Update on Rejected C Plea for Pharma Company

Judge pronouncing sentence to manA recent blog post summarized an opinion in which a district court catalogued his reasons for rejecting a corporate “C” plea involving a pharmaceutical company.  Several developments have occurred since the court’s opinion including a plea and sentencing hearing scheduled for January 30, 2018. Please see the Anticorruption blog here for an update on this matter.

Reduced 340B Reimbursements? Nonprofit Institutions Act May Provide New Possibilities

A recent Centers for Medicare & Medicaid Services (CMS) final rule reduces some Medicare reimbursements to hospitals in 2018, paying 28 percent less for certain “specified covered outpatient drugs” (SCODs) purchased at a discount through the 340B Drug Pricing Program (340B). Although hospitals recently lost a challenge to the lower CMS rates in American Hospital Association v. Hargan, they may be able to offset a portion of the losses from a countervailing development in antitrust law. Regardless of 340B changes, the Robinson Patman Act (RPA) continues to apply to sales of discounted pharmaceuticals, while the scope of the Nonprofit Institutions Act (NPIA) exemption to RPA appears to have expanded. This suggests that hospitals may have new opportunities to arbitrage discounted products purchased outside of 340B. Continue Reading

HHS OCR Issues New Research Guidance

As part of its ongoing implementation of the 21st Century Cures Act (Public Law 114-255), the Department of Health and Human Services last month released a number of new HIPAA guidance tools, including additional information about research uses and disclosures.  The research guidance contains helpful tips for covered entities regarding authorizations, revocations, and “reviews preparatory to research” (including when researcher remote access is permissible).  For more information, please see our Data Privacy and Cybersecurity blog post, available here.

Will Antitrust Review of CVS/Aetna Shed Additional Light on Vertical Theories?

According to press reports, CVS/Caremark’s proposed $66 billion acquisition of Aetna is at the Department of Justice Antitrust Division (DOJ) for antitrust review, as opposed to the Federal Trade Commission (FTC). Under our bifurcated system of antitrust review, both agencies theoretically could have made a claim for the deal. The FTC historically has reviewed transactions involving retail pharmacies (such as the transactions last year involving Walgreens and Rite-Aid), as well as deals involving pharmacy benefit management, or PBM, firms. DOJ, by contrast, historically reviews health plan transactions, as demonstrated by its recent successful challenges to the proposed combinations of Anthem/Cigna and Aetna/Humana. The current deal involves CVS/Caremark, which operates both one of the nation’s two largest retail pharmacy chains and one of the two largest PBMs in the country, and Aetna, which is a major national health plan. Given that the deal touches on industries typically reviewed by both agencies, it was unclear which agency would prevail and get the opportunity to conduct the review. It appears DOJ won out.

Assuming the deal is in fact at DOJ, it will be interesting to see whether the Antitrust Division finds an issue with the transaction. The deal apparently presents some horizontal overlaps, as both parties offer Medicare Part D plans. But the core of the deal is vertical: Aetna’s health plan and CVS’s PBM. For most of the last 50 years, a deal presenting only (or predominantly) vertical issues would be extremely unlikely to draw much interest from DOJ, much less a challenge. There’s little reason to think that under the historical approach this deal would present an antitrust concern. But given the DOJ’s recent challenge to the vertical AT&T/Time Warner transaction, one could reasonably ask whether the parties in CVS/Aetna are in for a fight. Only time will tell if DOJ’s interest in vertical theories of harm extends beyond deals involving the entertainment industry, where in the past they have partnered with the FCC to impose regulatory conditions. At a minimum, DOJ’s response to the CVS/Aetna tie-up may help give the public clarification on its thinking on vertical mergers.

 

Safe Harbor Proposals Face Deadline in February

Suggestions for Safe Harbor proposals face a deadline of February 27, 2018, according to a Federal Register announcement. The same deadline applies to suggestions for practices that should be discussed in a Special Fraud Alert.

Safe Harbors

The Office of Inspector General (OIG) requests recommendations for Safe Harbors because the Anti-kickback statute “is so broad” that “relatively innocuous commercial arrangements” can violate the law. In order to promote effective healthcare practices, the OIG may designate certain “payment and business practices” will not be treated as criminal offenses under the Anti-kickback statute or the basis for administrative sanctions.

Factors for Safe Harbors

When evaluating whether to create a Safe Harbor, the OIG will consider how the proposal affects

  • access to health care services,
  • the quality of health care services,
  • patient freedom of choice among health care providers,
  • competition among health care providers,
  • the cost to Federal health care programs,
  • the potential overutilization of health care services, and
  • the ability of health care facilities to provide services in medically underserved areas or to medically underserved populations.

Special Fraud Alerts

The OIG also solicits recommendations of practices that should be discussed in a Special Fraud Alert. These Alerts allow the OIG to provide guidance to the healthcare industry about practices that could be considered fraudulent. The Alerts assist providers to be compliant with the law.

How to Submit

Recommendations for either Safe Harbors or Special Fraud Alerts may be submitted through the Federal eRulemaking Portal at http://www.regulations.gov

or

by regular, express, or overnight mail to Patrice Drew, Office of Inspector General, Regulatory Affairs, Department of Health and Human Services, Attention: OIG-125-N, Room 5541C, Cohen Building, 330 Independence Avenue SW., Washington, DC 20201.

Comment Dates Set For Federal Communications Commission Rulemaking On $400 Million Rural Health Care Program

Medical CostsThe FCC’s Notice of Proposed Rulemaking (NPRM) to consider changes to its Rural Health Care Program (RHCP), which provides $400 million in annual subsidies for telecommunications and broadband services to eligible rural healthcare providers (HCP), has now been published in the Federal Register.

Interested parties may submit initial comments on the FCC’s proposals by February 2, 2018. Reply comments are due no later than March 5, 2018. Comments, which may be in letter form, can be filed electronically in the Commission’s WC Docket No. 17-310 through the Commission’s Electronic Comment Filing System or the Federal eRulemaking Portal. Access instructions to each are found in the Addresses section of the Federal Register Notice.

 

OIG Allows Nursing Facility Discounts to Insurers

Nursing Facility ConsultationThe HHS Office of Inspector General allows nursing facilities to give discounts to private insurers. OIG Advisory Opinion 17-08 describes a startup company planning to develop a network of nursing facilities (the Network). The company wants nursing facilities in the Network to provide discounts on daily rates charged to a long-term care insurer (Participating Payor) and its Policyholders. Qualifying nursing facilities must 1) have a quality rank of 3-stars or higher and 2) offer discounts off the daily rates for semi-private rooms covered by a Participating Payor.

Elements of the Discount Program

The OIG lists important aspects of the discount program such as:

  • A Participating Payor must be a private long-term care insurer, although a Policyholder may also be a federal healthcare Beneficiary.
  • No discounts are offered for stays covered by federal healthcare programs.
  • The discount is split with 2/3 to the Participating Payor and 1/3 to the Policyholder.
  • The Network provides no benefits other than the discount to a Participating Payor or a Policyholder.
  • The Network pays an administrative fee to the Participating Payor.
  • A Policyholder remains free to select any nursing facility covered by the Participating Payor and is not penalized for choosing a non-participating facility.

Factors Favoring Approval

The OIG considered whether the Anti-Kickback Statute and Civil Monetary Penalties could apply but found “sufficiently low” likelihood of improper inducement of a federal healthcare Beneficiary for several reasons.

  • The Network has no control over whether a Policyholder who is also a Beneficiary may need care in the future that is federally reimbursable.
  • A discount is not contingent on whether items or services are received from the Network.
  • The arrangement does not affect competition. Any qualified nursing facility has access to the Network, and a Beneficiary is free to use a non-covered facility without increased cost.
  • Open access to the Network avoids steering.
  • A Beneficiary is likely to select a nursing facility based on many factors beyond the discount.

Physicians and Planners Not Compensated

The OIG also approvingly emphasizes that physicians, discharge planners, and others participating in site selection do not receive remuneration.

Usual Limitations Apply

Although the Advisory Opinion contains the standard list of limitations on its application, nursing facilities and insurers will want to analyze the opinion for guidance.

FDA Issues Guidance on Clinical and Patient Decision Support Software

On December 8, 2017, the Food and Drug Administration (FDA) published a notice of availability for the Clinical and Patient Decision Support Software – Clinical and Patient Decision Support Software – Draft Guidance for Industry and Food and Drug Administration Staff (“Draft Guidance”). The Draft Guidance, available here, provides clarity on the scope of FDA’s regulatory oversight of (1) clinical decision support software intended for health care professionals, and (2) patient decision support software intended for patients and caregivers who are not health care professionals.

The purpose the Draft Guidance is to identify the types of decision support software functionalities that: (1) do not meet the definition of a “device” as amended by the 21st Century Cures Act (“Cures”); (2) may meet the definition of a “device” under Cures but for which FDA does not intend to enforce compliance with applicable regulatory requirements, including, but not limited to, premarket clearance and premarket approval; and (3) “devices” that will be the focus of FDA’s regulatory and enforcement oversight.

Medical device and software manufacturers with products that may influence medical decision-making should study the Draft Guidance since it reflects FDA’s current regulatory thinking.

Section 3060(a) of Cures amended section 520 of the Food, Drug, and Cosmetic Act to exclude certain software functions from the definition of a “device,” thereby reducing the regulatory obligations applicable to such software. Specifically, under Cures, “clinical decision support software” (CDS) that meets all four of the following criteria excluded from the definition of a medical device:

  1. Software that is not intended to acquire, process, or analyze a medical image or a signal from an in vitro diagnostic device or a pattern or signal from a signal acquisition system;
  2. Software that is intended for the purpose of displaying, analyzing, or printing medical information about a patient, or other types of information (such as a peer-reviewed clinical studies and clinical practice guidelines);
  3. Software that is intended for the purpose of supporting or providing recommendations to a health care professional about prevention, diagnosis, or treatment of a disease or condition; and
  4. Software that is intended to enable a health care professional (HCP) to independently review the basis for the recommendations that the software presents so that it is not the intent that such HCP rely primarily on any of such recommendations to make a clinical diagnosis or treatment decision regarding an individual patient.

Cures does not apply to patient decision support software (PDS), which refers to software that a patient or non-HCP caregiver may use to help make a medical decision. PDS implicates a much different balance of risks and benefits because the software must make up the difference between a lay patient and a physician’s education and training. With respect to PDS, the fourth criteria should allow patients or their non-HCP caregivers to independently review the software’s recommendation. FDA states that it does not intend to take enforcement action against manufacturers with PDS for violating the applicable regulatory requirements if the PDS meets all of the above criteria.

FDA does not single-out any one of the four criteria as being more important, but it does identify the fourth criteria as the lynchpin of its analysis. Therefore, manufacturers seeking apply the Draft Guidance must ensure that an HCP or a patient (or their non-HCP caregiver) can reach the same recommendation as the software, without relying primarily on the software to come to that decision. In practice, this means that the software functions clearly explain (1) the purpose or intended use of the software function; (2) the intended user (e.g., patient, non-HCP); (3) the inputs used to generate the recommendations (e.g., patient age and gender); and (4) the rationale or support for the recommendation.

The Draft Guidance provides many examples that manufactures can review to help understand how these criteria will be evaluated in practice. For example, software that simply identifies drug-allergy contraindications based on FDA-approved labeling, or identifies patients that meet the clinical definition of a disease based on test results, are no longer medical devices. On the other hand, software that conducts its own analyses on a patient and, for example, uses those analyses to create treatment or surgical plans, will continue to be medical devices under FDA’s oversight.

Either electronic or written comments on the Draft Guidance may be submitted to FDA by February 6, 2018 to ensure that the FDA considers all comments on the Draft Guidance before it begins work on the final version. Submit electronic comments to https://www.regulations.gov or submit written comments to the Dockets Management Staff (HFA-305), Food and Drug Administration, 5630 17 Fishers Lane, Rm. 1061, Rockville, MD 20852. Identify all comments with Docket No. FDA–2017–D–6569.

If you have any questions regarding the Draft Guidance, please contact the authors or your regular Squire Patton Boggs attorney.

FCC Focuses on Critical Role of $400 Million Rural Health Care Program

Noting that technology and telemedicine are assuming an increasingly critical role in healthcare delivery, the FCC has initiated a proceeding to consider changes to its Rural Health Care Program (RHCP), which provides $400 million in annual subsidies for telecommunications and broadband services to eligible rural healthcare providers (HCP). These changes would potentially affect existing as well as future Program participants.

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Recent Federal District Court Ruling Considers Who May Bring EMTALA Claims

Emergency Room

The United States District Court for the Northern District of Georgia recently granted several defending healthcare insurers’ motions to compel arbitration and (in part) to dismiss claims alleging improper reimbursement practices brought under the Emergency Medical Treatment and Labor Act (“EMTALA”), Affordable Care Act (“ACA”), COBRA, and various Georgia state law theories.  The order, styled Apollo MD Business Services v. Amerigroup Corporation (Delaware), No. 1:16-cv-4814, Dkt. 70 (N.D. Ga. Nov. 27, 2017), is available here. Continue Reading

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