Alissa Smith

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.