Life Science Compliance Update

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31 posts from June 2017

June 30, 2017

RAND Releases Study on MACRA Implementation


According to a RAND study in Health Affairs, MACRA will slow the rate of growth for the program's spending on physician services, saving anywhere from $35 billion to $106 billion over 15 years. Over this time, the relative drop in revenue under MACRA is still better than what could have transpired under Medicare's former reimbursement system. With plenty of uncertainty surrounding MACRA's implementation, the RAND forecast is useful, but due to potential changes in MACRA, the study’s results may need to be revisited in the future.

Study Findings

Two important findings from the study: First, Medicare spending on physician services will be lower under MACRA. The RAND team estimates a drop somewhere between $35 billion and $106 billion. However, second, there is a wide range of possibilities when it comes to hospital payment changes. They could see an increase of $32 billion or a decrease of $250 billion.

Peter Hussey, a senior policy researcher with the RAND Corporation and a coauthor of the study, said the losses will result from physicians responding to payment models in ways that reduce the use of hospital care, such as avoiding admissions and readmissions.

“What we found was that physicians will be in a scenario where their Medicare payments are increasing very slowly over the next 10 years,” Hussey said in an interview. “And the only way to increase those reimbursements is through participating in APMs which, if they are successful, keep patients out of hospitals. The biggest effect from MACRA could be a decrease in hospital revenues.”

More from RAND

As described in the Health Affairs abstract, Congress repealed the Sustainable Growth Rate formula for Medicare physician payment in 2015, eliminating mandatory payment cuts when spending exceeded what was budgeted. In its place, Congress enacted the Medicare Access and CHIP Reauthorization Act (MACRA), which established a two-track performance-based payment system that encourages physicians to participate in alternative payment models. MACRA could have huge effects on health care delivery, but the nature of those effects is highly uncertain.

RAND’s model estimates MACRA’s effects under different scenarios. RAND estimates that MACRA will decrease Medicare spending on physician services by −$35 to −$106 billion (−2.3 percent to −7.1 percent) and change spending on hospital services by $32 to −$250 billion (0.7 percent to −5.1 percent) in 2015–30. The spending effects are critically dependent on the strength of incentives in the alternative payment models, particularly the incentives for physicians to reduce hospital spending and physician responses to MACRA payment rates.

Look At Risk

RAND’s assessment of alternative payment models (APMs) looked at different levels of risk. Generally speaking, the riskier the Advanced APM, the more money physicians stand to lose if they pump up the volume of services. The study then compared the riskiness levels (low, medium, and high) to a “pre-MACRA baseline” scenario where Congress continued its tradition of postponing SGR pay cuts, and instead gives physicians nominal rate hikes of 0.5% from 2015 to 2025 with a 2% annual increase when sequestration cuts to Medicare expire. In this scenario starting in 2014, Medicare spent $81 billion on physician services and the spending baseline increases to $109 billion in 2030.

Ultimately, all three MACRA scenarios trailed the pre-MACRA scenarios for Medicare spending on physician services from 2015 to 2030. The gap varied, depending on the level of MACRA risk. In the low-risk MACRA scenario, physician revenue is $35 billion lower than the pre-MACRA baseline over 15 years for a 2.3% decrease. The highest-risk MACRA scenario comes in at $106 billion, or 7.1% lower, while the medium-risk scenario is $47 billion or 3.2% lower.

Grain of Salt

The Advisory Board recommends having some caution while reviewing the study’s results. They note the study results are projections, and the authors themselves stressed that they "are subject to a high degree of uncertainty." The researchers projected Medicare spending between 2015 and 2030 under three MACRA scenarios with different assumptions about financial incentives under alternative payment models (APMs). They also made assumptions about physician participation in APMs based on those financial incentives. In addition, they acknowledged that MACRA regulations could change and that "elements of MACRA such as the definition of APMs will also change over time.

Furthermore, it may be too soon to predict the ultimate financial impact of MACRA’s APM models, since physicians and hospitals are just beginning to understand the role of value-based care. Nevertheless, regardless of the uncertain financial impact, CMS must be careful how it designs and implements new APM models, and providers and hospitals must understand the impact of their participation in such APMs.

The 21st Century Cures Act: Is It Worth the Cost for Lifesciences?


The 21st Century Cures Act (“Act”), which provides substantial funding for medical research, seeks to alleviate the regulatory process for developmental and experimental treatments and to implement reform measures on mental health care. This article explores whether the long-term the Act’s benefits will outweigh the costs.

The 21st Century Cures Act (“Act”), passed by the U.S. Congress and signed into law by former U.S. President Obama on December 13, 2016, legislatively boosts funding for a host of government research and regulatory programs including $4.8 billion for the National Institutes
of Health (“NIH”); $1.8 billion to accelerate research for cancer; $1.6 billion for brain diseases including Alzheimer’s; $500 million in funding for the U.S. Food and Drug Administration (“FDA”) and $1 billion in grants to assist States deal with opioid abuse.

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June 29, 2017

Chicago Releases Pharmaceutical Representative Disclosure Log Draft


The City of Chicago recently released a draft of the disclosure log pharmaceutical representatives will be expected to use to keep track of the interactions they have with Chicago physicians. The form requires pharmaceutical representatives to log the following information with respect to any interactions they have with physicians within city limits: HCP first name; HCP middle initial/name; HCP last name; HCP name suffix (i.e., Jr.); HCP primary business address; HCP license type (i.e., MD, DO, etc.); HCP state license number; HCP NPI (if applicable); date of interaction; location of interaction; duration of interaction; pharmaceuticals promoted; whether drug samples were provided, and if so, the quantity of samples given and the value of such samples; whether pharmaceutical-related materials were given, if so, the value of the materials given; and whether any other items of value or compensation were given, if so, what type and the combined value of other items.

The log includes instructions, which state,

Use one line per interaction. An interaction is any instance in which you communicate with an HCP as part of your work as a pharmaceutical representative, whether in person, over the phone, via video conference, by email, or via another communications method, as well as any time you leave materials or samples for that HCP, even if you do not communicate personally. However, you do not need to report a telecommunication or written communication if it was done simply to set up a meeting or other communication with an HCP and no marketing or promotion took place. It is not necessary to include time spent in a waiting room before meeting an HCP when reporting the duration of the interaction. If the options in any of the dropdown menus do not provide a perfect description of the contact, select the closest option. However, if the "HCP license type" dropdown menu does not include the license type of the HCP with whom you interacted, you do not need to disclose the interaction at all. If you interact with multiple HCPs at one time, for example through a dinner or entertainment event with several doctors, include a line for each HCP. If you cannot precisely break down the number of items or amount of compensation that went to each HCP because you provided them as a set to multiple HCPs, please report the average amount per HCP by dividing the number of items and the compensation value by the total number of HCPs. For instance, if you give a box of 50 samples to two HCPs jointly, mark down 25 apiece. For group meals or other forms of compensation that you provide to HCPs and non-HCPs jointly — like a lunch for a medical office that includes four HCPs and one receptionist — figure out the per-person cost and report that for each HCP. For instance, if you were to provide that office (four HCPs, one receptionist) with a $100 lunch, you would report $20 in food and beverages for each HCP.

The instructions are quite interesting and actually create more questions than they answer. While the next box explains that only interactions that take place while both parties are within the Chicago city limits should be reported, does that mean licensed representatives in Chicago have to disclose emails to physicians if both parties are within city limits when the email chain is started? What if the emails continue, after one party exits city limits?

The proposed disclosure form is draconian and adds unnecessary requirements for Chicago pharmaceutical representatives and the physicians they interact with.


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