis facilities can purchase ESRD drugs for less than the levels provided in the ESRD base rate (9% below, in the aggregate), but average acquisition costs for hospital based dialysis facilities exceeded the reimbursement amounts (5% above, in the aggregate). Thus the OIG cautioned that any reductions to the ESRD base rate could potentially harm hospital-based dialysis facilities. While dialysis facilities’ average acquisition costs for the majority of drugs under review have decreased over the last 3 years, the average costs for epoetin alfa (which represented more than three-quarters of drug costs in responding facilities) have increased by at least 17%. The OIG also determined that the concluded that the Producer Price Index (PPI) for Prescription Drugs was not an accurate predictor of cost changes for most drugs under review. In addition to rebasing the ESRD base rate to reflect current trends in drug acquisition costs (as is required by law), the OIG recommends that CMS (1) distinguish payments in the ESRD base rate between independent and hospital-based dialysis facilities, and (2) consider updating the ESRD payment bundle using a factor that takes into account drug acquisition costs.
Our Life Sciences Legal Update blog reports today that the FDA’s Office of Prescription Drug Promotion has warned a Swiss drug company about statements the company made on its Facebook page, suggesting that consumers talk to their doctor about a drug without disclosing the risks associated with the product (risks serious enough to require a boxed warning on the label). The FDA action is a reminder that that FDA’s advertising and promotion rules apply regardless of how or where the product is promoted, and the FDA is monitoring social media sites for such activities. For more information, see the full post.
On March 4, 2014, the Obama Administration released its proposed federal budget for fiscal year (FY) 2015. Virtually all types of health care providers, health plans, and drug manufacturers would be impacted by the budget provisions if adopted as proposed – an unlikely scenario given the Republican House leadership’s reaction to the document. Nevertheless, the Medicare and Medicaid savings proposals (many of which are carry-overs from prior budgets) could resurface as spending offsets in the pending negotiations on Medicare physician fee schedule reform legislation or in future budget negotiations. Highlights of the Administration’s Medicare and Medicaid legislative proposals include the following (all savings estimates are for the 10-year period of FYs 2015-2024):
Major Medicare Provider Payment Provisions
The proposed FY 2015 budget includes a package of Medicare legislative proposals estimated to save $407.2 billion over 10 years.
- Reduce Medicare coverage of bad debts from 65% in most cases to 25% over three years starting in 2015 ($30.8 billion/10 years).
- Reduce Medicare indirect medical education add-on payments by $14.6 billion (although a new targeted grant program would reinvest $5.2 billion of these savings).
- 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 ($720 million).
- Reduce payment updates for inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), and home health agencies (HHAs) by 1.1 percentage points each year from 2015 through 2024 (the update could not fall below 0%). The SNF reduction would be accelerated, beginning with a -2.5% update in FY 2015, tapering down to a -0.97% update in FY 2022. These provisions would save $97.9 billion over 10 years.
- Implement bundled payment for post-acute care providers, including LTCHs, IRFs, SNFs, and HHAs beginning in 2019, with rates set to produce a permanent and total cumulative adjustment of 2.85% by 2021, and beneficiary coinsurance equal to current levels ($8.7 billion).
- Adjust the standard for classifying a facility as an IRF (at least 75% of patient cases admitted to an IRF must meet one or more of 13 designated conditions), saving $2.4 billion.
- Reduce by up to 3% payments to SNFs with high rates of care-sensitive, preventable hospital readmissions, beginning in 2018 ($1.9 billion).
- Equalize IRF and SNF payments for certain conditions involving hips and knees, pulmonary conditions, and other conditions selected by the Secretary ($1.6 billion).
- Implement a budget neutral value-based purchasing program for additional provider types, including SNFs, HHAs, ambulatory surgical centers, and hospital outpatient departments beginning in 2016. At least 2% of payments must be tied to the quality and efficiency of care.
- Align Medicare payment for clinical laboratory services with private sector rates and encourage electronic reporting of laboratory results ($7.9 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 ACA provisions requiring reductions to Medicare provider reimbursement ($12.9 billion).
- The budget endorses reform of the sustainable growth rate formula used to update Medicare physician fee schedule payments, including a period of predictable payments followed by reimbursement tied to alternative payment models and value-based purchasing, along the lines of pending Congressional reform legislation.
Prescription Drug Provisions
- Reduce payment for physician-administered Medicare Part B drugs from 106% to 103% of average sales price (ASP). 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. This proposal is estimated to result in $6.8 billion in savings.
- Provide Medicaid-level drug rebates for brand name and generic drugs provided to Medicare beneficiaries who receive Part D low-income subsidies, beginning in 2016 ($117.3 billion).
- Effectively close the Medicare Part D coverage gap by 2016, rather than 2020, by increasing manufacturer “coverage gap” discounts from 50% to 75% beginning in plan year 2016 ($7.9 billion).
- Allow the Secretary to suspend coverage and payment for Part D drugs (1) prescribed by providers who have misprescribed or overprescribed drugs with abuse potential, and (2) that pose an imminent risk to patients. The Secretary also could require additional information on certain Part D prescriptions, such as diagnosis and incident codes, as a condition of coverage.
- Encourage the use of generic drugs by Part D low-income subsidy beneficiaries by modifying copayments ($8.5 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 Affordable Care Act (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, and calculate Medicaid federal upper limits based only on generic drug prices. These proposals are projected to save $8.6 billion over 10 years.
- Direct states to track high prescribers and utilizers of Medicaid prescription drugs ($540 million).
- 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. In addition, the budget 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.
- 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 ($9.1 billion) and modifying the length of exclusivity on brand name biologics ($4 billion).
Major Program Integrity/Efficiency Provisions
- Expand funding for the Health Care Fraud and Abuse Control (HCFAC) program, the Medicaid Integrity Program, and Medicaid Fraud Control Units, and other Department of Health and Human Services (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 ($60 million in savings).
- Authorize civil monetary penalties or other intermediate sanctions for providers who do not update enrollment records ($90 million).
- Expand authority to investigate and prosecute allegations of abuse or neglect of Medicaid beneficiaries in non-institutional settings.
- 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 meets certain accountability standards, as defined by the Secretary effective for calendar year 2016 ($6 billion).
- Expand the authority of the Centers for Medicare & Medicaid Services (CMS) to require prior authorization for all Medicare fee-for-service items, and mandate prior authorization of advance imaging services and power mobility devices ($90 million).
- Allow the Secretary to create a system to validate practitioners’ orders for certain high-risk items and services.
- Increase reporting and review of so-called “higher-risk” banking arrangements to receive Medicare payments (such as “sweep accounts” that immediately transfer funds from a financial account to an investment account in another jurisdiction, preventing Medicare from recovering improper payments).
Other Medicare & Medicaid Provisions
- Increase the minimum Medicare Advantage (MA) coding intensity adjustment ($31 billion).
- 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.
- Revise beneficiary cost-sharing requirements, including increased income-related premiums under Parts B and D, a new home health copayment, increased Part B deductible for new enrollees, and increased premiums for beneficiaries with Medigap policies with particularly low cost-sharing requirements.
- Base Medicaid rates for DME on Medicare rates ($3.1 billion).
- Rebase future Medicaid Disproportionate Share Hospital (DSH) allotments to account for levels of uncompensated care under ACA coverage expansion ($3.3 billion).
The Food and Drug Administration (FDA) has just announced that it will hold a public hearing March 25 and 26, 2014 to obtain input on the Agency’s current process for reviewing over-the-counter (OTC) drugs. This is a significant advancement in FDA’s long-standing plan to overhaul the OTC drug system. According to the announcement, the Agency’s OTC drug review “needs a critical examination at this juncture to examine whether and how to modernize its processes and regulatory framework.”
Teeing up the importance of the public hearing, Dr. Janet Woodcock, the Director of FDA’s Center for Drug Evaluation and Research (CDER), informed the Wall Street Journal that the Agency was “looking for creative ideas about how to improve the process.”1 According to Dr. Woodcock, “The current system isn’t working well for the public or for us.” Additional details are available after the jump.
THE CURRENT SYSTEM
The FDA’s announcement highlights a number of challenges associated with the current OTC drug review process (sometimes referred to as the OTC Monograph Process, OTC Monograph, or OTC Drug Review), a process that has not changed in more than 40 years. FDA sees the biggest challenges as the following:
- The large number of products currently on the market for which there are not yet final monographs. Much of the OTC marketplace is still not covered by final monographs, and data may be insufficient for FDA to determine safety and/or efficacy. An unintended consequence of the enforcement discretion given to products marketed in accordance with tentative final monographs (TFMs) is that it creates negative incentives for sponsors to conduct studies or otherwise respond to safety concerns, as to do so may slow the final monograph process.
- The current system’s limitations on FDA’s ability to change the monograph to address new safety or efficacy issues. The current process is not sufficiently agile to adapt quickly to new safety concerns that arise either during the rulemaking process or after issuance of a final monograph.
- The inability of the current OTC Drug Review to easily accommodate innovative changes to OTC products. According to the notice, the FDA generally thought at the time it established the OTC drug review process “that safety and effectiveness evaluations for the various active ingredients would be fairly straightforward and would not need continuous reexamination over time.” Yet, FDA has learned that this is not the case. Scientific advances have given rise to new information about how drugs interact with the body, changing how FDA evaluates drugs. This is particularly relevant in the context of pediatric OTC products, as the preferred approach to pediatric dosing has changed since the OTC drug review was instituted. The current OTC drug review process relies on extrapolated data from an adult population to determine pediatric dosing, however, as opposed to the currently accepted practice of relying on data from actual use in the pediatric population.
THE PROPOSED OVERHAULS
After discussing what it views as the current shortcomings with the system, the FDA asks for input as to how it can improve and modernize the OTC process. FDA is looking for changes to the existing framework or ideas for a complete replacement. The Agency presents some ideas as a starting point for discussion, as noted below. The FDA wants to hear all ideas – from detailed proposals to initial thoughts as to why the current process is not fully successful, noting that public comments “need not be comprehensive to be useful.”
The following are some of FDA’s preliminary proposals to modernize the OTC drug review program for which it seeks public input:
- Identify a streamlined process that would allow a prompt resolution of existing tentative final monographs. FDA is considering ways to more efficiently bring TFMs to closure.
- Issue monographs by administrative order. FDA is examining streamlining the monograph process to mimic the device reclassification process put in place by the Food and Drug Administration Safety and Innovation Act. Under this proposed process, monographs could be established by administrative order, after issuance of a proposed order for public comment.
- Issue regulations to require product-specific information and expand the use of guidance. FDA is raising the possibility of new regulations that could require sponsors to submit limited information about individual products prior to marketing. This could be similar to, but less detailed than, a new drug application (NDA).
- Expand the NDA deviation process. The OTC drug review process provides for an NDA deviation process. A sponsor applies for this deviation by showing that the product complies with all the conditions of a monograph except for the deviation, and provides FDA adequate data to demonstrate the safety and effectiveness of the product with the deviation. FDA questions why industry has not utilized this option and seeks input as to whether this process could be improved to increase utilization.
FDA will hold the public hearing March 25 and 26, 2014, at FDA’s White Oak Campus in Silver Spring, Maryland. The registration deadline is March 12, 2014, and FDA will be accepting comments until May 12, 2014.
1 http://online.wsj.com/news/articles/SB10001424052702304275304579395813156008466?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304275304579395813156008466.html (this article requires a subscription).
Coming to a TV Near You? FDA Seeks Public Input on Limiting Risks Presented in Direct-to-Consumer Television Ads
This post was written by Jennifer Pike.
In a notice published in the Federal Register on February 18, 2014, the Food and Drug Administration (FDA) asked for feedback on a proposed research study related to prescription drug television advertisements. The study, Disclosure Regarding Additional Risks in Direct-to-Consumer (DTC) Prescription Drug Television (TV) Advertisements (Ads), would investigate the impact of limiting the risks presented in DTC prescription drug TV ads to those that are serious and actionable. The ads would also include a disclosure statement to alert consumers that there are other product risks not included in the ad.
Current FDA regulations (21 CFR § 202.1) require that TV and radio ads present a product’s major risks in audio, or audio and visual parts of the ads (“major statements”). FDA is concerned that these major statements are too long, resulting in reduced consumer comprehension, minimization of important risk information, and potentially, therapeutic noncompliance due to fear of side effects. At the same time, and in conflict with the above, FDA is concerned that DTC TV ads do not include adequate risk information. FDA believes that providing limited risk information in ads will promote improved consumer perception and understanding of serious and actionable drug risks. Comments to the study should be submitted in writing, or electronically at www.regulations.gov, by April 21, 2014.
On February 10, the House Energy and Commerce Subcommittee on Health held a hearing entitled “Examining Drug Shortages and Recent Efforts to Address Them.” In connection with the hearing, the Government Accountability Office (GAO) released a report that concluded that the number of shortages remains high, even though the FDA has taken steps to prevent and mitigate shortages (e.g., expediting application reviews and inspections, exercising enforcement discretion in appropriate cases, and helping manufacturers respond to quality problems). Some of the causes of shortages are beyond the agency’s authority, however, since the FDA “does not have control over private companies’ business decisions,” and cannot, for example, require manufacturers to start producing or continue producing drugs, or to build redundant manufacturing capacity. Nevertheless, the GAO called on the FDA to strengthen its internal controls over its drug shortage data, conduct periodic analyses to routinely and systematically assess drug shortage information, and use this information to proactively identify drug shortage risk factors.
President Obama has signed into law the Consolidated Appropriations Act of 2014, which provides $1.012 trillion in discretionary funding for the operations of the federal government through September 30, 2014. In addition to setting overall funding levels for HHS agencies, the law specifies funding for numerous HHS policies and initiatives, such as additional funding for program integrity effort involving the 340B drug pricing program and research on the impact of health information technology on patient safety, and reduced funding for the IPAB and certain other ACA activities. The agreement also includes directives for HHS to improve fraud and abuse efforts, including using the latest technology to ensure only valid beneficiaries and valid providers receive benefits (although on the other hand, the agreement raises concerns that the Recovery Audit Contractor program includes incentives “to take overly aggressive actions”). In addition, the agreement highlights more Congressional interest in more narrow HHS policies, such as objections to the criteria CMS uses to package drug costs under the hospital outpatient prospective payment system, and concerns that rural patients maintain access to needed health services if CMS proceeds with a proposal to remove critical access hospital status from certain facilities.
On February 26, 2014, CMS is hosting a call to discuss the National Partnership to Improve Dementia Care in Nursing Homes, which includes as a goal reducing the use of unnecessary antipsychotic medications in nursing homes. This call will focus on the role of surveyors in the implementation of the partnership, the importance of leadership, and the correlation between proper pain assessment and antipsychotic medication use.
This post was written by Jillian W. Riley.
On January 16, 2014, the Food and Drug Administration (FDA) issued a final guidance document for industry providing specific recommendations on the content and format of Dear Health Care Provider (DHCP or “Dear Doctor”) letters. DHCP letters are an important means of communicating new information to the health care provider community about a product that is already on the market. The guidance provides insight into (1) when to send a DHCP letter, (2) what information should be included, (3) how to organize the letter, and (4) how to format the letter. The recent guidance finalizes a draft guidance FDA published in November of 2010.
The guidance stresses the importance of collaborating with FDA when crafting DHCP letters to ensure that a DHCP letter is appropriate under the circumstances, that the target audience has been identified, and that the message is clearly conveyed. Additionally, the guidance provides template examples to aid industry in drafting a clear and effective DHCP letter.
As reported on our Life Sciences Legal Update blog, the FDA has issued draft guidance addressing the unique challenges of drug promotion in the age of social media. Specifically, the draft guidance addresses how to submit interactive promotional media for postmarket review. Comments on the document, “Draft Guidance for Industry on Fulfilling Regulatory Requirements for Postmarketing Submissions of Interactive Promotional Media for Prescription Human and Animal Drugs and Biologics,” are due April 14, 2014.
On January 6, 2014, CMS released a proposed rule that would revise the Medicare Advantage (MA) and Part D prescription drug program regulations to implement various statutory requirements, strengthen beneficiary protections, improve program efficiencies and payment accuracy; and clarify program requirements. CMS estimates that the proposed rule would reduce Medicare spending by $1.3 billion between 2015 and 2019. The sweeping proposed rule is summarized after the jump.
Among many other things, the proposed rule would:
- Revise the definition of “negotiated prices” to require that all price concessions from pharmacies are reflected in these prices. Under the proposed rule, negotiated prices would mean prices for covered Part D drugs that: (1) the Part D sponsor (or other intermediary contracting organization) and the network dispensing pharmacy or other network dispensing provider have negotiated as the amount such network entity will receive, in total, for a particular drug; and (2) are inclusive of all price concessions and any other fees charged to network pharmacies; and (3) include any dispensing fees; but (4) exclude additional contingent amounts, such as incentive fees, only if these amounts increase prices and cannot be predicted in advance; and (5) may not be rebated back to the Part D sponsor (or other intermediary contracting organization) in whole or in part.
- Modify CMS’s interpretation of the Affordable Care Act’s (ACA) “drug categories or classes of clinical concern” requirement. Instead of mandating coverage of all drug products in a particular class on all Part D formularies, CMS generally would limit protected classes to those meeting criteria established under the regulation. The proposed criteria generally would result in formulary inclusion of all drugs within the antineoplastic, anticonvulsant, and antiretroviral drug classes (subject to proposed exceptions), but the rule would not require all drugs from the antidepressant and immunosuppressant drug classes to be included on all Part D formularies. While antipsychotics would not meet the criteria, CMS proposes that they remain protected at least through 2015 to ensure that CMS has “not overlooked a need for any transitional consideration.”
- Modify rules for “preferred pharmacies” within Part D plans’ pharmacy networks, so as to allow Part D sponsors to reduce copayments or coinsurance at such pharmacies only if they offer consistently lower negotiated prices than are available from other pharmacies in the pharmacy network.
- Modify the “any willing pharmacy” requirement to require plan sponsors to contract with any willing pharmacy able to meet one set of the terms and conditions offered by that plan for that type of pharmacy. CMS also would require that, in establishing its contracted pharmacy network, a Part D sponsor must offer and publicly post standard terms and conditions for network participation for each type of pharmacy in the network, and (1) may not require a pharmacy to accept insurance risk as a condition of participation in the PDP sponsor's contracted pharmacy network, and (2) must offer payment terms for every level of cost sharing offered under its plans (consistent with CMS limitations on the number and type of cost sharing levels) and for every type of similarly-situated pharmacy.
- Limit prescription drug plans sponsors to offering no more than two Part D plans in the same service area.
- Implement an ACA requirement that MA plans and Part D sponsors report and return identified Medicare overpayments.
- Address prescription drug abuse by, among other things, authorizing CMS to revoke a physician’s or eligible professional’s Medicare enrollment if he or she has a pattern of prescribing Part D drugs that is abusive and represents a threat to beneficiary health and safety or otherwise fails to meet Medicare requirements, or if the prescriber’s Drug Enforcement Administration (DEA) certificate of registration or state license is suspended or revoked. The rule also would require that prescribers of Part D drugs enroll in Medicare as a condition of coverage for their prescriptions.
- Establish U.S. citizenship and lawful presence as an eligibility requirement for enrollment in MA and Part D plans.
The official version of the rule will be published on January 10, 2014. CMS will accept comments on the proposed rule until March 7, 2014.
This post was written by Jennifer Pike.
The Food and Drug Administration (FDA) has announced the availability of a final guidance document which describes the qualification process for drug development tools (DDTs) intended for use, over time, in multiple drug development programs. DDTs are methods, materials, or measures that aid drug development. Examples of DDTs include biomarkers and patient reported outcome instruments.
The purpose of the guidance document is to describe the formal process that FDA will use in working with sponsors of DDTs to guide them as they refine the tools and rigorously evaluate them for use in the regulatory process. The guidance also provides a framework for interactions between FDA and sponsors to support work towards qualification of DDTs, as well as explains the kinds of data that should be submitted to support qualification of a DDT and creates a mechanism for FDA’s formal review of the data to ultimately qualify the DDT. For purposes of the guidance, the submitter of a DDT is the person, group, organization (including the federal government), or consortium that takes responsibility for and initiates a DDT qualification proposal using the procedures described in the guidance.
The creation of the DDT qualification process is one of multiple initiatives FDA has undertaken, as a result of its 2004 FDA’s Critical Path Initiative, to support the development of new DDTs. DDTs can help streamline the drug development process, improve the chances for clinical trial success, and yield more information about a treatment or disease. Comments to the guidance may be submitted at any time at www.regulations.gov.
The Department of Justice (DOJ) recently announced that it recovered $3.8 billion in settlements and judgments in civil False Claims Act cases in fiscal year (FY) 2013, including health care fraud recoveries totaling approximately $2.6 billion. The DOJ notes that about $1.8 billion in recoveries involved alleged false claims for drugs and medical devices under federally insured health programs (with an additional $443 million recovered for state Medicaid programs). The Department also reports that in FY 2013, a record 752 qui tam/whistleblower suits were filed and $2.9 billion was recovered in such suits (with whistleblowers recovering $345 million).
On December 10, 2013, CMS published a final rule that updates Medicare payment and other policies under the hospital outpatient prospective payment system (OPPS) and the ambulatory surgical center (ASC) prospective payment system (PPS) for calendar year (CY) 2014. Key provisions of the final rule include the following:
- CMS is increasing OPPS rates by 1.7% for 2014, which reflects a 2.5% hospital market basket increase, minus a 0.5% multifactor productivity (MFP) adjustment and an additional 0.3% reduction (both mandated by the Affordable Care Act, or ACA). The OPPS update is subject to other adjustments, including a 2% reduction for hospitals that do not meet quality reporting requirements.
- CMS is adopting a revised version of its proposal to establish larger payment bundles to maximize hospitals’ incentives to provide care in an efficient manner. Specifically, CMS will package the following five new categories of supporting items and services into the procedural ambulatory payment classification (APC) payment: (1) drugs, biologicals, and radiopharmaceuticals that function as supplies when used in a diagnostic test or procedure; (2) drugs and biologicals that function as supplies or devices when used in a surgical procedure; (3) certain clinical diagnostic laboratory tests; (4) procedures described by add-on codes (except for add-on codes for drug administration services and, for CY 2014 only, add-on codes assigned to device-dependent APCs); and (5) device removal procedures. Note that in some cases separate payment is permitted if these services are reported alone on a claim. CMS is not finalizing its proposed policy to include two other categories of items in its expanded packaging policy: ancillary services with a CY 2013 status indicator of “X,” and diagnostic tests on the bypass list.
- CMS has adopted its proposal to create 29 all-inclusive, “comprehensive APCs” to replace 39 existing device-dependent APCs, but CMS is delaying implementation until 2015. Under this policy, CMS will package into the comprehensive APCs all “adjunctive services” provided during the delivery of the comprehensive service, which results in a single prospective payment for all charges on the claim, excluding only charges for services that cannot be covered by Medicare Part B or that are not payable under the OPPS. Under this policy, the comprehensive APC payment will include all outpatient services, including: diagnostic procedures, laboratory tests and other diagnostic tests, and treatments that assist in the delivery of the primary procedure; visits and evaluations performed in association with the procedure; coded and uncoded services and supplies used during the service; outpatient department services delivered by therapists as part of the comprehensive service; durable medical equipment (DME), as well as prosthetic and orthotic items and supplies when provided as part of the outpatient service; and any other outpatient components reported by HCPCS codes that are provided during the comprehensive service (except for certain services including mammography services, ambulance services, brachytherapy seeds, and pass-through drugs and devices). Because CMS has delayed implementation until 2015, CMS will accept comments on this policy to be considered in next year’s rulemaking.
- CMS has adopted its plan to collapse the current five levels of outpatient clinic visit codes into a single code for each unique type of outpatient hospital visit. CMS is not finalizing its proposal to replace the current five levels of codes for each type of emergency department visits, however; CMS will reassess this policy issue and consider revisions in a future rulemaking.
- For 2014, CMS is calculating OPPS relative payment weights using distinct cost-to-charge ratios for cardiac catheterization, CT scan, and MRI, and implantable medical devices. To address commenters’ concerns about the impact of this change on rates for MRI and CT procedures, CMS has adopted a temporary policy that accommodates variations in hospital cost allocation methods, which has the effect of mitigating the rate reductions for these procedures compared to the proposed rule. CMS will allow four years for hospitals to transition to the cost allocation methods identified in the final rule.
- CMS will continue a policy adopted last year setting OPPS payment for separately payable drugs and biologicals without pass-through status at average sales price (ASP) plus 6% (which it calls the "statutory default" rate), without an adjustment for pharmacy overhead costs. The 2014 threshold for separate payment for outpatient drugs is a cost per day that exceeds $90, compared to $80 in 2013.
- With regard to ASC policy, the final rule increases ASC rates by 1.2% compared to 2013 levels. ASCs that do not meet quality reporting requirements are subject to a 2% payment reduction. As proposed, ancillary services that are packaged under the OPPS also will be packaged under the ASC payment system for CY 2014.
- In addition, the final rule addresses, among many other things: refinements to the Hospital Outpatient Quality Reporting Program, the ASC Quality Reporting Program, and the Hospital Value-Based Purchasing Program; payment for partial hospitalization services; a requirement that individuals furnish “incident to” hospital or critical access hospital outpatient services in compliance with state law; and changes to Quality Improvement Organization eligibility and contracting rules.
Comments on limited provisions of the rule will be accepted until January 27, 2014.
On December 2, 2013, CMS published its final rule updating Medicare end-stage renal disease (ESRD) PPS rates and policies for 2014. Instead of cutting rates by more than 9%, as CMS proposed this summer, the final rule holds 2014 rates flat compared to 2013. This improved reimbursement picture is a result of CMS adopting a multi-year phase-in of a drug utilization adjustment to the base rate mandated by the ATRA, which is intended to reflect changes in ESRD-related drugs and biologicals use since 2007. Instead of making the full drug utilization adjustment in 2014, which would be -$29.93, CMS is applying a $8.16 reduction in 2014, and the remainder of the adjustment will be phased in over the next two to three years (to be determined in the 2016 rulemaking). The 2014 drug utilization adjustment offsets other payment updates in the rule, including the 2.5% base rate update (derived from a 3.2% market basket update reduced by a 0.4% productivity adjustment). The rule also finalizes a 50% increase to the home dialysis training add-on payment adjustment for peritoneal dialysis and home hemodialysis training treatments. Moreover, CMS is updating ESRD Quality Incentive Program measures and scoring methodologies for 2016. Note that 2014 is the last year of the transition to the ESRD PPS; all ESRD facilities will be paid 100% of the ESRD PPS rate for services furnished on or after January 1, 2014. In addition to ESRD policy changes, the final rule addresses Medicare coverage of and payment for durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), which are discussed in a separate post.
This post was written by Kevin Madagan.
On November 27, 2013, President Obama signed into law H.R. 3204, the “Drug Quality and Security Act” (the “Act”), bipartisan drug distribution security legislation. Among other things, the sweeping measure: clarifies current federal law and regulatory oversight regarding pharmacy compounding; establishes a uniform, national drug tracking and tracing framework; mandates national licensure standards for wholesale distributors and third-party logistics providers; and preempts state product tracing requirements. The following is an overview of the Act and highlights of initial FDA implementation guidance.
Clarification of federal law and regulatory oversight regarding pharmacy compounding
The Act clarifies current federal law and regulatory oversight by distinguishing between traditional compounders and outsourcing facilities. It also requires enhanced communication between FDA and state regulators about compounding entities.
An outsourcing facility is a facility that compounds sterile drugs by or under the direct supervision of a licensed pharmacist, is registered with FDA as an outsourcing facility, and complies with all standards governing such facilities. Outsourcing facilities will need to comply with certain adverse event reporting requirements and report biannually (June/December) to FDA the drugs compounded during the previous 6-month period. FDA will subject outsourcing facilities to risk-based inspections. The benefit to registering as an outsourcing facility is that drugs compounded in such facilities will be exempt from new drug requirements, labeling requirements, and track and trace requirements. However, new labeling standards will apply to drugs compounded in outsourcing facilities. For instance, the label for a drug compounded in an outsourcing facility will need to contain the statements: “This is a compounded drug” (or a reasonable comparable alternative statement that prominently identifies the drug as a compounded drug) and “Not for resale.” The statement “Office Use Only” will be required on the labels of drugs that are dispensed or distributed other than pursuant to a prescription for an individual identified patient.
The Act requires enhanced communication between FDA and state regulators about compounding facilities. Specifically, state boards of pharmacy must submit information to FDA describing any “actions taken against compounding pharmacies” for issues pertaining to compounding, including, for example, “the issuance of a warning letter, or the issuance of sanctions or penalties, by a state for violating the state’s pharmacy regulations pertaining to compounding.” State boards of pharmacy must also submit any information “expressing concerns” that a compounding pharmacy “may be” acting contrary to federal pharmacy compounding laws. The federal government must consult with the National Association of Boards of Pharmacy before implementing these mandatory reporting standards, and then must “immediately” notify “state boards of pharmacy” when it receives one of these mandatory reports or when it determines that a pharmacy is acting contrary to federal pharmacy compounding laws.
FDA recently issued numerous statements and draft guidance documents about how it interprets and intends to implement these and other requirements of the Act.
- FDA Draft Guidance: Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act (Dec. 2013).
- Compounding and the FDA: Questions and Answers.
- FDA Draft Guidance: Registration for Human Drug Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act (Dec. 2013).
- FDA Draft Guidance: Interim Product Reporting for Human Drug Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act (Dec. 2013).
- FDA Implementation Statement (Dec. 2013).
Uniform, national drug tracking and tracing framework
The Act establishes a uniform, national drug tracking and tracing framework to track prescription drugs from the manufacturer to the pharmacy. It does this by requiring manufacturers to serialize prescription drugs at the unit level. The Act then establishes unit-level product tracing requirements for “downstream” pharmaceutical supply chain members (drug manufacturers, repackagers, wholesale distributors, and dispensers).
National licensure standards for wholesale distributors
Beginning January 1, 2015, the Act requires any person who owns or operates an establishment that engages in wholesale distribution to report the following information to the Secretary on an annual basis: (1) each state by which the person is licensed and the appropriate identification number of each such license; (2) the name, address, and contact information of each facility at which, and all trade names under which, the person conducts business. Wholesale distributors must also report to the Secretary “within a reasonable period of time and in a reasonable manner” (as determined by the Secretary) any “significant disciplinary actions, such as the revocation or suspension of a wholesale distributor license,” taken by a state or the federal government.
For the purpose of ensuring uniformity with respect to wholesale distribution standards, the Act requires the Secretary to establish additional wholesale distribution standards governing: (1) the storage and handling of prescription drugs, including facility requirements; (2) the establishment and maintenance of records of the distribution of such drugs; (3) the furnishing of a bond or other equivalent means of security; (4) mandatory background checks and fingerprinting of facility managers or designated representatives; (5) the establishment and implementation of qualifications for key personnel; (6) the mandatory physical inspection of any facility to be used in wholesale distribution; and (7) the prohibition of certain persons from receiving or maintaining licensure for wholesale distribution (e.g., persons convicted of a felony for conduct relating to wholesale distribution). In addition, if a state chooses not to establish a licensing program for a wholesale distributor, the federal government must license the distributor and collect reasonable fees to cover the costs of administering a federal licensing program for entities in such states.
National licensure standards for third-party logistics providers
Beginning one year after the date of enactment of the Act, a facility of a third-party logistics provider must report to the federal government on an annual basis: (1) the state by which the facility is licensed and the appropriate identification number of such license; and (2) the name and address of the facility and all trade names under which such facility conducts business. If a state chooses not to establish a licensing program for a third-party logistics provider, the federal government must license the provider and collect reasonable fees to cover the costs of administering a federal licensing program for entities in such states. The Act also allows for a third-party accreditation program to be developed to license providers and requires the federal government to issue regulations regarding the standards for licensing third-party logistics providers. Third-party logistics providers will be subject to periodic inspection by their licensing authority and must provide the applicable licensing authority, upon a request by such authority, a list of all product manufacturers, wholesale distributors, and dispensers for whom the third-party logistics provider provides services.
Preemption of state product tracing requirements
The product tracing requirements set forth in the Act preempt state product tracing requirements, including paper or electronic pedigree systems. Preemption resolves a long-standing problem facing the drug distributor industry: the increasingly complex, and often conflicting, state pedigree requirements, many of which are not fully established or have staggered implementation deadlines.
On November 22, 2013, CMS is hosting a Special Open Door Forum to discuss the design and implementation of the Medicare Intravenous Immune Globulin (IVIG) Demonstration. The purpose of the demonstration is to evaluate the impact of providing payment for items and services needed for the in-home administration of IVIG for the treatment of primary immune deficiency disease.