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27 posts from April 2018

April 25, 2018

McKesson Accused of Illegally Handling Cancer Medications

Drug Distribution
On April 4, 2018, a lawsuit was unsealed that shows McKesson Corporation – America’s largest drug distributor and one of the top five largest public companies of any kind in America – is being accused of illegally pooling leftover cancer medication from single-dose vials and selling it to healthcare providers. Those healthcare providers then in turn treated patients with it and typically billed the cost to government programs for reimbursement.

The lawsuit, brought by a private company, Omni Healthcare, seeks unspecified damages from McKesson for violating the federal False Claims Act by selling the medication and providing kickbacks by offering the pooled drugs at a discount and repackaging them under non-sterile conditions, from 2001 until at least 2010. The lawsuit was brought under the qui tam  provisions and the federal government, thirty states, Washington, D.C., New York City, and Chicago all joined as plaintiffs.

Allegedly, McKesson produced and sold pre-filled syringes containing drugs for cancer and its side effects to oncology centers, hospitals, and physicians. To ensure that each syringe could be properly filled, each vial contained up to ten percent more than would be necessary to fill the syringe. Additionally, since the vials did not contain any preservatives, once the vial was punctured, the medication was out in the open, available to be contaminated. Because of the possibility of contamination, the distributor is supposed to dispose of the partially-used vials.

However, instead of disposing of the partially-used vials, McKesson allegedly “harvested” them, producing roughly one extra syringe per every ten legitimate ones. Further complicating the situation, In some cases, the company put false FDA identification numbers on the unlawfully produced syringes. Some health-care providers billed Medicare and Medicaid for the treatment they gave patients, an action the lawsuit described as defrauding the government.

The lawsuit further contends that McKesson encouraged providers to purchase the pre-filled syringes (using the leftover vials) by offering them at a discount. For example, in September 2007, a syringe cost $327.42, compared to the $346.99 cost of the vials.

McKesson responded in a statement saying, “patient safety, compliance with the law and maintaining the trust of our customers are top priorities for us. While we have not yet formally received the complaint, we reject the allegations as they’ve been reported and plan to vigorously defend the company in court if this case moves forward.”

One of McKesson’s competitors, AmerisourceBergen, pled guilty last year to similar actions and made a payment of roughly $900 million in fines - $625 million in the form of a settlement to resolve FCA allegations and $260 million in fines and forfeitures as part of a criminal suit. Time will tell if the same cards will play out for McKesson. 

The End of Guidance Documents or Simply a Reminder of Well-Established Administrative Law Principles?


As discussed in several news outlets, the Trump Administration recently announced that it would begin to enforce long-standing administrative law principles and limit the weight guidance documents carry in government actions against private companies and individuals. While the ramifications of this decision are still months away from realization, this article outlines the principles and the possible effects we will see in the future from this decision.

Chaos and controversy seem to be synonymous with Trump Administration activities. This was certainly the case a few weeks ago when the United States Department of Justice (“DOJ”), with the support of the White House, recently announced that it would begin limiting the use of “guidance documents” and that non-compliance with guidance documents did not constitute a punishable violation.

The announcement, quickly picked up by several news outlets, had the predictable effect of having the pundits take sides on whether this announcement was simply a reminder of the proper role of guidance documents, a domino effect that may have vast implications for the government’s ability to sue companies accused of violating those document or something more nefarious such as Trump was trying to dismantle Executive Branch agencies.

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April 24, 2018

Numerof & Associates Releases Annual Report on Health Adoption


On April 10, 2018, Numerof & Associates released its third annual national study of population health adoption. The report provides a national in-depth look at the pace of transition from fee-for-service models to models that are based on fixed payments linked to outcomes. According to the report, a growing number of healthcare delivery organizations are failing to keep pace with their population health objectives and are actually continuing to fall further behind the industry leaders.

The report surveys and summarizes responses from over 400 executives and decision makers in the healthcare industry.

Unfortunately, progress has failed to keep up with prior expectations. In each prior survey, respondents predicted a dramatic increase in the percentage of annual revenue that would be at risk in the next two years. However, those projections were not realized, as the majority of respondents to this year’s survey (54 percent) still reported less than 10 percent of their revenue comes through risk-based agreements.

The results from the report indicate many organizations have fallen short of their targets. In the 2015 survey, over half of respondents predicted they would be at least “very prepared” to take on risk in 2017. In the current survey, however, only one in five felt they had achieved that mark.

Despite the slow overall adoption, some leading organizations did report a substantial portion of revenue moving to new models, increasing the gap over the lagging providers. And most executives agree that population health is the future, with 95 percent of respondents rating it “moderately,” “very” or “critically” important. Roughly one-quarter of respondents cited the threat of financial losses as a barrier to moving to a risk-based model, with other concerns including uncertainty about timing (12 percent), and issues with systems like IT, tracking, and management (12 percent).

While more than 75 percent of respondents reported involvement in risk-based agreements, their financial exposure has generally been limited.

As in our last survey, over three-quarters of respondents reported some experience with an alternative payment contract – but for most (70%), less than 20% of revenue was involved. Among those who claimed experience with an alternative payment contract, a substantial portion – 38% – didn’t risk actual loss. Their risk was upside only – of not receiving a “bonus” if targets were not achieved.

“Numerof’s third annual survey finds that while nearly all healthcare providers see population health as an important next step, a few leading organizations have separated themselves from the rest of the pack,” said Rita Numerof, PhD, the firm’s president. “The shift in the business model has proven difficult for many to achieve due to institutional hurdles and concerns over financial losses.”

“Hospitals that hedge their bets by experimenting at the margins with at-risk payment models underestimate the importance of moving up the experience curve,” said Michael Abrams, managing partner of Numerof & Associates. “Accountability for cost and quality is inevitable, and the sooner a commitment is made, the sooner the necessary competencies will be developed.”

Numerof conducted the study in collaboration with David B. Nash, MD, MBA, Dean of the Jefferson College of Population Health. “Improving the health of the populations we serve while implementing population health management programs, as a part of risk-bearing arrangements, is an apparent paradox in our country today,” said Dr. Nash. “We want to improve health, but the numbers say that we are far short of previously stated goals. One is therefore forced to ask the question---what is the real mission of our industry at this key juncture?”


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