Alissa Smith

On September 7, 2017, the OIG posted an advisory opinion regarding a retail pharmacy chain’s proposal to extend to federal health care program beneficiaries the option to participate in a paid membership program that includes discounts on certain prescriptions and clinical services offered by the retail chains’ pharmacies and in-store clinics.  Presently, the pharmacy chain’s program excludes federal health care program beneficiaries.  The OIG found that the proposed program would meet the retailer reward exception to the definition of remuneration under the Beneficiary Inducement law, and that the proposed program would pose a minimal risk of fraud and abuse under the Anti-Kickback Statute.   The pharmacy chain’s proposed membership program included the following benefits:   Members of the program would have access to discounts on the pharmacies’ retail prices for specific items that the Member paid for entirely out-of-pocket (ex. generic drugs, pet prescriptions, nebulizer devises, blood glucose testing meters, immunizations, and other prescriptions listed on the pharmacy membership benefit program’s formulary); Members would have access to a 10 percent discount on clinical services paid for out-of-pocket (ex. physicals, immunizations, health screenings); Members could earn a 10 percent credit toward future eligible retail purchases when they purchased certain company-branded products and in-store photo finishing.  The credit could not be used to purchase prescriptions, immunizations, clinic services, alcohol, gift cards, postage stamps, pre-paid cards, milk products, tobacco products, or for retail pharmacy or clinic cost-sharing amounts. The OIG noted that the vast majority of products and services for which Members could earn and redeem credits are not federally reimbursable.   Members could enroll in the program either online through the company’s website or in person. The membership would be open to the general public. The only requirements for membership are a payment of an annual membership fee, that the Member be over 18 years of age, and that the Member provide certain personal information such as name, date of birth, address and phone number.   In order for federal health care program beneficiaries to access the discounts, the Members would need to pay for such items and services out-of-pocket (if the Member’s health plan or prescription plan covers an item that the Member would like to purchase through the retailer’s membership program, the Member would have to relinquish his or her health or prescription plan’s coverage for that particular purchase and instead, pay for the item out-of-pocket). The proposed membership program’s terms and conditions specifically state that Members are entirely responsible for all charges for discounted items or services they purchase through the program and that there would be no additional incentives given to Members for filling or transferring a new prescription to the pharmacy. The proposed program would allow for Medicare beneficiaries to submit claims for drugs purchased out-of-pocket while the beneficiary is in the Part D coverage gap, which would count toward a Medicare Part D beneficiary’s true out-of-pocket cost calculation.   Based on these facts, the OIG concluded that the proposed arrangement would implicate both the Anti-Kickback Statute and the Beneficiary Inducement CMP because the discounted items, services and earned credits could induce a beneficiary to select the retailer for his or her federally reimbursable items or services.  However, the OIG found that inclusion of federal health care program beneficiaries into the paid membership program would not constitute grounds for civil money penalties under the Beneficiary Inducement law, and that the OIG would not impose administrative sanctions under the Anti-Kickback Statute because the program:   Would satisfy the requirements of the exception to the definition of remuneration related to retailer rewards under the Beneficiary Inducement law. Specifically, the OIG noted that: the membership is the equivalent of a “coupon” under the retailer rewards exception; the earned credits would constitute a “rebate” under the same exception; the membership is available to the general public on equal terms; and the offer or transfer of rewards would not be tied to the provision of any other items or services that are federally reimbursed.  The retailer specifically certified that its pharmacies and clinics would not submit a claim to a Federal healthcare program or to any other 3rd party payor for any of the items or services purchased at a discount under the membership program, and that the Members would be entirely responsible for all charges.  Further, the OIG noted that with respect to the credits, the membership program did not have a different mechanism for accumulating or redeeming credits between items and services that are, and are not, covered by Federal health care programs.  Also, the vast majority of items and services for which a Member could earn and redeem a credit are not federally reimbursable.  Of note, the OIG stated that if the Member could only earn or redeem (or could preferentially accumulate or use) credits based on the purchase of federally reimbursable items or services, the OIG would reach a different conclusion; and Would pose a low risk of fraud and abuse under the Anti-Kickback Statute because, in addition to the positive factors described under the OIG’s analysis under the Beneficiary Inducement law, the arrangement also does not include any features to specifically steer beneficiaries to the retail pharmacies or clinics or to purchase federally reimbursable items or services. It was noted that the membership program included a broad range of inventory, including groceries and toiletries.  The Members would not be required to purchase prescriptions, immunizations, clinic services or any other services that are federally reimbursable.  Instead, the Members would earn credits through other purchases under the membership program.  Also, there would not be any offers related to transferring prescriptions or filling them at the retailer, or receiving clinic services at the retailer’s stores. Further, the OIG pointed out that the arrangement would be unlikely to result in overutilization or otherwise increase costs to Federal health care programs because the Member would already have obtained a written order for a prescription from his or her prescriber, and, regardless, the pharmacies would not submit claims for the prescriptions purchased under the membership program to any Federal health care program.  Further, the arrangement would not involve a waiver or reduction in any cost sharing amounts incurred by Federal health care program beneficiaries, and there would only be “very limited exceptions” in which Members would earn/redeem credits on items that would be paid for by Federal health care programs.   As always, OIG opinions are only applicable to the requesting individual or entity and cannot be relied on by any other individual or entity. However, this opinion provides guidance on the OIG’s current stance on pharmacy member benefit programs that include federal health care beneficiaries. We recommend organizations looking to extend their member benefit programs to include federal health care beneficiaries contact their legal representatives to help structure the program in accordance with federal and state statutes and regulations.   The full advisory opinion can be found here.

  Today, in a move that is widely supported by those in both political parties and across the country, President Trump declared the opioid epidemic a national emergency.  Doing so will allow for additional resources to be used toward fighting the opioid crisis, which could include expanding treatment facilities and supplying first responders with the anti-overdose remedy, naloxone.  The declaration of a public health emergency unrelated to a natural disaster is rare; the US Department of Health and Human Services declared one in 2016 due to the Zika virus but, prior to that, the last declaration unrelated to a natural disaster was during the 2009-10 flu season.   Drug overdose deaths continue to rise across the county, with 6 out of 10 involving an opioid.  According to the Centers for Disease Control and Prevention, 91 Americans die every day from an opioid overdose, and overdoses from prescription opioids are a driving factor in the increase in opioid overdose deaths.  Since 1999, the prescription opioids sold (and the deaths from prescription opioids) have quadrupled, with no overall change in the amount of pain American’s report.   Across the country, states have adopted a variety of strategies to combat the alarming rise in opioid drug abuse.  Additionally, as of late, a number of legislative bills have been introduced in an attempt to curb the abuse.  For example, on July 28, 2017, the “Every Prescription Conveyed Securely Act” (“Act”) was introduced in the United States House of Representatives. The Act calls for, with some exceptions, controlled substance prescriptions covered under Medicare Part D to be transmitted by a health care practitioner electronically to a pharmacy. Representative Markwayne Mullin, one of the authors of the Act, said in a press release, “[b]y requiring all doctors and pharmacists to use an online database when prescribing these highly addictive drugs, we allow e-prescriptions to control, track, and monitor these highly addictive painkillers on a new level.” The National Association of Chain Drug Stores has long been a proponent of electronic prescriptions believing that electronic prescriptions “are more efficient, improve prescription accuracy, and . . . make it easier for patients to get the medications they need, while also helping to prevent fraud and abuse.”   A full copy of the Every Prescription Conveyed Securely Act can be found by clicking here.  

The Centers for Medicare & Medicaid Services (CMS) released its 2018 Medicare Physician Fee Schedule proposed rule on July 13, 2017. The proposed rule, among other things, proposes to cut Medicare payments for services provided at non-excepted, off-campus provider-based departments from 50% to 25% of the Outpatient Prospective Payment System (OPPS) rate for the 2018 calendar year.   Currently, non-excepted, off-campus provider-based departments are paid for certain items and services under the Medicare Physician Fee Schedule at a payment rate equal to 50% of the OPPS payment rate for the applicable item or service.  The current payment rate has only been in place since January.  CMS said in the proposed rule that it viewed the 2017 rates as “transitional policy,” but few people in the industry were likely expecting to see such a significant decrease in payment so soon.  CMS openly admits, however, that it is working with a limited set of payment data since it does not have claims data from calendar year 2017 and that additional analysis is needed.  CMS said it welcomes stakeholder input with regard to its initial analysis and the proposal to pay for the applicable services at 25% of the OPPS.  In fact, CMS specifically requested comment on whether it should adopt a different payment rate, such as 40% of the OPPS, that would represent a middle ground between the current rates and the proposed rate. If finalized, the payment cut would further disincentive hospitals from opening or operating new (i.e., non-excepted) off-campus provider-based locations.   Some of the key additional changes proposed by CMS in the 1,000+ page proposed rule include:   Medicare Telehealth Services.  CMS is proposing to add several codes to the list of covered telehealth services, including: HCPCS code G0296 (visit to determine low dose computed tomography (LDCT) eligibility); CPT code 90785 (Interactive Complexity); CPT codes 96160 and 96161 (Health Risk Assessment); HCPCS code G0506 (Care Planning for Chronic Care Management); and CPT codes 90839 and 90840 (Psychotherapy for Crisis). Retroactive PQRS and Value Modifier Adjustments.  CMS is also proposing to reduce or eliminate certain financial penalties for performance in 2016 under the Physician Quality Reporting System (PQRS) and the Value Modifier program.  Under PQRS, for example, CMS says it wants to retroactively reduce the number of metrics that physicians had to report on in PQRS from nine to six measures.  For the Value Modifier, CMS proposes to reduce the automatic downward adjustment for not meeting minimum quality reporting requirements from negative four percent to negative two percent for groups of ten or more clinicians and from negative two percent to negative one percent for physician and non-physician solo practitioners and groups of two to nine clinicians. Evaluation and Management Comment Solicitation.  CMS is seeking comment from stakeholders on specific changes it should undertake to “update the guidelines, to reduce the associated burden, and to better align” Evaluation and Management coding and documentation with the current practice of medicine.   The advanced copy of the Proposed Rule is available here.  The official version of the Proposed Rule is scheduled for publication in the Federal Register on July 21, 2017.  Comments on the Proposed Rule are due by September 11, 2017.

On July 13, 2017, CMS released a proposed rule as part of its 2018 Outpatient Prospective Payment System proposals [available here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-14883.pdf] that is aimed at helping to reduce some of the burdens rural hospitals experience in recruiting physicians. Specifically, CMS proposes a two-year moratorium, for CY 2018 and CY 2019, on the direct supervision requirements for outpatient therapeutic services at critical access hospitals and rural hospitals with 100 or fewer beds.  CMS addressed its proposal in a fact sheet it released on the same day [available here: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-07-13.html].   CMS has not enforced the direct supervision rules for these hospitals for several years, but the prior moratorium on enforcement had expired on December 31, 2016.  The current proposed rule provides some additional certainty and extended relief for these providers.  Rural hospitals and CAHs have consistently expressed to CMS that there is insufficient staff available to furnish direct supervision- especially for specialty services such as radiation oncology, which cannot be directly supervised by the physicians on-site in the emergency department either because of the volume of emergency patients or the providers’ lack of specialty expertise in the area to be supervised.  It is difficult to recruit physician and nonphysical practitioners to rural areas.  The comments discuss whether CMS should apply the same supervision rules to all hospitals, to ensure that CMS is purchasing the same basic level of quality and safe outpatient care for all beneficiaries, regardless of the hospital type.  However, CMS acknowledges the unique recruiting challenges facing CAHs and rural hospitals, and also noted that CMS is not aware of any quality of care complaints from beneficiaries or providers in these hospitals related to general supervision being provided (instead of direct physician supervision) for these services.   CMS’ Advisory Panel on Hospital Outpatient Payment is continuing to evaluate whether changes should be made to the supervision requirements.  In the meantime, CMS proposes this two-year moratorium to allow CAHs and rural hospitals additional time to get into compliance, and to give all parties time to submit recommendations to the Advisory Panel.

On July 13, 2017, CMS released several proposed rules impacting health care, including the 2018 Outpatient Prospective Payment System (OPPS) proposed rule [available here https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-14883.pdf] which, among other proposals, could have a significant impact on 340B covered entities.  The proposed rule states that CMS will change how Medicare pays hospitals that participate in the 340B program for the drugs they acquire under the program in order to address increasing drug prices.  CMS stated that its current reimbursement rates, “…allow[s] these providers to generate significant profits when they administer Part B drugs.”  Specifically, CMS proposes to reduce its reimbursement to hospitals for certain 340B covered drugs from the average sales price (ASP) plus 6 percent (which is the current reimbursement for prescription drugs paid by Medicare) to ASP minus 22.5 percent. Drugs that are on pass-through status and vaccines would be excluded from the proposed reduction.  CMS addressed its proposal in a fact sheet it released on the same day [available here: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-07-13.html]   CMS explained, “Such changes would allow the Medicare program and Medicare beneficiaries to share in some of the savings realized by hospitals participating in the 340B program.”  CMS emphasized that because Medicare beneficiaries pay a portion of the cost of the drug (20%) based on the amount Medicare paid for the drug, regardless of the actual cost to the hospital for acquiring the drug, CMS’ proposed reduction in Medicare reimbursement would also help beneficiaries of the Medicare program save money.  The estimated total impact of the reduction to 340B covered entities’ reimbursement is approximately $900 million dollars.   According to CMS, this significant reduction in 340B drug reimbursement is consistent with what the Medicare Payment Advisory Commission (MedPAC) estimated to be the average minimum discount hospitals receive for 340B acquired drugs.  CMS noted that the 22.5% figure was a conservative number, since more recent MedPAC estimates show the average discount being closer to ASP minus 33.6%, and because the U.S. Government Accountability Office (GAO) estimates the discount to range from 20 to 50 percent compared to what the hospitals would have otherwise paid.   In further support of its proposed reduction to 340B drug reimbursement, CMS questioned the benefit of the 340B program overall by citing research showing that Medicare beneficiaries at disproportionate share hospitals (DSH) generally spent more on prescription drugs than patients at hospitals that did not participate in the 340B program.  CMS cited a 2012 GAO study of Medicare beneficiary Part B drug spending at DSH hospitals which found the average beneficiary spending there was $144, compared to $60 at non-340B hospitals.  CMS reported that the discrepancies could not be explained by unique characteristics of the hospitals in the study or by the health status of the patients.  CMS believes the studies indicate the 340B DSH hospitals were either prescribing more drugs or more expensive drugs compared to non-340B hospitals in the study. CMS hopes to learn more about the discrepancy through the use of a new claims modifier that it proposes be established to better track drugs that are billed under OPPS and purchased under the 340B program.   In addition to the OPPS proposed rule, early drafts of the Trump administration’s proposed executive order rolling back the 340B program have led to much speculation that there will be future limitations on 340B contract pharmacy arrangements, among other changes to the program. There is a Congressional Hearing scheduled for July 18, 2017 regarding 340B Program Oversight where representatives from HRSA and HHS-OIG will be testifying.  Hospitals, contract pharmacies and others affected by the 340B program should continue to closely monitor these changes which could have a significant impact on 340B operations across the country.

On June 16th, 2017, The Department of Justice (“DOJ”) announced a $53.6 million dollar settlement with Genesis Healthcare Inc. (“Genesis”) over six federal whistleblower lawsuits alleging that subsidiaries of the rehabilitation and transitional care provider violated the False Claims Act (“FCA”). The original qui tam plaintiffs, former employees of companies acquired by Genesis, will receive a combined $9.67 million dollars in recovery. The settlement resolved allegations involving Genesis subsidiaries; Skilled Healthcare Group Inc. (“SKG”) and its subsidiaries, Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. The settlement resolved the allegations that SKG and its subsidiaries knowingly submitted false claims for Medicare services by “billing for hospice services for patients who were not terminally ill” and “billing inappropriately for physician evaluation management services.” The complaint does not elaborate on the nature of the management services billing violations. Further, SKG and its subsidiaries allegedly submitted false claims to Medicare, TRICARE, and Medicaid by providing therapy to patients longer than medically needed, as well as billing for more therapy than patients actually received. The settlement also resolved allegations that Sun Healthcare Group Inc., SunDance Rehabilitation Agency Inc., and SunDance Rehabilitation Corp. knowingly submitted false claims to Medicare by billing for therapy services in the state of Georgia that were either medically unnecessary or unskilled in nature. Finally, the settlement resolved allegations that Skilled LLC, a subsidiary of SKG, violated the FCA by submitting false claims to the Medicare and Medi-Cal programs for “services that were grossly substandard or worthless and therefore ineligible for payment.” Specifically, the allegations pointed to Skilled LLC failing to meet the requirements for nurse staffing in order to be eligible for government healthcare program reimbursements. The case matter was handled by the DOJ Civil Division’s Commercial Litigation Branch, the Office of the Inspector General, and the U.S. Attorney’s Offices for the Northern District of California, the Northern District of Georgia, the Western District of Missouri, and the District of Nevada. Acting U.S. Attorney Steven W. Myhre for the District of Nevada noted, “Today’s settlement is an example of the U.S. Attorney’s Office’s commitment to holding medical providers accountable…We are committed to protecting federal health care programs, including Medicare, TRICARE, and Medicaid, which are funded by taxpayer dollars.” The recent settlement falls in line with the DOJ’s increased commitment to combating health care fraud. The DOJ budget request for 2017 included a $70.8 million dollar increase ($320.2 million in total) of funding for health care fraud prevention. Summer Associate Justin Taylor provided substantial assistance with the drafting of this blog post/article.

New York Times Obtains Copy of Draft Executive Order on Drug Prices; FDA Blogs that it is Working to Lift Barriers to Generic Drug Competition On June 20, 2017, the New York Times reported that it had obtained a draft proposal of President Trump’s Executive Order on drug prices.[1] The draft Executive Order, which has not been published, has been characterized as focusing on rolling back regulations, with the New York Times reporting that the Executive Order strengthens the pharmaceutical industry’s monopoly power overseas and scales back the federal 340B program, a program that allows hospital and clinics that serve low-income populations to receive discounts on drugs from pharmaceutical companies. One day later, the FDA posted in a blog[2] that it was working on a “Drug Competition Action Plan” and that it intends to hold a public meeting on July 18, 2017 to solicit input on FDA rules, standards and procedures that create obstacles to generic access.  One issue the FDA specifically calls out in the blog post is the use of regulatory or commercial strategies by pharmaceutical companies that create obstacles to the development of generic drugs.  Some of these strategies are to limit access to samples of brand name drugs so that generic alternatives cannot be developed.  This issue has been raised a number of times recently.  For example, the issue was discussed in a June 19, 2017 letter Senate Chuck Grassley (R-Iowa), chairman of the Senate Judiciary Committee, sent to FDA Commissioner Scott Gottlieb[3].  Senator Grassley asked Mr. Gottlieb to  consider ideas proposed in the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act[4] to solve the problem.  The issue was also discussed at the June 13, 2017 Senate Health, Education, Labor and Pensions Committee hearing on prescription drug pricing and prescription drug supply-chain.[5] We do not know yet how the Executive Order will impact the 340B program. However, changes to the 340B program could have a substantial financial impact on hospital and clinics currently enrolled in the program, as well as on contract pharmacies and others who provide services related to the 340B program. Other proposed changes by the Trump Administration and the FDA will likely impact the entire pharmaceutical supply-chain and are being closely watched by the industry.  We will continue to monitor these changes and update our blog as they occur. [1]  https://www.nytimes.com/2017/06/20/health/draft-order-on-drug-prices-proposes-easing-regulations.html [2]  https://blogs.fda.gov/fdavoice/index.php/2017/06/fda-working-to-lift-barriers-to-generic-drug-competition/ [3]  https://www.judiciary.senate.gov/imo/media/doc/2017-06-19%20CEG%20to%20FDA%20-%20Affordable%20Prescription%20Medication.pdf [4]  https://www.congress.gov/115/bills/s974/BILLS-115s974is.pdf [5]  https://www.help.senate.gov/hearings/the-cost-of-prescription-drugs-how-the-drug-delivery-system-affects-what-patients-pay  

The Centers for Medicare & Medicaid Services (CMS) released an advanced copy of its latest proposed rule revising the Quality Payment Program created by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The proposed rule, among other things, would further streamline reporting requirements and ease administrative burdens for small and rural providers. By way of background, MACRA created the Quality Payment Program which reforms how Medicare Part B pays more than 600,000 clinicians across the country.  Under the Quality Payment Program, eligible clinicians, including physicians, physician assistants, nurse practitioners, clinical nurse specialists and certified nurse anesthetists, can participate in the Quality Payment Program through one of two tracks: the Merit-Based Incentive Payment System (MIPS) or Advanced Alternative Payment Models (Advanced APMs).  We are currently in the middle of the first performance year, which began on January 1, 2017.  How clinicians perform in the first year will impact Part B payments beginning on January 1, 2019. Given the complexity of the transition, and the significant impact the new payment rules have on Part B clinicians, CMS has continued to seek public input about how it should implement and revise the program going forward.  The proposed rule is the latest example of CMS’ efforts to respond to public input, particularly from small physician practices and rural providers. Some of the key changes proposed by CMS in the 1,000+ page proposed rule include: Increasing low-volume threshold.  For the current performance year, clinicians and groups are subject to MIPS if they billed more than $30,000 to Medicare Part B and provided care for more than 100 Part B-enrolled Medicare beneficiaries.  Clinicians or groups that do not exceed these thresholds are excluded from MIPS participation.  CMS has proposed to increase the low volume threshold to less than or equal to $90,000 in Medicare Part B allowed charges or less than or equal to 200 Medicare Part B patients.   CMS estimates that approximately 134,000 clinicians currently subject to MIPS will be excluded from MIPS in the 2018 performance year based on the proposed new additional increase in the low-volume threshold. Continuing to allow the use of 2014 Edition CEHRT (Certified Electronic Health Record Technology).  CMS is proposing to allow MIPS eligible clinicians to continue to use EHR technology certified to the 2014 Edition for the 2018 performance year. Creation of virtual groups.  In the current performance year (Year One), clinicians may only participate in MIPS as an individual or as a group under a common Tax Identification Number.  CMS is proposing to allow clinicians to participate in MIPS in virtual groups in future performance years.  Virtual groups would be composed of solo practitioners and groups of 10 or fewer eligible clinicians who come together “virtually” with at least 1 other such solo practitioner or small group in order to participate in MIPS. Adding more flexibility for clinicians in small practices.  CMS proposes to add a new hardship exception under the MIPS Advancing Care Information performance category for clinicians in small practices.  Additionally, for these small practice clinicians, CMS is proposing to add bonus points to their final MIPS score, and continue to award 3 points for measures in the quality performance category that do not meet data completeness requirements. The advanced copy of the Proposed Rule is available here.  The official version of the Proposed Rule is scheduled for publication in the Federal Register on June 30, 2017.  Comments on the Proposed Rule are due by August 21, 2017.  We will continue to provide updates as more information about changes to MACRA are released.

According to an article posted today on the BioCentury website, the Trump administration is drafting an executive order that will take on the high costs of pharmaceuticals by instructing “executive agencies to use value-based contracts for drug purchases, and to pursue trade policies that enhance the intellectual property rights of American pharmaceutical companies.” This is in line with a statement made by Health and Human Service Secretary, Tom Price, who told senators on June 8, 2017 that taking on the high price of prescription drugs in the United States is still “an absolute priority” to the administration. This report comes just two days after the first of three hearings held by the Senate Health, Education, Labor and Pensions Committee. The bi-partisan hearing was categorized by the Committee chair as a fact-gathering hearing on the issues of prescription drug pricing and the prescription drug supply-chain in the United States.  Those involved in the hearing acknowledged that prescription drug spending has become the fastest growing share of health spending[1] and that changes to current system may be warranted. The June 13, 2017 hearing included discussions on a wide-range of topics such as: the historical increases in drug prices; an overview of the current prescription drug supply chain players; discussion of widely-used industry such as “list price”, “net price”, “drug rebates and discounts” and “average wholesale price”; the effect of research and development costs for new drugs; current biosimilar approval regulations; and patient protections for drug manufacturers. Senators at the hearing asked witnesses for recommendations of legislation that would address drug spending trends and reduce drug cost burdens on consumers and government entities. Some ideas presented at the hearing included the use of outcomes-based contracts; faster approval of second-and-third branded drugs in a therapeutic class; policy development to limit “reverse payment” settlements; policies that limit manufacturers of brand name drugs from blocking generic developers’ access to sample products required for bioequivalence testing; reforms to the 340B drug discount program; revisions to Medicare catastrophic drug spending rules; and policies addresses PBM and PDP rebates. The full committee hearing can be watched at: https://www.help.senate.gov/hearings/the-cost-of-prescription-drugs-how-the-drug-delivery-system-affects-what-patients-pay The second committee hearing on this topic is expected to take place next month. [1] The Centers for Medicare & Medicaid Services projects that prescription drug spending growth will continue to outpace overall health care cost increases over the next decade. Source: Centers for Medicare & Medicaid Services, “National Health Expenditure Projections 2016-2025,” Available at: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2016.pdf

New legislation recently signed into law in Texas paves the way both for digital health companies to expand, particularly direct-to-consumer (D2C) companies, and also potentially heralds an era of virtual care visits on a truly national scale. Over Memorial Day weekend, Texas Governor Greg Abbott signed Senate Bill 1107/House Bill 2697 (found here).  The bill adds video consults to the definition of telehealth and eliminates Texas’s previous requirement that a physician-patient relationship must be established first in person prior to any telehealth visit.  Provided that certain follow-up requirements are met (primarily, that the telehealth practitioner provide guidance as to appropriate follow-up care), patients and physicians in Texas now may initiate telehealth visits for even a first-time meeting. Patients in Texas have had a particular need for telehealth, and this regulatory change is being applauded by patients and businesses alike. Texas ranks 46th out of 50 states in primary care physicians per capita, and 35 of Texas’s 254 counties do not have a family physician.  For those living in less populated areas, access to primary care was typically not possible without a long drive to a doctor’s office.  By quashing the regulatory hurdle to offer telehealth visits for first-time patients, the now-signed bill opens up many more opportunities for new telehealth patients and easier access to care for those who are home-bound or in less populated areas.  It also encourages digital health companies that have been reluctant to offer services in Texas to expand, which could lead to more options for care. Finally, the bill’s passage also portends telehealth expansion at a national level. To date, telehealth companies and providers hoping to offer virtual care have been curtailed by the patchwork of state laws that make it difficult to expand beyond state lines, much less offer consistent types of telehealth services across the nation.  States vary significantly in whether and to what degree they regulate telehealth, and the applicable regulations themselves span a wide range of topics.  (For example, there are a wide variety of state laws pertaining to licensure, scope of practice, DEA registration, prescriptions, privacy, and requisite patient visit documentation – to name a few.)  Texas was the last state to require an in-person physician-patient interaction prior to a telehealth visit.  With this hurdle removed, a new patient can initiate a telehealth visit without a prior in-person visit in all states in the nation.  Although the other telehealth regulatory challenges persist, the Texas bill’s passage into law serves as an important signal of growing national alignment to support and incentivize digital health. What, then, are the business implications for telehealth companies and providers seeking to offer virtual care visits? The most prominent “win” is that direct-to-consumer (D2C) telehealth providers now have a much more viable path to market.  Previously, they would have needed to partner with a (non-telehealth) provider to ensure that the first-time visit requirement was met; now, they may work directly with patients from the outset.  In addition, the ability to initiate a telehealth visit with a first-time patient at a truly national level (with only minor exceptions for telephone-based visits in Arkansas and Idaho) significantly eases the path for telehealth initiatives to expand their businesses and contemplate national service.

Compliance programs are an important tool for health care providers.  Compliance programs help to prevent fraud, waste and abuse, create a mechanism for catching problems early, and effective compliance programs can also provide the basis for a penalty reduction under the US Sentencing Guidelines if an entity is ever faced with sentencing for a criminal violation. It can be difficult to know whether your current compliance program in place is effective since no agency has published a template that will work in all cases.  Instead, the effectiveness of a compliance program is to be evaluated based on the size, operations, resources and risks facing each unique organization.  While an individualized assessment is still necessary, and no “one size fits all” program is available, both the Department of Justice and the Office of Inspector General (along with the Health Care Compliance Association) have recently published guidance to help organizations measure the effectiveness of their compliance programs. The DOJ guidance (available here https://www.justice.gov/criminal-fraud/page/file/937501/download) is not specific to healthcare; however, it does apply to health care organizations.  It provides a checklist of questions for organizations to answer in the process of evaluating their ethics and compliance programs. The OIG guidance (available here https://oig.hhs.gov/compliance/101/files/HCCA-OIG-Resource-Guide.pdf) was published with health care organizations in mind.  It is longer and provides more than 400 ideas of  “what to measure” and  “how to measure” each of the seven elements of an effective healthcare compliance program.  The Inspector General reiterated that no organization is expected to adopt all or even a large number of the suggestions in the guidance document at any one time.  Instead, organizations are encouraged to select the measures that are applicable to them, based on their unique needs, resources and risks, as part of their ongoing compliance program assessment. These two new guidance documents provide valuable and practical assistance to compliance professionals and counsel who work continuously to evaluate and improve compliance programs for organizations in the health care industry.

One of President Trump’s first actions in office was to sign an Executive Order stating that his Administration will seek to repeal the Affordable Care Act (the “Act”). In the meantime, President Trump directed the executive branch to take “all actions consistent with law to minimize the unwarranted economic and regulatory burdens of the Act, and prepare to afford the States more flexibility and control to create a more free and open healthcare market.”  The Order directs the Secretary of HHS and the heads of other executive departments and agencies with authority under the Act to have all “authority and discretion” to waive, defer, grant exemptions from or delay implementing any provisions of the Act that would impose a fiscal burden on a State, individual, health care provider, health insurer, medical device maker, etc.  The Order states that the heads of applicable departments and agencies shall encourage the free and open market to preserve maximum options for patients and consumers.  To the extent any rulemaking is needed to carry out the directives in the Order, the heads of agencies are directed to follow through with notice and comment rulemaking. The Executive Order regarding agency actions pending the Act’s repeal is in today’s federal register, and can be found here:  https://www.federalregister.gov/documents/2017/01/24/2017-01799/minimizing-the-economic-burden-of-the-patient-protection-and-affordable-care-act-pending-repeal.  There are a large number of regulations that could be impacted in a short time frame. It is unclear whether and what agency action would be taken at the present when there is not yet in place an alternative system to the Affordable Care Act.  Dorsey attorneys will be closely following the changes to the Affordable Care Act and will provide updates as developments unfold.