Life Science Compliance Update

October 12, 2016

Mylan Reaches Deal Over EpiPen Rebates


On October 7, 2016, Mylan announced it reached an agreement with the United States Department of Justice (DOJ) to settle claims related to the classification of EpiPen under the Medicaid rebate program. Mylan noted that the settlement, under which the company admits no wrongdoing, resolves all “potential rebate liability claims by federal and state governments.”

The question in the underlying matter of the settlement was whether the EpiPen Auto-Injector was properly classified with the Centers for Medicaid and Medicare Services (CMS) as a non-innovator drug under the applicable definition in the Medicaid rebate statute and subject to the formula that is used to calculate rebates to Medicaid for such drugs. According to Mylan, EpiPen has been classified as a non-innovator drug since prior to Mylan’s acquisition of the product in 2007, based on “longstanding written guidance from the federal government.”

According to the federal government, EpiPen is a branded drug, meaning Mylan should have been paying Medicaid a far higher rebate under the government’s pricing rules. Pharmaceutical manufacturers are required to pay Medicaid rebates of just thirteen percent for generic products purchased, compared to a 23.1 percent rebate for brand-name drugs, which cost much more.

On October 6, 2016, CMS stated that besides paying Medicaid a too-low rebate on EpiPen purchases, Mylan also hasn’t been paying Medicaid a second rebate that is required whenever the price of a brand-name drug price rises more than inflation. On the other hand, the price of an EpiPen pack rose twenty-three percent a year on average between 2007 and 2016. Inflation has averaged less than two percent per year over the same period.

In connection with the settlement, Mylan expects to enter into a corporate integrity agreement with the Health and Human Services (HHS) Office of Inspector General (OIG).

Based on the settlement, Mylan disclosed that it will reduce its full-year earnings guidance to a per-share range of $4.70 to $4.90, down from prior guidance of $4.85 per share to $5.15 per share. The company also added that it will take a pre-tax charge of approximately $465 million for the quarter ending September 30.

Mylan CEO Heather Bresch commented,

This agreement is another important step in Mylan's efforts to move forward and bring resolution to all EpiPen Auto-Injector related matters. The agreement is in addition to the significant steps Mylan has taken in relation to EpiPen Auto-Injector over the past several weeks, including the unprecedented, pending launch of a generic version of EpiPen Auto-Injector and expansion of our patient access programs for this product. Entering into this settlement is the right course of action at this time for the Company, its stakeholders and the Medicaid program.

Congressional Influence

Congress took a front seat in the investigation of Mylan, including taking testimony from CEO Heather Bresch. Some in the Senate have been pushing for the DOJ to investigate the matter more fully. Interestingly, Mylan short-circuited that possibility by reaching this settlement.

However, several Senators, have spoken out against this settlement. For example, Senator Richard Blumenthal called the deal “a shadow of what it should be,” and accused it of “lacking real accountability for Mylan’s apparent lawbreaking.”

Senator Chuck Grassley believes that there are still some questions remaining, even following the settlement. He noted, “It’s unclear whether this settlement is fair or in proportion to the amount Mylan overcharged the taxpayers. It’s also unclear how much money is going back to the states. The Justice Department should make all of the details as transparent as possible, including when it opened the investigation into Mylan. This is public money, and the public’s business generally ought to be public.”

This deal (one of the quickest we can remember) follows months of controversy and investigations over EpiPen price increases, and two weeks of close scrutiny on Mylan’s rebates to Medicaid.

September 20, 2016

Legislation Introduced to Modify Hospital Quality Star Ratings Release


We have previously covered another of CMS’ transparency initiatives—its hospital star ratings—and some of the concerns industry has with the program. After a delay, CMS released the star ratings amid significant industry criticism. At the same time, a recent bipartisan bill would require CMS to take down overall hospital quality star ratings. Of note, according to a recent analysis, these rankings have been found to actually further confuse consumers, rather than provide actionable data to improve health care choices and the market overall.

Bill in Congress

Reps. Kathleen Rice (D-N.Y.) and James Renacci (R-Ohio) introduced the bill (Hospital Quality Rating Transparency Act of 2016, H.R. 5927) that would require CMS to remove its newly published overall hospital quality star ratings from its Hospital Compare website and delay the ratings' release for one year. On July 25, it was referred to the House Committee on Energy and Commerce.

Tom Nickels, the American Hospital Association’s executive vice president for government relations and public policy, in a statement said, "We continue to urge CMS to work with hospitals and health systems to provide patients with a rating system that accurately reflects the quality of care provided at their facilities, and will work with Reps. Renacci and Rice to move this legislation forward"

225 members of Congress previously wrote to CMS in April with their concerns over the hospital ratings system. Part of the letter states, “Many prominent hospitals that are in the top echelon of other quality rating reports, and handle the most complex procedures and patients, will receive one or two stars (out of possible five), indicating that they have the poorest quality in comparison to other hospitals".

The lawmakers' specific concerns included CMS' insufficient disclosure of its methodology and the possibility the rating system gives excessive weight to the "patient experience of care" category, as reported by patients, which accounts for 25 percent of a hospital's score, according to CMS's Quality Net website. The remaining criteria categories are outcome (40 percent), efficiency (25 percent), and clinical process of care (10 percent).

The Ratings

According to CMS, the methodology for the new Overall Hospital Quality Star Rating was developed with significant input form a Technical Expert Panel and refined after public input. CMS says it will continue to analyze the star rating data and consider public feedback to make enhancements to the scoring methodology as needed. The star rating will be updated quarterly, and will incorporate new measures as they are publicly reported on the website as well as remove measures retired from the quality reporting programs.

The agency notes it hosted two opportunities for public input and hosted two National Provider Calls with over 4,000 participants. Hospitals had an opportunity to review their Overall Hospital Quality Star Rating, ask questions, and provide feedback during a “dry run” in July and August 2015.

Ultimately, 3 out of a possible 5 stars was the most common rating, earned by 1,770 hospitals, or about 39 percent. The ratings summarize the findings from 64 existing quality measures already reported on the Hospital Compare website and summarize them into a unified rating of one to five stars. The ratings include measures for care provided when treated for heart attacks and pneumonia, as well as hospital-acquired infections.

Industry Reaction to Ratings

Hospital groups were strongly opposed to the ratings, writing in July to CMS the following: “We urge CMS to share additional information with hospitals and the public about how accurately star ratings portray hospital performance. We also urge CMS to address several significant underlying methodological problems with its star ratings. Until CMS has taken the time to address these problems and share information with hospitals and the public demonstrating that its star ratings methods offer a fair and accurate assessment of hospital quality, we strongly urge the agency to continue to withhold publication of the flawed star ratings.”

The letter was signed by the American Hospital Association, the Association of American Medical Colleges, America’s Essential Hospitals, and the Federation of American Hospitals.

Despite their objections, the ratings were released. Rick Pollack, President and CEO of the American Hospital Association released a statement strongly opposing CMS’ move. “The new CMS star ratings program is confusing for patients and families trying to choose the best hospital to meet their health care needs. Health care consumers making critical decisions about their care cannot be expected to rely on a rating system that raises far more questions than answers. And it adds yet another to a long list of conflicting rating and ranking systems,” said Pollack.

He added, “We are further disappointed that CMS moved forward with release of its star ratings, which clearly are not ready for prime time. As written, they fall short of meeting principles that the AHA has embraced for quality report cards and rating systems. We want to work with CMS and the Congress to fix the hospital star ratings so that it is helpful and useful to both patients and the hospitals that treat them.”

Lack of Utility and Fairness

A recent report in Health Affairs looks at the Hospital Compare ratings from the perspective of a 5-star hospital. The results are highly critical of the CMS program. While supportive of using public disclosure of provider quality data, the article notes, “as currently constructed the scores are unlikely to achieve this goal for the following reasons: roll-up scores across conditions/procedures obfuscate quality at the level of the condition or procedure where gains in quality could happen; grading on a curve fails to identify whether quality is good or bad; and measurement is incomplete and/or imbalanced both in terms of the application of existing measures across hospitals and the absence of important measures in the set.”

The continue by summarizing: “the current scores don’t help consumers pick a high-quality hospital for specific conditions or procedures and don’t promote meaningful quality improvement across hospitals. In fact, in a value-based market where financial rewards are given only to the highest performers rather than providers that achieve high quality, defining quality based on a curve rather than a meaningful threshold will prevent some high-quality hospitals from being rewarded and could discourage hospitals from sharing best practices.”

It has also been repeatedly pointed out that the CMS ratings unfairly penalize teaching and safety net hospitals. For example, the ratings fail to account for socio-demographic factors such as patients' education, race, economic status and regular access to medical care which all have a tremendous impact on health. As a result, many urban hospitals that provide stellar patient care and pioneer groundbreaking therapies, in addition to caring for large numbers of poor patients, received fewer stars than hospitals in affluent suburbs that treat fewer complex patients.

July 18, 2016

Bipartisan PRICED Act Introduced in Congress

Three members of Congress, a bipartisan trio that spans both the House and the Senate, have introduced the Price Relief, Innovation, and Competition for Essential Drugs (PRICED) Act in the House of Representatives and the Senate on Friday, June 24. The bill points to higher medication prices and if passed, would reduce the data exclusivity period for biologic drugs from twelve years to just seven.

The bill, clocking in at a whopping two pages, would amend the Reference Product Exclusivity (RPE) provisions in the Public Health Service Act (PHS Act), striking "12 years" and inserting "7 years" in place. Conforming amendments would be made throughout the Act where necessary. The PRICED Act would apply only with respect to a biological product for which the reference product … is licensed under [PHS Act] on or after" the date of enactment of the PRICED Act.

Such a reduction would have a large effect on the biologic industry: it would mean significantly more competition for branded biologic manufacturers from the biosimilar drug makers. The current twelve-year data exclusivity threshold for biologic products was set under a compromise in the Affordable Care Act. Since that time, President Obama has advocated for reducing that period to seven years through budget proposals, in an effort to cut healthcare spending.

According to Representative Janice Schakowsky, the sponsor of the bill in the House of Representatives, the PRICED Act would "foster competition and provide opportunity for more biologics to enter the marketplace and drive down costs."

Senator Sherrod Brown believes that, "in the same way the entrance of generics helped increase competition and boost access to more affordable prescription drugs, an increased number of biologics and equally effective 'biosimilars' will provide additional competition in the marketplace and make life-saving drugs more affordable for consumers."

Senator John McCain opined that the "PRICED Act would inject much-needed competition in the biologics market, bring down costs for live-saving drugs, and save billions in taxpayer dollars."

Industry Reaction

Industry reaction has overall been very predictable: major trade groups oppose any efforts to shorten the period while generic groups support efforts. The Biotechnology Innovation Organization (BIO) argues that anything less than twelve years of exclusivity would have repercussions, i.e., stifled innovation, reduced drug access, and increased prices of drugs in the long run. They also noted that a "majority of biotechnology companies are small, private start-ups, heavily reliant on venture capital investment" and need the full twelve-year incentive.

The Generic Pharmaceutical Association (GPhA), on the other hand, argues that the legislation would "speed patient access to more affordable versions of some of the most expensive medicines" and that "as brand and specialty drug costs rise at a concerning rate, the association looks forward to working with Congress and others to ensure timely access to biosimilar medicines."

What Does This Mean

This bill is introduced in the midst of several other important, and related, discussions and events. The Trans-Pacific Partnership (TPP) currently under negotiations, has caused high-level discussions on the exclusivity period, as some countries have pushed for a shorter exclusivity period under the deal (e.g., Australia only allows for a five-year exclusivity period), which United States negotiators have resisted.

This bill also comes shortly after the Supreme Court's invitation to the Solicitor General to file briefs regarding the Sandoz and Amgen petitions for certiorari.

The likelihood that the PRICED Act will make its way through Congress and be signed into law by the end of President Obama's term is pretty low. Even still, the bill is yet another sign of the concern on Capitol Hill over drug prices.


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