Life Science Compliance Update

November 25, 2015

Pharmaceutical Pricing – A Reminder of the Value Equation

We previously wrote about the actions Congress is taking to "combat rising prescription drug prices," and the rhetoric politicians of all stripes are using in an attempt to force public opinion on their side. HHS has announced a pharmaceutical pricing forum set for November 20, Congress has committees on both sides working toward a "solution," and Hillary Clinton has said that if she is elected president, she would "demand a stop to excessive profiteering and marketing" by the drug industry.

Often left out those discussions includes the value of medications, PhRMA has recently released a forty-deck slideshow that addresses the issue of the cost of pharmaceutical drugs in great detail. It is important that we understand in setting the pharmaceutical industry record straight, when speaking with both laypeople and the media. The slides help to explain how the goals of the 21st Century Cures Act, which passed with bipartisan support, cannot be reached without assistance and participation from biopharmaceutical companies and their allies.

The 21st Century Cures Act was lauded by some as being an "encouraging show of bipartisanship ... designed to speed the process from scientific discovery to health treatments and cures for people who need them." The Act "expands funding for the National Institutes of Health and Food and Drug Administration to support promising new research and approval of new therapies." The legislation is also forward-looking in that it recognizes the outstanding potential of new scientific concepts such as personalized medicine and medical applications.

With such a promising piece of legislation passed on a bipartisan basis just over a year ago, one might wonder why politicians are all of a sudden antagonizing the pharmaceutical industry, instead of continuing to work with it. While public opinion does ebb and flow, it is important for the industry to get the facts out there so that everyone can understand that pharmaceutical companies are not their enemies, but instead their allies in health.

It is time we focus on the broad range of benefits the developments in the pharmaceutical industry have brought health care patients. For example, in the last 100 years, medicines have helped raise the average United States life expectancy from 47 years to 78 years; death rates for HIV/AIDS and cancer have fallen 85 percent, and nearly 22 percent since their peaks in 1995 and 1991; and new hepatitis C therapies have cure rates of more than 90 percent. Those numbers are astounding and just a small glimpse into the benefits the pharmaceutical industry provides the health care system as a whole.

There are more than 7,000 medicines that are currently in development around the world. Just to name a few, there are currently over 1800 medicines in development for cancer; over 1250 medicines in development for infectious diseases; and over 1300 medicines in development for neurological disorders.

The presentation highlights how adherence to medicines lowers total health spending for chronically ill patients, stating that the U.S. healthcare system could save $213 billion per year if medicines are used properly to avoid expensive hospitalization and emergency room visits. The biggest savings are realized for congestive heart failure, diabetes, hypertension and dyslipidemia.

It is important in this debate that we go a step further and highlights the fact that that the cost of disease could bankrupt the United States health care system if it weren't for new and developing medicines. There is an estimated $22.4 billion savings to Medicare if adherence to congestive heart failure medications is improved and reaches recommended levels.

There is a compelling argument to be made that the biopharmaceuticals industry is an important force in the U.S. economy, supporting 3.4 million jobs across the country in 2011. Often overlooked this industry sector is the single largest funder of business research and development in the United States and the most R&D intensive industry.

In a similar vein, is the importance clinical trials are to the US economy with $25 billion in economic activity that stems from industry-sponsored clinical trials throughout all fifty states and the District of Columbia.

Even though the cost of medical procedures continue to rise, cost containment is built into the drug pricing life cycle. For example, the cost of percutaneous coronary angioplasty rose from $47,962 in 2005 to $79,391 in 2013, while the cost of Atorvastin 10 mg decreased from $2.13 in 2005 to $0.15 in 2014. Additionally, nearly nine out of 10 U.S. prescriptions are filled with lower-cost generic drugs.

There is often unsung economic realities of the drug development process, a new medicine takes at least 10 years on average, costs roughly $2.6 billion and results in fewer than 12 percent of the drugs that make it into Phase I clinical trials being approved by the FDA. Often the political rhetoric out shadows the other financial benefits when it comes to targeting healthcare costs, pharmaceutical companies are being singled out, despite the statistics cited here.

By no means are all the pharmaceutical companies going about pricing in an ethical manor, especially those pirate companies with no interest in the drug development process, but by and large researched based companies are working to bring about cures that save lives. These slides are recommended as a simple review and reminder about how much good the pharmaceutical industry brings to the world: a strong dose of reality, as compared to the constant barrage of negative publicity.

November 24, 2015

Stage III Meaningful Use CMS Doubles Down as Opposition Mounts

Despite Congressional interest in delaying Stage 3 of the electronic health record Meaningful Use program and the AMA coming out strongly against the roll out, HHS recently went forward and published its 752-page Final Rule for Stage 3 and Stage 2 modifications. One of the central pieces to the Affordable Care Act, along with the American Reinvestment and Recovery Act (ARRA) was the implementation and "meaningful use" of electronic health records (EHRs)—through the HITECH provision. Implemented in stages, Stage 3 is the final step of the program.

Final Rule

The 2015-2017 Meaningful Use (MU) Final Rule establishes MU program requirements for 2015 - 2017, creating a new "Modified Stage 2." All providers, including those in the Medicaid program, would attest to a single set of objectives and measures beginning in 2015. The Modified Stage 2 program reduces the number of requirements and lowers certain measure thresholds compared to Stage 2. All providers are required to move to Stage 3 beginning in 2018 regardless of their prior participation or Stage of MU.

The final rule establishes a modified version of Stage 2 for 2015 - 2017 for all participants. In 2015, all participants must follow Modified Stage 2 with accommodations for providers who were schedule to demonstrate Stage 1 in 2015. Next year, in 2016, all participants would follow the Modified Stage 2 with a smaller set of accommodations for providers who were scheduled to demonstrate Stage 1 in 2016. The following year, in 2017, participants may select to report on Modified Stage 2 or the full version of Stage 3 outlined in the Stage 3 rule. By 2018 all participants would follow the full version of Stage 3.

CMS recently announced a new FAQ that allows any provider to apply for a hardship exception for 2015 under the "extreme and uncontrollable" circumstances category due to the lateness of the modifications rule. The agency has also clarified that physicians switching EHRs or experiencing issues with a vendor product may apply for a hardship exemption under the existing "extreme and uncontrollable circumstances" category.

The MU Stage 3 Final Rule allows for a 60-day public comment period to continue to consider program changes and align requirements with the Medicare Access and CHIP Reauthorization Act (MACRA). This is the last stage of MU and Stage 3 requirements are optional in 2017 and mandatory for all participants in 2018, no matter when they started the MU program.

All Stage 3 MU participants (both physicians and hospitals) must meet 8 objectives. Each objective may include multiple measures. Objections include: (1) Protect Electronic Health Information; (2) Electronic Prescribing (eRx); (3) Clinical Decision Support (CDS); (4) Computerized Provider Order Entry (CPOE); (5) Patient Electronic Access; (6) Coordination of Care through Patient Engagement; (7) Health Information Exchange (HIE); and (8) Public Health and Clinical Data Registry Reporting.

Physicians in opposition, economics of practice changing in part due to Health IT

As reported by Politico, the American Medical Association helped lead the charge to pause finalization of the Stage 3 rules. AMA argued Stage 3 takes a "drastic step backwards" from CMS's proposed changes to Stage 2. The implementation of electronic health records has been especially difficult for independent and smaller physician practices—one of the most consistent arguments against moving forward with the MU program.

As also reported in Modern Healthcare, according to a recent report, independent practices acquired by hospitals are seeing operating costs spike as they try to keep up with the federal electronic health record requirements. Multispecialty physician practices spent an average of $20,693 per full-time-equivalent doctor in 2014, a 12% increase from the year before and a 34% increase from 2010.

More than 3,100 physician groups were surveyed for the report, which includes information on other administrative issues such as staffing ratios. It found that between 2010 and 2014, physician practices increased use of non-physician providers, such as physician assistants and nurse practitioners, to meet demand and compete to hire from a limited supply of doctors. Administrative burdens and costs related to running an independent practice has a growing number of physicians opting to become employees of hospitals. Reports indicate that physicians will continue leaving private practice to work for hospitals and that only a third of physicians would remain independent by the end of 2016.

Along these lines, Politico recently asked if electronic health records are creating a spike in hospital mergers. According to American Hospital Association CEO Rick Pollack in a recent House Judiciary Committee hearing, he estimated hospitals will spend between $20 million and $200 million on EHRs each year depending on their size, and that dollar amount is unmanageable for smaller hospitals. This causes them to merge and results in fewer players in the market. "The fundamental restructuring that CMS anticipates in response to its alternative reimbursement models will undoubtedly come with a high cost that will be particularly difficult to bear for small and stand-alone hospitals," Pollack testified.

GOP Doctors Caucus Resistance

In line with the aforementioned physician resistance, the GOP Doctors Caucus announced plans to ask House of Representatives Speaker Paul Ryan for end-of-year legislation to include a delay in Stage 3 of meaningful use and broad exemptions for the programs penalties. This forthcoming letter is in addition to a letter sent in September to the Obama administration. The September letter asked for a delay in meaningful use Stage 3, and was signed by approximately 25% of House members. 

Tennessee Representative Phil Roe, chairman of the GOP Doctors Caucus, said, "Many of us believe the appropriations process is also an effective way to get this done. The Caucus is open to various vehicles for these requests and looks forward to working with Speaker Ryan and other House leaders on these important initiatives."

Problems with vendors

Over the past year, health IT vendors have come under scrutiny for the practice of intentionally blocking the sharing of patient information, hurting progress toward a national goal of interoperability. New legislation, the Transparent Ratings on Usability and Security to Transform Information Technology Act of 2015, or the "TRUST IT Act" hopes to combat this practice. The legislation aims to ensure that certified health IT systems are performing as promised in the field, and establish a rating system that will enable consumers to compare different products based on that performance.

According to Senator Bill Cassidy's press release—one of the three Senate physiciansthe legislation will also:

  • Authorize the Office of the National Coordinator for Health Information Technology to make publicly available information, such as summaries, screen shots, or video demonstrations, showing how certified health information technology meets certification requirements;
  • Require the certification program to establish that health IT products meet applicable security requirements, incorporate user-centered design, and achieve interoperability, consistent with the reporting criteria developed for the Health IT Rating Program;
  • Require health IT vendors to attest they do not engage in certain information blocking activities, including nondisclosure clauses in their contracts, as a condition of certification and maintenance of certification;
  • Authorize the Inspector General of the Department of Health and Human Services to investigate claims of information blocking and assess civil monetary penalties on any person or entity determined to have committed information blocking.

This comes after CMS also published recommendations earlier this year to address the information blocking problem, including:

  • Assisting federal and state law enforcement agencies in identifying information blocking cases that violate current laws;
  • Bolstering oversight of certified health IT capabilities "in the field" through new requirements;
  • Creating a nationwide health information exchange governance framework;
  • Requiring certified health IT developers to disclose additional costs, limitations and restrictions associated with their products;
  • Working with CMS to create incentive payments that reward interoperability and health data sharing; and
  • Working with HHS' Office for Civil Rights to educate stakeholders on how HIPAA privacy and security standards apply to information sharing.

Now, despite federal rules, many developers of electronic health records are not meeting federal design requirements, according to research published in JAMA. The researchers from the National Center for Human Factors in Healthcare at MedStar Health in Washington, D.C. found that not all vendors filed required reports on usability testing. The report adds to the mounting concern that EHRs are failing to raise the quality and safety of healthcare and lower its costs.

Gag orders, another previously raised issue, are a separate, but related concern. A Politico investigation found that some of the biggest firms marketing electronic record systems inserted "gag clauses" in their taxpayer-subsidized contracts, effectively forbidding health care providers from talking about glitches that slow their work and potentially jeopardize patients. The website obtained 11 contracts through public record requests from hospitals and health systems in New York City, California, and Florida that use six of the biggest vendors of digital record systems. With one exception, each of the contracts contains a clause protecting potentially large swaths of information from public exposure. This is the first time the existence of the gag clauses has been conclusively documented. Politico faults the government's slow response, noting that little has been done to address the problem despite many years of warnings.



There is a significant amount of opposition to current health information technology policies both within the government and the larger medical community. Stage 3 of Meaningful Use could ultimately be delayed through Congressional action, and larger legislative fixes may be necessary to combat the litany of problems raised by stakeholders over the past few years. The ultimate goals of electronic health records may be laudable, but the unintended consequences could be far greater than the Administration had originally perceived.

November 23, 2015

House E&C Committee Turns Focus to the Regulation of Diagnostic Tests and Laboratory Operations



The House Energy & Commerce Committee's Health Subcommittee held a hearing on November 17, 2015, to discuss a proposal by the Food and Drug Administration (FDA) that would broaden FDA authority on the regulation of laboratory developed tests (LDTs).

As part of the 21st Century Cures initiative, the Committee has heard from a wide range of interested parties about the important role diagnostic tests play in the advancement of precision medicine. Following a July 2014 roundtable on the topic, the FDA informed Congress of FDA's intent to issue draft guidance documents that would alter the regulatory landscape for the review and oversight of LDTs. As with most policy proposals, there are significant differences of opinion about the FDA's proposed approach. However, the draft guidance has served as a catalyst for conversations about the "ideal" modern regulatory framework for these unique and evolving tests and services.

In December 2014, the Energy & Commerce Committee issued a white paper, asking for feedback on what roles the FDA and the Centers for Medicare and Medicaid Services (CMS) should play in the framework. This November 17th hearing was the first time that FDA and CMS testified together for a comprehensive understanding of their areas of expertise, their current responsibilities, and what their responsibilities should be moving forward.

Currently, CMS has authority from the Clinical Laboratory Improvement Amendments (CLIA) to inspect labs and lab equipment to ensure that tests are being completed properly. However, in this system, no pre-market evaluation is done to ensure the clinical validity of the tests themselves, which brings the FDA into the issue, as they claim to have better expertise than CMS in pre-market evaluations.

Opening Statements

During the opening statements, Chairman Joe Pitts seemed to understand the importance of precision medicine, biomarkers, and diagnostic testing, asserting that the medical community "needs a regulatory environment that supports this kind of testing," and asking the FDA how its authority of LDTs could be "clarified or improved." Ranking Member Gene Green seemed to agree with Rep. Pitts in claiming the best way to establish a regulatory framework is through legislative action.


Dr. Jeffrey Shuren, the Director of the Center for Devices and Radiological Health at the FDA, stated it was his belief and understanding that modern diagnostic tests have a much higher risk and are exceedingly more complicated than when the original legislation regarding their regulation was passed in the 1970s. He claimed that the FDA has been asked to "more actively regulate" LDTs, but when they issued a proposal in 2007 to regulate a subset of tests, labs said they wanted a more comprehensive framework. That desire for a more comprehensive framework has resulted in the upcoming final guidance.

Dr. Patrick Conway, Deputy Administrator for Innovation and Quality and Chief Medical Officer at CMS, maintained that CLIA has been working for twenty-five years and would remain relevant going forward. However, Dr. Conway is cognizant of limitations with the framework, especially the fact that it is designed to reduce harm based on where the test is performed, not the validity of the test itself. He agreed with the FDA's stance on expertise, that the FDA is be better equipped to ensure the clinical validity of tests.


Both Dr. Shuren and Dr. Conway warned against having both the FDA and CMS attempt to perform pre-trial evaluation of LDTs as it would likely "lead to duplication and inefficiency." Dr. Shuren went a step further, claiming it would lead to "inconsistent standards" and make coordination between the FDA and CMS much more difficult.

Dr. Conway insisted that while his staff is not "trained to test for clinical validity," they would still play a "critically important role" by ensuring that the labs have the right procedures, staff, and equipment in place in order to accurately complete LDTs.

Representative Michael Burgess was concerned about the FDA playing a greater role, saying, "It's unclear to me how we can separate the practice of medicine from lab processes," somewhat suggesting that mandated premarket approval of LDTs would potentially impose unnecessary requirements and additional costs. Representative Joe Barton agreed, bringing up the old adage," If it's not broke, don't fix it."

Rep. Marsha Blackburn's was curious as to when we can expect final LDT guidance from the FDA. Dr. Shuren stated that the FDA planned a 2016 release – "hopefully earlier rather than later." (See the draft guidance here.)

Dr. Shuren and Dr. Conway both asserted that a risk-based approach would be used in conducting a pre-market review. The FDA is planning to focus on clearing the high-risk tests first and then move onto moderate-risk evaluations. Importantly, under this risk-based approach, all low-risk and some moderate-risk tests would not be subject to a strict pre-market evaluation. The FDA will determine levels of risk based upon assessments of the consequences if a test were to demonstrate an incorrect result.

Several members were concerned that an adjustment in the review of diagnostic tests would lead to them being taxed differently, under the Affordable Care Act's medical device excise tax. Dr. Shuren was unable to provide a confirmation that they would not be, instead stating that the FDA would work to maintain LDTs tax-exempt status.


Over the years, the FDA has pushed to regulate LDTs, all the while maintaining that the lack of oversight has resulted in real harm to patients. However, the FDA has been unable to back up those claims, save a few examples. The aforementioned recently released FDA report came up with twenty such examples, but even with those additional examples, Congress is remaining somewhat skeptical.

Congress seems concerned with the current path of progress, with some members concerned about new government regulation and others concerned about what an FDA "stamp of approval" would suggest to physicians and consumers about the accuracy of the tests. Overall, most present members offered support for some legislative action to be taken to clarify the regulatory structure of LDTs.


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