Dorsey Health Law

Today, the Federal Government announced enforcement actions against 60 defendants in eleven federal districts, including 31 doctors, seven pharmacists, eight nurse practitioners, and seven other licensed medical professional for allegedly prescribing and distribution opioids and other dangerous narcotics and for health care fraud schemes. (DOJ Press Release, April 17, 2019). The charges involve over 350,000 controlled substances prescriptions and over 32 million pills. The unsealed indictments against the defendants can be found here. The enforcement action was led by the Appalachian Regional Prescription Opioid (ARPO) Strike Force. The ARPO Strike Force was formed in December and includes a team of federal agents and prosecutors to combat the opioid epidemic in the worst hit area of the country. The Strike Force analyzed a variety of databases to identify suspicious prescribing activity; investigators then used confidential and undercover agents to document medical professionals’ prescribing and dispensing of opioids in exchange for sex and cash. Sari Horwitz & Scott Higham, Doctors in seven states charged with prescribing pain killers for cash, sex, Wall St. J. (Apr. 17, 2019, 1:36 PM), https://www.washingtonpost.com/world/national-security/doctors-in-five-states-charged-with-prescribing-pain-killers-for-cash-sex/2019/04/17/7670d20e-607e-11e9-9ff2-abc984dc9eec_story.html?utm_term=.7ae448f3b507. In one case, a doctor allegedly prescribed combinations of opioids and benzodiazepine, sometimes in exchange for sexual favors; in total, the doctor is alleged to have prescribed approximately 500,000 hydrocodone pills, 300,000 oxycodone pills, 1,500 fentanyl patches and more than 600,000 benzodiazepine pills. In another case, a pharmacist was charged with allegedly dispensing large amounts of opioids outside the usual scope of professional practice and for no legitimate medical purpose. A dentist was also charged for alleged conduct that included writing prescriptions for opioids that had no legitimate medical purpose, removing teeth unnecessarily, scheduling unnecessary follow-up appointments and incorrect billing practices. While there has been an intense focus through litigation across the country on the role of manufacturers and distributors in the opioid crisis, recent initiatives have focused on prescribers and dispensers. Since June 2018, over 650 individuals have been excluded from participation in Medicare, Medicaid and all other Federal health care programs for conduct related to opioid diversion and abuse. For law-abiding prescribers and dispensers, it may be easy to dismiss today’s headline news as “not applicable”. However, all prescribers and dispensers should take notice of the increased number of investigations against their fellow licensees. The increased scrutiny of providers’ opioid prescribing and dispensing across the country could mean that even innocent providers are caught up in an investigation. Federal and state resources are being devoted in record numbers to investigations of prescribers and dispensers. There are regional DEA and DOJ task forces in place, dedicated funding streams for U.S. Attorneys, focused attention by state Medicaid agencies and Medicaid Fraud Control Units, and enforcement actions by state Boards of Medicine and Pharmacy. Cases against prescribers and dispensers are more likely today than in the past to include both civil and criminal penalties related to opioid prescribing and dispensing. As evidenced by today’s announcement, the government has become sophisticated in the use of data mining to identify outliers who will be the next targets of government investigations. Outliers in the number and dosages of prescriptions, the numbers of pain patients, the combinations of drugs prescribed, and failure to check and report to state prescription drug monitoring programs or report significant loss or theft to the DEA, can all trigger an investigation. In order to reduce risk of becoming the target of an investigation, prescribers and dispensers of opioids should ensure that they stay abreast of all State specific guidelines and standards of care for prescribing and dispensing opioids; review CMS guidance on opioid prescribing; review CDC Guidelines for prescribing opioids for chronic pain; and utilize their state’s prescription drug monitoring programs. Prescribers and dispensers should also focus on appropriate recordkeeping and documentation and inventory counts to reduce theft and unexplained inventory shortages. Dispensers should also ensure they know and verify the prescribers of prescriptions and document how any red flags in opioid prescriptions are resolved.   If you have any questions about these topics, please contact the authors or your regular attorney at Dorsey & Whitney.

This month the Department of Justice rough a "first of its kind" action against two pharmacies, their owner, and three pharmacists for allegedly dispensing and billing Medicare for prescriptions in violation of both the Controlled Substances Act and the False Claims Act. For more on information on this, visit our FCA Now blog, linked here: https://dorseyfca.com/doj-levels-false-claims-act-at-pharmacies-to-combat-opioid-crisis/

The Office of Inspector General of the Department of Health and Human Services (“OIG”) released a proposed rule to eliminate safe harbor protection under the anti-kickback statute for drug price reductions that pharmaceutical manufacturers pay to Medicare and Medicaid plan sponsors and their pharmacy benefit managers (“PBMs”). The OIG proposed replacing the current safe harbor protection for drug price discounts and rebates with a new safe harbor to protect only those drug price reductions that are set in advance and are applied fully to the price of the product charged to the Medicare or Medicaid beneficiary at the point of sale. In addition, the OIG proposed a new safe harbor to protect compensation from pharmaceutical manufacturers to PBMs for services provided to the manufacturer, but only if those payments are fixed, fair market value payments not tied to volume or value, and the PBM discloses such payments to its health plan customers. The OIG’s proposals could have a significant impact on the drug discount and rebate arrangements that are commonly in place between manufacturers and Medicare Part D plans/Medicaid managed care organizations (and PBMs acting on behalf of these plans). The OIG’s proposals would also impact Medicare and Medicaid beneficiaries who would be entitled to receive any such discounts directly at the point of sale. The proposed rule release can be found here and is expected to be published in the Federal Register on February 6. The proposed effective date of the new rules is January 1, 2020, with an earlier effective date of 60 days after the final rule is published, for the new point of sale safe harbor.           I.        Discount Safe Harbor – Changes to Focus on Point-of-Sale Reductions in Drug Prices   The federal anti-kickback statute (Social Security Act § 1128B(b)) makes it a criminal offense for anyone knowingly and willfully to pay, solicit, or receive anything of value to induce referrals of items or services that are reimbursable under any federal health care program. Violation of the statute is a felony, and can carry civil fines, imprisonment, exclusion from federal health care programs, and be the basis for liability under the False Claims Act. An existing safe harbor protects from anti-kickback statute liability discounts and rebates on drug prices that pharmaceutical manufacturers pay to health plans or their PBMs. The OIG’s proposal would revise the discount safe harbor to exclude from protection any reduction in price or other compensation in any form paid from a pharmaceutical manufacturer to a Medicare Part D or Medicaid managed care organization or their PBM in connection with the sale or purchase of a prescription drug. The proposal reflects OIG’s concern that the current manner in which drug price discounts and rebates are structured does not result in lower drug costs to federal programs and federal program beneficiaries, and in fact may be a cause of rising drug costs, and may be contrary to the purposes of the anti-kickback statute. In its place, the OIG proposes to add a new safe harbor focused narrowly on point-of-sale reductions in prescription drug prices. That safe harbor would protect reductions in the price charged by a manufacturer for drug products that are payable by a Medicare Part D or Medicaid managed care organization or their PBM, but only if that price reduction meets three conditions (the “Point of Sale Safe Harbor”): First, the reduced price must be set in advance. OIG intends this to mean that the terms of the price reduction are fixed and disclosed in writing to the plan sponsor by the time of the initial purchase. Second, the sale may not involve a rebate unless the full value of the price reduction is provided to the dispensing pharmacy through chargebacks. This means that when a pharmacy dispenses a drug to a beneficiary, the total payment to the pharmacy (including the beneficiary co-payment, payment from the health plan, and any chargeback payment from the manufacturer) must be no less than the drug price agreed between the manufacturer and the health plan sponsor or their PBM. Lastly, the reduction in price must be completely applied to the price charged to the beneficiary at the time of sale. This means that the drug price to which the beneficiary’s cost-sharing obligations apply at the point of sale must be the same price (taking into account all discounts) that the manufacturer charges to the plan sponsor or their PBM. The OIG also noted that the discount safe harbor would continue to not apply if a manufacturer offered a price reduction to payors other than Medicare and Medicaid payors (i.e., situations in which parties “carve out” referrals of federal health care program beneficiaries or business from otherwise “questionable” financial arrangements). The OIG is especially concerned with these “carve out” arrangements if the offer of a discount on products would serve as an inducement for the purchase of products that are reimbursable by federal healthcare programs (e.g., offering a discount to a private health plan that is conditioned, even implicitly, on a product’s favorable formulary placement in the health payor’s Part D plans).            II.        New PBM Service Fee Safe Harbor   In addition, the OIG proposed a new safe harbor to protect compensation from pharmaceutical manufacturers to PBMs for services rendered to the manufacturers that relate to PBMs’ arrangements to provide PBM services to health plans (the “PBM Service Fee Safe Harbor”). The OIG did propose three specific conditions that must be met in order for compensation to be protected under the PBM Services Fee Safe Harbor. The first proposed condition of the safe harbor would require the PBM and the pharmaceutical manufacturer to have a written agreement that covers all of the services the PBM provides to the manufacturer in connection with the PBM’s arrangements with health plans for the term of the agreement, and specifies each of the services to be provided by the PBM and the compensation for such services. Notably, the OIG declined to propose a specific definition for PBM services but did provide a list of examples of services that it generally considers to be PBM services, including: contracting with a network of pharmacies; establishing payment levels for network pharmacies; negotiating rebate arrangements; developing and managing formularies, preferred drug lists, and prior authorization programs; performing drug utilization review; and operating disease management programs. The second proposed condition requires that compensation paid to the PBM must: (i) be consistent with fair market value in an arm’s-length transaction; (ii) be a fixed payment, not based on a percentage of sales; and (iii) not be determined in a manner that takes into account the volume or value of any referrals or business otherwise generated between the parties, or between the manufacturer and the PBM’s health plans, for which payment may be made in whole or in part under Medicare, Medicaid, or other Federal health care programs. Finally, the Department proposes that the PBM disclose in writing to each health plan with which it contracts at least annually, and to the Secretary upon request, the services it rendered to each pharmaceutical manufacturer that are related to the PBM’s arrangements with that health plan and the associated costs for such services. Other than the proposed revisions to the discount safe harbor, and the new PBM Service Fee Safe Harbor, the OIG did not propose to modify any other existing safe harbors which PBMs may use to protect payments from manufacturers. The OIG specifically noted the possibility that certain types of remuneration that manufacturers might pay to PBMs could continue to be protected under another existing safe harbor. For example, PBMs could presumably continue to rely on the Group Purchasing Organization (GPO) safe harbor to protect certain administrative fees paid by drug manufacturers to PBMs for GPO services, even if those fees are based on the total prescription volumes of health plans on behalf of which the PBM contracts with the manufacturers.          III.        Conclusion   The OIG proposal reflects a clear intent to substantially alter many of the current drug discount and services compensation practices among pharmaceutical manufacturers and Part D/Medicaid MCO payers and their PBMs. The proposal also reflects the OIG’s skepticism that current drug discount and compensation practices among manufacturers and PBMs are sufficiently transparent to health plans to ensure that all appropriate cost reductions and value is passed through to health plans and reflected in lower health plans costs and lower premiums for beneficiaries. The proposal to exclude drug price reductions to Part D and Medicaid MCO health plan sponsors and PBMs is proposed to be effective on January 1, 2020. The OIG is also proposing that the new Point-of-Sale Safe Harbor will take effect in a shorter time frame of sixty (60) days after the rule is finalized. Comments to the proposed rule may be submitted 60 days after publication in the Federal Register. There are a number of steps that parties to the type of arrangements covered by the proposed rule should take, including reviewing their current discount and rebate agreements to determine whether there will need to be amendments to these contracts in order to comply with the proposed rule, if it is finalized. Parties will also need to evaluate what compliance measures are needed in order to operationalize the changes in these arrangements to ensure compliance with the new safe harbor requirements. Finally, in light of the attention OIG is giving to these type of arrangements, now would be an opportune time to review arrangements for compliance with the current safe harbor restrictions, such as the carve out restriction described above. If you have further questions about this proposed rule, please contact the authors or any other health care transaction and regulatory attorneys at Dorsey & Whitney.

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.

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.

  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.     

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.

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.

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.

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

Several states have proposed and enacted new laws to address the opioid crisis, including laws that focus on reducing financial incentives that drug manufacturers can give to providers. Most recently, New Jersey Governor Chris Christie proposed a new regulation that would cap how much NJ prescribers can earn from drug companies at $10,000 per year.  The governor’s office estimates that doctors in New Jersey were paid $69 million from drug companies and device manufacturers in 2016 and that two thirds of that amount were paid to 300 physicians in the state. The goal of the regulation is to reduce unnecessary prescription of painkillers by prohibiting prescribers from accepting lavish meals and uncapped compensation for any speaking engagements, consulting, or other services. The proposed regulation also strengthens existing limitations for licensees of the NJ Boards of Medical Examiners, Dentistry, and Optometry and extends requirements to Advanced Practice Nurses in order to reduce incentives for “over prescribing.” The proposed rule’s clarifications are designed to make it easier for these NJ state boards to hold prescribers accountable by: specifying prohibited items as the following: cash, gift cards, entertainment and recreational items; items for prescriber’s personal use; payments supporting non-faculty attendance at promotional activities; and continuing education events; providing exemptions from these prohibitions if the purpose of the payment is for the benefit of patients or prescriber education, including some educational materials; setting standards for agreements for “bona fide services,” which might include speaking at promotional activities and continuing education events, participation in advisory bodies, and under consulting arrangements. These standards include requiring the terms of those agreements to be in writing, with dollar amounts, and an articulation of the prescriber’s expertise; giving clear restrictions on what constitutes a “modest” meal: it must be provided in a setting that enables learning, the value of the meal must not exceed $15, and such meals must not occur more than four times per year for any one provider; and capping compensations for bona fide services (with the exception of speaking at continuing education events) from all manufacturers at $10,000 every calendar year.   New Jersey is just one of several states to react recently to the opioid crisis with additional scrutiny of payments to physicians. In June of 2017, the Maine governor signed 32 MRSA §13759, An Act to Prohibit Certain Gifts to Health Care Practitioners. The law prohibits licensed pharmaceutical and medical device manufacturers and wholesalers from providing certain gifts to practitioners. Member of the Maine House of Representatives, Scott M. Hamann explained the law is meant to curb the addiction problem in the state by preventing doctors from overprescribing. Also in June of 2017, the city of Chicago took aim at the opioid crisis publishing rules to implement a city ordinance which requires a license for pharmaceutical representatives who market or promote within Chicago more than 15 calendar days per year. Those licensees must collect and disclose information about their activities, including a list of health care professionals within Chicago contacted; the number of times the health care professionals were contacted; the location and duration of contact; the pharmaceuticals promoted; whether product samples, materials, or gifts of any value were provided to the health care professional and the value of the products, materials, or gifts; and whether and how the health care professional was compensated for contact with the pharmaceutical representative.   Various state open payments requirements are also in place in Vermont, Nevada, Massachusetts, Connecticut, California, Washington D.C., and Minnesota. Drug and manufacturing companies should note and monitor these and other states’ ongoing developments in this area. The New Jersey rule will be published October 2, 2017, but it will not be implemented until after a public hearing to take public comment from the regulated communities, industry representatives, and the public. The public hearing is expected to be held October 19, 2017.

On July 18, 2017, the United States Attorney’s Office for the Northern District of Illinois announced that it was creating a new unit located in Chicago within the office’s Criminal Division dedicated to prosecuting criminal health care fraud (the Health Care Fraud Unit). The office explained that it expected the unit, which will include five prosecutors, to build on its successful prosecution of numerous health care fraud cases in recent years and “bring even greater focus, efficiency and impact to [its] efforts in this important area.” The Health Care Fraud Unit will also build on the office’s previous prosecution of significant diversion of controlled substances cases, in line with the office’s emphasis on battling the opioid crisis. Other United States Attorney’s Offices may follow suit in creating such units. Chicago is also one of nine areas where a Medicare Fraud Strike Force team is located, which are inter-agency teams that focus on the worst offenders in health care fraud “hot spots.” The week prior to the announcement of the new Health Care Fraud Unit in Chicago, there was a national health care fraud “takedown” involving more than 400 defendants allegedly responsible for $1.3 billion in false billings to Medicare and Medicaid, which was the largest health care fraud enforcement action in the history of the Department of Justice and involved coordination among multiple federal and state agencies. While such “takedowns” occur on approximately a bi-annual basis, this one is notable for its size. These events and others like them show the continued emphasis on combating health care fraud under the new administration. In Chicago and across the country, prosecution of criminal healthcare fraud cases will likely continue to increase, and civil health care fraud investigations and qui tam actions will also likely increase.

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

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

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

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

The FDA has called on the drugmaker Endo Pharmaceuticals to stop selling the opioid Opana ER. The press release on June 8th reflecting this announcement marks a novel approach from the FDA, as the agency for the first time has asked a company to remove a painkiller from the market based on the public health consequences of abuse. This opioid is an extended release version of Opana, and was first approved in 2006. As the nation increasingly faced an epidemic of opioid abuse and overdoses, the manufacturer reformulated the drug in 2012, adding a coating to the medication intended to make it harder to snort or inject the medicine. The FDA found that the product met the regulatory standards for approval, but declined to approve labeling describing the medication as having abuse deterrent properties because they found that the data did not show that the reformulation could be expected to meaningfully reduce abuse. Despite the 2012 reformulation, an increasing number of people abused this opioid by crushing, dissolving, and injecting it. In March of 2017, a panel of advisers to the FDA voted 19-8, with one abstention, that the drug’s benefits no longer outweighed the risks. Data showed that while nasal abuse fell, the rate of abuse through intravenous injection increased and the drug has been associated with outbreaks of HIV and hepatitis C, as well as a blood disorder thrombotic microangiopathy. In addition, Opana was considered at the center of an HIV outbreak in Indiana in 2015. The opioid epidemic in the United States has prompted several novel approaches to reducing abuse, often at the state level. State level responses, including prescription drug monitoring programs, declarations of a state of emergency, and limiting prescription lengths for opioids, are being implemented across the country, at the same time that lawmakers debate the future of the Affordable Care Act which has aimed millions of dollars within the Medicaid program towards addiction treatment and prevention, and expanded the scope of the Mental Health Parity Act. Ohio Attorney General Mike DeWine filed a lawsuit against five opioid manufacturers on May 31, including Endo, accusing them of misleading doctors and patients about the danger of addiction and overdose. Other states and cities have filed similar lawsuits. Ninety-one Americans die every day from opioid overdose according to the CDC. The FDA has stated that if the company resists removal of this opioid from the market, the agency intends to take formal steps to remove it by withdrawing approval. Endo in a response stated that the company is reviewing the request and evaluating potential options as they “determine the appropriate path to move forward.” This FDA action is a significant step in what will likely be a lengthy journey in which federal and state regulators (and private plaintiffs) use whatever legal authorities available to combat an increasingly damaging public health crisis.

On February 17, 2017 the Office of the Inspector General (OIG) posted a Drug Pricing and Reimbursement Web portfolio on its website that, according to the OIG announcement, “pulls together the HHS OIG’s body of work since 2010 as well as other relevant items that relate to drug pricing and reimbursement in HHS programs.” The portfolio showcases the OIG’s work in the drug pricing and reimbursement realm as drug pricing continues to be a political hot topic. Overall, the portfolio includes OIG’s reports; implemented and unimplemented recommendations; summaries of civil monetary penalties and assessments against individuals and entities for prohibited conduct related to reporting requirements required under the Medicaid Drug Rebate Program; and OIG’s advisory statements and bulletins on a variety of drug pricing and reimbursement topics. The portfolio should be monitored by plan sponsors, pharmaceutical companies, pharmacy benefit managers, and pharmacies, and others involved in drug distribution as a convenient location to find information published by the OIG that will impact their business. For example, the portfolio outlines future OIG report topics and their expected publication dates, such as the expected 2017 report on the quality of sponsor data used in calculating coverage gap discounts. Additionally, those in the industry can monitor and review OIG recommendations to HHS that, while unimplemented, can shed light on potential future enforcement areas.

As of January 6, 2017, final rules published by the United States Department of Health and Human Services Office of the Inspector General (the “OIG”) implementing certain exceptions to the Civil Monetary Penalty law (“CMP”) took effect. The CMP rules were published alongside final rules regarding safe harbors to the federal Anti-Kickback Statute (“AKS”), about which more can be learned in our earlier blog post here. The final rule as published in the Federal Register is available here. As a refresher, the CMP, codified at 42 U.S.C. § 1320a-7a, prohibits inducements in the form of offering or transferring remuneration to beneficiaries of Medicare and State health care programs if the offeror knows or should know the inducement is likely to influence such beneficiary to order or receive a reimbursable service from a particular provider, practitioner, or supplier. It is important to note, and in fact the final rule goes out of its way to remind us, that activities potentially implicating the CMP and AKS may overlap, and meeting a CMP exception does not necessarily mean that AKS risk is mitigated. The final rules amend the CMP’s definition of “remuneration,” codified at 42 C.F.R. § 1003.110, by interpreting and incorporating statutory exceptions. The exceptions interpreted and incorporated are: (i) copayment reductions for certain hospital outpatient department services; (ii) certain remuneration that poses a low risk of harm and promotes access to care; (iii) coupons, rebates, or other retailer reward programs that meet specified requirements; (iv) certain remuneration to financially needy individuals; and (v) copayment waivers for the first fill of generic drugs. While all of the exceptions merit attention, this blog post specifically focuses on certain changes and clarifications to exceptions (ii), (iii), and (v), as listed above. Low risk of harm and promotes access to care: In the final rule, the OIG expanded its interpretation of “care” beyond “medically necessary health care items and services,” as it was in the proposed rules, to the broader “items and services payable under Medicare or State health care programs for beneficiaries who receive them” in recognition of the fact that nonclinical items and services can improve health. Additionally, responding to various comments, the OIG pushed back multiple times on the idea that different standards should apply under this exception to different types of entities, such as risk-bearing providers and suppliers, ACOs, or pharmacy programs (though the OIG did recognize that the structure of arrangements with risk-bearing providers and suppliers and ACOs may make it easier for them to meet the same standards); Coupons, rebates, or other retailer reward programs meeting specified requirements: The OIG maintained its interpretation that a “retailer” is an entity that sells items directly to consumers and does not include individuals or entities that primarily provide services. The OIG clarified in comments that a pharmacy is considered a retailer whether it is a “big box” pharmacy or a smaller pharmacy, stating that, even if a smaller pharmacy provides services, it does not “primarily” provide services. In addition, entities such as a hospital system with a separate retail component (e.g., a pharmacy) may be considered a retailer with respect to a program specific to that retail component. The OIG also clarified that the concept of “other rewards” should be interpreted broadly, provided that it meets other requirements of this exception (i.e., it is a retailer reward, offered or transferred to the public on equal terms, and not tied to other reimbursable items or services). However, “other rewards” could not include a copayment waiver, as it fails to meet the requirement that the rewards not be tied to other reimbursable items or services; and Copayment waivers for the first fill of generic drugs: While otherwise finalizing this rule unchanged, OIG clarified that, because the final rule was published after the deadline for submission to CMS of benefit plan packages for coverage year 2017, the exception for copayment waivers would be applicable to coverage years beginning on or after January 1, 2018. The final rule also adds “copayment” to the definition of “remuneration” for the sake of consistency with other proposed and finalized text and announces an increase in the limits for gifts of nominal value that do not require an exception under the CMP, from $10 for an individual gift and $50 annual aggregate per patient, to $15 and $75, respectively.

On January 6, 2017, two new safe harbors to the federal anti-kickback statute (the “AKS”) will become effective pursuant to a final rule published by the United States Department of Health and Human Services Office of the Inspector General (the “OIG”) on December 7, 2016. The final rule also codifies safe harbors for certain AKS exceptions and makes a technical correction to the existing safe harbor for referral services.  The OIG is authorized to promulgate safe harbors to protect various business arrangements from criminal prosecution under the AKS even though the arrangements potentially may be capable of inducing referrals of federal health care program business.  The final rule as published in the Federal Register is available here. New Safe Harbors Created The two new safe harbors share a focus on making medical-related transportation more affordable. The first new safe harbor protects reductions or waivers of a federal health care program beneficiary’s obligation to pay copayment, coinsurance or deductible (“cost-sharing”) amounts for emergency ambulance services provided by a state-, municipality- or tribal-owned ambulance supplier and paid for under a fee-for-service payment system if specified requirements are satisfied (e.g., the reduction or waiver must be offered on a uniform basis to all residents, tribal members or transported individuals). See 42 C.F.R. § 1001.952(k)(4).  The second new safe harbor protects free or discounted local transportation provided by an “eligible entity” (i.e., any individual or entity, except for individuals or entities that primarily supply health care items) to federal health care beneficiaries in the form of a “shuttle service” if certain conditions are met. See 42 C.F.R. § 1001.952(bb). AKS Exceptions Codified as Safe Harbors The final rule also protects certain pharmacy reductions or waivers of cost-sharing amounts (see 42 C.F.R. § 1001.952(k)(3)), remuneration between a federally qualified health center (“FQHC”) and a Medicare Advantage (“MA”) organization and (see 42 C.F.R. § 1001.952(z)), and discounts by manufacturers on drugs furnished to beneficiaries under the Medicare Coverage Gap Discount Program (see 42 C.F.R. § 1001.952(aa)). Focus on Safe Harbor for Pharmacy Cost-Sharing Waivers While all of the safe harbors are noteworthy, some additional commentary on the scope and requirements of the safe harbor for pharmacy cost-sharing waivers is warranted. First, the scope of the final rule’s pharmacy cost-sharing waiver safe harbor includes both the Medicare Part D program and the Medicaid program, whereas the similar AKS statutory exception covers only Medicare Part D. Second, the OIG clarified in its comments to the final rule that the safe harbor requirement that the reduction or waiver not be part of an “advertisement or solicitation” would be violated by a pharmacy posting information on its Web site regarding the reduction or wavier, but generally would not be violated by responding to an inquiry from a particular patient in person. Third, with respect to the safe harbor requirement that the reduction or waiver not be “routine,” the OIG stated in its comments that what is “routine” depends on the facts and circumstances of a particular case but that giving a reduction or waiver could be common enough without being automatic and still be routine. Fourth, the OIG declined to specify any particular method of determining whether a beneficiary has a “financial need,” permitting pharmacies flexibility, by way of examples, to use a multiple of the poverty guidelines or to use a combination of the poverty guidelines plus family medical expenses. The key to satisfying the requirement is that the pharmacy must apply a reasonable determination method of financial need uniformly. And while not requiring a written policy describing the pharmacy’s determination method, the OIG did say that having such a written policy, along with evidence that the policy was followed, would be “useful” in asserting the safe harbor’s protection. Fifth, if a patient is not in financial need then the pharmacy must make “reasonable collection efforts” before waiving the cost-sharing amount. The OIG recognized in its comments that the amount of the copayment or the historical inability to collect from a particular patient might be factors in a pharmacy’s decision regarding what collection efforts to take. However, a preemptive decision by a pharmacy not to request payment from, or not to pursue any collection efforts regarding, a particular patient would not satisfy this requirement. Parties intending to fit within a particular safe harbor are advised to review all of the applicable requirements. In addition, as illustrated by the discussion of the safe harbor for pharmacy cost-sharing waivers above, reviewing the OIG’s responses to comments in the final rule can help interpret the regulatory language.