Life Science Compliance Update

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21 posts from November 2015

November 30, 2015

Novartis Settlement and Corporate Integrity Agreement Amendment

We have previously written about the proposed Novartis AG settlement relating its False Claims Act suit. The suit alleged Novartis participated in improper kickbacks to pharmacies to boost sales of several prescription drugs. Novartis Chief Executive Joe Jimenez claimed that Novartis had made the disputed payments, but did so to ensure patients took the drugs.

In October, Novartis announced a $390 million tentative agreement to settle that claim against them. That tentative agreement did not assign liability for the resolved allegations of improper discounts and rebates to specialty pharmacies in conjunction with the immunosuppressant Myofortic and the iron overload drug Exjade.

Allegedly, sales of Exjade were not meeting expectations primarily due to the side effects of the drug, when Novartis pressured a set of three hand-selected specialty pharmacies, including Bioscrip, Inc. and Accredo Health Group, to "hire or assign nurses to call Exjade patients and under the guise of education or clinical counseling, encourage patients to order more refills."

With regard to Myofortic, Novartis allegedly offered "lucrative rebate offers to five specialty pharmacies in return for the pharmacies' promise to recommend to doctors that they switch patients to Myofortic from competitor drugs."

Settlement and Admissions

The final settlement, approved November 20, 2015, settled the claims against Novartis for $370 million. That $370 million goes towards paying the fines to settle the claims against it, while an additional $20 million in profits will be forfeited, bringing the total settlement to $390 million. This is much less than the $3.35 billion the government was seeking. Of the $270 million, $286,870,245.98 will be paid to the federal government and $83,129,754.02 will be paid to settling states.

This settlement is the third settlement of this lawsuit – in January 2014 and April 2015, two specialty pharmacies (Bioscrip and Accredo) agreed to pay a total of $75 million to resolve federal and state claims against them based on the same allegations. Taken with this recent Novartis settlement, the federal and state governments' recovery will total $465 million.

In addition to the settlement, Novartis made a lengthy list of admissions relating to the Exjade and Myofortic claims. Novartis admitted to pressuring at least one of the specialty pharmacies into filling more Exjade prescriptions, even if it meant skirting the law a bit. Novartis also admitted to offering discounts and market share rebates to certain specialty pharmacies that dispensed Myofortic, though the agreements did not refer to any action that the pharmacies contemplated taking to increase Myofortic's market share.

Corporate Integrity Agreement Amendment

Part of this settlement requires Novartis to add provisions relating to specialty pharmacies as part of an addendum to its existing corporate integrity agreement, which will be extended for five years from November 19, 2015. These new CIA obligations will provide greater clarity on working with specialty pharmacies in support of patient care.

Novartis will "implement the agreed upon controls to ensure appropriate support for patients, and compliance with all Federal Healthcare program requirements related to its interactions with specialty pharmacies." These controls include a variety of things, such as "enhancing policies and procedures at [Novartis] for specialty pharmacy service arrangements and contracts, training for [Novartis] associates, as well as strengthened monitoring and tracking processes to ensure that services are provided in a compliance manner."

Part of those controls require an annual certification from Novartis officers and employees that the applicable Novartis business unit is compliant with applicable Federal health care program and FDA requirements.

In addition, Novartis will design policies and procedures to ensure that Novartis' arrangements with specialty pharmacies are "used for legitimate and lawful purposes in accordance with the federal anti-kickback statute ... and other applicable Federal health care program and FDA requirements." All arrangements will be subject to a written review and approval process. The policies and procedures shall include requirements about the business need for the arrangements, the services provided under the arrangements, and the amount of compensation provided under the arrangements – including that the amount of compensation is fair market value for the service.

Within 120 days of the effective date of the addendum, Novartis is required to create procedures reasonably designed to ensure that each existing and new or renewed arrangement does not violate the anti-kickback statute or the regulations, directives, and guidance related to the statute. Each new or renewed arrangement must be set forth in writing and comply with the arrangements procedures. Each party to the arrangement must have a copy of its Code of Conduct and relevant policies and procedures relating to the anti-kickback statute. A certification must be signed that the parties shall not violate the anti-kickback statute with respect to the performance of the arrangement, and that certification must remain on file.

Novartis has stated that they will provide its contracted specialty pharmacies with a "clear understanding of the Novartis Code of Conduct and training on the policies that guide our activities to help ensure compliance with Federal Healthcare program requirements." Novartis has agreed to provide a comprehensive annual report to the government of on its compliance with the aforementioned, and other, CIA obligations.

Novartis insists that it is "committed to high standards of ethical business conduct" and now has a comprehensive compliance program in place to ensure its future responsible behavior.

Preet Bharara, the U.S. Attorney for Manhattan made a warning statement to all pharmaceutical companies, stating, "Novartis turned pharmacies that should have been disinterested healthcare providers into a biased sales force for the drug maker. Drug makers and their relationships with healthcare providers ... must comply with the Anti-Kickback Statute. If they don't we will bring all appropriate law enforcement tools to bear to ensure that they do."

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.

 

Conclusion

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.

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