As the September 1, 2023 deadline for Centers for Medicare & Medicaid Services (CMS) to publish the first 10 “selected drugs” subject to negotiation of “maximum fair prices” under Medicare Parts B and D fast approaches, CMS has recently specified information that manufacturers must submit in order for their drugs to qualify for the “Small Biotech Exception” to being included on the list. The information is to be submitted during the summer of 2023; the specific deadline has not yet been announced.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA). Among other provisions, the IRA provides for the CMS to negotiate “maximum fair prices” with manufacturers of “selected drugs” covered under Medicare Parts B and D. The price negotiation process begins on September 1, 2023, when CMS is required to publish the list of the first 10 selected drugs subject to negotiation, for maximum fair prices which will take effect beginning January 1, 2026.

The IRA provides that the selected drugs will be the 10 “negotiation-eligible drugs” having the highest total expenditures under Medicare Part D during the period June 1, 2022 through May 31, 2023. Negotiation-eligible drugs generally consist of “qualifying single-source drugs”, which are generally defined as branded drugs and biologicals approved by the Food and Drug Administration (FDA) at least 7 years (with respect to drugs) or 11 years (with respect to biologicals) before the date the list is published, and which do not have a marketed generic equivalent or biosimilar. However, for 2026 through 2028, the IRA provides that negotiation-eligible drugs exclude certain drugs under what CMS refers to as the “Small Biotech Exception”.

Continue Reading CMS Specifies Info Needed for Small Biotech Exception to Medicare Drug Price Negotiation

The three agencies that oversee the independent dispute resolution (IDR) process established by the No Surprises Act have notified certified IDR entities that they should not issue any new payment determinations while the agencies evaulate and update IDR guidance to comply with a recent court decision vacating provisions of the IDR rule.

The notice comes in response to an order from the U.S. District Court for the Eastern District of Texas which vacated portions of the IDR final rule. For more information on the court’s order see our previous blog post. The notice, posted on the website for the Centers for Medicare and Medicaid Services, instructed certified IDR entities to recall any payment determinations issued after February 6, 2023 (the date of the court’s decision) and to stop any further payment determinations until they receive further guidance from the departments. The notice specifically tells the entities to continue working through other parts of the IDR process.

Reed Smith will continue to follow developments of the No Surprises Act, its implementing regulations, and the dispute resolution and court processes around application of both. For more information about this rule or for advice on how this will apply to your business, please reach out to the health care attorneys at Reed Smith, LLP.

[Note, this is Part 3 in an ongoing series of posts exploring substantive aspects of the Consolidated Appropriations Act, 2023 (P.L. 117-328) (referred to hereafter as 2023 CAA). Earlier parts covered Medicare Payments and the PIE Act]

The Modernization of Cosmetics Regulation Act of 2022 (MoCRA) is Subtitle E of the Food and Drug Administration Title of the 2023 CAA. The subtitle itself is a major change for the cosmetics industry, bringing almost all manufacturers and distributors into a regulatory and reporting structure similar to that currently used by the FDA to govern drugs and medical devices.

The Senate and House committee markups for both versions of the FDA User Fee legislation included a version of this law. However, the final version of that legislation had almost all policy riders stripped from it. But, it reappeared in the 2023 CAA and is now law.

So, what is MoCRA and what does it do? As with the previous posts on the 2023 CAA, we will go a little deeper on this than a regular blog post. That approach is particularly warranted here since this is an entirely new regulatory structure.

Continue Reading Health Provisions of the Consolidated Appropriations Act, 2023: Part 3 Cosmetics Regulation

For the second time in 12 months, a federal district court has set aside provisions of the No Surprises Act’s Independent Dispute Resolution Final Rule on the grounds that the portions of the rule that provide guidance to arbitrators on how to weight price submissions violate the statute’s requirements.

This decision from Judge Jeremy D. Kernodle for the U.S. District Court for the Eastern District of Texas in a group of challenges to the rule, consolidated under Texas Medical Association v. U.S. Department of Health & Human Services (No. 6:22-cv-372), follows closely on the Requirements Related to Surprise Billing Final Rule issued in August 2022 (August Rule), which sought to address earlier criticisms of the independent dispute resolution process, and marks the second time that the rule has been vacated in part and sent back to the three agencies for another chance.

The previous remand was covered in an earlier post on this blog. In both that instance and in this one, the court took issue with the prominence of the “qualifying payment amount” or QPA. The QPA is a statutorily defined payment rate that represents the median contracted rates recognized by an insurer for the same or similar items or services in the same geographic area.

Continue Reading Portions of No Surprises Act IDR rule procedures set aside by federal court again

In December 2022, the New York City Council introduced the Secure Jobs Act. The Act attempts to redefine the long-established system of at-will employment by requiring New York City employers to provide “just cause” before firing an employee. The Act builds on December 2020 legislation that imposed similar restrictions within the fast food industry, and while covered in depth on our Employment Law Watch blog, we are sharing more broadly, given the significant number of health care and life sciences workers in New York City

The Act includes the following significant parts:

  • If an employer fires an employee for a violation of a work rule, the Act requires the employer to show that the employee knew or should have known of the rule that was violated, that the employee received adequate training regarding the rule, and that progressive discipline was applied reasonably and equitably; and
  • It requires an employer to provide the employee with a written explanation within five days of discharge identifying the precise reasons for the termination including a copy of any materials the employer used to make the discharge decision.

If passed, the Act would amend New York City’s anti-discrimination laws and fundamentally alter the employer-employee relationship in the Big Apple. The Act would apply to all private sector employers with at least four workers in New York City, which roughly covers four million jobs, as reported by the New York State Department of Labor. The Act is particularly relevant to the life science industry, as it is reported that the NYC Metro area (which includes New York City, Long Island, the Hudson Valley, northern New Jersey, and Connecticut) leads the country with approximately 150,000 life sciences jobs and over 5,000 businesses.

Reed Smith will continue to monitor developments of the Act, which is currently awaiting the members of the New York City Council’s Committee on Consumer and Worker Protection to vote upon it before full Council vote. Follow Employment Law Watch to stay updated.

The Biden Administration plans to put an end to the COVID-19 health emergencies on May 11, 2023, according to a Statement of Administration Policy submitted to the Rules Committee of the House of Representatives today.

The statement was presented in opposition to two items that the committee was considering for submission to the full House: The Pandemic is Over Act (H.R. 382) and a resolution relating to a national emergency declared by the President (H.J. Res. 7).

The administration’s policy statement indicated that the plan is to end both the public health emergency (PHE) declaration that was issued by the Secretary of Health and Human Services in January 2020 and the related national emergency issued by President Trump in March 2020.

Continue Reading Administration may end public health emergencies in May 2023

[Note, this is Part 2 in an ongoing series of posts exploring substantive aspects of the Consolidated Appropriations Act, 2023 (P.L. 117-328) (referred to hereafter as 2023 CAA). Part 1, available here, covered changes in Medicare payment rates.]

Buried in the “Miscellaneous” chapter of Subtitle F (“Cross-Cutting Provisions”) of the Food and Drug Administration Title (Title III) of the 2023 CAA is Section 3630, a provision without a short title called “Facilitating exchange of product information prior to approval.”

This provision was originally proposed as the Pre-approval Information Exchange Act (or PIE Act) in March 2022 and was included in the House version of the Food and Drug Administration user fee legislation before being dropped from that legislation along with almost all other policy riders in a deal to get the FDA User Fee program approved before it expired.

But the same language was included in the 2023 CAA that was signed into law on Dec. 29, 2022. And again, while it was not directly entitled as such in the law, it is the PIE Act and that is how this post will refer to it. So, exactly what is the PIE Act and what does it do?  Before assuming there is “PIE” for everyone, read more for important content on the boundaries of this law, and remaining challenges for companies seeking to exchange information under this statutory authority.

Continue Reading Health Provisions of the Consolidated Appropriations Act, 2023: Part 2 The PIE Act

On December 28, 2022, the Department of Health and Human Services’ Office of Inspector General (OIG) issued a favorable advisory opinion on a proposal by a drug manufacturer to enter into an arrangement with certain hospitals to provide up to a specified number of free samples of a long-acting antipsychotic drug for inpatient use.

The OIG indicated it would not impose administrative sanctions, despite the fact that there is no safe harbor available under the federal Anti-Kickback Statute (AKS) to protect the proposed arrangement.

Continue Reading OIG approves arrangement involving free drug samples for inpatient hospital use

Can a hospital be sued as a seller in a pharmaceutical product liability action?

That may be the case in Oregon as a result of a recent Court of Appeals decision there. Given the strict liability nature of the Oregon law, this is an important determination.

Stephen McConnell has the details in a post on the Reed Smith Drug & Device Law Blog.

The Department of Health and Human Services recently issued a proposed rule that would streamline the federal regulations governing the confidentiality of substance use disorder (SUD) patient records at 42 CFR Part 2 (Part 2) with the Health Insurance Portability and Accountability Act and its implementing regulations (HIPAA). Comments on the proposed rule are due to HHS by January 31, 2023

For years, health care providers regulated by both Part 2 and HIPAA and their patients, have wrestled with the inconsistencies across these two privacy frameworks. Part 2, for example, currently imposes different patient consent requirements and disclosure restrictions on Part 2-protected SUD treatment records (Part 2 Records) than HIPAA, even though such records often constitute protected health information (PHI) as well. The inconsistencies (and in some cases, conflicts) between HIPAA and Part 2 requirements have created barriers to information sharing and confusion and compliance challenges for entities regulated under both frameworks, which in turn have unnecessarily impeded treatment access and care coordination.

As noted in the HHS fact sheet and the press release issued by the Substance Abuse and Mental Health Services Administration (SAMHSA), the proposed rule would, if finalized, enhance care coordination, afford patients a formal right of access to their SUD records, and extend HIPAA’s breach notification standards to Part 2-regulated providers and information. The proposed rule would also allow health care providers to align internal privacy compliance programs, the importance of which is underscored by another proposal to impose the same HIPAA civil and criminal penalties on regulated providers for noncompliance with Part 2 regulations.

Continue Reading HHS proposes update to Part 2 confidentiality regulations to align with HIPAA

The Consolidated Appropriations Act, 2023 (P.L. 117-328) (referred to hereafter as 2023 CAA) runs more than 1,600 pages long in the official PDF version, so you would be excused if you missed a few key substantive health provisions that were included in the law.

Many of the substantive provisions of the law had been proposed as parts of other packages throughout the year, including the Infrastructure law, the FDA User Fee legislation and the Inflation Reduction Act. However, for one reason or another, these provisions were eliminated from the final versions of the laws that were passed.

The 2023 CAA included, among other aspects, changes to the Medicare payment program and sequestration requirements, additions to the accelerated approval process for drugs, a regulatory regime for cosmetics, and changes related to pre-approval communication of health care economic information to payors, formularies and similar entities.

This is the first in a series of posts exploring some of the more important policy aspects of the law. With part 1, we will explore the changes to Medicare payment rules.

Continue Reading Health Provisions of the Consolidated Appropriations Act, 2023: Part 1 Medicare Payments

The Centers for Medicare & Medicaid Services (“CMS”) has proposed a new rule that, among other changes, would amend the “identified overpayment” standard in the current regulations for Medicare to align with the False Claims Act’s (“FCA”) “knowingly” standard. The proposed rule plans to remove “the exercise of reasonable diligence” language from the relevant regulations and replace that language with the “knowingly” standard from the FCA.

The regulations at issue — 42 C.F.R. § 401.305(a)(2); 42 C.F.R. § 422.326(c) and 42. C.F.R. § 423.360(c) — are supposed to implement, in part, Section 6402(a) of the Affordable Care Act (“ACA”), codified at 42 U.S.C. § 1320a-7k. This section of the ACA explains that if an overpayment under the various Medicare programs has been identified and has not been reported and returned in a set amount of time, then an enforcement action can be brought under the FCA. This section also states that the terms “knowing” and “knowingly” have the same meaning as under the FCA.

The FCA defines these terms to mean that a person has actual knowledge of information, acts in deliberate ignorance of the truth or falsity of information, or acts in reckless disregard of the truth or falsity of information; the terms do not require a specific intent to defraud. 31 U.S.C. § 3729(b)(1).

Continue Reading CMS Proposes Amending Identified Overpayment Rules to Align with FCA Knowledge Standard

The Office for Civil Rights (“OCR”) at the U.S. Department of Health and Human Services (“HHS”) recently issued a bulletin highlighting the application of Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) to covered entities and business associates (“Regulated Entities”) under the HIPAA Privacy, Security, and Breach Notification Rules (“HIPAA Rules”) when using online tracking technologies that collect and analyze information about how internet users interact with websites or mobile applications (“Tracking Technologies”). While the Bulletin emphasizes that Regulated Entities have always been prohibited from impermissible uses and disclosures of protected health information (“PHI”) collected through Tracking Technologies, including disclosing PHI to Tracking Technology vendors without entering into business associate agreements (“BAAs”), OCR has been relatively silent on this issue to date.

To highlight the application of HIPAA to Regulated Entities leveraging Tracking Technologies, the Bulletin provides several examples of how Tracking Technologies may collect and share PHI, including on authenticated and unauthenticated webpages, as well as mobile apps. In particular, the Bulletin describes how websites and mobile apps commonly use Tracking Technologies to collect information from users, including identifiers that are unique to users’ mobile devices. This information can then be used by the owner of a website or app, a related vendor, or a third party to gain insights about users’ online activities and to create a unique profile for each user. These insights and information can be used in beneficial ways to help improve care or the patient experience, but they can also be misused to promote misinformation and for other detrimental purposes.

In a nutshell, OCR’s Bulletin stresses that when an individual uses Regulated Entities’ websites or mobile apps, information such as the individual’s medical record number, home or email address, dates of appointments, IP address, geographic location, or medical device ID may constitute PHI subject to HIPAA and should be held by Regulated Entities accordingly. According to OCR, such information generally is PHI, even if the individual does not have an existing relationship with the Regulated Entity and even if the information does not include specific treatment or billing information like dates and types of health care services. Per OCR, this is because the information connects the individual to the Regulated Entity (i.e., it is indicative that the individual has received or will receive health care services or benefits from the covered entity), and thus relates to the individual’s past, present, or future health or health care or payment for care

Continue Reading HHS OCR Issues Bulletin on HIPAA Compliance for Tracking Technologies 

Under provisions of the 21st Century Cures Act (Cures Act), providers of Medicaid-funded personal care services (PCS) and home health care services (HHCS) will need to be fully compliant with their state’s electronic visit verification (EVV) systems by January 1, 2023

Congress passed the Cures Act on December 13, 2016. Among other things, in an effort to increase transparency and reduce fraud in connection with the delivery of health care services, this law mandated that states implement EVV systems for all Medicaid-funded (including under waiver programs) PCS by January 1, 2019, and HHCS by January 1, 2023, in each case where services include an in-home visit by a provider. Subsequent legislation extended the deadline for PCS to implement EVV requirements to January 1, 2020. However, the deadline for HHCS remains January 1, 2023, and is quickly approaching.

Providers of PCS and HHCS services should make sure that they are working towards implementing EVV systems in their own business operations in compliance with applicable state requirements, the majority of which also are requiring provider compliance by January 1, 2023

Continue Reading Home Health Care Services Electronic Visit Verification System Implementation Required by January 1, 2023

The Department of Health and Human Services (“HHS”) has proposed a rule that updates retail pharmacy standards for electronic transactions adopted under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  There is a 60-day public comment period for this rule, which closes on January 9, 2023.  This proposed rule, if finalized, would modify the currently adopted National Council for Prescription Drug Programs (“NCPDP”) Telecommunications Standard Implementation Guide (“TSIG”) and its equivalent batch standards. 

Specifically, the proposed rule would adopt TSIG version F6, and its equivalent batch standards NCPDP Batch Standard Implementation Guide, Version 15, and Batch Standard Pharmacy Subrogation Implementation Guide Version 10 (for non-Medicaid health plans).

The new standards will allow retail pharmacies with multiple locations to send one batch mode transaction that meets the F6 standard.  Among the changes from version to version are new data fields, new data segments, and new functionality.

Continue Reading HHS Proposes Rule to Update Retail Pharmacy Standards for Electronic Transactions under HIPAA

In its latest effort to increase transparency and improve patient access to information about their health care providers the U.S. Department Health and Human Services Centers for Medicare & Medicaid Services (CMS) published a Request for Information (RFI) on October 7, 2022, seeking input on creation of a national provider directory for use by patients, regulators, and insurers.  

According to the announcement, the RFI was prompted by inefficiencies arising from “the fragmentation of current provider directories” maintained by providers, insurers and/or third-party sources that CMS believes could be remedied by a federal provider directory containing “digital contact information containing the most accurate, up-to-date, and validated . . . data in a publicly accessible index.”

The stated goal of the RFI is to examine the feasibility and requirements for a proposed National Directory of Healthcare Providers and Service (NDH). Responses to the RFI are due by December 6, 2022, and stakeholder comments already are being submitted.

Continue Reading CMS Considers National Directory of Healthcare Providers and Services

Health care and life science companies operating globally should be aware of the increased regulatory scrutiny in the U.S., the UK and Asia-Pacific when considering their obligations to monitor and retain business communications conducted through messaging platforms on employees’ personal devices. It is vital for these companies review the effectiveness of their compliance policies and procedures to monitor and preserve business communications and ensure that employees are properly disciplined when such policies are violated.

In a recent client alert, authored by Calvin Chan, Michael J. Lowell, Rizwan A. Qureshi, Mark E. Bini, Daniel H. Ahn, Jonathan L. Marcus, Rosanne Kay, Steven Li, Ruiteng Liu, Min Jian Chan, and Stefanie Dai, the team looks at the DOJ’s updated criminal enforcement program, the SEC and CFTC’s nearly $2 billion fines imposed on companies failing to monitor and retain business communications on messaging platforms, plus regulator activity in the UK and Asia-Pacific region in relation to this topic.

The Inflation Reduction Act included some very significant changes to the ways in which the Medicare program handles drug pricing.

Among the changes are a redesign of the Medicare Part D (prescription drug benefit) program, as well as requirements that certain drug prices be negotiated with the Centers for Medicare & Medicaid Services and a provision that drug manufacturers pay inflation rebates to on utilization of drugs covered by Medicare Part B and Part D in certain circumstances.

To address these changes to the law, Reed Smith has put together a series of alerts and webinars on the topics.

Continue Reading Analysis of Medicare Prescription Drug Pricing Changes in Inflation Reduction Act

On September 27, 2022, FDA announced the publication of a  final guidance  document entitled Clinical Decision Support Software, Guidance for Industry and Food and Drug Administration Staff (Final CDS Guidance), which focuses on clarifying the types of clinical decision support (CDS) software functions that are excluded from the definition of device by the criteria in section 520(o)(1)(E) of the Federal Food Drug and Cosmetic Act.

This final guidance document addresses industry comments made in response to FDA’s September 2019 draft guidance (Draft CDS Guidance). The Final CDS Guidance streamlines the Draft CDS Guidance by focusing the scope on CDS intended to be used by state licensed, registered, or certified health care professionals , rather than those also used by patients and caregivers, which were included in the scope of the Draft CDS Guidance.

Continue Reading FDA Announces Final Guidance on Clinical Decision Support Software

The U.S. Court of Appeals for the Eighth Circuit recently weighed in on the causation standard for False Claims Act (“FCA”) cases premised on Anti-Kickback Statute (“AKS”) violations. United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828 (8th Cir. 2022). The panel adopted a strict interpretation, finding that the government or whistleblowers must show a “but-for” causal relationship between kickbacks and claims for payment to establish the requisite link in the FCA liability chain, creating a circuit split on an issue that courts have struggled with for years.

The decision is notable for FCA defendants as it offers support for a defense they have long asserted, and that courts have been reluctant to condone, including an opinion from the U.S. Court of Appeals for the Third Circuit that refused to require a direct causal link between an AKS violation and a false claim.

Continue Reading Eighth Circuit Finds “But-For” Causation Standard for AKS-Premised FCA Cases