Life Science Compliance Update

September 22, 2017

Accountable Care Organizations Under Magnifying Glass

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Calling into question whether value-based care will ever truly work, a recent report casts dark news for ACOs. As reported, nearly half of physicians participating in the Medicare Shared Savings Program (MSSP) ACO in 2015 did not know if they could receive shared savings or faced downside risk, according to a study. Even as there are flaws with fee-for-service, there are legitimate questions being raised about the feasibility of implementing value-based health projects, as evident in this latest MSSP study.

MSSP ACO Study

The survey was conducted between September 2014 and April 2015 and asked more than 1,400 doctors participating in Pioneer, MSSP, and Advance Payment Model ACOs about their programs' incentive structure and effectiveness, among other topics.

The survey found many doctors participating in each model were not aware how their respective incentive structures worked. Specifically:

  • 5 percent of Advance Payment participants did not know if they or their practice faced downside risk and 16.1 percent said they did face downside risk;
  • 5 percent of MSSP participants did not know if they or their practice faced downside risk and 20.6 percent said they did face downside risk; and
  • 7 percent of Pioneer participants said they did not know if they or their practice faced downside risk and 19.8 percent inaccurately said they did not face downside risk.

Additionally, the survey found that similar proportions of physicians did not know whether they were eligible for shared savings in their respective programs. Specifically:

  • 9 percent of Advance Payment physicians said they were not sure whether they or their practice were eligible for shared savings;
  • 5 percent of MSSP participants said they were not sure whether they or their practice were eligible for shared savings; and
  • 2 percent of Pioneer participants said they were not sure whether they or their practice were eligible for shared savings.

The survey also found that many doctors were unsure of which of their patients were attributable to an ACO. Specifically, 42.7 percent of MSSP, 21.4 percent of Advance Payment, and 34 percent of Pioneer physicians did not know which of their patients were attributable to an ACO.

Will Value-based Payment Actually Work?

This question is raised in a recent MedPage Today article on the subject. During a panel discussion, one member raised concerns about the current push to pay for the value of services rather than the volume of services under MACRA. Under MACRA, for example, the push could have unintended consequences for the healthcare system, with the influx of APMs resulting in "a thousand flowers blooming," borrowing an expression from former Chinese leader Mao Zedong. Such an approach -- having one model for a single aspect of one specialty -- might only increase fragmentation in the healthcare system.

Additionally, some have been critical of recent changes to MACRA that slow the “on ramp” for physicians to participate. They argue it creates an incentive not to get on board with value-based programs in Medicare. However, with so many physicians unaware of MACRA, and the complexity of the law, it seems reasonable that CMS would take a slower approach in the implementation of the law.

The Point of Value-Based Pricing

Raised in a recent athenahealth article by Paul Levy, the former CEO of Beth Israel Deaconess Medical Center from 2002-2011 and author of “Goal Play! Leadership Lessons from the Soccer Field,” a key element of President Obama's healthcare policy was a push for "value-based pricing," using the authority of the Centers for Medicare and Medicaid Services to experiment with pricing incentives to reduce overuse in clinical care. Private insurers were likewise encouraged to pursue this direction.

The status quo in the U.S. for years has been “fee-for-service" pricing, in which doctors and hospitals were paid for piecework. Believing that the persistent rise in healthcare costs in the United States was driven by overuse resulting from this financial incentive, some policy analysts decided that doctors and hospitals should be given a countervailing financial incentive to reduce certain kinds of diagnostic tests and to avoid medically unnecessary procedures.

The predominant form of value-based pricing to emerge from this policy assumption was the so-called “global payment." Medicare or private insurers would give each health system (now called an accountable care organization or ACO) an annual number of dollars per year per patient, based on the risk profile of that system's population. If the health system could treat the patient for less money, it would keep the surplus. If its spending exceeded that budget, it would suffer a loss.

In essence, the plan consisted of CMS and private insurers trying to transfer the actuarial risk of patient care to providers, counting on the new financial incentive to change behavior.

Good Intentions but Rough Outcomes

Levy’s analysis continues by pointing out if the premise of global payments is that doctors are economically rational creatures who will respond to financial incentives, then the financial incentives have to be substantial, immediate, and transparent to be effective. Under a global payment regime, however, the incentives are minor, delayed, and fuzzy. Even those doctors who might want to be good corporate citizens will find themselves inexorably pushed to play “X," and thereby will undermine the hoped-for results.

Thus global payment regimes are hoisted on the petard of their own underlying assumption: The rationality of the participants. In the case of CMS, the global payment plan was doomed for other reasons. For one thing, early versions had no downside: While there was the potential to garner surpluses, health systems were protected against losses. Further, under federal law, Medicare patients are mobile: They have no obligation to stick with one health system if they feel they can get more of what they want from another.

To Disclose or Not to Disclose… That is the Question: The DOJ’s FCPA Pilot Program – Insights from Year One and Beyond

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It has been over one-year since the US Department of Justice has launched its pilot program aimed to incentivize companies to self-report potential Foreign Corrupt Practices Act violations. Since its launch on April 5, 2016, the Justice Department resolved nine investigations. However, the question still remains – “Is the carrot bigger than the stick?” This article examines settlement trends before and during the Pilot Program to answer the question of whether or not it is sensible to self-disclose.

Last month, Sandra Moser, the acting chief of the DOJ’s Fraud Section made it clear that the DOJ would be increasing its enforcement efforts of healthcare related companies. Although life science companies have not been immune to Foreign Corrupt Practices Act (“FCPA”) investigations in the past, Moser stated that the DOJ viewed the healthcare industry as ‘one that faces serious compliance and corruption challenges not only in high risk markets overseas but right here at home as well.’ Simply put, life science companies will be under the FCPA microscope more than ever.

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September 21, 2017

MedPAC Discusses Pharmacy Benefit Managers

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During September 7th’s Medicare Payment Advisory Commission (MedPAC) public meeting, its commissioners discussed issues related to pharmacy benefit managers (PBMs). The slides during the presentation can be found here and an issue brief here as well. The Commission discussed issues related to the conflicts of interest between PBMs and PBM-owned specialty pharmacies, the role for exclusive specialty pharmacy networks in Part D, whether CMS should mandate PBMs’ disclosure of data to plan sponsors, among other topics. The following discussion between the commissioners broke along two lines: those supporting PBMs and others critical of them.

Commissioners Supporting PBMs

Commissioner Bricker (of Express Scripts) made several remarks about PBMs. First, they are required to meet discounts and provide rebates to plan sponsors. Second, they accept financial risk for generating agreed-upon levels of discounts from drug manufacturers. Third, PBMs are required to pass direct and indirect remuneration (DIR) information onto plan sponsors, and she is not aware of any widespread lack of disclosure among PBMs. The commissioner was open to exploring exclusive pharmacy networks in Part D but pushed back against the conflict of interest in PBM-owned specialty pharmacists, suggesting that the competitiveness in the industry forces PBMs to focus on negotiating low prices. Finally, she expressed support for allowing MA-PDs to manage Part B drugs similarly to Part D drugs.

Commissioner Nerenz is quoted as saying, “conflicts-of-interest run throughout the health care system, in some instances, we encourage it.” He said that if conflicts-of-interest are going to be addressed as a concern, it should also be made clear “why it’s a problem here more than elsewhere.” Also, regarding transparency, he said that PBMs work as a consultant to the plan sponsor, and that “in general, we don’t require consultants to disclose elements of their own internal finances.”

Commissioners Critical of PBMs

Commissioner Jack Hoadley raised concerns about the “maze of financial entanglements,” saying it is “unclear where the system saves money and where it adds costs.” He suggested MedPAC should look at where prices go up even as new competitors enter the market and how rebate savings should be shared with beneficiaries. Commissioner Rita Redberg criticized PBMs’ secrecy, fees, and unknown rebates.

Other Comments

Commissioner Warner Thomas acknowledged that “one could have the view that it is so complicated it must be a problem,” adding that, “we don’t really know.” Commissioner DeBusk suggested that it “is complicated enough and there is enough money that singling out a PBM is not the solution to our problem.”

Despite some of the concerns cited with PBMs, several commissioners suggested that the high cost of specialty drugs should be more of a concern than the supply chain. Commissioner Kathy Buto, a former CMS and CBO official, asked, “How big a difference do PBMs make in the value and the reduction in overall cost? Probably not a huge amount,” she said. “It’s probably the manufacture costs and utilization.” Commissioner Buto suggested that “structural changes in Part D” could help address pricing issues, and added expressed support for allowing MA-PDs to manage drugs that under Part B. Commissioner Pat Wang noted she is “not opposed to the recommendations around PBMs, they won’t change the cost of specialty drugs.” Finally, Commissioner Thomas agreed that “this pricing cascade starts with the manufacturer who sets their own price.”

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