Dorsey Health Law

On January 7, 2019, FDA Commissioner Scott Gottlieb announced significant updates to the FDA’s pilot Software Pre-Certification Program, sometimes referred to more broadly as a Digital Health Pre-Certification Program (“Pre-Cert”). Pre-Cert was originally announced in 2017 as part of the FDA’s Digital Health Innovation Action Plan. The FDA envisions the program as a streamlined process for bringing digital health technologies to market. More specifically, the FDA hopes to develop Pre-Cert into a program by which certain digital health developers can become precertified as part of an “Excellence Appraisal.” Excellence-appraised developers could then take advantage of streamlined premarket submission processes for their digital devices. To date, the FDA has been working with a variety of stakeholders, including nine companies “represent[ing] a wide range of companies and technology in the digital health sector,” in developing the program. In connection with the announcement earlier this week, the FDA issued “three documents that, together, launch us into the next phase of the agency’s vision of Pre-Cert.” The first of the three documents is a Regulatory Framework for Conducting the Pilot Program within Current Authorities (the “Framework”). This document builds out the regulatory framework within which the FDA will implement Pre-Cert.  Here are some highlights: At least to start, Pre-Cert is limited to software as a medical device (“SaMD”), defined as software intended to be used for one or more medical purposes that perform these purposes without being part of a hardware medical device. The FDA hopes eventually to expand the program to review all medical device software products, including software in a medical device (“SiMD”) and other software that could be considered accessories to hardware medical devices. The FDA intends to utilize the De Novo classification process (section 513(f)(2) of the FD&C Act), an existing pathway for certain new types of low to moderate risk devices to obtain marketing authorization as a Class I or Class II device as opposed to automatic Class III designation, for the next phase of Pre-Cert. Here is an overview of the proposed process: Participants with a SaMD product may participate in an Excellence Appraisal, as well as an optional Review Determination Pre-Submission. When submitting a product for De Novo Review, an excellence-appraised developer would submit a streamlined “Pre-Cert De Novo Request,” in which it would not need to re-submit information reviewed during the Excellence Appraisal or the optional Pre-Submission. Assuming premarket requirements are met, the FDA would classify the device by written order and, if the device is Class II, establish special controls, which may include Excellence Appraisal elements and postmarket data collection elements. Following a De Novo order, an excellence-appraised developer would also be able to take advantage of a streamlined “Pre-Cert 510(k)” process, in which the developer can again leverage submission requirements already documented during the Excellence Appraisal and optional Pre-Submission process. The FDA expects review of a Pre-Cert 510(k) to be more efficient than the review of a traditional 510(k). The Pre-Cert 510(k) can also be used for modifications to devices, assuming a 510(k) is required for the modification.  The second document is a 2019 Test Plan (the “Test Plan”). The Test Plan lays out the scope and approach of the Pre-Cert pilot in 2019.  The primary purpose of the Test Plan “is to assess whether the Excellence Appraisal and Streamlined Review components together produce an equivalent basis for determining reasonable assurance of safety and effectiveness for a SaMD product… as compared to the traditional paradigm.” Here are some highlights: Consistent with the Framework, the scope of the Test Plan is limited to: (i) selected SaMD with De Novo Requests, and (ii) selected 510(k) submissions, which would be tested as if they were follow-on 510(k)s for devices classified through a Pre-Cert De Novo Request. The FDA plans to prioritize selection of submissions that will enable evaluation and testing of all four components (Excellence Appraisal, Review Pathway Determination, Streamlined Review, and Real-World Performance plan) outlined in the Working Model (discussed below), and to focus on cases representing a broad spectrum of software developers (e.g., small and large firms, low- and high-risk products, companies not traditionally considered medical device manufacturers). During the Test Plan, the FDA will apply both the proposed Pre-Cert pathway and the traditional review process to each test case, enabling it to refine Pre-Cert and confirm the validity of the overall program. Developers participating in the Pre-Cert pilot, after an Excellence Appraisal and optional Pre-Submission, will still need to submit full traditional marketing submissions. Internally, the FDA will then create a “mock Streamlined Review package” and review the submission on parallel paths, traditional and “mock Streamlined.” Similarly, the FDA will also be internally conducting retrospective tests of SaMD regulatory submissions previously reviewed. Finally, the third document released is an updated Working Model (currently v1.0). The Working Model, which has been updated over time with continuous public input, describes in greater detail the goal, vision, scope, and process for Pre-Cert. It also includes summaries of public comments that have been received and FDA responses to them. Pre-Cert, if implemented and successful in accomplishing FDA’s stated goals, could have a significant impact on the healthcare industry beyond the software developers it promises to impact directly. Digital health is increasingly becoming an important tool for healthcare businesses. Streamlining processes for bringing digital health technology to market and modifying existing technology will in turn increase the rate at which providers are able to utilize updated digital health technologies in practice. As this technology continues to garner the focus and support of regulatory bodies, it will be important not only for developers to understand the FDA’s streamlined approval process, but also for providers to prepare for the potential transformative effect digital health tools can have on the care they provide.

On December 21, 2018, CMS announced a final rule, subsequently published in the December 31 issue of the federal register, significantly overhauling the Medicare Shared Savings Program (“MSSP”). Among the important changes in the final rule is a redesign of MSSP’s participation options. Under MSSP, providers of services and suppliers participating in an Accountable Care Organization (“ACO”) continue to receive traditional fee-for-service payments under Medicare Parts A and B but may be eligible to receive shared savings payments if they meet specified quality and savings requirements. Originally launched in 2012, MSSP has grown such that CMS estimates more than a quarter of Medicare FFS beneficiaries now receive care from providers participating in a Medicare ACO. Prior to the redesign, MSSP included three tracks. Track 1 was “one-sided,” meaning ACOs received a share of savings they achieved for Medicare (i.e., spending less than a benchmark), but they were not required to pay back a share of any losses (i.e., spending exceeding the benchmark). Tracks 2 and 3, on the other hand, were “two-sided,” meaning ACOs were eligible to receive a share of savings but also had to pay back a share of any losses. In exchange for accepting risk of loss, ACOs in Tracks 2 and 3 were eligible to receive a larger portion of savings than ACOs in Track 1. ACOs were only permitted to participate in Track 1 for a maximum of six years (two, three-year agreement periods) before switching to a two-sided model. Given that 2019 marks the seventh year of the MSSP program, MSSP entrants from the initial program year in 2012 faced mandatory transition to Track 2 in 2019 if they wanted to remain in the program, with other early adopters facing the same fate in coming years. However, in reviews of the program, CMS found that the vast majority of ACOs were still participating under Track 1, and many Track 1 ACOs were reluctant and/or unprepared to move to a two-sided model under Track 2. Meanwhile, CMS found ACOs in one-sided models actually increased Medicare spending relative to their benchmarks, while ACOs participating in two-sided models generated significant savings for Medicare. As an initial step to address some of these issues, CMS created a temporary “Track 1+” model, which began in 2018, which incorporated into the Track 1 model a more limited downside risk payment design as compared to Track 2. The MSSP redesign in many ways builds on the experience of introducing the Track 1+ model, which CMS found to be an effective way to encourage ACOs to progress more rapidly to performance-based risk.  Under the redesign, CMS has replaced the Track 1, Track 2, Track 3, and Track 1+ models with two tracks, a BASIC track and an ENHANCED track. The ENHANCED track is based on the existing Track 3. The BASIC track, on the other hand, replaces the rest of the existing tracks with a model aimed at aiding ACOs in transitioning to more significant downside risk, providing them with “pathways to success.” Under the BASIC track, ACOs begin under a one-sided model and incrementally phase-in higher levels of risk that, at their highest point, would qualify as an Advanced Alternative Payment Model under the Quality Payment Program (for background on QPP see some of our earlier posts, here and here).  The BASIC track provides a one-sided model available for the first two years for most eligible ACOs (some ACOs that previously participated in Track 1 are restricted to a single year, while some low revenue ACOs are allowed up to three years).  Following that, ACOs can take on progressively higher risk in third through fifth years (the MSSP redesign also replaces existing three-year agreement periods with minimum five-year agreement periods). In order to allow time to transition to the new BASIC or ENHANCED tracks, CMS finalized an agreement period start date of July 1, 2019 rather than January 1, 2019. Pursuant to an earlier rule, in anticipation of changes, ACOs with agreement periods that would have ended December 31, 2018 were able to opt for a six-month extension period. In addition, in this final rule, CMS provides for ACOs in a three-year agreement period not expiring in 2018 the ability to voluntarily terminate existing participation agreements and enter a new agreement period starting July 1, 2019 under one of the new tracks (prior to this change, ACOs would have faced a “sit out” period after termination). For ACOs entering into agreements with a July 1, 2019 start date, there will be an initial, six-month performance year through December 31, 2019, with five additional performance years to follow. The Notice of Intent to Apply for the ACO agreement period with a July 1, 2019 start date is available through January 18, 2019. As of this blog posting, CMS has yet to finalize the rest of the application timeline for the July 1, 2019 start date. Information on the timeline is available here. There are many other pieces to the final rule. Some highlights include: Updates to repayment mechanisms for two-sided model ACOs; Revisions to MSSP’s benchmarking methodology; Integrity-focused changes, including modifying review criteria for ACOs, providing additional termination options for CMS in ACO participation agreements, and revising consequences for agreement termination; A number of changes aimed at promoting innovation through regulatory flexibility, including annual choice of beneficiary-assignment methodology for ACOs, expanding the use of telehealth in ACOs, and expanding SNF 3-day rule waiver eligibility; and Changes aimed at promoting beneficiary engagement, including allowing certain beneficiary incentive programs and strengthening beneficiary notification requirements (CMS is developing template notices for ACOs and ACO participants to use). CMS also sought input on allowing a beneficiary “opt-in” methodology for assignment, or possibly using a hybrid claims-based and opt-in approach, but it continues to consider comments on this issue and did not finalize an opt-in based methodology in this rule. A CMS fact sheet including additional information on the highlights noted above can be found here. Overall, in its comments regarding the final rule, CMS expressed confidence that two-sided ACO models remain a viable, and promising, option for achieving savings in Medicare while also promoting greater quality in care. Through its final rule, CMS aimed to provide ACOs and ACO participants with new “pathways to success” in realizing these goals of the MSSP.  Only time will tell if ACOs are able to successfully navigate these new pathways. In any event, the overhaul will begin affecting MSSP ACOs as early as July of 2019.

On Wednesday, November 28, 2018, the U.S. Department of Health and Human Services (“HHS”) released a draft document titled, Strategy on Reducing Regulatory and Administrative Burden Relating to the Use of Health IT and EHRs.  The report was developed by the Centers for Medicare and Medicaid Services (“CMS”) and the HHS Office of the National Coordinator for Health Information Technology (“ONC”).  HHS was required under the 21st Century Cures Act—signed into law in December 2016—to develop goals, strategies, and recommendations to reduce electronic health record (“EHR”) burdens that impact the delivery of health care services.  HHS solicited input for the strategy in listening sessions, written responses, and other stakeholder contact.  Now that the draft strategy is released, HHS is soliciting additional feedback on their website for sixty days, until January 28, 2019.  To provide written comments and review the strategy, visit the strategy webpage here. The report identifies three goals: Reduce the effort and time required to record health information in EHRs for clinicians; Reduce the effort and time required to meet regulatory reporting requirements for clinicians, hospitals, and healthcare organizations; and Improve the functionality and intuitiveness (ease of use) of EHRs. Potentially more enlightening are the strategies and recommendations, which offer a guide to what actions CMS may take in future rulemaking and guidance.  The report recommends that the regulatory burden around patient encounter documentation should continue to be reduced.  HHS notes that office and outpatient evaluation and management visit documentation has already been updated and streamlined in the 2019 Physician Fee Schedule final rule and that CMS removed some documentation requirements for admission orders to inpatient rehabilitation facilities.  Other recommendations that may directly reduce or alter the regulatory burden on providers include the following: Waive documentation requirements for alternative payment models Automate ordering and prior authorization procedures by adopting standardized templates, data elements, and real-time standards-based electronic transactions Support pilots for standardized electronic ordering Simplify scoring for the Promoting Interoperability performance category (of the Quality Payment Program and Promoting Interoperability Programs, formerly EHR Incentive Programs for hospitals and clinicians) Incentivize innovative uses of health IT and interoperability Continue providing states with Medicaid funding for health IT systems and to promote interoperability among Medicaid providers Adopt additional data standards for better access, integration, and analysis across different systems Explore less burdensome electronic quality measurements Improve interoperability between EHRs and state prescription drug monitoring programs Increase the use of electronic prescribing of controlled substances, with better access to medication history Harmonize EHR data reporting requirements across federal programs to reduce reporting burden Provide additional guidance on HIPAA privacy and other federal confidentiality requirements regarding substance use disorder health information (to facilitate electronic health information exchange) When health IT and EHR incentive programs, such as the Medicare EHR Incentive Program (commonly known as “meaningful use,” and now part of the Merit-Based Incentive Payment System (“MIPS”)), were first rolled out, much of the focus was on switching providers to electronic systems to enable better care and patient access.  For example, in ONC’s Federal Health IT Strategic Plan 2015 – 2020, goals include: improving health care quality and value, supporting individual access, privacy, and autonomy, honoring personal health preferences, and building a culture of EHR use.  The 2015 – 2020 strategic plan makes minimal reference to improving clinical workflows or enabling efficiencies for providers.  As health IT and EHRs have matured in the past few years, it is increasingly clear that individual clinicians and health care organizations have become more burdened through the implementation of electronic systems, not less.  The new Strategy on Reducing Regulatory and Administrative Burden Relating to the Use of Health IT and EHRs discusses the issues faced and potential solutions to be implemented by CMS and other federal programs.  The final version of the strategy will be published in late 2019 after ONC reviews and analyzes the comments made through January 28, 2019.

On Friday, November 2, 2018, the Centers for Medicare and Medicaid Services (“CMS”) issued its calendar year 2019 Medicare Hospital Outpatient Prospective Payment System (“OPPS”) and Ambulatory Surgical Center Payment System final rule. Despite significant resistance and concerns from hospitals, CMS finalized its proposed site-neutral payment policy for clinic visit services provided at off-campus provider-based departments (“PBDs”), including PBDs that were excepted under the Bipartisan Budget Act of 2015. Currently, clinic visit services receive a higher payment when provided at PBDs. Under the new site-neutral payments rule, PBD clinic visit services will be paid at the same rate as clinic visit services provided in standalone physician offices, even when the PBD is excepted. The site-neutral payments will be phased in over two calendar years, 2019 and 2020. The services that will be affected are described by HCPCS code G0463: hospital outpatient clinic visit for assessment and management of a patient. These services are the most common services paid for under OPPS, and in calendar year 2017 represented about one-third of all OPPS claims. In 2017, PBDs received $184 for a new patient clinic visit, compared to $109 reimbursement in a physician office setting. For established patients, the same service is $158 compared to $74, respectively. Under the new site-neutral payments rule, the OPPS reimbursement for the clinic visit service will be cut by 30 percent in calendar year 2019 and 60 percent in 2020 and onward. CMS justified the change as a cost cutting measure, citing Medicare Payment Advisory Commission (“MedPAC”) reports that have long called for site-neutral payments to combat the shift of services from lower-cost physician offices to higher-cost PBDs. CMS’ concern—based on OPPS payment growth and the MedPAC report—is that “payment incentives, rather than patient acuity or medical necessity, are affecting site-of-service decision-making.” In sum, CMS believes increasing OPPS payments are a result of services shifted to PBDs to pursue higher reimbursement (not care-centered factors), and therefore switching to site-neutral payments will not affect patient care and outcomes. Affected hospitals and providers have vigorously disagreed with CMS’ reasoning for site-neutral payments, believing patients, especially those in rural and disadvantaged communities, will suffer. Opponents of site-neutral payments noted many reasons why costs are higher at PBDs than independent physician offices: patients are typically poorer and have more chronic health problems, hospitals have higher overhead, and more regulatory compliance is required. In addition, in responses to the CMS proposed rule in July, many commenters disputed CMS’ statutory authority to enact site-neutral payments. CMS disagreed, stating in the final rule, that it had broad authority to develop a method for controlling unnecessary increases in the volume of covered outpatient department services. The American Hospital Association has already released a statement that it, along with the Association of American Medical Colleges and others, intend to challenge the site-neutral payment provisions in court. Beyond finalizing site-neutral payments, the 1,100 page final rule included other important developments. Notably, in response to comments on the proposed rule and upon further consideration by CMS, the proposal to limit service expansion for excepted, off-campus PBDs was not adopted. The proposal would have limited new items and services excepted off-campus PBDs could provide to clinical groups of services that were in place by a set date. Many commenters opposed the service limitation plan and found it irrational that services would not be allowed to change along with community and provider demand and evolution. CMS stated it may still pursue future rulemaking limiting service expansions. Additionally, CMS finalized its proposal to reduce 340B drug reimbursements for 340B drugs dispensed at off-campus PBDs. A copy of the final rule is available here, which will be officially published in the Federal Register on November 21, 2018.

On October 18, 2018, the Centers for Medicare and Medicaid Services (“CMS”) proposed a new rule (“Proposal”) that would require direct-to-consumer (“DTC”) television advertisements of prescription drugs paid for by Medicare or Medicaid to include the drug’s wholesale acquisition cost (“List Price”). The Proposal comes as part of the current administration’s promise and attempt to both lower the cost and increase the transparency of prescription drug prices. As the Proposal notes, prescription drug prices have seen a dramatic increase over the past decade due to factors such as lack of competition and lack of relevant product information. The Proposal aims to address these factors in an attempt to improve the efficient administration of the Medicare and Medicaid programs and lower the cost of prescription drugs. Prescription drug prices are variable and largely unknown to everyday consumers. Typically, a consumer knows the price of a product before making an informed decision on purchasing that product. That is not the case with prescription drugs where the consumer often makes purchase decisions without knowing much, if any, information about the drug’s price. By mandating the inclusion of a prescription drug’s List Price, CMS hopes to make prescription drug prices more transparent in a fashion similar to the “sticker” price on a new car. The List Price is the price set by drug manufacturers. It can play a major role in price negotiations between payors (e.g., an employer providing a prescription drug benefit plan to its employees or the government providing Medicare and Medicaid coverage), pharmacy benefit managers, and manufacturers. These negotiations impact a benefit plan’s cost sharing and the ultimate drug price paid by the consumer. The price paid by the consumer for prescription drugs can vary widely based on these individual negotiations, but the underlying element of every price is the static List Price. Currently, there is no market pressure for manufacturers or pharmaceutical companies to compete based on the List Price, but the Proposal argues that mandating its inclusion in DTC television advertising will eventually lead to lower prices through increased competition and consumer knowledge. There are at least three main critiques with this Proposal, all of which are pre-emptively addressed by the Proposal: The first is that the Proposal will not lower drug prices but rather make the market for prescription drugs more confusing to consumers. The argument is that since the List Price is rarely the price paid by consumers (in fact, it is largely only paid by those without any coverage), advertising a high List Price will only deter potential consumers instead of create competition. The Proposal states that even though the List Price is typically not the price paid, it is a basic piece of factual information that the consumer should know in order to have at least one metric for comparison shopping. The second critique is that the Proposal will not withstand First Amendment scrutiny; namely, that this mandate is unreasonably compelled speech by the government. The Proposal states that the List Price is simply a required disclosure of factual information in a commercial speech setting, thus requiring a lower level of First Amendment scrutiny. The third main critique is that the Proposal lacks an enforcement mechanism. If a prescription drug advertiser violates the Proposal, their name is only added to a list of violators on the CMS website. The Proposal assumes that enforcement will come from private actions for false or misleading advertising under the federal Lanham Act. In order to better address the critiques outlined above, CMS is accepting comments on the Proposal until December 17th, 2018. In addition to the above critiques, CMS is seeking comments regarding the requirements of the price disclosure among other specific aspects of the Proposal. If you would like to submit comments, one of the authors or your regular Dorsey attorney would be happy to assist you.  

Today, President Trump signed into law two bills that have gained bipartisan support including the “Know the Lowest Price Act of 2018” and the “Patient Right to Know Drug Prices Act”. Together, these two bills ban “gag order” clauses in contracts for Medicare and Medicare Advantage Beneficiaries and commercial employer-based and individual insurance policies. “Gag order” clauses are sometimes in contractual agreements between pharmacies, insurance companies, and pharmacy benefit managers and usually restrict or penalize pharmacies and their staff for informing patients that their prescription would be less expensive if they paid the cash price for the prescription, instead of paying for the prescription using an insurance plan. Under the new legislation, while pharmacists may tell patients about lower cost options, they are not required to do so. Therefore, if a pharmacist does not provide the information to the patient, the patient will be responsible for asking for the information from pharmacy. The new legislation is effective immediately for commercial insurance contracts and will be effective for Medicare beneficiaries starting January 1, 2020. Some pharmacies and patients will be impacted by the new federal legislation more than others, since as of March 2018, fourteen states have already passed legislation that banned the “gag order” practice.

The Dorsey Health Law blog team keeps readers up-to-date on relevant topics in the health care industry. In order to do so, the members of the blog team communicate regularly with other practice groups within the firm for applicable updates from client publications. For this post, we would like to thank Dorsey’s Telephone Consumer Protection Act (“TCPA”) practice group, who writes monthly summaries about ongoing TCPA cases, for providing the following summary of note: Healthcare Message Exempt under the TCPA’s Implementing Regulations In Bailey v. CVS Pharm., Inc., No. 17-cv-11482, 2018 U.S. Dist. LEXIS 137049 (D.N.J. Aug. 14, 2018), the District of New Jersey Court granted CVS’ motion to dismiss plaintiff’s class action complaint for violation of the TCPA; defendant sent texts to customers notifying them that their prescriptions were ready for pick-up and included the words “flu shots available.”  Plaintiff had visited one of CVS’ pharmacies and provided her phone number to receive notification of when her prescription would be ready for pick-up.  The court granted the motion to dismiss, because it found the message to be a “healthcare message” which was exempt under the TCPA’s implementing regulations. The court also found that plaintiff had provided prior express consent to receive a message about a “health-related benefit” (e.g., the notification about the flu shot), because under the healthcare exemption, “an entity need only receive express consent, not written, to escape TCPA liability.” You can read the rest of this month's TCPA case summaries here.

The Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) has identified the anti-kickback statute (AKS) and beneficiary inducements civil monetary penalty (CMP) as potential barriers to arrangements that could promote better patient care coordination and value-based arrangements.  On August 27, 2018, the OIG published a Request for Information (RFI) seeking input from industry stakeholders on how the agency could modify existing or add new safe harbors to the AKS and exceptions to the beneficiary inducements CMP definition of “remuneration” in order to “foster arrangements that would promote care coordination and advance the delivery of value-based care, while also protecting against harms caused by fraud and abuse.”     The RFI describes how transforming the healthcare system into one that better pays for value is a key priority for HHS, and that HHS has launched what it calls a “Regulatory Sprint to Coordinated Care” to accelerate this transformation, with a focus of removing “unnecessary obstacles” to coordinated care. This OIG RFI is part of HHS’s Regulatory Sprint. As we described in our blog post here, the Centers for Medicare & Medicaid Services (CMS) also recently published an RFI related to reforms to the federal physician self-referral law (or “Stark Law”) as part of HHS’s Regulatory Sprint. Comments are due from stakeholders to the OIG RFI by 5 PM on October 26, 2018. Specifically, OIG is seeking input on the following topics: Promoting Care Coordination and Value-Based CareThe OIG would like information about potential arrangements that the healthcare industry is interested in pursuing, which may implicate the AKS and CMP, such as care coordination arrangements, value-based arrangements, alternative payment models, arrangements involving innovative technology and other novel financial arrangements.  The OIG requests a detailed explanation of the proposed structure and terms of the arrangements, and a description of how the arrangement promotes care coordination or value-based care.  The description should also include an explanation of how the proposed arrangement prevents potential harms such as increased costs, inappropriate utilization, poor quality of care and distorted decision-making.  For each detailed description, the OIG requests that stakeholders describe the new or modified AKS safe harbors or exceptions to the beneficiary inducements CMP definition of “remuneration” that may be necessary in order to protect the described arrangement.  The OIG is also seeking input on several key definitions that are used in the regulatory provisions related to health care delivery reform, payment reform and the AKS, such as the definition of coordinated care, care coordinator and care coordination services. Beneficiary Engagement, including Beneficiary Incentives and Beneficiary Cost-Sharing Obligations  The OIG is seeking feedback on the types of incentives that providers, suppliers and others want to provide to beneficiaries.  For each incentive, the OIG wants to know how providing the incentive would contribute to or improve quality of care, care coordination and patient engagement (including adherence programs).  The OIG published several specific questions in the RFI such as whether beneficiary incentives connected to medication adherence and medication management should be treated differently than other types of beneficiary incentives, and if so, how and why.  Further, the OIG is seeking input regarding what disclosures the offer or should be required to make to beneficiaries regarding an incentive, such as the source of the incentive, as well as input regarding the risks and benefits related to certain types of incentives such as cash equivalents, gift cards, in-kind items and services, and non-monetary remuneration.  Additionally, the OIG is also seeking input on whether the “nominal value” threshold under the CMP should be increased from $15 per item and $75 in the aggregate per patient on an annual basis, whether a similar nominal value “policy” should be applied to the AKS, and if so, how such policy would contribute to care coordination or value-based care.  The OIG is also requesting information about how reducing or eliminating patient cost-sharing obligations might improve care delivery and promote quality of care. Other Related Topics of Interest  The OIG is seeking feedback on a number of related topics of interest. These include: (a) current fraud and abuse waivers developed for purposes of carrying out the Medicare Shared Savings Program; (b) donated or subsidized cybersecurity-related items and services; and (c) new exceptions under the Bipartisan Budget Act of 2018 related to (i) incentive payments under the ACO Beneficiary Incentive Program and (ii) telehealth technologies. The Intersection of the Stark Law and the AKSFinally, the OIG would like feedback regarding circumstances in which Stark Law exceptions and AKS safe harbors should align for purposes of the goals of the RFI and circumstances in which Stark Law exceptions related to care coordination/value-based care should not have a corresponding AKS safe harbor. The OIG noted that, where relevant, it intends to review comments submitted in response to the CMS RFI related to the Stark Law (described above), but that it urges commenters to resubmit any relevant comments to the OIG RFI to ensure that they are considered by the OIG, given the volume of questions included in the CMS RFI and the separate authorities of the OIG and CMS.   Please contact the authors or your regular attorney at Dorsey & Whitney if you want more information about the RFI process or desire to submit comments to the RFI by the October 26, 2018 deadline.  

Many regulatory and legislative calls for modernizing the federal physician self-referral law (or “Stark Law”) in light of the move to value-based payment under Medicare have been made in recent months.  Most recently, a hearing on “Modernizing the Stark Law to Ensure the Successful Transition from Volume to Value in the Medicare Program” took place on July 17th with the House Ways and Means Subcommittee on Health.  At the hearing, the Department of Health and Human Services (HHS), legislators and providers emphasized that the Stark Law has slowed the move to value-based payment under Medicare and that reforms to the Stark Law are needed. Further, the Centers for Medicare & Medicaid Services (CMS) published a Request for Information (RFI) on June 25th regarding reducing the regulatory burdens of the Stark Law, with a particular focus on soliciting comments on how the Stark Law may impede care coordination initiatives.  The RFI describes how transforming the healthcare system into one that pays for value is a key priority of HHS, and that HHS launched a “Regulatory Sprint to Coordinated Care” to accelerate this transformation.  One of CMS’s goals in this Regulatory Sprint is to address “unnecessary obstacles to coordinated care, real or perceived, caused by the [Stark Law].”  In a press release related to the RFI, CMS Administrator Seema Verma is quoted as follows: “We are looking for information and bold ideas on how to change the existing regulations to reduce provider burden and put patients in the driver’s seat. . . . Dealing with the burden of the physician self-referral law is one of our top priorities as we move towards a health care system that pays for value rather than volume.” In the RFI, CMS requests public input on 20 different areas.  These areas include, among others, the structure of existing or potential alternative payment models and other novel financial arrangements, what additional exceptions to the Stark Law are needed for these arrangements, the utility of certain existing exceptions to the Stark Law, and creating new defined terms and revising certain existing defined terms.  CMS also requests comments on areas beyond care coordination initiatives, such as requests for input on defining “commercial reasonableness” in the context of Stark Law exceptions, qualifying as a “group practice,” other areas of Stark Law regulations that need clarification, and compliance costs for regulated entities. The hearing and RFI continue the recent trend of regulatory and legislative initiatives aimed at modernizing the Stark Law in light of the move to value-based payment under Medicare.  As we explained in our prior post, a bill that addresses this very topic, titled the “Medicare Care Coordination Improvement Act of 2017,” was introduced in both the U.S. House of Representatives (H.R. 4206) and Senate (S. 2051) in November 2017.  The bill is still under consideration in both the House and the Senate.  (Please see our prior post for a detailed explanation of the bill.)  As we also explained in this prior post, in January 2018, CMS Administrator Verma identified Stark Law reform as a top policy priority and reported that an inter-agency group was being formed to review the law. Next, as the RFI describes, the President’s fiscal year 2019 budget, which was released in February 2018, included a legislative proposal to create a new Stark Law exception for arrangements arising from alternative payment model participation. Given these recent developments, Stark Law legislative and regulatory reforms are likely to occur in the near future.  The RFI is a great opportunity for stakeholders to be involved in these reforms.  CMS is accepting comments on the RFI through August 24, 2018.  If you would like to submit comments, one of the authors or your regular Dorsey attorney would be happy to assist you.

On June 12, the FDA issued guidance that clarifies its recommendations for certain product communications made by medical product manufacturers, packers, and distributors (collectively “firms”). The guidance, “Medical Product Communications That Are Consistent With the FDA-Required Labeling” (the “Guidance”), explains the FDA’s views on firms’ communication of information that is not contained in the FDA-required labeling for their drugs or medical devices, but that is consistent with that labeling. As explained in a statement by FDA Commissioner Scott Gottlieb introducing the Guidance, FDA-required labeling “is the primary tool that communicates the essential information needed for the safe and effective use of a medical product [and it is] subject to content requirements and limitations.” That being said, FDA-required labeling does not address all that is known about a product, such as data from post-market studies and surveillance of a product’s approved uses or additional information obtained from pre-market studies. Firms may want to communicate this information to help inform decision-making regarding patient care, and payors want this information to inform their purchasing decisions or negotiation of value-based contracts. However, firms may be wary of communicating such information for fear of being deemed to have communicated information that is inconsistent with FDA-approved labeling, that is false or misleading, and/or that establishes a new intended use. In response to a number of questions from firms on these issues, the Guidance seeks to clarify what types of information are considered consistent with FDA-required labeling. It also provides general recommendations for conveying that information in a truthful and non-misleading way, along with examples to illustrate these concepts. The Guidance makes clear that the FDA does not view communications consistent with required labeling alone as evidence of a new intended use, though it does caution that such communications will not necessarily be excluded altogether from assessing a firm’s conduct if there is other evidence of a new intended use. When determining whether a communication is consistent with the required labeling for the product, the FDA considers three factors. A communication must satisfy all three factors in order to be consistent with the required labeling: Comparing to Conditions of Use: First, the FDA considers how the information in the product communication compares to the information about the conditions of use in the product’s required labeling. More specifically, a product communication is not consistent with the FDA-required labeling if the representations/suggestions in the communication relate to a different indication than the ones reflected in the product’s required labeling, if the patient population represented/suggested in the communication is outside of the approved/cleared patient population in the required labeling, if the representations/suggestions in the communication conflict with the use limitations or directions for handling, preparing, and/or using the product reflected in the required labeling, or if the representations/suggestions about the product conflict with the recommended dosage or use regimen, route of administration, or strengths set forth in the required labeling.   Evaluating Effect on Potential for Harm: Second, the FDA considers whether the product communication increases the potential for harm to health relative to the labeling. If a communication alters the risk-benefit profile of a product in a way that may result in increased harm to health, this indicates the communication is not consistent with the required labeling. For example, if the representations/suggestions in a communication may introduce new risks not included in FDA-required labeling or increase the rate of occurrence or severity of existing risks, the communication may fail this test.   Evaluating Effect on Safe and Effective Use: Finally, the FDA considers whether the directions for use in the labeling enable the product to be used safely and effectively under the conditions represented/suggested in the product communication under consideration. Here, firms should examine any unique considerations associated with the use suggested by a product communication and whether the FDA-required labeling furnishes appropriate context.   The Guidance acknowledges the potential for overlap in these three factors, but emphasizes that all must be satisfied for a communication to be consistent with the required labeling. It also gives examples of communications that may satisfy one factor but fail others. The Guidance also outlines recommendations for truthful and non-misleading promotional communications of information consistent with required labeling, including recommendations regarding evidentiary support. To be truthful and non-misleading, representations or suggestions made by firms about their products need to be grounded in fact and science and presented with appropriate context. Any data, studies, or analyses relied on should be scientifically appropriate and statistically sound to support the representations or suggestions made. While sufficient evidentiary support must be presented, the FDA will not consider representations or suggestions in a communication consistent with required labeling to be false or misleading based only on the lack of evidence sufficient to satisfy the applicable approval/clearance standard. In the same statement introducing the Guidance, Commissioner Gottlieb also introduced accompanying guidance, “Drug and Device Manufacturer Communications With Payors, Formulary Committees, and Similar Entities - Questions and Answers,” which we covered in more detail in a previous post. Commissioner Gottlieb explained that the ultimate goal of the two guidances “is to help facilitate a market that is more competitive, based on the outcomes that matter most –the benefit to patients.” Authors’ Note: Summer Associate Margaret Fitzpatrick provided substantial assistance with the drafting of this blog post.

On June 12, the FDA issued guidance that clarifies its recommendations for certain medical product communications. The guidance, “Drug and Device Manufacturer Communications With Payors, Formulary Committees, and Similar Entities - Questions and Answers” (the “Guidance”), provides answers to common questions about the communications between medical product manufactures, packers, and distributors (“firms”), and insurance companies, formulary committees and similar entities (“payors”). In particular, it addresses communications by firms to payors regarding approved or cleared products as well as unapproved products and unapproved uses of approved or cleared products. In a statement, FDA Commissioner Scott Gottlieb acknowledged the sophistication of payors as an audience and recognized their need for access to a range of information on the effectiveness, safety, and cost-effectiveness of approved/cleared products. The Guidance is therefore designed to enable truthful, non-misleading and appropriate company communications to promote public health benefits such as increased cost savings from informed and appropriate coverage and reimbursement decisions. The FDA similarly seeks to give companies clear guidelines for providing payors with truthful and non-misleading information about unapproved products and unapproved uses of approved/cleared products. Through the Guidance, the FDA aims to help facilitate communications that can allow payors to provide coverage for these new products and new uses more quickly after FDA approval or clearance as well as help companies and payors to establish pricing structures that benefit patients as well as health plans. First, the Guidance addresses the communication of health care economic information (“HCEI”) regarding both approved drugs and approved/cleared devices. HCEI is defined in section 502(a) of the Food, Drug, and Cosmetics Act (“Section 502(a)”) as “analysis… that identifies, measures, or describes the economic consequences… of the use of a drug.” As noted in the Guidance, HCEI generally pertains to economic consequences related to the clinical outcomes of treating, preventing, or diagnosing a disease. The Guidance clarifies Section 502(a), which provides that the FDA will not consider dissemination of HCEI to an appropriate audience to be false or misleading if the HCEI relates to an approved indication and is based on competent and reliable scientific evidence (the “CARSE” standard). Specifically, the Guidance expounds on the FDA’s thinking as to what it means to “relate to an [approved] indication,” the type of evidentiary support needed for HCEI, and the components of HCEI to which the CARSE standard applies, among other topics. Notably, although the language in Section 502(a) addressing HCEI applies to drugs, not devices, the FDA states that its recommendations are also applicable to firms’ communications of HCEI regarding approved/cleared devices. The Guidance also describes information that should be included when disseminating HCEI. While recognizing not all categories of information will be applicable to particular HCEI presentations, the Guidance provides that, when relevant, the HCEI presentation should also clearly and prominently include appropriate background and contextual information, including study design and methodology, generalizability, limitations, sensitivity analysis, and additional information for a balanced and complete presentation. The disclosure of this information may be concise, so long as all material information is provided. In response to indications from payors that they need to plan for and make coverage and reimbursement decisions far in advance of the effective date of such decisions, the Guidance also discusses types of information about unapproved products or unapproved uses of approved/cleared/licensed products that a firm may communicate to a payor. Provided that the information is “unbiased, factual, accurate, and non-misleading,” communications may include product information, information about the indication sought, anticipated timeline for possible FDA approval/clearance/licensure of the product or new use, product pricing information, patient utilization projections, product-related programs or services, and factual presentations of results from studies including clinical studies of drugs or devices or bench tests that describe device performance. Additionally, the communication must be accompanied by additional information, including a clear statement that the product or use is not approved/cleared/licensed, and that the safety or effectiveness of the product or use has not been established. In the same statement introducing the Guidance, Commissioner Gottlieb also introduced accompanying guidance, “Medical Product Communications That Are Consistent With the FDA-Required Labeling - Questions and Answers,” which we will cover in more detail in Part II of this post.   Authors' Note: Summer Associate Margaret Fitzpatrick provided substantial assistance with the drafting of this blog post.

Last week the Centers for Medicare & Medicaid Services (“CMS”) released its first Rural Health Strategy. The strategy is intended to improve the agency’s service to individuals living in rural areas. CMS’ Rural Health Council, created during the Obama Administration, developed the strategy by examining current rural-focused programs at CMS, reviewing the methods used by CMS Centers and Offices to integrate rural issues in agency policies, and hosting several listening sessions with stakeholders, including healthcare providers and consumers. CMS notes in the strategy that approximately one in five Americans live in rural areas, and that rural communities are plagued with many issues: higher poverty, more chronic conditions, greater levels of uninsured and underinsured, a shrinking healthcare workforce, lack of specialty services, and fragmented care. The information gathered was grouped into eight themes, including: improving reimbursement; adapting and improving quality measures and reporting; improving access to services and providers; improving service delivery and payment models; and improving affordability and accessibility of insurance options. From the themes, the Rural Health Council drafted five key objectives that constitute the goals of the Rural Health Strategy: apply a rural lens to CMS programs and policies; improve access to care through provider engagement and support; advance telehealth and telemedicine; empower patients in rural communities to make decisions about their health care; and leverage partnerships to achieve the goals of the CMS Rural Health Strategy. According to CMS, applying a rural lens to the agency’s actions aims will ensure rural communities’ unique needs are considered in CMS policymaking and program creation. Improving access to care will focus on transportation, the move away from volume and toward value, technical assistance to providers, and scope of practice. Advancing telehealth and telemedicine will build on CMS’ recent support of such measures, including improved reimbursement, easing cross-state licensure, and reducing related administrative and financial burdens. The strategy concludes that the latter two objectives, empowering rural patients and leveraging partnership, will require better engagement and communication with patients and collaborations with stakeholders, respectively. CMS noted it was already working on several of these initiatives, even before the Rural Health Strategy was announced. The extent to which, and how quickly, these initiatives are adopted and implemented, however, is unclear. We will continue to monitor any future developments and progress of CMS’ Rural Health Council and Rural Health Strategy and provide additional analysis of related legal changes.  

Last month, the Centers for Medicare and Medicaid Services (“CMS”) announced new flexibility in what Medicare Advantage plans may cover as “supplemental health care benefits.” The announcement was part of CMS’ release of Calendar Year 2019 Medicare Advantage and Part D Rate Announcement and Call Letter. The Medicare Managed Care Manual (Chapter 4, Section 30.1) defines supplemental benefits as (1) not covered by original Medicare, (2) primarily health related, and (3) incurring a non-zero direct medical cost. Primarily health related items or services previously have been described as having a primary purpose to “prevent, cure or diminish an illness or injury” and primary purposes of comfort, cosmetic, or daily maintenance have been specifically excluded. CMS’ new interpretation of “primarily health related” expressly allows daily maintenance and other items. The agency’s justification to expand its interpretation was that items and services that can diminish the impact of injuries or health conditions have been shown to reduce emergency care and overall utilization of health care services. The one example provided in the call letter was fall prevention devices, e.g., support bars in bathrooms and showers. Primarily health related items or services must now have a primary purpose to “diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization.” Items or services “must be reasonably and rationally encompassed” by at least one of these purposes. In addition, CMS stated that the benefits need to directly focus on an enrollee’s healthcare needs, be medically appropriate, and be “recommended” by a provider as part of a care plan if not supplied by that provider. Importantly, a physician order is not necessary for an item or service to be “recommended.” Keeping with federal beneficiary inducement prohibitions, plans may not offer supplementary benefits that are solely inducements to enroll. Clearly, this new interpretation of “primarily health related” creates a much broader allowance for items or services than only those that prevent, cure or diminish illness or injury under the old definition. Services that compensate for physical impairments might include transportation, cooking, or cleaning. Services that reduce healthcare utilization might include more intensive home-based support to keep Medicare Advantage enrollees in their homes and out of nursing facilities. Many groups stand to benefit from the increased flexibility for supplemental benefits, most obviously being plan sponsors, who can take a more comprehensive approach to healthcare to drive down utilization. Ride-hailing services, such as Uber and Lyft, may be enlisted to provide transportation to medical appointments, while grocery delivery services like Instacart could keep beneficiaries stocked with healthy foods selected for individual dietary needs. Finally, beneficiaries themselves will enjoy assistance with daily tasks that impact their health and allow them to age-in-place, at home. What remains unknown is whether CMS will eventually roll out similar benefits to traditional Medicare, which covers approximately two-thirds of all Medicare enrollees. Traditional Medicare still does not cover directly health related supplemental benefits such as dental care and eyeglasses that Medicare Advantage has been covering for years under the more restrictive definition of supplemental benefits.

On May 11, 2018, President Trump gave his long-awaited speech on his administration’s plan to lower prescription drug prices. In addition, the administration published its Blueprint to Lower Drug Prices and Reduce Out-of-Pocket costs. The blueprint can be found here.  The blueprint focuses on four areas for reform including strategies to: (1) improve competition; (2) increase negotiation power; (3) provide incentives for lower list prices; and (4) lowering out-of-pocket costs. Some specific strategies outlined in President’s speech and in the blueprint include: Measures to promote innovation and competition for biologics; Assessing the varying drug prices paid by foreign countries versus the United States; Encouraging sharing of samples needed for generic drug development; Creating additional efforts to promote the use of biosimilars; Reforming Medicare Part D to give plan sponsors more power when negotiating with manufacturers; Allowing additional substitution in Medicare Part D to address price increases for single-source generics; Considering requiring manufacturers to include list prices in advertisements; Considering whether to restrict the use of rebates, including reconsidering the Anti-Kickback safe harbor for drug rebates; Considering fiduciary status for Pharmacy Benefit Managers; Reforms to the 340B Drug Discount Program; Considering changes to regulations regarding drug copay discount cards; and Prohibiting Part D contracts from preventing pharmacists’ from telling patients when they could pay less out-of-packet by not using their insurance. President Trump emphasized in his address that he expects many of these changes to occur quickly, and comments are being sought on the policies outlined in the Blueprint. It is unclear how quickly, and how many, of the proposals will actually be adopted and implemented.  We are continuing to monitor these trends and any resulting changes for our clients in the pharmacy market, and we will provide updates as we have them.

All eyes are on the federal government as top officials have recently signaled upcoming actions which could impact the prices of prescription drugs. In the past two weeks, leaders from both the FDA and HHS have made statements signaling that the agencies are focused on reducing prescription drug prices. In remarks at the Food and Drug Law Institute conference held on May 3, 2018, U.S. Food and Drug Administration Chief Scott Gottlieb suggested that by reexamining the current safe harbor under the anti-kickback statute for drug rebates, list prices for drugs would be closer to negotiated prices and competition may increase. Mr. Gottlieb stated that, while “[t]here’s a range of reasons why drug prices are too high” one reason “that’s driving higher and higher list prices, is the system of rebates between payers and manufacturers. And so what if we took on this system directly, by having the federal government reexamine the current safe harbor for drug rebates under the Anti-Kickback Statute?” (The transcript of Mr. Gottlieb’s remarks can be found here). Mr. Gottlieb appears to be siding with critics of drug rebates who have argued that the practice leads to higher prices for patients because the rebates do not make their way down to patients, and instead, patients pay list prices for the drugs as they meet their out-of-pocket obligations. Mr. Gottlieb also mentioned some additional upcoming actions to reduce drug prices, including a Biosimilars Action Plan that is similar to the FDA’s Drug Competition Act Plan (DCAP); additional policies under DCAP to promote generic competition; a comprehensive framework for the regulation of gene therapy; and prioritizing the review of low competition products for generic product applications. Additionally, Mr. Gottlieb alluded to changes that may be introduced by Secretary of Health and Human Services, Alex Azar, including policies that “will dismantle many of the provisions that shield parts of the drug industry from more vigorous competition” and “a series of changes to the pricing mechanism in [Medicare] Part D.” Days later, on May 9, Alex Azar told members of the American Hospital Association that “HHS is focused on solving a number of the problems that plague drug markets. These include the high list prices set by manufacturers; seniors and government programs overpaying for drugs due to the lack of the latest negotiating tools; rising out-of-pocket costs for consumers; and foreign governments free-riding off of American investments in innovation.” Mr. Azar’s full speech can be watched here. President Trump is schedule to deliver a speech on Friday, May 11, 2018 addressing the steps that the administration plans to take to address drug pricing in the United States. Mr. Azar noted that President Trump wants to go “much, much further” in addressing drug prices than the proposals initially set forth in the President’s 2019 Budget. We will continue to closely monitor these activities which may have a significant impact on all involved in the prescription drug market.

  Last week, with bipartisan support, both the Iowa House and Senate passed, unanimously, HF 2377   (“An Act Relating to the Regulation of Certain Substances, Including the Regulation of the Practice of Pharmacy, Providing Penalties, and Including Effective Date Provisions”). The bill is expected to be signed into law by the Governor in the coming days. Like many other states throughout the country, Iowa has taken steps to increase the State’s regulation of opioid prescriptions in the wake of a national opioid epidemic. The new law will impact the operations of prescribers and pharmacies.  New requirements state that most prescribing practitioners must register with the State’s prescription drug monitoring program (PMP) and check the PMP database prior to prescribing an opioid.  The current law encourages, but does not require, practitioners to check the PMP database prior to writing a prescription for an opioid. The new law will also require pharmacies and prescribers that furnish, dispense, or supply controlled substances identified in Iowa Code 124.544(1)(g) to submit information to the PMP regarding the prescription within one business day of dispensing the controlled substance.  Current law at Iowa Admin. r. 657-37.3(3) exempts prescribers who administer or dispensed a controlled substances for purposes of outpatient care from this reporting requirement. Additionally, beginning January 1, 2020, unless an exemption applies, every prescription issued for a controlled substance must be transmitted to a pharmacy electronically. The bill also establishes continuing education requirements for licensed individuals prescribing opioids. Prescribers should be aware that, similar to legislation passed in other states, beginning February 1, 2019, the Iowa Board of Pharmacy will provide annual reports to prescribers which are aimed at showing prescribers how they compare to their peers.  Each year, prescribing practitioners will receive a summary of the prescriber’s history of prescribing controlled substances and a comparison to others in the same profession or specialty. Additionally, the Iowa Board of Pharmacy will provide specific notifications to prescribing practitioners and pharmacists regarding patients that may be doctor or pharmacy shopping or be at risk of abusing or misusing controlled substances. The bill also includes a “Good Samaritan Law” that provides immunity from prosecution under laws such as drug possession, for persons who call 911 to seek help for a drug overdose.  The immunity is not available for drug dealers or repeat offenders.  Practitioners and pharmacies should prepare now by implementing immediate changes to their policies and procedures in order to comply with the new requirements under HF 2377.  Changes would include requirements for prescribers to enroll in the PMP database, report to the PMP database within 1 business day of dispensing a controlled substance, and check the PMP database prior to writing a prescription for a controlled substance.  Software security changes may also need to be implemented by January 1, 2020 in order to accommodate the new electronic prescribing requirements for controlled substances.     

Harnessing existing digital health solutions to improve chronic care management was a prominent topic at HIMMS this year (amongst many others, including AI and cybersecurity, both of which we will cover in upcoming blog posts). While this is not a new topic, it was particularly “buzzy” this year due to the ever-increasing number of large technology and wearables vendors entering the healthcare space, and as medical device manufacturers look to pair services with their existing devices. Chronic care management, as its name denotes, involves higher-touch and ongoing communication between the patient and the provider. Since digital health solutions are a cost-effective means to connect patients and providers, and because providers can use them to reach patients at home to help correct behaviors that contribute to or ameliorate chronic conditions, digital health solutions hold great promise as an effective chronic care management tool – and, indeed, as HIMMS this year made apparent, digital health solutions are poised for exponential growth. As with any relatively new field, however, we have noticed that certain key issues tend to be overlooked, often at great cost. Here are the top 5 overlooked issues we have noted:   Value proposition in a crowded market: Make no mistake about it: this is a crowded market with many different types of vendors hoping to launch the next big thing in digital chronic care management solutions. So many of the pitch decks and conversations we have been privileged to be a part of tend to focus on the market size in terms of clinical need: that there are X number of patients with Y chronic condition who would welcome Z solution. The mistake, however, is presuming that this suffices to capture attention. The barrier to market entry is relatively low (FDA considerations, if applicable, notwithstanding!), and the customers – providers and patients – are relatively wary of yet another device, application, or website to manage. Investors and customers alike will ask, what, specifically, is your digital health chronic care solution’s real value proposition; what truly differentiates you? Effectively managing a chronic condition is the baseline minimum expectation. You must offer something more.   EHR integration – the how and where: Many sellers of digital health chronic care solutions tout the ability of the device or software program to integrate with a provider’s EHR and/or with a patient-facing application so that providers and patients can monitor the relevant condition. This is all to the good, as transparent, real-time results are a key facet of chronic care management. The item that is missed, however, is how that information will be displayed in the EHR; where, exactly, will it appear? Is that in readable and, importantly, reportable format for the providers? It does a provider little good if a blood viscosity result appears in the EHR as a pdf attachment that is not searchable as a discrete data element. It is important to ask vendors and potential partners this at the outset, and to obtain the answer in writing.   Process flow: Providers and medical device manufacturers alike are doing a good job of convening clinical experts to discuss particular care needs and associated care management regimen. This is then translated into the digital health offering. What is missed, however, is thinking through the end-to-end process between provider, patient, and both their interactions with the software, to ensure that it’s as seamless and hassle-free as possible. Patients who would be, well, patient with a clinician who is taking a few extra moments to answer a question would not necessarily be as patient with extra clicks or wait time from a digital health program. Providers, in turn, are looking for the least amount of clicks to enable them to do what they do best: offer the patients helpful advice. Mapping out the exact flow of when and how the software – and any integrated devices – will behave, and who is required to do what, is critical.   Data ownership and access: While vendors – medical device and software and analytics alike – race to develop in-house chronic-care solutions, many are looking to partner with providers to provide clinical input and data and to serve as a beta testing and initial customer site. Partnerships are proliferating, and while good attention is paid in the negotiating process to the typical business terms, we have noted that data flow, ownership, and access tends to be a secondary thought. To be clear, HIPAA, privacy, and cybersecurity are still at the front of everyone’s minds; however, the operational brass tacks of exactly what data will display where, which party will provide that data, and exactly who will access the data and its derivatives is still oft-overlooked. Just as we recommend process flows from the user-end perspective (see above point), we also have found that data maps are instrumental to a successful partnership. If you have created one for your organization for cybersecurity and breach incident response, you will find that to be a useful starting point; you will then want to discuss and create a new, macro-level flow that reflects the flow across the parties. Then, check with counsel, and ensure that the relevant contracts (e.g., partnership, services, and/or BAA agreement(s)) align with that data map.   Licensure – you probably need it: “Chronic care management” encompasses so many conditions that it can, at times, be used as a marketing lure to sell wellness-related devices and services. Any company that considers itself in the “wellness” sphere and employing people to provide ongoing advice – whether by phone, video, e-mail, or other means – should make a point to check with counsel as to whether professional licensure is required. It does not matter what label you give to those employees (e.g., “coach” vs. “counselor,” or “care guide” vs. “RN”), rather, it matters what type of care is being offered through the digital health solution and what condition(s) it is addressing. A digital health solution that addresses a specific clinical condition is likely one that is regulated, which means that the employees interacting with the patient are also likely to need some form of relevant licensure. This one is a mission-critical ask, so be sure to check with counsel early on (and title your employees correctly on your website and sales materials).   We welcome your suggestions for additional focus topics within this series on digital health-related issues. Please contact Shira Hauschen at Hauschen.Shira@Dorsey.com with any comments, suggestions, or questions.

On February 13, in a matter of special note to non-profit hospitals and senior living organizations across the country, legislation was introduced in the United States House of Representatives that would restore tax exemption for interest on advance refunding bonds.   The Tax Cuts and Jobs Act of 2017 eliminated tax exemption for interest on such advance refundings when President Trump signed the act into law on December 22. Non-profit health care organizations have used advanced refundings for years as a way to take advantage of lower interest rates and to refinance debt in advance of the call date. That financing tool was taken away by the new tax law as of December 31, 2017.   Representative Randy Hultgren (R-IL), joined by five co-sponsors representing both parties (two Republicans and three Democrats), introduced H.R. 5003 seeking to fully reinstate tax exemption for interest on advance refunding bonds. The legislation, which has been referred to the House Committee on Ways and Means, enjoys not only bipartisan support but also the backing of national organizations such as the American Hospital Association and the Bond Dealers of America. The text of the legislation can be found here https://www.congress.gov/115/bills/hr5003/BILLS-115hr5003ih.pdf.   Among the numerous legislative responses to the new tax law introduced this session, tax-exempt health care organizations should pay particular attention to the progress of H.R. 5003.  

Overview On February 9, President Trump signed the Bipartisan Budget Act of 2018 (“BBA”) into law. The BBA funds the federal government through March 23 and included a bipartisan agreement to increase annual spending authority for a two-year period. In addition, the legislation contains significant policy changes impacting Medicare, Medicaid and other federal health agencies. These changes include revisions to the federal physician self-referral law (commonly referred to as the “Stark Law”), expansion of coverage for telehealth services, funding extensions of several critical Medicare programs, and changes to the Medicare Shared Savings Program. A summary of some of these key health care policy changes is included below. Revisions to the Stark Law The BBA revised the Stark Law to codify certain regulatory changes that went into effect on January 1, 2016 and corresponding clarifications via preamble by the Centers for Medicare & Medicaid Services (“CMS”) in the 2016 Medicare Physician Fee Schedule Final Rule (the “2016 Final Rule”). Specifically, the BBA revised the Stark Law to indicate the following: The writing requirement of various Stark Law compensation exceptions can be satisfied “. . . by a collection of documents, including contemporaneous documents evidencing the course of conduct between the parties involved.” Previously, CMS had only indicated in preamble text in the 2016 Final Rule that a collection of documents could be relied upon to meet the writing requirement. This was not set forth in regulatory text, however. Now that this language is in the Stark Law itself, stakeholders can take greater comfort in relying on a collection of documents to meet the writing requirement. The signature requirement of various Stark compensation exceptions is met if the parties obtain the required signatures “not later than 90 consecutive calendar days immediately following the date on which the compensation arrangement became noncompliant” and the arrangement otherwise complies with all applicable criteria. This statutory language now aligns with regulatory language in 42 C.F.R. § 411.353(g) regarding temporary noncompliance with signature requirements. That regulatory language was revised in the 2016 Final Rule to provide organizations with greater flexibility and to eliminate the prior rule that included a confusing, and often unhelpful, distinction between inadvertent noncompliance not inadvertent noncompliance. The Stark Law itself, however, has not previously referenced any provisions with respect to temporary noncompliance with the signature requirements. A holdover lease or personal service arrangement can indefinitely meet the requirements of the Stark exceptions for rental of office space, rental of equipment and personal service arrangements, respectively. However, the immediately preceding arrangement must have expired after a term of at least one year, the arrangement must have met all requirements of the applicable exception when it expired, the holdover arrangement must be on the same terms and conditions as the immediately preceding arrangement, and the holdover arrangement must continue to satisfy the conditions of the applicable exception. This statutory language now aligns with regulatory language regarding holdovers in the rental of office space, rental of equipment and personal service arrangements exceptions in 42 C.F.R. § 411.357. That regulatory language was revised in the 2016 Final Rule which previously only permitted holdovers for up to six months. The Stark Law itself, however, has not previously referenced any provisions with respect to holdover arrangements. These Stark-related provisions of the BBA used the language from Section 301 of H.R.3178, titled the “Medicare Part B Improvement Act of 2017,” which we summarized in our blog post here. This bill, which includes many other non-Stark Law-related provisions, is still pending in the Senate. We note that, while the changes to the Stark Law under the BBA were fairly inconsequential, broader Stark Law reform initiatives, including in response to the move to value-based payments under Medicare, are also currently underway. See our blog post here for further details. Increase in Civil and Criminal Penalties for Violations of Fraud and Abuse Laws The BBA significantly increased civil and criminal penalties for federal health care program fraud and abuse. Specifically, existing maximum penalties under the Civil Monetary Penalties Law (“CMPL”) for improperly filed claims (under 42 U.S.C. § 1320a–7a(a)) increased to $20,000 (from $10,000), to $30,000 (from $15,000), and to $100,000 (from $50,000). Maximum penalties under the CMPL for payments to induce reduction or limitation of services (under 42 U.S.C. § 1320a–7a(b)) increased to $5,000 where they were previously $2,000 and $10,000 where they were previously $5,000. Additionally, criminal penalties for acts involving federal health care programs under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased to $100,000 (from $25,000), to $20,000 (from $10,000), and to $4,000 (from $2,000). Finally, maximum sentences for felonies involving federal health care program fraud and abuse under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased to ten years where they were previously five years. The effective date of these increased penalties is February 9, 2018 (the date of enactment of the BBA). We note that, in 2016, penalties under the CMPL and for criminal acts involving federal health care programs were adjusted for inflation in accordance with the Bipartisan Budget Act of 2015 (see 81 Fed. Reg. 61538 et seq. (Sept. 6, 2016)), and are adjusted on an annual basis under 45 C.F.R. § 102.3 (but have not yet been updated for 2018). So, the previous statutory maximum penalties had already been increased from the amounts set forth in the statute, and now have been increased even further. It is not clear how inflation adjustments will be applied in 2018 to the new statutory penalty maximums under these laws. Medicare Telehealth Expansion The BBA also included potentially far-reaching expansions to Medicare coverage for telehealth services. Telehealth Services for Stroke Patients Current Medicare coverage for telehealth services is limited to certain care locations that are either: (A) outside of any Metropolitan Statistical Area and designated as a rural health professional shortage area; or (B) participating in a Federal telemedicine demonstration project. The BBA eliminates this originating site requirement beginning January 1, 2019 for services to diagnose, treat, or evaluate symptoms of an acute stroke. The Medicare beneficiary receiving diagnosis, treatment, or evaluation of an acute stroke may be located at any hospital or critical access hospital, mobile stroke unit, or any other type of care site that CMS designates. Home Dialysis Assessments Similarly, beginning January 1, 2019 Medicare beneficiaries with End Stage Renal Disease (“ESRD”) may choose to receive monthly ESRD-related clinical assessments via telehealth. A face-to-face clinical assessment will be required monthly during the initial 3 months of home dialysis, and thereafter only once every 3 consecutive months. The statute also states that the provision of telehealth technologies to a Medicare beneficiary receiving home dialysis will not be considered remuneration under the beneficiary inducement statute, so long as the telehealth technologies are not offered as part of any advertisement or solicitation, are provided for purposes of furnishing telehealth services related to the beneficiary’s ESRD, and meet any other requirements CMS may adopt by regulation. The condition-based expansions in telehealth coverage for ESRD and stroke patients beyond rural health professional shortage areas signals an important recognition that service delivery via telehealth is both effective and increasingly common. Telehealth Services Provided Under Medicare Advantage Plans Beginning in plan year 2020, a Medicare Advantage Plan (“MA Plan”) may provide additional telehealth benefits to its enrollees. The telehealth benefits must be a service type available under Medicare Part B, and must be services that the MA Plan identifies as clinically appropriate to furnish using electronic information and telecommunications technology when a clinician is not at the same locations as the plan enrollee. CMS will adopt regulations regarding physician and practitioner requirements, coordination of benefits rules, and other requirements. If the MA Plan wishes to offer the service via telehealth, the MA Plan must offer the same benefit in-person and allow the enrollee to determine whether or not to receive the benefit via telehealth. The MA Plan’s bid to CMS must attribute the telehealth benefit cost to amounts attributable to the provision of benefits under the original Medicare fee-for-service program. Telehealth Services to ACO Beneficiaries Lastly, the BBA allows increased Medicare coverage for telehealth services provided to Medicare fee-for-service beneficiaries assigned to an Accountable Care Organization (“ACO”) participating in certain Medicare shared savings programs. After January 1, 2020, the existing Medicare telehealth geographic limitations will not apply when a physician or practitioner participating in an ACO provides telehealth services covered under Medicare to a Medicare beneficiary assigned to the ACO. The beneficiary’s home can be an originating site for the telehealth services, but the beneficiary’s home need not be located in a rural health professional shortage area. This expansion in telehealth coverage applies only to ACOs participating in a two-sided ACO model (in which the ACO shares in both savings and losses), or an ACO tested and expanded pursuant to authority granted to the Center for Medicare and Medicaid Innovation. No facility fee will be paid; only the professional service is paid pursuant to this telehealth expansion. And coverage does not extend to services appropriate only for hospital inpatients. Other ACO Changes The BBA includes a provision allowing ACOs to elect to have beneficiaries assigned to the ACO prospectively rather than having Medicare beneficiaries attributed to ACOs retroactively using encounter data based upon visits for primary care services. A beneficiary may also choose to align with an ACO in which his or her main primary care provider participates. The beneficiary can continue to receive services from any provider participating in Medicare even if he or she elects to align with a specific ACO. The BBA also establishes a new voluntary ACO beneficiary incentive program that allows certain two-sided risk ACOs to offer beneficiaries a payment of up to $20 per service for receiving select primary care services. ACOs that want to offer payment to beneficiaries will have to apply for approval to participate in the incentive program with Health and Human Services. Outpatient Therapy Payments The BBA repeals annual payment caps for outpatient hospital therapy services (including physical therapy, speech-language pathology services, and occupational therapy) effective January 1, 2018. Funding Extensions The BBA includes a number of funding extensions for critical health care programs, including: Extension of CHIP funding for four more years (Fiscal Year 2024 through Fiscal Year 2027); Five-year extension of the Medicare low-volume hospital payments through September 30, 2022; Five-year extension of the Medicare-dependent hospital (MDH) program through September 30, 2022. Two-year extension of funding for quality measure endorsement, input, selection, and reporting requirements. Five-year extension with reforms of the home health rural add-on until October 1, 2022.

    When the U.S. Department of Health and Human Services (“HHS”) announced a new Conscience and Religious Freedom Division in the HHS Office for Civil Rights (“OCR”), it framed a problem and a solution. The press release stated that “fundamental and unalienable rights of conscience and religious freedom” are not being fully enforced on a federal level, and that as part of President Trump’s promise to uphold such rights a new division in OCR will be tasked with vigorous and effective enforcement.[1] What was less immediately clear in the announcement was how the new division of OCR will improve enforcement of conscience and religious freedom rights. Here we provide an overview of the history and cites to various laws in the conscience and religious freedom space that OCR may use for enforcement, as well as a summary of the recent proposed regulations that OCR issued on this topic on January 26, 2018 Religious Discrimination Against Federal Healthcare Beneficiaries The new OCR division cites several laws prohibiting discrimination against recipients of HHS assistance on the basis of religion. OCR enforces the following: Section 508 of the Social Security Act, for the Maternal and Child Health Services Block Grant Section 533 of the Public Health Services Act, for the Projects for Assistance in Transition from Homelessness Section 1908 of the Public Health Service Act, for the Preventive Health and Health Services Block Grants Section 1947 of the Public Health Service Act, for the Community Mental Health Services Block Grant and the Substance Abuse Prevention and Treatment Block Grants The Family Violence Prevention and Services Act, for programs, services and activities under the Act The Communications Act of 1934, for federally-funded public telecommunication entities[2] Existing Conscience Laws Since the 1970s, several statutes have been enacted that protect the rights of providers, entities and beneficiaries of federal health care programs to object in a variety of ways to certain health care services. OCR reviews complaints under these laws and can take action to enforce them. In its recently proposed rule, OCR details several laws it intends to enforce.[3] Some of the earliest conscience protections, which are called the “Church Amendments”, prohibit a person from being required to perform abortions or sterilizations if contrary to his or her religious or moral beliefs. Entities are provided similar protection. Discrimination in employment of physicians and other personnel, and in residency and internship programs based on a person’s religious or moral beliefs regarding abortion and sterilization is also prohibited. The Church Amendments apply to grants, contracts, loans and loan guarantees under the Public Health Service Act and in some instances, under the Developmental Disabilities Assistance and Bill of Rights Act.[4] The Coats-Snowe Amendment extends abortion-related nondiscrimination provisions to federal, state and local governments receiving federal financial assistance. It protects conscience rights of entities, which includes physicians, physician trainees and residents.[5] The Weldon Amendment attached to an HHS appropriation bill similarly prohibits funds going to any government, agency or program that requires individuals or entities to provide, pay for, cover, or refer for abortions.[6] The Consolidated Appropriations Act of 2017 expands Weldon Amendment protections to the Medicare Advantage program.[7] The Affordable Care Act includes a variety of conscience protections related to assisted suicide, abortion, and the individual mandate to carry insurance.[8] Revised Conscience Rule In January 2018, OCR announced a proposed rule to strengthen conscience-based protections for individuals and entities with objections to certain activities based on religious belief and moral convictions.[9] The proposed rule is not entirely new, however. It would make significant changes to 45 CFR part 88 (entitled: “ENSURING THAT DEPARTMENT OF HEALTH AND HUMAN SERVICES FUNDS DO NOT SUPPORT COERCIVE OR DISCIMINATORY POLICIES OR PRACTICES IN VIOLATION OF FEDERAL LAW”), which stems originally from a 2008 Bush-era rule.[10] The Bush-era rule was itself revised substantially in 2011 during the Obama administration.[11] OCR now proposes to return much of 45 CFR part 88 to its 2008 Bush-era form, adding a requirement that certain recipients of HHS funds certify they comply with conscience protection laws and notify individuals of their rights thereunder.[12] The proposed rule details OCR’s enhanced investigative and enforcement abilities and expands its enforcement authority to more conscience-protection laws than the 2008 or 2011 iterations.[13] The rulemaking states that OCR will “handle complaints [both formal and not], perform compliance reviews, investigate, and seek appropriate action,” including terminating funding and requiring repayment.[14] OCR states that a more centralized approach to enforcement of conscience protections is necessary in part due to rapidly rising complaints. OCR notes that ten conscience-related complaints were filed from implementation of 45 CFR part 88 in 2008 until the November 2016 presidential election.[15] However, since President Trump’s election, thirty-four complaints have been filed.[16] We will continue to monitor the development of this rule as it proceeds through the rulemaking process.   [1] https://www.hhs.gov/about/news/2018/01/18/hhs-ocr-announces-new-conscience-and-religious-freedom-division.html [2] https://www.hhs.gov/conscience/religious-freedom/index.html [3] 83 Fed. Reg. 3880. [4] Id. at 3882. [5] Id. at 3882-83. [6] Id. at 3883. [7] Id. [8] Id. [9] https://www.hhs.gov/about/news/2018/01/19/hhs-takes-major-actions-protect-conscience-rights-and-life.html [10] 83 Fed. Reg. at 3885. [11] Id. [12] Id. at 3891. [13] Id. [14] Id. at 3899. [15] Id. at 3886. [16] Id.  

https://dorseyfca.com/third-circuit-false-claims-act-liability-premised-on-an-anti-kickback-statute-violation-requires-proof-that-at-least-one-federal-claim-resulted-from-an-improper-referral-or-recommendation/

Stark Law Reform Initiatives The Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma recently identified federal physician self-referral law (or “Stark Law”) reform as a top policy priority and reported that an inter-agency group is being formed to review the law. Specifically, in a January 17 American Hospital Association Town Hall webcast focused on regulatory relief for hospitals and health systems (excerpt available here), Verma reported that CMS will be looking to modernize the Stark Law to reflect the move from fee-for-service to value-based payments under Medicare. According to Verma, the Stark Law was one of the top responses from providers to a CMS request asking providers to identify the most burdensome regulations. Because the Stark Law is not completely in CMS’s jurisdiction, an inter-agency group is being formed to look at Stark Law reform initiatives that will include CMS, the Department of Health and Human Services (HHS) Office of Inspector General, the HHS General Counsel, and the Department of Justice. Verma also indicated that then-acting Secretary of HHS Eric Hargan was interested in the issue. Lastly, Verma specified that Congressional intervention may be required. While not mentioned by Verma in the recent webcast, a bill that addresses modernizing the Stark Law in light of the shift to value-based payment under Medicare, titled the “Medicare Care Coordination Improvement Act of 2017,” was introduced in both the U.S. House of Representatives (H.R. 4206) and the Senate (S. 2051) on November 1, 2017. The bill is still under consideration in both the House and the Senate. If enacted, this bill would give HHS authority to grant waivers to fraud and abuse-related statutes for participants in the Medicare Shared Savings Program, i.e., accountable care organizations. Such waiver authority would be extended to “covered APM entities” such as entities participating in alternative payment models (or “APMs,” as defined by MACRA) and similar entities. Additionally, the bill would expand the authority of HHS to promulgate ownership and compensation exceptions to the Stark Law to promote care coordination, by expanding the HHS Secretary’s authority to provide exceptions for financial relationships not posing a “significant risk of program or patient abuse, including those that would promote care coordination, quality improvement, or resource conservation by physician practices under [Medicare] part B” (emphasis added), rather than the current standard for exceptions, which requires that excepted arrangements not pose a “risk of program or patient abuse.” It would also limit the Secretary from imposing requirements that could adversely affect care coordination or participation in APMs. Finally, it would establish a new statutory exception to the Stark Law for services furnished pursuant to an arrangement entered into for the purpose of developing or operating an APM, provided the arrangement meets certain requirements including that it is in writing, that services are furnished at fair market value and that semi-annual reports are submitted to the Secretary on the progress of the APM (among other requirements). Further, while not addressing modernizing the Stark Law in light of the shift to value-based payment under Medicare, two additional bills that would amend the Stark Law are currently pending. First, H.R. 3726, the “Stark Administrative Simplification Act of 2017,” was introduced in the House on September 11, 2017. This bill proposes an alternative protocol to the Stark self-referral disclosure protocol (SRDP) for inadvertent technical noncompliance (including, for example, compensation arrangements with an inadvertent missing signature) with the Stark Law and reduced civil monetary penalties for disclosures made pursuant to this alternative protocol. This bill is still under consideration in the House. Second, H.R. 3178, titled the “Medicare Part B Improvement Act of 2017”, was passed in the House in July 2017 and is currently pending in the Senate. Among non-Stark Law-related provisions, if enacted, this bill would codify in the Stark Law certain regulatory changes that went into effect on January 1, 2016 (and corresponding clarifications via preamble by CMS) regarding the writing requirement of the Stark Law compensation exceptions, temporary non-compliance with the signature requirement of the Stark Law compensation exceptions, and the indefinite holdover provision for the lease of office space or equipment and personal services arrangements exceptions. It remains to be seen where the above-described legislation will lead, and what additional legislative and/or regulatory initiatives will be pursued given the stated focus on Stark Law reform by CMS Administrator Verma, the inter-agency group formed to review Stark Law changes, and the new HHS Secretary Alex Azar. 2018 DHS Code List and CPI-U Updates The 2018 Medicare Physician Fee Schedule (PFS) final rule, which took effect on January 1, included the annual update to the list of CPT/HCPCS codes used to identify certain categories of Stark designated health services (DHS) (the Code List).  As we explained in our post on the 2017 PFS, the Stark Law regulations at 42 C.F.R. § 411.351 specify that the following four categories of DHS are defined by reference to the Code List: (1) clinical laboratory services; (2) physical therapy, occupational therapy, and outpatient speech-language pathology services; (3) radiology and certain other imaging services; and (4) radiation therapy services and supplies.  (The other categories of DHS—which are (1) durable medical equipment and supplies; (2) parenteral and enteral nutrients, equipment and supplies; (3) prosthetics, orthotics, and prosthetic devices and supplies; (4) home health services; (5) outpatient prescription drugs; and (6) inpatient and outpatient hospital services—are defined at 42 C.F.R. § 411.351 without reference to the Code List.) The Code List is updated annually to reflect changes in the most recent CPT and HCPCS Level II publications and to account for changes in Medicare coverage and payment policies. Further, items and services that may qualify for either of two Stark Law exceptions—the exception for preventive screening tests, immunizations and vaccines at 42 C.F.R. § 411.355(h) and the exception for EPO and other dialysis-related drugs at 42 C.F.R. § 411.355(g)—are identified by reference to the Code List.  The Code List included the annual updates to the codes eligible for the preventive screening tests, immunizations and vaccines exception.  However, as in previous years, the Code List does not include any codes eligible for the EPO and other dialysis-related drugs exception (for reasons explained by CMS in the rule). The PFS rule includes tables showing the additions and deletions to the Code List.  As per usual, the complete list was posted to the CMS website dedicated to the Code List, found here. Finally, per the CPI-U Updates page of the CMS Stark website, CMS updated the compensation limits for the nonmonetary compensation exception (at 42 C.F.R. § 411.357(k)) and medical staff incidental benefits exception (at 42 C.F.R. § 411.357(m)), which are both updated annually for inflation. For calendar year 2018, the non-monetary compensation limit is $407 and medical staff incidental benefits must be less than $34 per occurrence. (CMS also noted in a footnote on this page that, “From November 9, 2016, through November 16, 2017, the CY 2015 nonmonetary compensation limit was inadvertently listed on this website as $395 instead of $392.”)

The annual H-1B cap season will be opening April 2, 2018.  As usual, the application window period is 5 business days.  65,000 H-1B visas are allotted every year. An additional 20,000 visas are set aside for individuals with a U.S. Master’s or higher degree. In general, first time H-1B visa applicants, such as foreign students in F-1 visa status, are subject to the cap, unless the employer is a cap-exempt organization. To apply, one must have a U.S. job offer in a professional-level position that requires at least a bachelor’s degree in a relevant field, and the individual must also have such educational credentials. The cap will almost certainly be met this year within the 5 day window period (April 2 to April 6, 2018).  If an employer misses this window, no new H-1B visas will be available until the following year. The petitions that are timely filed are then subject to a government-conducted lottery. Last year, for 85,000 H-1B visas, around 200,000 applied. Interested employers should initiate the application process as soon as possible to allow sufficient time for petition preparation by the end of March, 2018. H-1B preparation could take 4-6 weeks, which includes getting the Department of Labor’s certification needed for H-1B filing. In addition, President Trump’s “Buy American, Hire American” executive order recently heightened the level of scrutiny on H-1B petitions, leading to a significant increase in the number of pushbacks (Requests for Further Evidence). H-1B petitions now need to be prepared with these added issues in mind. Please contact us for further information.

In recent weeks, the United States Department of Justice (“DOJ”) issued two memoranda that might change the calculus of False Claims Act (“FCA”) cases.  The memoranda at a minimum provide organizations with new—or at least invigorated—defenses to qui tam actions and civil enforcement matters. First, on January 10, Michael Granston, Director of DOJ’s Civil Frauds section, issued a memorandum encouraging DOJ trial attorneys to consider dismissing unmeritorious qui tam cases (even over the objection of the relator).  The DOJ’s authority to dismiss FCA cases has long been built directly into the governing statute, 31 U.S.C. § 3730(c)(2)(A), which provides that: The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion. In practice, DOJ trial attorneys rarely uses this power, preferring to allow qui tam cases they declined to intervene in to continue being prosecuted by the relator.  The Granston Memo encourages a shift in practice by suggesting that DOJ attorneys should dismiss qui tam cases that lack substantial merit.  Meritless qui tam cases drain limited government resources and may “generate adverse decisions that may affect the government’s ability to enforce the FCA.”  To aid in determining whether a DOJ attorney should seek dismissal of a declined qui tam action, the Granston Memo sets forth seven factors, including curbing parasitic qui tams and preserving government resources. Second, on January 25, the Associate Attorney General (“AAG”) issued a memorandum prohibiting reliance on government agency “guidance documents” as a basis for liability in DOJ affirmative civil enforcement matters—including FCA cases.  Such “guidance documents” include all non-statutory or regulatory documents that purport to advise the public of legal rights or obligations, as are commonly issued by agencies like the US Environmental Protection Agency and the Department of Health and Human Services.  The memo advises DOJ litigators that because “[g]uidance documents cannot create binding requirements that do not already exist by statute or regulation . . . [DOJ] litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law.”  The AAG's memo acknowledges that sub-regulatory guidance serves a valuable function, and does not likely presage a government-wide change in agency’s use of such documents.  But FCA matters—qui tam or otherwise—that are built on such sub-regulatory guidance are on shakier ground. These memoranda create interesting implications for FCA cases.  First, the AAG’s memo narrows potential FCA liability by excluding a wide range of agency documents from being the basis of FCA violations.  The AAG’s memo also raises interesting questions about what agency materials might be evidence of “materiality,” particularly after the Supreme Court’s recent Escobar decision.  Second, although the authority of the DOJ to dismiss qui tam actions has not changed, the government may be newly receptive to arguments for the dismissal of plainly deficient qui tam cases.  The memo thus presents an opportunity for legal counsel to affirmatively seek dismissal of a weak FCA case—a move that could potentially save the accused violator the time and expense of otherwise defending against the case. The two memoranda are available here and here.

In a prior blog post from September 8, 2017, we wrote about the many ways in which states are addressing the opioid crisis through legislation. One of the states we discussed was New Jersey who at the time had proposed a new rule to regulate the relationship between manufacturers and prescribers. This month that New Jersey rule became final. On January 16, 2018 the New Jersey Attorney General issued final regulations entitled Limitations On and Obligations Associated with Acceptance of Compensation from Pharmaceutical Manufacturers by Prescribers (“the Rule”). The stated intent of the Rule is to minimize the potential for conflicts of interest and reduce incentives for treatment decisions to be influenced by payments from drug manufacturers, thereby encouraging healthcare practitioners who prescribe to focus on the patient's best interests.[1] The Rule became effective on January 16, 2018. The Rule does not apply to contracts entered into on or before January 15, 2018.[2] Second, the Rule only prohibits “prescribers” (defined as physicians, podiatrists, physician assistants, advanced practice nurses, dentists, and optometrists licensed in New Jersey) from accepting certain compensation from pharmaceutical manufacturers; the Rule does not prohibit the offering or payment of any compensation.[3]  In other words, the Rule does not authorize any penalties or other enforcement action against any pharmaceutical manufacturer; rather the various New Jersey professional licensing boards have authority to take enforcement action against prescribers for accepting prohibited compensation. Prohibited Gifts and Payments A New Jersey prescriber may not accept, directly or indirectly, any of the following from a pharmaceutical manufacturer or a manufacturer’s agent: Any financial benefit or benefit-in-kind, including, but not limited to, gifts, payments, stock, stock options, grants, scholarships, subsidies, and charitable contributions, except as specifically permitted by the Rule. Any entertainment or recreational items (e.g., tickets to theater or sporting events, or leisure or vacation trips). Items of value that do not advance disease or treatment education, including, but not limited to: Pens, note pads, clipboards, mugs, or other items with a company or product logo; Items intended for the personal benefit of the prescriber or staff, such as floral arrangements, sporting equipment, or artwork; Any payment in cash or a cash equivalent; or Any payment or direct subsidy to a non-faculty prescriber to support attendance at, as remuneration for time spent attending, or for the costs of travel, lodging, or other personal expenses associated with attending, any education event or a promotional activity. Any meals unless permitted as described below under Permitted Gifts and Payments.[4] “Pharmaceutical manufacturer" means any entity: engaged in the production, preparation, propagation, compounding, conversion, or processing of prescription drugs or biologics, by extraction from substances of natural origin, or independently by means of chemical synthesis; or directly engaged in the packaging, repackaging, labeling, relabeling, or distribution of prescription drugs or prescription biologics. “Pharmaceutical manufacturer's agent" or "manufacturer's agent" means a person who, while employed by, or under contract with, a pharmaceutical manufacturer, engages in detailing, promotional activities, or other marketing of prescription drugs or biologics to any prescriber authorized to prescribe, dispense, or purchase prescription drugs, biologics, healthcare facility, or pharmacist, but shall not include a prescriber or pharmacist when acting within the ordinary scope of the practice for which he or she is licensed.[5] Permitted Gifts The following permitted gifts and payments from pharmaceutical manufacturers or manufacturer’s agents are permitted: Items designed primarily for educational purposes for patients or the prescriber that have minimal or no value to the prescriber outside of his/her professional responsibilities (e.g., anatomical models). A subsidized registration fee at an education event, if that fee is available to all participants. Modest meals, worth no more than $15 per prescriber[6], provided by an event organizer at an education event, but only if the meals facilitate the educational program to maximize prescriber learning. Modest meals, worth no more than $15 per prescriber, provided by a manufacturer to non-faculty prescribers at a promotional activity. Compensation, based on fair market value, for providing bona fide services as a speaker or faculty organizer or academic program consultant for an education event which may also include reasonable payment and remuneration for travel, lodging, and other personal expenses associated with such services, and continuing education credit if applicable. Compensation, based on fair market value, for providing bona fide services as a speaker or faculty organizer or academic program consultant for a promotional activity, or for participation on advisory bodies or under consulting arrangements. A prescriber may also accept reasonable payment for travel, lodging, and other expenses associated with such services, but may not accept continuing education credit. Compensation, based on fair market value, for participation on advisory bodies or under consulting arrangements. Reasonable payment or remuneration for travel, lodging, and other expenses in connection with research activities. Reasonable payment to prospective applicants for travel, lodging, and other expenses in connection with employment recruitment. Royalties, licensing fees, or other arrangements regarding the purchase of intellectual property rights from a prescriber.[7] Sample medications intended to be used exclusively for the benefit of the prescriber’s patients, so long as the prescriber does not charge for these samples.[8] Bona Fide Services Payment Cap Prescribers are limited to a total of $10,000 in the aggregate per calendar year from all pharmaceutical manufacturers for speaking at promotional activities, participation on advisory boards, and consulting arrangements.[9] Permitted payments for speaking at education events (in contrast to payments for speaking at promotional activity) are not subject to the $10,000 cap but must be fair market value and set forth in a written agreement. Payments for research activities and payments for royalties and licensing fees are also not subject to this cap.[10] Research is defined to include pre- and post-market activities assessing the safety or efficacy of prescribed products as well as scientific advising on the development, testing, and evaluation of prescribed products.[11] "Bona fide services" means those services provided by a prescriber pursuant to an arrangement formalized in a written agreement including, but not limited to, presentations as speakers at promotional activities and education events, participation on advisory boards, and consulting arrangements. The written agreement shall specify the services to be provided, the dollar value of the consideration to be received by the prescriber, based on the fair market value of the services, specify that the meetings held in association with bona fide services occur in venues and under circumstances conducive to the services provided and that the activities related to the services are the primary focus of the meeting, and identify the following: The legitimate need for services in advance; The connection between the competence, knowledge, and expertise of the prescriber and the purpose of the arrangement; How participation of the prescriber is reasonably related to achieving the identified purpose; The manner by which the prescriber will maintain records concerning the arrangement and the services provided by the prescriber; and An attestation that the prescriber's decision to render the services is not unduly influenced by a pharmaceutical manufacturer's agent.[12] "Bona fide services" does not include services provided by a prescriber in connection with research activities. Required Disclosures Prescribers speaking at an education event or for a promotional activity must directly disclose to attendees, either orally or in writing, at the beginning of the presentation that they have accepted payment from the sponsoring manufacturer within the preceding 5 years.[13] A prescriber who is an employee of a pharmaceutical manufacturer and who also provides patient care must disclose this to patients, but those employees are exempt from the compensation prohibitions of the Rule.[14] Conclusions The final Rule will certainly impact the interaction between manufacturers and prescribers licensed in New Jersey. A key difference between the New Jersey Rule and other state laws and voluntary ethics codes addressing relationships between pharmaceutical manufacturers and prescribers is that the New Jersey Rule is directed at prohibiting New Jersey licensed prescribers from accepting prohibited compensation. Until now, much of the federal and state law (other than anti-kickback statutes) regulating this area has focused on prohibiting manufacturers from paying prescribers certain types or levels of compensation (or mandating disclosure of such payments). In contrast, the Rule places at risk the professional licensure of a New Jersey prescriber if they accept a prohibited payment. This New Jersey rule regulating the relationship of manufacturers and prescribers is one of several approaches to curb the opioid crisis and increase transparency and may become a model as other states evaluate how to stem the tide of this growing epidemic. [1] See Attorney General Response to Comment 1, 50 N.J.R. 578(a). [2] N.J.A.C. § 13:45J-1.1A. [3] N.J.A.C. § 13:45J-1.2. [4] N.J.A.C. § 13:45J-1.3. [5] N.J.A.C. § 13:45J-1.2. [6] N.J.A.C. § 13:45J-1.2 (defining “Modest Meal”). [7] N.J.A.C. § 13:45J-1.4. [8] N.J.A.C. § 13:45J-1.5. [9] N.J.A.C. § 13:45J-1.6. [10] N.J.A.C. § 13:45J-1.6. [11] N.J.A.C. § 13:45J-1.2 (defining “Research” as “ any study assessing the safety or efficacy of prescribed products administered alone or in combination with other prescribed products or other therapies, or assessing the relative safety or efficacy of prescribed products in comparison with other prescribed products or other therapies, or any systemic investigation, including scientific advising on the development, testing, and evaluation, that is designed to develop or contribute to general knowledge, or reasonably can be considered to be of significant interest or value to scientists or prescribers working in a particular field. "Research" shall include both pre-market and post-market activities that satisfy the requirements of this definition.”).   [12] N.J.A.C. § 13:45J-1.2 (defining “Bona Fide Services”). [13] N.J.A.C. § 13:45J-1.7. [14] N.J.A.C. § 13:45J-1.8.

If the government does not take action and continues to pay for Medicare/Medicaid claims after it learns of non-compliance related to the claims, is the non-compliance material to the government’s decision to pay? This is a question being answered in the negative by courts across the country, who have concluded that the government (or a qui tam relator) is not able to proceed under a False Claims Act (FCA) “implied certification” theory if evidence shows that the government did not take action and continued to pay claims after learning of non-compliance with laws associated with those claims. A Florida Federal Court in United States ex. rel. Ruckh v. Salus Rehabilitation, LLC et. al (Case No. 8:11-cv-1303-T-23TBM), is one of the latest to address this issue and find no FCA violation. Background In 2016, the United States Supreme Court addressed the issue of whether a claim submission without disclosure of a statute or regulation infraction could potentially trigger a FCA violation in Universal Health Services, Inc. v. United States ex rel. Escobar, spawning a new line of cases that have interpreted the new standards the Court set forth for implied certification FCA cases. Prior to the Escobar decision, the circuit courts across the U.S. were split on the issue. In these so-called “implied certification” cases, the government alleged that the party submitting a claim to the government impliedly certified that the services were provided in compliance with laws. In Escobar, the Supreme Court analyzed the reach of the FCA in situations in which a party was alleged to have made a misrepresentation in a payment claim to the federal government because the services provided were, in fact, not in compliance with the law. The Court recognized the implied certification theory, but held, among other things, that under the theory, FCA liability depends on whether the defendant violated a requirement that it knew was material to the government’s decision to pay. In providing guidance on how to determine “materiality”, the Court noted that, “[t]he materiality standard is demanding. The False Claims Act is not ‘an all-purpose antifraud statute’ or a vehicle for punishing garden-variety breaches of contract or regulatory violations.” The Court went on to note: “[I]f the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material” and “if the Government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.” Analysis In light of the guidance in Escobar, many courts in analyzing “implied certification” allegations under the FCA, have given significant consideration to evidence about how the government acted following a defendant’s non-compliance disclosure. Courts will make a fact-intensive inquiry into the post-disclosure conduct of the government in order to determine whether a given violation is material to the governments’ payment decision on the related claims. If the government refused to make further payment or took other action against the provider after learning of the non-compliance, that refusal may help the government or a relator to establish that compliance with the particular law at issue was material to the government’s decision to pay. However, if the government continues to pay the claims, and takes no other action, it has proven difficult for the government or a relator to succeed. A recent example of the uphill battle Escobar is presenting for relators and the government in these “implied certification” FCA cases is the Salus case. On January 11, 2018, a federal court in Florida followed a line of post-Escobar cases, denying an implied certification theory case under the FCA based on evidence that the government continued to pay claims related to the subject matter of the relator’s complaint, even after the government learned about the non-compliance. In Salus, a nurse relator alleged FCA violations against the owners and operators of 53 specialized nursing facilities based on the nursing facility’s alleged failure to maintain a comprehensive care plan for residents required under Medicaid, as well as defects in paperwork required to support claims to the Medicare program, such as unsigned or undated documents. The judge in Salus vacated a $350 million verdict against Salus Rehabilitation, which had been entered less than a year earlier (on March 1, 2017), because the evidence in the case showed that the government knew about the non-compliance, and did nothing about it. In overturning the prior verdict against the nursing homes, the court stated, “[n]ot only did the relator fail to prove that the governments regarded the disputed practices as material and would have refused to pay, but the relator failed to prove that the defendants submitted claims for payment despite the defendants’ knowing that the governments would refuse to pay the claims if either or both governments had known about the disputed practices. In fact, both governments were—and are—aware of the defendants’ disputed practices, aware of this action, aware of the allegations, aware of the evidence, and aware of the judgements for the relator—but neither government has ceased to pay or even threatened to stop paying the defendants for the services provided to patients throughout Florida continuously since long before this action began in 2011.” The judge noted that the government had never made any complaint or imposed any administrative sanction on the practices alleged by the relator. The judge further wrote, “federal and state governments regard the disputed practices with leniency or tolerance or indifference, or perhaps with resignation to the colossal difficultly of precise, pervasive, ponderous and permanent record-keeping in the pertinent clinical environment.” The Salus decision is another win for health care providers who have long lived in fear of the enormous penalties under the FCA whenever non-compliance is discovered with the highly complex, technical and ever-changing health care regulations. While each case applying the materiality standard must be analyzed on its particular facts and circumstances at issue, the post-Escobar cases analyzing the materiality standard have provided a welcomed, more consistent approach that providers can look to when defending these cases.

https://dorseyfca.com/hipaa-as-a-basis-for-fca-liability-one-court-says-yes/

On January 5, 2018, the Office of the Inspector General of the United States Department of Health and Human Services (“OIG”) released a favorable Advisory Opinion 17-09 that addresses Section 1128A(b)(1) of the Social Security Act (the “Gainsharing CMP”) and Section 1128B(b) of the Social Security Act (the “Anti-Kickback Statute”) with respect to a cost-reduction arrangement (the “Arrangement) between a medical center (“Medical Center”) and designated surgeons. The Arrangement called for the Medical Center to share with the designated surgeons a percentage of the Medical Center’s cost savings as a result of the cost-reduction measures agreed to by the parties. This advisory opinion is the first gainsharing advisory opinion issued since the passage of the Medicare Access and CHIP Reauthorization Act (“MACRA”) in 2015.  MACRA clarified that the Gainsharing CMP was only violated if the payment to the physician is for the purpose of reducing medically necessary services. However, the clarification under MACRA does not appear to have changed the OIG’s analysis significantly.  Gainsharing arrangements have long been considered suspicious by the OIG; although numerous gainsharing arrangements had been reviewed in OIG Advisory Opinions, and have been found to contain enough mitigating factors to not warrant sanctions.  The OIG has analyzed these arrangements under the Gainsharing CMP and the Anti-kickback Statute, and has expressed concern that gainsharing arrangements could result in: (i) stinting on patient care; (ii) cherry picking healthy patients and steering sicker (and more costly) patients to hospitals that do not offer such arrangements; (iii) payments to induce patient referrals; and (iv) unfair competition among hospitals that offer incentive compensation programs in order to foster physician loyalty to attract more referrals.  This advisory opinion joins the list of previous advisory opinions in which the OIG has analyzed detailed facts and circumstances about a proposed gainsharing arrangement with physicians, and has approved the arrangement because it included certain criteria for minimizing the risk of fraud and abuse.  Advisory Opinion 17-09 is helpful to hospitals and physicians that are interesting in entering into gainsharing arrangements because it provides recent insight into the OIG’s perspective on the important factors to include in these arrangements. The Gainsharing CMP prohibits a hospital from knowingly making payments, directly or indirectly, to a physician to induce the physician to reduce or limit medically necessary services to Medicare and Medicaid beneficiaries who are under the physician’s direct care. The Anti-Kickback Statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a Federal health care program. Here, Advisory Opinion 17-09 addresses an Arrangement between a Medical Center and spine surgeons (“Neurosurgeons”) who are part of a larger multi-specialty physician group (“Group”). In order to participate in the Arrangement, physicians have to be in the Group and be a Neurosurgeon. In total, four physicians were identified as eligible for participation in the Arrangement. All of the Neurosurgeons have medical staff privileges at the Medical Center and all of the Medical Center’s spinal surgeries are performed by the Neurosurgeons. In an effort to reduce costs, a subsidiary of the Medical Center (the “Program Administrator”) conducted a historical practices study of spinal fusion surgeries performed by the Neurosurgeons and identified 34 cost-saving opportunities; including things such as using product standardization. Under the Arrangement, the Medical Center will pay the Neurosurgeons a share of the three-years of cost-savings attributed to the changes the Neurosurgeons make when selecting products to use during the spinal fusion surgeries, among other cost-savings measures. The payment will be distributed to the Neurosurgeons on a per capita basis and the amount allocated to each Neurosurgeon will be subject to a long-standing, pre-existing provision in the Group’s operating agreement that requires the Group to withhold a percentage of collections earned by all physicians for their personally performed services to fund the Group’s administrative and recruitment expenses. The Arrangement includes safeguards such as monitoring and documentation requirements, which are intended to maintain quality of care and protect against inappropriate reduction in services to patients. The parties certified that the cost-savings recommendations will not reduce or limit medically necessary services for patients. Anti-Kickback Analysis: In reaching a favorable opinion, the OIG specifically noted the following safeguards are present in the Arrangement which limit the risk under the Anti-Kickback Statute that the payments to the Neurosurgeons would induce or reward referrals or attract referring physicians: (1) the payment of the cost savings on a per capita (as opposed to an individual) basis reduces the risk the Arrangement creates for any one Neurosurgeon to generate disproportionate cost savings; (2) the potential savings are capped based on the number of spinal fusion surgeries performed by the Neurosurgeons on Federal health care program beneficiaries in the relevant base year, thus limiting the Neurosurgeons’ incentives to increase their referrals to the Medical Center; (3) the aggregate payment to the Neurosurgeons will not exceed 50 percent of the projected cost savings estimated at the beginning of the term of the Arrangement, which reduces the risk of incentivizing referrals; (4) the Program Administrator collects and reviews data on patient severity, age, and payor of the spinal surgeries to confirm historically consistent selection of patients, to prevent data-skewing based on selecting healthier patients; (5) the group of Neurosurgeons retains the portion of the savings, rather than the individual physicians, and the amount retained must be used exclusively for the group’s long-standing formula set forth in their governance documents related to payment of administrative and recruitment expenses, which reduces the risk of inducing or rewarding referrals from non-participating physicians or any particular physician; (6) an annual rebasing method removes savings from prior years and ensures that the performance year savings are calculated only as compared to the most recent base year therefore preventing improper duplicate payments that could constitute unlawful kickbacks; (7) evidence-based medical reviews were completed in order to establish clinical guidelines and evaluations related to the recommended cost-saving measures. Following these reviews, the Requester certified that the recommendations may require additional training for the Neurosurgeons, or changes in their clinical practices/processes, which provided support for the compensation to the Neurosurgeons; (8) the Arrangement ties the incentives to the actual, verifiable cost savings attributable to each recommendation implemented during spinal fusion surgeries, which creates transparency that reduces the risk of the Medical Center accounts being manipulated to “game the system”; (9) Neurosurgeons continue to make patient-by-patient determinations as to the most appropriate device or supply and continue to have access to the same selection of devices and supplies that they had prior to the Arrangement; and (10) no neurosurgeons from other physician groups participate in the Arrangement, thus the risk is reduced that the Medical Center would use the Arrangement to attract others from competitor hospitals to perform surgeries at the Medical Center. Gainsharing CMP: With respect to its analysis of the Arrangement under the Gainsharing CMP, the OIG stated that it relied on the truthfulness of the Requestor’s certification that none of the cost-saving recommendations in the Arrangement will reduce or limit medically necessary services for patients, and that the Program Administrator monitors any changes in cost, resource utilization or quality of patient care; and reports quarterly to a Program Oversight Committee, which is comprised of representatives from the Medical Center, an administrative subsidiary of the Medical Center, the Program Administrator and the Neurosurgeons. The OIG would not opine on whether the recommended cost-saving measures would reduce only non-medically necessary services, but the OIG did evaluate the Requestor’s methodology for developing the recommendations, monitoring safeguards and calculating the savings, and the OIG concluded the methodology was reasonable. The OIG concluded that together, the reasonableness of the methodology and the certifications from the Requestor reduced the risk appropriately that the payments to the Neurosurgeons would limit/reduce medically necessary services to Medicare and Medicaid patients. For more information about gainsharing arrangements, contact your Dorsey & Whitney attorney.    

Last week, Dr. Scott Gottlieb, Commissioner of the FDA, touched on two issues that have frequented headlines in the past two years. First, in remarks made on November 28, 2017, Commissioner Gottlieb expanded on plans to finalize guidance related to complex generic drugs, a broader issue that received specialized focus during coverage of EpiPen’s price hike that began in 2016 and has continued in 2017. Then, on November 30, 2017, Commissioner Gottlieb stated plans to leverage accelerated approval processes for promising drugs, using targeted cancer drugs as an example. Innovative cancer treatments, especially recently approved cancer treatments using gene alteration techniques, which the Commissioner specifically discussed later in the session when discussing the progress of the Oncology Center of Excellence, have also grabbed headlines of late. While these topics, and efforts to address them, are not entirely novel, each statement provided understanding into the FDA’s ongoing efforts to remove regulatory barriers to drug access and gave additional insight as to concrete changes the FDA may be implementing in the foreseeable future. On the complex generic drug issue, Commissioner Gottlieb started by noting steps the FDA has taken to address lack of competition due to branded drug makers using tactics to block generic drug makers from running bioequivalence studies, as well as opportunistic behavior by speculators who acquire off patent drugs with little competition and raise prices sharply. He then went on to expand on plans to improve the process for developing and approving complex generic drugs. Without mentioning EpiPen by name, Commissioner Gottlieb used an example of a drug delivered through a complex device, such as an auto-injector, and went on to explain that “the branded drug maker may still hold IP on certain features of the device. In such a circumstance, the drug can be an old medicine, but the device can be hard to copy since new patents protect its key features.” According to Commissioner Gottlieb, the FDA will aim to address this and similar issues in guidance it is working to finalize under which, among other things, generic products will be allowed “to have certain labeling differences from the branded product – if such labeling changes stem from permitted design differences.” As long as differences in design will not affect the clinical effect or safety profile, the generic product can be approved. This relaxation of rigorous “sameness” standards may prove to have a significant effect on the availability of generic products in situations such as that presented by EpiPen. Similar to the complex generics, the accelerated approval discussion was also part of a larger discussion of steps the FDA is taking to address issues in its approval process. Commissioner Gottlieb and Dr. Francis Collins, Director of NIH, addressed the House Committee on Energy and Commerce to discuss progress in implementing the 21st Century Cures Act nearly a year into its existence. The Cures Act is sweeping legislation that, among other things, aims to streamline the drug and device approval process. For earlier discussion of the Cures Act and its treatment of certain medical software, see this post from my colleague, Ross D’Emanuele. Although Commissioner Gottlieb and Dr. Collins discussed progress under the Cures Act broadly, the Commissioner used his opening statement to specifically mention his view of a potential path for accelerated approval of promising drugs such as targeted cancer treatments. Specifically, Commissioner Gottlieb discussed the potential for using a process, similar to existing accelerated approval processes, for drugs like targeted cancer treatments that may show an “outsized benefit on overall survival” in small trials. Such drugs would ordinarily require further evidence as to how to use the drug in clinical setting, but Commissioner Gottlieb said earlier approval with post-market approval studies to collect further information could often be beneficial. As explained by the Commissioner, accelerated approval is ordinarily granted in situations where drugs show benefits on a surrogate endpoint, such as tumor shrinkage; however, he suggested in his prepared statement it may also be appropriate in these circumstances where outsized benefit is shown on a clinical endpoint, such as survival. It remains to be seen if and how these plans will be finalized and implemented. However, it is clear that the FDA plans to continue to address issues in the drug and device approval process that have come under public scrutiny as of late.