Life Science Compliance Update

May 26, 2017

Current State of Telemedicine

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As we previously reported, the CHRONIC Care Act of 2017 was introduced by Senate Finance Committee Chairman Orrin Hatch and Ranking Member Ron Wyden, along with Johnny Isakson and Mark Warner, the co-chairs of the Committee’s Chronic Care Working Group. The bill is largely unchanged from the previous version, which was introduced in December 2016. The bill will have an especially large impact on telehealth services in the United States by allowing MA plans the ability to include telehealth services; gives some ACOs the opportunity to provide telehealth services; gives those receiving dialysis treatments at home the ability to check-in with their physician at home; and expands the availability of telehealth to ensure individuals who may be having a stroke receive the correct diagnosis and treatment.

Expanding Telemedicine Adoption

As of late 2012, 42 percent of U.S. hospitals had adopted telemedicine, but adoption rates vary significantly by geography. Alaska was the highest with 75 percent, while Rhode Island had minimal adoption. Additionally, states often require physicians to be licensed to practice in the “originating” site, i.e., the patient must be in the same state in which the attending physician is licensed to practice. Some states require that providers maintain a license with the board where the patient is located, which can lead to extra costs and paperwork for the providers.

Recent Telemedicine Developments

MACRA contained a number of provisions that aim to expand telemedicine. One provision limits restrictions on telemedicine only to fee-for-service (FFS) as opposed to alternative payment models (APMs) created through the law. It also directed the GAO to study telemedicine. Telemedicine is also promoted in the new “improvement activities” category in MIPS.

Furthermore, the 21st Century Cures legislation included provisions related to telemedicine, including requirements of CMS and the Medicare Payment Advisory Commission (MedPAC) to provide detailed information to Congress regarding the potential uses of telemedicine in Medicare. The Cures Act focuses on Medicare’s “originating site” requirement as well as the role of CMMI regarding telehealth. The law also on the House Energy & Commerce Committee Telemedicine Workgroup to develop next steps on Medicare telehealth.

Reimbursement for telemedicine

Among public payers, Medicare offers the most limited coverage of telehealth. Medicare pays for a narrow set of services and only in rural areas. Fee-for-service (FFS) Medicare covers a defined set of outpatient services furnished to an eligible beneficiary via an approved real-time interactive audio and video telecommunications system. Beneficiaries are eligible for the services if they receive care from an “originating site” located in a county outside of a Metropolitan Statistical Area (MSA) or A rural Health Professional Shortage Area (HPSA) located in a rural census tract.

Medicare covers a number of telehealth services in lieu of in-person services – including

“consultations, office visits, psychiatry services, and some physician fee schedule services.” These services are reimbursed “at the same rate as the comparable in-person medical service” according to the codes and applicable payments set forth in the current Medicare Physician Fee Schedule (MPFS). Ultimately, roughly 80% of Medicare beneficiaries do not qualify for telemedicine services because they live in a metropolitan area. In general, telemedicine coverage and reimbursement restrictions have remained in place out of “concern that the service might increase Medicare expenses” due to an increase in beneficiaries’ use of services.

In the Medicare Advantage (MA) program, reimbursement for telemedicine depends on the private plan. In contrast to Medicare FFS, a number of MA plans as well as Medicare Accountable Care Organizations (ACOs) have turned to telemedicine as a means by which to facilitate greater care management and beneficiary engagement. This is predominantly due to the fact that “[MA] plans have the option to offer telemedicine without the tight restrictions in the traditional Medicare program because they are paid a fixed amount by the federal government to care for seniors. As a result, Medicare is not directly paying for the telemedicine services; instead, the services are paid for through plan revenue.”

In Medicaid, the American Telemedicine Association (ATA) reports that all 50 states provide some level of reimbursement for telemedicine services. While federal Medicaid statute does not explicitly recognize telemedicine as a distinct service, states have considerable flexibility in covering and reimbursing for these activities. State Medicaid reimbursement for telemedicine services must meet broad federal requirements “of efficiency, economy and quality of care,” though states are encouraged to use the flexibility of the program to establish payment methodologies that serve their residents’ needs. Due to the flexibility of the program, states do not need to submit a separate State Plan Amendment (SPA) for establishing the coverage of telemedicine services if it reimburses providers the same as a face-to-face service. However, states must obtain approval from CMS if reimbursement differs from the face-to-face service.

In the private insurance market, state-mandated telemedicine coverage of has become increasingly prevalent over the past decade. However, only 16 of the 24 states with telemedicine parity laws for private insurance “authorize state-wide coverage, without any provider or technology restrictions.” Telemedicine advocates are pushing for more states to pass legislation requiring that telemedicine services be covered to the same extent and in a similar manner as in-person services.

A Port in Any Storm – Adding New Safe Harbors to the Anti-Kickback Statute

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On December 7, 2016, the HHS Office of the Inspector General ("OIG") approved new safe harbors to the federal anti-kickback statute (“AKS”) and amendments to the civil monetary penalty ("CMP") rules, including recognizing new statutory exceptions, seeking to alleviate blanket prohibitions, and regulatory measures to promote access to care. In doing so, the OIG is ushering in a new era for compliance and providing life science companies some refuge from the regulatory storm.

Dating back to 1972, the Anti-Kickback Statute (“AKS”) is a legal requirement whose “main purpose is to protect patients and the federal health care programs from fraud and abuse by curtailing the corrupting influence of money on health care decisions.” At the time the AKS was implemented, various “concerns arose among health care providers that some relatively innocuous, and in some cases even beneficial, commercial arrangements are prohibited by the anti-kickback law.” This was a result of the fact that in an effort to combat all types of fraud and abuse, the AKS’s reach is incredibly broad.

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May 25, 2017

Citizen Petitions to Come Front and Center

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In February, the Federal Trade Commission filed a complaint in federal district court charging Shire ViroPharma Inc. with violating the antitrust laws by abusing government processes to delay generic competition to its branded prescription drug, Vancocin HCl Capsules. The complaint alleges that because of ViroPharma’s actions, consumers and other purchasers paid hundreds of millions of dollars more for their medication.

FTC has been looking for similar case

Congress amended federal law in 2007 in the hopes of curbing underhanded petitions. It authorized the FDA to flatly reject petitions that clearly don’t raise legitimate issues, and told the FDA not to delay generics unless public health would be jeopardized.

But it’s not clear that the action worked as intended. In a report to Congress last year, the FDA said it “continues to be concerned that [the amendment] may not be discouraging the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific issues.”

As was reported, Wilson Sonsini Goodrich & Rosati PC partner Seth Silber, a former FTC lawyer, told Law360 that the ViroPharma case represents the culmination of the commission’s years long interest in challenging flimsy petitions.

“I think the FTC, probably from that time [of Congress’ amendment] to present, has been looking for a good case,” Silber said. “They obviously thought they had a good fact pattern.”

What is a citizen petition?

A citizen petition is a request for the FDA to take an action such as evaluating a drug’s safety or effectiveness. When used appropriately, it could raise awareness of legitimate concerns with a drug. But when used inappropriately, it could extend the brand firm’s monopoly by delaying FDA approval of generic drugs. This delay could result in literally millions of dollars a day being transferred from consumers to drug companies

FTC argument

The FTC alleges that to maintain its monopoly, ViroPharma waged a campaign of serial, repetitive, and unsupported filings with the US Food and Drug Administration and courts to delay the FDA’s approval of generic Vancocin Capsules, and exclude competition. According to the FTC, ViroPharma submitted 43 filings with the FDA and filed three lawsuits against the FDA between 2006 and 2012.

The number and frequency of ViroPharma’s petitioning at the FDA are many multiples beyond that by any drug company related to any other drug. ViroPharma knew that it was the FDA’s practice to refrain from approving any generic applications until it resolved any pending relevant citizen petition filings. ViroPharma intended for its serial filings to delay the approval of generics, and thus competition and lower prices.

Shire response

The company notes it acquired ViroPharma in January 2014, and divested Vancocin in August 2014. The Company played no role in ViroPharma’s challenged petitioning, which took place between 2006 and 2012. Shire believes the FTC’s challenge to ViroPharma is wholly without merit, and will vigorously defend these claims. ViroPharma’s actions were in furtherance of its fundamental right to petition the government, which is guaranteed and protected by the First Amendment, and raised legitimate issues with the U.S. Food and Drug Administration (“FDA”) involving complex scientific questions that had significant public health implications.

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