Life Science Compliance Update

« August 2014 | Main | October 2014 »

32 posts from September 2014

September 30, 2014

Physician Payments Sunshine Act: Open Payments Is….Live?


Today, CMS launched its Open Payments System. The website went live at 2pm. Open Payments gives users the option of (1) downloading gigantic excel files of data or (2) using CMS’s “data explorer tool.”

We took advantage of both options, hoping to analyze the raw data using Excel and also to get a feel for what patients would experience if they wanted to use Open Payments to find their doctor.

Big Picture

CMS announced that the Sunshine reports revealed $3.5 billion in payments for the last five months of 2013, there were approximately 4.4 million payments.  Payments were made to 546,000 physicians and 1,360 teaching hospitals.

CMS broke down their data in several ways, including general payments and research payments, as promised. However, they also separated the data into “identifiable” at the physician level or “de-identified.” This made it necessary to combine all of these data sources to get an idea of the total amount of payments. It also demonstrated that research payment totals far exceed general payments. Furthermore, a full 90 percent of research data is de-identified.  

CMS says such data will be identified in 2015 following the submission of corrected data and physician and teaching hospital opportunity to review/dispute. Further, “data that were disputed and not resolved by the end of the September 11 review period have not been published and will be updated at a later date.” CMS puts the current de-identified data figure at 40 percent which is lower than what the data shows. 

We found the following figures:

General Payments: $976,743,814

This figure includes all meals (a huge portion of the data, many of which hover at or below $10); speaker and consulting fees; travel and lodging; educational materials; entertainment; and gifts.  There were 4,283,132 total payments in the general database.

  • The identifiable general payment reports 2,720,099 payments  for a total of $669,561,563 in payments or transfers of value
  • The de-identified data reports 1,563,033 payments for a total of  $307,182,251 

Research Payments: $1,486,242,674

Pharmaceutical companies spent vastly more on their research endeavors than on general payments. Notably, only about 10 percent of the research payments are identifiable on the covered recipient level in the Open Payments.

  • The identifiable research payment spreadsheet has 23,226 lines of data equaling $155,815,828
  • The de-identified data has 199,887 lines equaling $1,330,426,846

The best analysis of the data thus far is available at ProPublica which includes a break out of nature of payment categories.  

In the ProPublica report they mention that companies reported by operating unit.   The way the final rule was written, companies are penalized for mistakes on an operating unit basis and interpreted the requirement to report that way.

We will provide a detailed analysis and breakdown of the research payments category tomorrow.


How Will the Average Patient Use This Data?

In its press release, CMS announced that they were releasing the Open Payments data "to help consumers understand the financial relationships between the health care industry, and physicians and teaching hospitals." While we suspect the majority of users today were from the press, we attempted to use the system as an average patient would.

Instead of downloading an immense Excel file, we expect patients will use a page enabling them to “Explore the Datain order to search for their doctor, if they pursue Open Payments in the first place. When the site went live, we were able to access this database after a process of trying to figure out which choice was the one you could find your doctor in.  It was a slow, rocky ride. A partner at a leading data firm called us and expressed that they personally found the process difficult to use, so we can only imagine how a patient would feel. 

I first went to the "General Payments" category with identifying recipient information. Not knowing my particular doctor's identification number, I searched by last name. The data eventually filtered down to hundreds of doctors and thousands of payment transactions. I located my doctor, wrote down her identification number, and then organized the data set by identification numbers. Each scroll was met with a processing signal, but eventually I found my doctor's 15-20 meal payments one after the other in the list. I calculated about $200 worth of value. 

A fundamental issue in the usability of the site right now is how many categories there are for each payment. This will require patients to wade through a fair amount of confusing information before landing on each particular transfer of value, which they will then have to calculate up on their own. CMS has included a number of filtering options that can provide fairly advanced analysis of the payment data. We think that the press and/or the government may be taking more advantage of those analytic tools than patients. 

Starting around 3pm, the website stopped working, despite numerous retries. As of this evening, the website is refreshing more quickly and seems to be in semi-working order. We will provide updates about the system as we continue to work through the databases. 

Open Payments Data Photo


Today we posted important contextual information that users of the database should consider. The AMA and PhRMA have also released a statement on the Open Payments database today.  

Physician Payment Sunshine Act: First Reports Likely Out this Afternoon; Physicians Concerned About Accuracy, Context

Sunshine Data

After over four years since the passage of the Affordable Care Act, September 30th marks the date for the release of the 2013 Sunshine Act data. Today, the Centers for Medicare and Medicaid Services (CMS) is set to publish a database on how much pharmaceutical and device manufacturers have paid to doctors for various engagements—including speaking fees, research grants, and the “value” of any snack a drug rep brings to a physician’s office. Sources say the agency will release the data sometime this afternoon. 

At its core, the Sunshine Act aims to better inform patients of the financial relationships their doctor has with manufacturers. The hope is that the public will see just how important these relationships are in the development of medicines and devices for heart attacks, strokes, multiple sclerosis, cancers and infectious diseases such as HIV, Hepititis C, and Ebola. While (almost) everyone opposes unethical interactions between physicians and pharma companies, the truth is that doctors collaborating with industry is an essential ingredient in patient care.

For example, physicians in academic medical centers often receive funding from industry as investigators in clinical research and as consultants who help design and evaluate clinical trials or develop new medical technologies. Such research is essential in order to find cures for many diseases. Physicians who engage with patients have invaluable practical knowledge to add to the process. Industry also supports physician education, and may provide reprints of peer-reviewed medical journals to busy practitioners.

Many physicians have supported the Sunshine Act’s goal to promote transparency, but are concerned about the potential for misrepresentation of information in public reports, and possible diminished innovation resulting from more limited physician-manufacturer relationships. 

The American Medical Association (AMA) has advocated specifically for more time for doctors to check the payment reports for accuracy. Physicians were allotted 45-days for a “dispute resolution” period with the companies that submitted data before the information went “live." This process was mired with a complicated registration process, missing data, and continuing website shutdowns. View our in-depth article on the physician registration and review period here

Things to consider when searching for doctors in the Open Payments system:

First, one of the fundamental issues that distorts the payment data is the fact that CMS will initially be withholding more than one-third of all the data from the system due to potential inaccuracies. Last month, we found issues in the way CMS matched doctor data for its system. The system relies heavily on physicians’ NPPES numbers, but we noted that this database is notoriously inaccurate. Physicians may have several NPI numbers, they may have entered the state license number incorrectly, or they may have moved states. Unless there is a particular time stamped date that CMS matches a company’s data with, even a completely identical transcription from NPPES to the Open Payments spreadsheet could be outdated and incorrect the very next day.

Second, payments may be incorrect.  One Massachusetts doctor we spoke with typed his name into the system to find that most of his payments were entered into the wrong Open Payments category--research and travel went in consulting, other payments went in travel, etc. No physician wants to see his or her name in the newspaper as receiving a huge sum of money from industry when that information is either untrue or misleading. However, due to the cumbersome "review and dispute process," many physicians were unable to check their data. This issue comes to a head when doctors have agreed not to accept consulting fees, and would have to explain why they have been reported. Thus, it is important for physicians to review and dispute the incorrect information they find next to their name.  The ability to dispute is always available to physicians even after the data is published.

Furthermore, because physicians do not have the option to register and view teaching hospital data, many physicians will be unable to view all of their allotted payments. Teaching hospital research payments in the thousands or millions of dollars may be attached to a single physician’s name who never had the opportunity to review the data for accuracy. The “review and dispute” process, in other words, will typically only reveal payments made by companies directly to the physician.

Due to potential inaccuracies, yesterday, the American Osteopathic Association, the professional membership organization for more than 104,000 osteopathic physicians and medical students, noted that the reports will cause further confusion to the public if released at this time. 

Third, this reporting year only includes data from August to December of 2013. 

Fourth, "payments" under the Sunshine Act are rarely money in a doctor's pocket. The best parallel for misleading reporting came out just a few months ago when CMS released the Medicare payment data. We saw a lot of "Find Out How Much Your Doctor Receives from Medicare” stories that were actually very misleading.  The least researched stories involved a doctor who worked at the Mayo Clinic, and was reported to have received $11 million from Medicare. All doctors at the Mayo clinic receive a salary. This doctor's name was just attached to a huge amount of payments because the Clinic conducts a large amount of research and employs a giant staff. A similar situation could happen with Sunshine Act reporting where the full expense of clinical trials are reported against one "principal investigator" physician. View our Medicare article here

Fifth, a fundamental issue with the Sunshine Act reporting requirements is that manufacturers will have drastically different methodologies for how they calculated certain types of payments--even when they may be for the exact same thing. For example, medical journal reprint valuation was a hotly contested issue among companies--are they worth the cost to the manufacturer, or the cost a physician needs to pay to order them? What if they are available for free online? Because the public will not have access to a manufacturer's "assumptions documents," a fair comparison is truly impossible.

Sixth, no one knows what kind of actual context CMS is going to post on or near the payment site, as CMS has kept this under wraps for months.

Seventh, many payment categories may be misinterpreted by those unfamiliar with the healthcare sector. For example, food and beverage expenses--what we anticipate to be one of the largest categories by number of payments but not dollar value--are often tied in with educational programs where the physician is learning about the safety or efficacy of a vital product. Thus, these meals (or trips for that matter) are almost never improperly lavish as certain articles may portray them to be. 


Concerns over the pending Sunshine Act data release are fairly simple: doctors don't want to be slammed in the press over either inaccurate payments or payments that reflect beneficial collaborations with industry.

We will follow the media coverage of the Sunshine payments in the coming days, as well as updates from CMS. 

September 29, 2014

Ivy Sports Medicine v. Burwell, et al.: FDA May Not "Short-Circuit" the Process For Reclassifying Medical Devices, Rules Federal Appeals Court


FDA does not have “inherent reconsideration authority” to reclassify medical devices without notice and a comment period, states the Federal Circuit Court of Appeals for the District of Columbia. The Court ruled Friday that the FDA may not “short-circuit” the statutory reclassification process after clearing a device for the market.

The case (available here) is being called a David v. Goliath type victory for industry, and an important reining in of FDA’s expansive interpretation of its own powers. Mark Duvall, the president of Duvall & Associates, which specializes in representing FDA-regulated companies, stated: "Our hope is that this Ivy Sports case will make industry and Congress revisit the giant we’ve created, called FDA, because like Goliath it’s clearly big, imposing and threatening to the existence of the device industry, especially the small companies who try to stand up to it."

ReGen’s Callogen Scaffold

The Callogen Scaffold, a knee-repair device developed by ReGen Biologics (now Ivy Sports Medicine) spent years in various FDA pathways. ReGen eventually had its 510(k) cleared by the FDA in December 2008. The agency determined that the Scaffold was “substantially equivalent” to an existing device, and could thus be marketed in the US.

Shortly thereafter, a Wall Street Journal article questioned the FDA’s decision-making. “The recent approval of a new device to treat knee injuries followed a lobbying campaign that overcame repeated rejections by scientists within the FDA, agency documents show,” the article stated. Political pressure followed the WSJ story, and FDA’s newly appointed Acting Commissioner ordered an internal investigation of the Collagen Scaffold’s review process.

FDA eventually stated that while they had “no basis to question the safety of the device,” the clearance process had “procedural irregularities.” Dr. Jeffrey Shuren, who, as part of the Obama administration, succeeded the original head of FDA’s Center for Devices and Radiological Health from when the Scaffold was cleared, notified ReGen that the clearance of the Scaffold “was in error.” In order to “rectify this error,” FDA would rescind its substantial equivalence determination. That decision meant that the ReGen would have to withdraw Collagen Scaffold from the market.

ReGen filed suit in the D.C. District Court seeking review of FDA’s decision. During the pendency of the case, ReGen filed for bankruptcy. ReGen and its successor, Ivy Sports, challenged FDA’s decision to rescind the clearance as being procedurally flawed. They argued that FDA must follow the procedure laid out in statute in order to reclassify their device. FDA countered that the agency has "inherent authority" to rescind a clearance determination, and could thus avoid the procedures in place to provide notice to affected parties and the opportunity for comment.

The District Court sided with FDA, but the Appeals Court overturned the decision. They found that “FDA did not follow the proper statutory procedure for reclassifying a device.”

Regulatory Framework

To make their way to the market, medical devices must go through either one of two paths at the FDA. The “premarket approval” path involves more scrutiny, usually requires clinical research demonstrating the safety of the device, and can take a very long time.

The “premarket notification” path, found under Section 510(k) of the Food, Drug, and Cosmetic Act, is a more streamlined process that requires the new device to be “substantially equivalent” to a device already on the market. We just wrote an article on the FDA’s new guidance on the 510(k) review process, which stated that beyond similarity, FDA also weighs the benefits and risks of 510(k) devices. Devices that FDA deems less risky than existing devices may still be kept from clearance if they exhibit measurably less benefits.

Companies seeking to register their device with FDA submit a premarket notification, or a “510(k) application” in order to demonstrate the device is “substantially equivalent” to a device already approved by the FDA, also known as a “predicate device.” If FDA determines a new device is substantially equivalent to a predicate, the new device is cleared and subject to the same regulatory Class controls as the predicate. If not, the new device is classified into Class III--the "riskiest" class of devices--and subject to premarket approval of its safety and effectiveness. 

A recent study found that it takes FDA 5 months to review and clear a medical device 510(k) application on the premarket notification pathway. This is the quick option.

What Happens When FDA Changes Its Mind?

During the time period relevant to the Ivy litigation, the statute 21 U.S.C. § 360c(e) stated: “Based on new information respecting a device, the Secretary may, upon his own initiative or upon petition of an interested person, by regulation (A) change such device’s classification, and (B) revoke, because of the change in classification, any regulation or requirement in effect . . . with respect to such device” (emphasis added). Because reclassification must be done “by regulation,” it must be done in accord with certain procedural requirements, including notice and comment. 

If FDA finds that a device is no longer substantially equivalent to any existing Class I or Class II devices, that device is automatically reclassified as a Class III device. In other words, to revoke a substantial equivalence determination is to “change the classification,” 21 U.S.C. § 360c(e)(2), of that device.

The Court determined that this language essentially precluded FDA from simply backtracking on its original classification. 

"[A]ccepting FDA’s assertion of inherent authority would render Section 360c(e) a dead letter in many cases because FDA could often reclassify a device without complying with the procedural requirements of that provision, in particular notice and comment.

"In short, because FDA concededly could have used Section 360c(e) to reclassify the Collagen Scaffold into Class III, it could not rely on a claimed inherent reconsideration authority to short-circuit that statutory process and revoke its prior substantial equivalence determination to achieve that same result.

"The practical significance of our holding on this point is limited but important. To reclassify under the statute, FDA must go through certain procedural hoops, including notice and comment...FDA obviously thinks notice and comment is unnecessary here, a not-uncommon sentiment among agencies that want to take action more promptly. But notice and comment helps to prevent mistakes, because agencies receive more input and information before they make a final decision. And notice and comment also helps ensure that regulated parties receive fair treatment, a value basic to American administrative law. So notice and comment, while somewhat burdensome, serves important purposes both generally and in this statute."

Furthermore, the court noted that there was no finding of fraud or impropriety in the FDA clearance process:

"To state the obvious, not every wrong decision or ill-considered decision is tainted by misconduct...Here, the record indicates that the review process for the Collagen Scaffold was perhaps imperfect, but the supposed mistakes do not rise to the level of misconduct...For example, FDA’s report on the scaffold’s review process acknowledged that communications between members of the New Jersey congressional delegation and FDA officials were “not inappropriate.” [] And in fact, representing the interests of constituents is a key and proper part of the job of Representatives and Senators. Indeed, FDA received pressure from other Members of Congress to change the original reclassification decision. Not surprisingly, therefore, Members of Congress were on both sides of the question."

"Similarly," the court stated, "while the report identified mistakes in the expert panel proceedings, the report found no evidence that those supposed defects affected FDA’s decision." They continued: "It is also notable that no senior leaders of FDA, executives of ReGen, or Members of Congress were disciplined for their involvement in the Scaffold’s review process. Yet if FDA actually rendered a decision tainted by misconduct – as opposed to simply reaching a mistaken decision or a decision it no longer agrees with – that misconduct must have been due to the legally or ethically wrongful actions of some person or persons."

The court concluded that the FDA's "inability or unwillingness to identify those wrongdoers" indicates that misconduct sufficient to potentially warrant FDA's "inherent reclassification power" did not occur.

Analysis and Commentary

Medical device companies that develop an FDA-approved product under the 510(k) pathway should not have to worry that the agency will simply rescind their decision without any process. The court in this case recognized that granting FDA what it desired--inherent reconsideration authority--would ignore explicit statutory procedures to ensure companies receive "fair treatment," what the court deems a "value basic to American administrative law." There is a process in place for FDA to change a device's classification, and FDA must follow that process. 

The Ivy Court's decision should alleviate some concerns over FDA's ever increasing authority. The court understood that granting FDA the unfettered right to rescind a "substantial equivalency" determination would essentially allow FDA to reconsider any number of 510(k) devices currently on the market. This would be detrimental not only to countless companies--after all, FDA's reclassification single-handedly bankrupt ReGen--but also to patients in need of new, innovative devices. 

Notably, FDA never rescinds cases absent a finding of fraud in the clearance process, which is what made their reclassification of Callogen Scaffold surprising. Here, the court hinted at the possibility that were serious misconduct involved--and punished accordingly--FDA indeed could have exercised inherent authority. It will be interesting to see whether the FDA, in the future, takes swift action in punishing what they deem to be wrongful actions in order to show "misconduct sufficient [to warrant] FDA's 'inherent reclassification power.'"

"The impact of this case cannot be underestimated," states Mark Duvall. "FDA not infrequently exceeds its statutory and regulatory authority often granting to itself powers and interpretations of law and regulations well outside the scope of that actually given to them." He notes that this is not the first time that FDA has "had its interpretations of law and regulations checked." He mentions the Washington Legal Foundation case, the IMS Health case, and the Caronia case, all focusing on 1st Amendment issues. "These cases all stand for the proposition that FDA is not always right in its interpretations," he notes, "which can often be self-serving and extend authority to areas and plateaus not granted to them by Congress."

We will continue to follow commentary around Ivy, and will be interested to see the effect of the case on the medical device industry. 


Preview | Powered by FeedBlitz


April 2018
Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30